Autochek Raises $13.1M Seed Round to Expand Across Africa | TLcom & 4DX

Autochek Secures $13.1 Million Seed Funding

African automotive firm Autochek has successfully obtained $13.1 million in a seed funding round, occurring approximately one year following a $3.4 million pre-seed raise in November 2020.

Rapid Growth and Key Investors

Since its launch in August of the previous year, the company, under the leadership of CEO Etop Ikpe, has experienced remarkable growth in demand. This expansion extends beyond consumer interest to encompass its business and banking affiliations.

Leading this seed round are pan-African venture capital firms TLcom Capital and 4DX Ventures, demonstrating continued confidence as they also spearheaded the startup’s pre-seed investment.

Expanded Investor Base

Existing investors, including Golden Palm Investments, Enza Capital, and Lateral Capital, also participated in this funding round.

New investors, ASK Capital and Mobility 54 Investment SAS – the venture capital division of Toyota Tsusho and CFAO Group – joined the investment group. Autochek’s total funding now reaches $16.5 million across two financing stages.

Strategic Acquisitions and Market Expansion

Last month, Ikpe revealed the completion of the acquisition of Cheki’s operations in Kenya and Uganda from Ringier One Africa Media (ROAM). This acquisition followed the earlier purchases of Cheki Ghana and Cheki Nigeria, marking the beginning of Autochek’s expansion strategy.

While expansion has largely been driven by acquisitions, the company entered the Ivory Coast through a partnership with CFAO Group, extending its marketplace to the Francophone region.

Addressing a Large Market Opportunity

This expansion brings Autochek’s presence to five African markets. The African used car market represents a substantial $45 billion industry, yet vehicle penetration remains low at just 5%.

A lack of market transparency presents challenges for lenders, particularly banks, in providing loans to individuals, businesses, and ride-hailing drivers.

Autochek’s Platform and Core Customers

Autochek’s platform utilizes a marketplace model focused on financing and after-sales support.

Its primary clientele includes dealerships, banks, and end consumers who purchase vehicles through the platform.

Vehicle Inspection and Financing Process

Upon dealership registration, Autochek assigns a workshop to conduct thorough vehicle inspections.

These assessments, combined with algorithmic checks, provide insights into the vehicle’s condition, determining its eligibility for financing.

“This process mitigates risk for banks, preventing financing of vehicles with potential mechanical issues,” explained Ikpe, highlighting the importance of Autochek’s due diligence.

Following inspection, Autochek notifies partner banks of available vehicles for financing and lists them on the marketplace.

Banks then submit their financing offers, providing end-users with a range of options. Autochek develops a credit profile to facilitate the loan application process, which is completed in approximately 48 hours – a significant reduction from the typical 40-45 days.

Post-Financing Support and Revenue Model

Autochek assists banks with loan disbursement, vehicle registration, insurance, and tracking.

Vehicles are then integrated into Autochek’s after-sales network, receiving free maintenance for mechanical issues.

Autochek generates revenue through fees charged to customers and banks upon successful loan disbursement, as well as commissions from dealerships.

“Our involvement extends beyond the initial disbursement, encompassing the entire loan lifecycle,” stated Ikpe. “We’ve created an ecosystem leveraging technology to integrate these verticals, maximizing value with financing as the central driver.”

Growth in Bank Partnerships and Loan Applications

Autochek has expanded its bank partnerships from 12 last year to approximately 70, including Access Bank, Ecobank, UBA, Bank of Africa, and NCBA Bank.

These banks have processed over 46,000 loan applications to date, a substantial increase from the 10 applications processed last November.

Expanding Product Offerings

Initially focused on used cars, Autochek has broadened its offerings to include financing for trucks and new vehicles.

Currently, over 1,200 dealerships utilize Autochek’s network, with more than 15,000 financeable vehicles listed across all markets.

Strategic Market Selection

Ikpe emphasizes that the introduction of these new verticals was driven by demand from partner banks, influencing the company’s expansion strategy.

However, Autochek has selectively declined entry into certain markets where it did not foresee sufficient potential, despite partner bank presence.

Future Expansion Plans

With a current presence in West and East Africa, Autochek is targeting expansion into Egypt and South Africa.

“We are in discussions with potential partners regarding market entry and anticipate identifying the optimal product-market fit by Q2 of next year,” said Ikpe. “We expect to establish a presence in these markets by Q3.”

Investor Confidence and Competitive Landscape

TLcom Capital’s reinvestment is attributed to Ikpe’s leadership, experience, and Autochek’s rapid growth, according to partner Andreata Muforo.

Walter Baddoo, managing partner at 4DX Ventures, highlighted the team’s “talent, ambition, and domain expertise” in building a comprehensive car ownership experience.

Addressing the African Mobility Market

In Africa, ride-hailing services like Uber and Bolt are dominant, prompting mobility startups to focus on vehicle financing and logistics solutions.

Autochek, alongside other vehicle financing startups such as Moove and FlexClub, has attracted significant investment, indicating growing investor interest and a maturing competitive environment.

Autochek’s funding round exceeded initial expectations, reflecting the potential of automotive technology in Africa, particularly given the company’s fintech component. This success aligns with the dominance of fintech in the African VC landscape and its record for the largest seed-stage investments.

Future Goals and Capital Allocation

Autochek aims to become a market leader and will allocate the new capital to enhance its auto loan processing platform, strengthen its presence in West Africa, and leverage Toyota Tsusho’s extensive retail network across 54 African countries to accelerate expansion.