Not often do company’s leap into life with the spectacular pace of Cazoo. Now, within two years of its launch, the team that promised to create the ‘Amazon of the used car industry’ is to go public in a $7bn merger.
Alex Chesterman, the driving force behind Cazoo, has been with us at Octopus since our own inception, back in 2008. We invested in Zoopla, the property service he co-founded, a week or two after Lehmans collapsed and the financial world imploded. The rest of the market had frozen, but we took a view on Alex and it paid off – not only in financial returns, but in the long term relationships we’ve formed with Alex and other serial entrepreneurs who extend like a family tree from those early days.
Prior to Zoopla, we had invested in Alex’s previous company, LoveFilm which he founded alongside others including William Reeve and Graham Bosher. We’ve remained closely connected to these entrepreneurs as they’ve come back to us repeatedly with the companies they went on to found, such as graze.com, tails.com, Secret Escapes, Zoopla and now Cazoo.
There are only a very small number of European entrepreneurs who have built successive, successful businesses from scratch. So when Alex called one Tuesday in late November 2018 with news of his latest venture, we met on the Thursday, committed on Friday and closed the investment in Cazoo the following Thursday. That’s a ten day cycle, although it’s fair to say the decision itself took as many minutes. The business proposition was intriguing, but we were really taking a view on Alex as the founder.
For all our portfolio entrepreneurs, it’s about the long game. When we back them in their first business, we’re doing so in order to be chosen to back them in their second, third and fourth businesses. We want to be the first call when they have good – or bad – news. Knowing when to be there and when to get out of the way is crucial in building healthy, long-standing relationships.
More than a decade on from our first investment with Alex, we see a greater than ever opportunity in European tech. Despite the pandemic, 2020 saw around $40 billion of investment in the European tech sector and this is rising further in 2021 as tech adoption continues to accelerate. Cazoo is among Europe’s fastest growing digital businesses, growing 300%+ year-on-year and the continent’s used car market is a $700bn opportunity, ripe for digital transformation. Europe has produced more tech IPOs than the US every year since 2016, so as the next generation of tech giants emerge on this side of the Atlantic, we intend to be alongside them.
Meanwhile, entrepreneurs in the UK and across Europe are building extraordinary businesses in all these verticals. We see this in our own portfolio: it was not so long ago that Zoopla going public and becoming valued at £1bn+ was remarkable. Now for so many of the teams we back, such as Bought By Many, Elvie and Depop this is and will be just one milestone on a journey to something much, much bigger. The best European companies are now able to raise capital far more easily and we’re seeing increasing numbers of large funding rounds in recent years.
As we always remind ourselves, the best entrepreneurs have a choice as to where they source their capital. We have to earn the right to be on their shortlist. This is why our ‘prepared minds’ structure, which divides our team’s expertise into health, fintech, deep tech and consumer spaces maximises our readiness to fund and fuel Europe’s rise on the world tech stage.
We scope out all our new investments with the care and precision, and like nothing better than meeting the as-yet-unknown stars of the future. But that ten day turn around with Cazoo, on the back of one phone call from its founder, is the kind of head-heart-gut decision we anticipate more of in the future.