TrueCar Has No Profits But Billion Dollar Valuation

According to the National Automobile Dealers Association, last year 15.5 million new cars were sold in the United States. The automotive sector is one of the largest segments in the country. Recently listed, TrueCar is trying to revolutionize the way cars are sold in the country.

TrueCar’s Offerings
Santa Monica-based TrueCar was founded in 2005 by Tom Taira, Bernie Brenner, Oded Noy, Jim Nguyen, and Scott Painter. TrueCar.com was founded to deliver a pricing information and analysis portal that helps automotive dealers and consumers in making improved buying decisions about both new and used cars. TrueCar operates a transparent information portal that takes into account parameters like make and model of the car, condition of the car and geographical location of the transaction to arrive at the best comparative prices.

The information on their site has been the benchmark for vehicle value information in the industry in both the US and Canadian markets. Consumers can use their portals to identify the car that they wish to purchase and select from their network of dealers to conduct the transaction. Additionally, TrueCar also customizes and operates their platform for other group marketing partners, such as USAA and Consumer Reports.

While TrueCar provides information on used cars, they are primarily focused on new car transactions. They are also improving the overall car buying experience by developing tools like TrueTrade that help provide users with an estimated daily market value for their existing cars and a guaranteed trade-in price that a dealer is willing to give for their car. Additional new products include TrueLoan and TrueLease which provide new car buyers with available financing options for cars at TrueCar Certified Dealers. For the dealers, TrueCar is working on providing an inventory management service that will also help them manage pricing decisions more efficiently.

They have built a network of more than 7,000 TrueCar Certified Dealers spread across the country. Their portal has helped sell more than 1.1 million cars of which nearly 400,000 were sold during the previous year.

TrueCar’s Financials
TrueCar earns revenues by charging $300 from dealers for each customer that buys a new vehicle from the dealer based on a reference from TrueCar. Sales of all used cars that are routed to the dealer from TrueCar help TrueCar earn $400 each.

Their offerings have helped them deliver strong revenue growth. Revenues have improved from $76.3 million in 2011 to $133.96 million in 2013. The company is yet to make profits. Losses have increased to $25.06 million from $8.92 million in 2011. The increased losses are attributed to growth in Sales and marketing efforts which grew from $41.99 million in 2011 to $75.18 million in 2013.

Till recently, TrueCar has been largely venture funded with $183.2 million from investors including Vulcan Capital, Global Investment House, USAA, Passport Capital, Allen & Company, Keating Capital, GSV Capital, Upfront Ventures, Silicon Valley Bank, Capricorn Investment Group, DealerTrack, Tech Coast Angels, Capricorn Management, Anthem Venture Partners, Arcturus Capital, and Capital One. Additionally, undisclosed investors had also provided $100 million in debt funds.

Last month, TrueCar went public on the Nasdaq under the ticker TRUE and raised $125 million at a share price of $9.00 each and a valuation of about $1 billion. Their stock is currently trading at $13.67 with a market capitalization of $971.1 million.