The Indonesian used car market is on the way to growth fueled by several trends: the growing digitization of used car sales; a greater variety of financing options; and the COVID-19 pandemic, which has pushed the idea of private car ownership.
Brooman Indonesia-based auto finance startup that wants to help used car dealerships work more efficiently by applying the asset-backed lending model to their businesses – offering in-app trades between dealerships and providing new financing for to do so – said on Tuesday that it had closed a $10 million pre-Series A funding round led by Openspace Ventures.
Other investors, including MUFG’s innovation partner, BRI Ventures and its former backers like AC Venture and Quona Capital, also participated in the latest round. (Broom declined to comment on whether he or his investors were affected by the outcome. Bank of Silicon Valley crisis.)
The startup was founded when Pandu Adi Laras, CEO and co-founder of Broom, wanted to sell his car a few years ago, which he was doing because he needed money to renovate his house. However, used car dealerships Laras visited told him they could not afford to buy Laras’ car back due to limited cash on hand and working capital, only offering trade-ins at the place.
“The traditional approach is more like opening mom and pop stores, where sellers have to wait for their inventory to sell [to end customers]then they can use the money to sell new inventory,” Laras said.
The problem was quite common among used car dealerships in Indonesia, according to Laras, and that’s how he got the idea for Broom.
Co-founder and chief financial officer (CFO) Andreas Sutanto and Laras started Broom in 2021. The following year, he launched his flagship service, Buyback, to help used car dealers in Indonesia, many of whom don’t have no access to capital.
“With the takeover, [car dealers] can optimize their inventory and accelerate turnover, thereby increasing their turnover; our app allows them to easily manage inbound and outbound flows and trade with other dealers in our ecosystem,” Laras said.
The buy-back provides dealers with “short-term working capital through a temporary car sale service with buy-back option” and dealer-to-dealer exchanges, making inventory management more efficient. The startup explained that Buyback is “not a loan per se, but rather a temporary sale, which includes a change of ownership. Resellers can then repurchase their item at a slightly higher price.
(left to right) Andreas Sutanto, co-founder & CFO; Pandu Adi Laras, co-founder and CEO; Claussen Sindhuwinata, Chief Operating Officer. Picture credits: Broom
The latest financing, bringing its total raised to $13 million in equity, will allow Broom to diversify its product offering and accelerate inventory turnover for Broom and its dealers. The company recently soft-launched its first offline showroom where its dealer partners can showcase their inventory to more end customers. In addition to the equity financing, Broom secured a $12 million loan from DBS Indonesia and BRI last year. The startup aims to double its credit facility with external lenders to handle more transactions.
According to Broom, more than 5,000 used car dealers, its main target customers, now use its platform in Indonesia, contributing about 30.6% of new car sales in Southeast Asia. On average, using its Buyback platform has allowed dealers to increase their inventory size, sales and profitability by 3x, according to Broom. The company is focused on Indonesia, where the used car market is estimated at $65 million and is expected to reach $70.3 billion by 2027. Broom has the ability to provide its solution to resellers and later to direct customers.
Some automotive markets, such as Body, Carsome and OLX Indonesia, cover trade and financing for direct customers. Broom has tried to differentiate itself by aiming to empower existing dealers, of which there are over 50,000 in Indonesia.
Broom’s technology plans include building an intelligence model to assess the quality of cars.
The company employs 120 people.
“The used car market in Indonesia is huge but fragmented and disorganized,” said Nobutake Suzuki, President and CEO of MUFG Innovation Partners. “Broom is taking a new approach to developing asset-backed lending solutions that are more flexible, less expensive and accessible, helping to empower the small dealerships that dominate used car transactions in Indonesia.”
