Used Car Marketplace Website Beepi Forced To Reduce Valuation

Back in June, we wrote about the massive funding round of at least $300 million by Beepi, the California-based used car marketplace website. Companies like Beepi are trying to change the way consumers buy and sell pre-owned vehicles by reducing the complications of purchasing a used car. In the rapidly-growing landscape of customer expectations for instant gratification, options that simplify the car purchasing process can be seen as a threat to the methods that continue to be used by traditional auto dealers.

However, after reports of Beepi’s massive funding success, it appears that the party may be winding down. The Wall Street Journal now reports that investors are beginning to question lofty private-company valuations against the backdrop of a chilly market for initial public offerings. “We’re seeing financing rounds where founders are coming back and lowering the price over and over again,” explained Bill Gurley, a partner with Benchmark.

Beepi is now facing doubts after it embarked on its fundraising effort this year, as the company has actually sold very few cars. State records in California, which is the company’s first and biggest market, indicate that Beepi sold only an average of 153 cars per month over the past three months. By contrast, the largest used car seller in California, Carmax, sold an average of 8,500 cars per month during that period. Even though Beepi sells a minuscule fraction of the number of cars that Carmax sells, it had sought a valuation one-sixth of Carmax’s $11.5 billion market value.

After facing resistance from investors, Beepi settled for $70 million in funding in August at a valuation of approximately $500 million, according to an unnamed person familiar with the matter. A Beepi representative said that its funding round was “not fully closed” and that it now operates in 13 markets in 9 states.

Beepi is not alone in this story. Other companies, including local-services website Thumbtack Inc. and e-commerce startup Jet.com Inc. have recently been forced to scale back their ambitious valuation expectations. Some investors say the trade winds are beginning to shift after a summer that saw an average of more than 10 companies per month announce funding at valuations of $1 billion or more.

“The public market has adjusted down its valuation for high-growth companies, and we’re starting to see the private market catch up to that,” said Brad Slingerland, portfolio manager for the $2 billion-plus Global Technology strategy funds at Janus Capital Group Inc., which has invested in private companies.