Clutch has had an incredible ride. As the “Carvana of Canada” it was a highflier in 2021. It had a brush with death in 2023 and effected an incredible turnaround. They are now once again on a tear. Dan Park, Clutch’s Founder & CEO, joined us to share all the lessons learned along the way.

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Transcript

Fabrice Grinda: Hi everyone. I hope you’re having a wonderful week. I’m very excited because this week we’re going to be talking about like the incredible story of Clutch, kind of like the Carvana of Canada, which I’d like was a super high flying. I had a brush with death and then I had an extraordinary comeback and they’re now once again on a tear.

And there are a lot of lessons that learned to learn here for all of us in terms of what to do in different circumstances, and I’m looking forward to doing it. So with that, any further ado, let’s get going. Welcome to episode 49. Clutch and the incredible comeback story.

So Dan thank you for joining us.

Dan Park: Thanks for having me. This is great.

Fabrice Grinda: So why don’t we start with like a little bit of your background then again, what led to the creation of Clutch?

Dan Park: So I think maybe like most entrepreneurs fell into use car sales as a medium for trying to build something big.

But originally started my career in finance. Actually spent some years on your side of the table doing VC or at stage investing which I loved. But felt like there was this yearning to actually pull some levers myself, I felt like in the different disciplines of finance, VC is probably the closest to pulling some of those levers, but you’re not there. Certainly day to day and got an opportunity to join Uber back in 2016. And at the time Uber was toying with some different business ideas outside of cars. They created this group called Uber, everything, which ironically was.

Not everything, it was everything that wasn’t ride sharing. So it was probably nothing. But Travis was still there at the time and Travis asked the question, you know, if you can get a car to someone in five minutes, what can you bring to someone in five minutes? And so I. It was a first, first there was an experimentation around food.

Started seeing some signals around demand and people wanting food on demand. And that was kind of like the early days of food delivery. DoorDash was, you know, certainly gaining momentum back then. There were other models around the world just eat takeaway in, in Europe and just Uber Eats was just getting started and actually globally, it started out in Toronto, which is where I’m based.

And so it was fun to watch and, and be a part of that. From super early on, we were, the first iteration was not even a marketplace. It was a bunch of people. Getting into Ubers, or sorry, getting food, meeting in parking lots, stuffing 25 sandwiches into an Uber. And there wasn’t a separate app for the Eats product at that point.

It was just the Uber app. And then instead of going UberX, there was Uber Instant and so on a given day, there was, you know, burgers, there was some Pad Thai, there was some me sandwiches and like, you selected what you wanted and it would come to your door. But inventory planning was a disaster because, you know, one driver would run outta their 25 sandwiches within an hour, and then another driver would still be driving around with, you know, 50 Pad Thai four hours later.

But it was, the early signal of food delivery on demand and we started at that point acquiring restaurants. We built, you know, what is now the current version of the Uber Eats app. And that was done in a conference room here locally over three months. Super raw MVP, but we got it out.

Fabrice Grinda: And you were based in Toronto for that period?

Dan Park: Based in Toronto and the business and started globally out of the Uber Eats product started globally outta Toronto. So we were the launch city.

Fabrice Grinda: Oh wow. That’s amazing!

Dan Park: I think it’s one of those things where, you know, if Uber messed it up, it would be like, oh, it’s one of those things that Canadian, Canada did that, you know, sweep that under the rug.

That was a mistake. But it was successful. And, you know, my P&L went from zero to 3 billion within three years. At least in GMV. And you know, we learned a lot about marketplaces. The three-sided marketplaces, super complex with drivers and we call them eaters, drivers, and restaurants.

And It was tough cause it was one of these marketplaces where it’s really hard to make anyone happy. Because drivers wanted to get paid more, restaurants wanted to pay less, and, and, and customers really don’t want to pay more than five, $6 for delivery. And so that threading of the needle in terms of marketplace balance and for pricing and take rates was challenging.

And at one point I think we were burning something like 400 million a year. And Travis came in and was like, what are you guys? I think we were losing $17 a trip in New York City and you know, basically like who this business is, this business work? And someone had to go prove the unit economics.

And so within a span of eight weeks the Atlanta market and then ourselves. Basically had the Toronto market, cause we were the two earliest markets, had to figure out how to get to unit economics positive in a very short period of time. We did it and then we went back into growth mode.

Fabrice Grinda: Amazing.

Dan Park: Yeah. And then you know, yeah, I, I was there for about, just over three years and a board member at Clutch, who I knew from my VC days approached me and said, Hey, look, there’s this like really early stage company pre-seed. They’re selling cars online and delivering cars online.

You’re delivering food online, you should do this instead. And got really excited about the white space that was used cars in Canada. I think it’s the last real e-commerce category that hasn’t been fully disrupted by, or sorry, retail category that’s been fully disrupted by e-commerce. And in Canada, unlike the US where there are some larger brands like CarMax, for example, in the US there is no real brand for used car retail in Canada.

And it’s such a complicated transaction with so much so much opacity and lack of transparency around the, the transaction. And it felt like there was a better way. And so we, we’ve now built effectively a fully managed marketplace around used cars in Canada.

Fabrice Grinda: And so when did you join Clutch at the pre-seed level?

Dan Park: Yeah, so that was 2019. Which I think if you look back, I don’t know if there’s a worse five year period to be in a used car business. Early stage used car business given pandemic, given tariffs now, given basically the evaporation of growth equity capital in 2022 and 2023.

But we’ve survived. It’s been a rollercoaster and you know, like you said at the beginning of the show, we’ve learned a lot from it.

Fabrice Grinda: So in 2019, what was the state of Carvana like and was that an inspiration or were the unique dynamics of that it didn’t matter that much.

Dan Park: Yeah. They were early and there were some unique dynamics. I think it was a proof point that this model could potentially work. But you know, at the same time, and you know this story well, I mean, there’s BP in in the past, I mean, people, this is not the first time this has been attempted. And so I think I.

There was probably a little bit more of a propensity for folks to transact online. E-commerce obviously had moved significantly since the days of bp, where people are much more comfortable buying large items online. So I think that the consumer had evolved but the business model certainly had not been proven at the time Carvana was burning billions of dollars. And so there was still a lot of question marks around the business, but we knew that and we had a lot of conviction in the fact that there had to be a better way for someone to deliver a used car experience that was much simpler.

Fabrice Grinda: Why don’t you walk us through what the clutch used car buying experiences and why it’s so much better than the offline equivalent.

Dan Park: Yeah. So you know, the traditional car buying experience is you walk into a dealership, you spend four or five hours negotiating with some sales person. They’re trying to jam a bunch of financial services products down your throat. You know, in some markets. If you go into a website advertising vehicles, they won’t even tell you the price of the car.

They’ll just say contact us for price, which just means like when you come in and visit me, I will determine how much I can charge you based on your negotiating ability or how much of a schmuck I think you are, right. And so, you know, it’s pretty terrible. I think there’s very little transparency around pricing which with technology and we can talk a little bit about how we apply pretty deep technology around vehicle pricing.

There is definitely a way to provide a more transparent experience. And so what we do. Because we buy cars directly from consumers. And so we put an instant cash offer in the market where a customer comes to us, puts in a little bit of information about their vehicle, and we give them an instant cash offer for their car.

We buy about $2 million worth of cars every day. We then take those cars, we put them through a fully vertically integrated reconditioning process, and that’s where the managed marketplace element comes into play, right? We take the risk of the inventory to provide a better and higher quality product.

And so we put that through a reconditioning process which we take a used car that for some reason someone does not want, and we turn it into a car that’s highly dir desirable. We put that on our website and provide a very seamless and easy way to buy a vehicle. Almost like, you know, we kind of try to make car buying as easy as ordering a pizza.

A little bit of a kind of nod to my food delivery days. But we wanna make it super simple and we built the logistics around that as well because today there is no real high quality three PL that can, you know, we can take a car and, you know, drop ship it to a consumer. There’s nothing that exists like that.

So we’ve had to build our own log logistics and as well as the full infrastructure around that, which I think for us creates a lot of advantage and competitive advantage because at this point it’s really hard to disrupt just the physical nature of the infrastructure that’s required to deliver the product.

Fabrice Grinda: So lemme summarize what I’m hearing. Yeah. If you’re selling a car, you take a few photos and a few descriptions, you get an instant offer, boom. The car is sold. So it’s super easy!

Dan Park: We don’t even take, we don’t even ask for photos because we do it scale.

Fabrice Grinda: Okay. So just the VIN or whatever. So, and then the buyer of the car, there’s a fixed price, they click buy and then it’s delivered directly to their house.

Dan Park: Or picked up at one of our locations.

Fabrice Grinda: Okay. Perfect. Yep. You’re using inventory, you’re buying cars, you’re refurbishing them, et cetera.

Is there, or did you think through a model where potentially you could refurbish them only after they’ve been sold? So you didn’t need to take the inventory or you felt that the inventory was required?

Dan Park: We experimented early on with a more consignment model, but the value proposition for a consumer on the consignment model is very small.

You know, you have to convince someone, I’m gonna take your car for a little bit, right? And you’re not gonna be able if you don’t know if it’s sold yet, but, you know, we’ll do some work on it when it does get sold. But trust us, you know, let’s just like play this waiting game to see what happens, you know, for us right now, because of the offer that we can provide, we can provide that instant certainty and you know, , there’s very few options where if someone is leaving the country, and this is a pretty big use case, you’re leaving the country or you’re gonna sell your car, you’ll drive your car to us, drop it off on the way to the airport, right?

 It allows that kind of certainty whereas if you’re kind of going through. One of the listing sites or try to list it on, eBay or Craigslist or whatever it is, it’s gonna take multiple people coming by, negotiating. Some people that are serious, some people that aren’t.

And so it’s a hassle. And so the traditional way for individuals to sell a car right now is super complicated. And so I think we’ve really solved. Now the NPS of our cell product is something like 85. It’s very hard to create that kind of experience if you do not take inventory.

And I think, we can get to some of this as we go on. But, back in 2020, back in 2019, there was still this kind of two schools of thoughts around do you take inventory or do you not take inventory? And the answer wasn’t very clear back then. And now I think it’s clearer because the answer and the people that have survived over the last five years are the, are the companies that built the infrastructure to take inventory so they can, one, provide a higher quality product, but then control the entire supply chain or basically the whole process.

I don’t necessarily want to make a political comment about Elon, but in his book there’s this concept called idiot index, right? I dunno if you’ve read this, but the idiot index is the price of the good that’s being provided with the cost of the inputs.

And if that ratio is super high. There’s either a flaw in the process or something can be done more efficiently. In car reconditioning, the cost of you to go take a car to some dealership and get that thing fixed is gonna be super expensive. Changing an air filter is like $60, right?

But the cost of the air filter itself is like $1. Getting a bumper changed, it’s some paint, it’s some plastic and some metal, and, you know, a little bit of o labor, it’ll cost up to $2,000- $4,000, depending on the car. What we do is we built reconditioning at scale that allows us to put a lot of work into the car at a relatively low cost.

Which is very, very high value to the consumer, which allows us to then offer a higher price to when we buy the vehicle and then offer a better car for either the same or a lower price back to the consumer.

Fabrice Grinda: Will you take any car because obviously if you have inventory that’s depreciating and you can’t sell it, it’s problematic.

Dan Park: Yeah. So we do, we take almost every car and half of our business is retail and half of our business is wholesale. And so half of the business are cars that don’t meet our retail standard, that will, we will not recondition and we’ll go to wholesale, which other dealers or other auctions will buy.

Fabrice Grinda: We have a few questions. While we’re doing this. Do you deliver to the door of the buyer anywhere in Canada, regardless of location or only in certain places.

Dan Park: Yeah. Today we’ve constrained things geographically and eventually we will deliver everywhere. But it will be in basically regionalized inventory clusters because at a certain point it doesn’t make sense to move inventory across the entire country.

And if you get to a certain level of selection, you know, whether if you have 50 Honda Civics in your inventory, do you need to get the extra, you know, whatever, it’s 20 from a different market. And what will people will do, and this is, an optimization problem is that, they’ll pick the Honda Civic that may be like, $20 cheaper, but halfway across the country.

And, maybe not that different. And so constraining your inventory towards geography is also just improves your logistical capabilities.

Fabrice Grinda: Makes sense and another question. When did you raise capital? Did you raise it from the very beginning or only when you realized you needed the money to grow? Or how did that play out?

Dan Park: Yeah, so we have this like interesting kind of chicken and egg problem where. Taking in inventory is incredibly expensive. Every time we buy an asset, one piece of inventory is, I went anywhere between 20 and $30,000 and that’s, we used debt financing to do that, but in the early days, you don’t have a lot of history. You’re burning money. And so lenders don’t wanna lend to you. And then the equity. Providers are like, who’s gonna fund your inventory? And they won’t put an equity until you find someone to fund your inventory. And so early days, it’s a real kind of a cold start problem cause you need the inventory to be able to scale the marketplace.

And so, I mean, early we were paying, pretty exorbitant rates on our debt facilities. I had a personal guarantee on the inventory. So myself and Steve as the founder, we both put personal guarantees on the inventory lines. And so we had to raise equity pretty early on just to be able to support the balance sheet.

It’s an incredibly capital intensive business, which, I don’t know if it’s like a good thing or a bad thing, and we can talk about that a bit, but for us, we had to do it early. And so we’ve gone through multiple rounds of financing at this point, and we raised approximately $200 million Canadian today.

Fabrice Grinda: What you describing for the companies that need that capital there’s kind of a pretty standard conveyor belt. You start by taking super expensive family office slash hedge fund capital at like whatever, 18% or 20% a year. Which is exorbitant, but you have no choice.

And then little by little you get better terms and you get like second tier banks. And then finally you get your whatever Citibank or HSBC line of credit at A. These days, probably 78%.

Dan Park: When it’s secured, you can get a prime, prime minus,

Fabrice Grinda: Okay. Oh, even better. Okay.

Dan Park: Yeah. So we started up at the high teens. For secured financing and then we eventually moved down to something more reasonable, which is in the prime rate now.

Fabrice Grinda: So why don’t we talk a little bit about like, the high flying years. Like at some point you ended up raising an amazing round and everything looked like it was up into the right.

So what we talk about, like what happened then and how it went wrong and then whether or not you do it again.

Dan Park: Yeah. I don’t know if you’re gonna bring it up or if I will, but I mean, I still distinctly remember that conversation back in 2020 about, nail it before you scale it.

Fabrice Grinda: Yep.

Dan Park: I think about that a lot actually. And I think about, whether or not we should have followed that advice better or, if we still made the right decisions. And I think it’s hard to look back and, and I think a lot of what we did was the circumstance of the times.

Chap Capital was really cheap and easy to come by back then. And I think that model for a long time worked right. A lot of businesses Uber is a good example of one that really only exists right now because of the availability of cheap capital. And so you know, back, back then we had a competitor and it was very much kind of a winner take most, if not winner, take all mentality.

And that fueled a lot of our decisions. I think when we were at Uber we lost a lot of ground battles to competitors because we weren’t there early enough and when we eventually got to launching those cities, it still took a lot of time and money to even, you know, make a dent in the market share they’d already kind of established. And so that really was framing a lot of my thinking back then, particularly with an aggressive competitor that we were up against. And so the mentality was look like, I’ve done this in the past you scale it and then you figure out the unit economics after, because we know that the car selling business is a profitable and lucrative one. So there’s no reason why once you’re at scale, you shouldn’t be able to deliver the same or if not better unit economics. That has now played out with Carmount in the public markets. Their financial profile is much, much more attractive than CarMax, for example. But that wasn’t always the case. And so

Fabrice Grinda: So you felt it was a line grab and in a line grab you want to be spending and get the market and the market share. What’s interesting is that that mentality actually killed Beepy.

Dan Park: Yeah.

Fabrice Grinda: But there are moments where it’s true that if you don’t go quickly enough and a winner takes all or takes most market, you die.

So the game theoretical decision tree typically is you spend because they’re like, if you don’t spend and they spend, they win. If you both spend, you both lose in a way, but it is the Nash equilibrium.

Dan Park: Yeah. And, and it was if you didn’t spend, you didn’t grow. And if you didn’t grow, you weren’t gonna get the capital. And if you didn’t get the capital, you weren’t gonna grow. And so, and, and I think that that really only works in a really kind of. Low interest rate, like cheap capital environment. And you know, before we got on, you asked me like, you know, would you have taken that a hundred million dollars round? I mean, I think from beginning, like first introduction to closing was less than four weeks.

It was super easy.

Fabrice Grinda: Those were the days.

Dan Park: Yeah. It wasn’t even the highest valuation. We had a valuation that was 30% higher and I remember being on a call, talking to the investor and convincing him why his valuation was too high, right? Like that was like, it was the other way around. And we took one that was lower for a bunch of different reasons, which in hindsight was probably the right call.

But it was, it was there, it was easy. And you know, someone offers you a hundred million dollars to go build, like, it’s hard to say no. And it was at a really rich valuation and so we got excited about it and you know.

Fabrice Grinda: So when we give a little bit of specifics. It was in what September, October, November 21.

Dan Park: That was late 2021. Yeah, that’s right.

Fabrice Grinda: Okay. So you raised how much and what terms, more or less?

Dan Park: It was 75 of primary 25 a secondary for some of the early investors, not employees. And at like a 5- 75 post.

Fabrice Grinda: Okay. And what happened after that?

Dan Park: Within six months, I would say less. cause at that first board meeting, it was go-go-go. I got handed a book called Seven Powers, which is a great book. It’s about basically competitive moats and defensibility. And we started building, right. We started building probably way further ahead of where our growth was, but that was what we needed to do.

Anticipating, you know, basically what was like a 200% growth rate. And that was the first board meeting and then said, Hey, look here’s your, there was you’re a hundred, like there’s another a hundred. Just, you know, go, go scale. Second board meeting was, whoa, whoa, whoa.

Fabrice Grinda: Hey, by the way, first you scaled from how much to how much were like, were using the capital.

Dan Park: We went from 87 million to like 200 million in a year.

Fabrice Grinda: Yeah, I mean 200 million. So that already pretty real scale.

Dan Park: Yeah and like the next year was projected to be like five, 600 million. So like, it was about like pure acceleration but within the next board meeting and early, this was early 2023 this crack started showing. Public market and all the e-commerce stocks, if you recall, were down 95%. People were trenching. I think every VC had escaped to like either Aspen or Italy in that summer. That summer was dead. Like no one would take my calls that summer. And we needed capital and we thought we could raise that capital cause it was bad, but, you know, it wasn’t that bad.

By the fall it started getting really bad. And, you know, basically if there wasn’t enough.

Fabrice Grinda: And how much were you burning a month to give a sense of scale?

Dan Park: We were burning like 5 million bucks a month.

Fabrice Grinda: 5 million a month. Okay.

Dan Park: So, and we built all this infrastructure to scale.

And so, we needed to continue to do that and it’s a little bit of that hamster wheel. And you know, by some miracle, we were able to get a term sheet in October of 2023 for a $95 million series C round that would’ve continued to put us on that trajectory. But within, what was it like? Four or five weeks, before we were supposed to close, the lead investor called us and said, Hey, look like we’re not feeling this deal anymore. We’re out. And so that was the last straw and that I think put us on a really healthy path. I mean, at the time I was in. I was on a family vacation and there was nowhere to take a call, so I was in the bathroom.

I remember this so distinctly. And so we were in the bathroom and I got the call that said, Hey, look, sorry, like we’re not gonna do this anymore. And I, I basically immediately got on the call with my exec team, we need to figure something out. Like now it’s pure survival mode.

So we went, that day I remember vividly it was January 4th, 2023. We went like fully into survival mode. And so within, I guess it’s 13 days. So January 17th, we executed a pretty large retrench cut 65% of the employee base, which super tough.

Fabrice Grinda: So how many to how many?

Dan Park: From our peak, 350 to 87.

Fabrice Grinda: Wow. In a couple weeks. Basically.

Dan Park: In one day.

Fabrice Grinda: In one day.

Dan Park: Well, sorry, we did one round kind of in 2023, you know, when everyone was kind of doing 2023. That was like the healthy round. That was the fat trimming round. Yeah. And then we did one really deep, deep cut. We, we only did two layoffs.

Fabrice Grinda: The total you riffed what, 65% or more than like 80%?

Dan Park: The second riff was 65. It went from 350 to 87.

Fabrice Grinda: Okay.

Dan Park: And cut three markets. So we were in five markets, cut, you know, down to two of our core markets, and then, all that mattered was profitability at that point. Survival and profitability. Set some very clear goals around where we wanted our margins to be.

And worked really hard at that and over the course of the next 12 months or I guess it was 16 months, got ourselves to net income positive, which really changed the game for us.

Fabrice Grinda: Let’s talk about two things. One is how much did revenues drop? cause obviously you were 200 million.

Dan Park: Yeah. The next year we only, we, we dropped to 1 75. Yeah, so we, we didn’t, we, we cut, I mean, there was a disproportionate amount of burn in our earlier markets. Right.

Fabrice Grinda: Okay.

Dan Park: So we just launched those markets. They hadn’t had a chance to scale. They hadn’t had a time chance to kind of mature. And so those markets were just disproportionately burning, which again, made the, the decision, fortunately easier. But we just, we just launched those markets. Right.

Fabrice Grinda: It was pretty crazy when you fire 75% of the people and you only shrink in a way, you know, like 10%.

Dan Park: Yeah. We got our legs cut out from underneath us before we even got started in some of those markets.

Fabrice Grinda: Yeah, the thing that’s probably worth talking about is like how you survive because you needed capital, you were outate cash. Yeah. And so you normally did you fire everyone, but you also had no more cash. So we had to completely recapitalize the company. And that, and completely changed the cap structure.

So probably tell us about that.

Dan Park: So we did that in the summer of 2023. And so we did a pretty punitive down round to basically put money into the business and clean up the cap table. Which at this point, it was nine institutional investors. I think all seven of the nine are going to be in a better position than they were prior to that down round. And the two that didn’t, I think understand and were, feel like they were tr treated fairly. And I still have a great, great relationship and have quarterly calls with them. But it was just truly a moment in time for a lot of folks.

Fabrice Grinda: Yeah. So if, if I’m not mistaken, and if you’re comfortable sharing, so I think the, basically the early stage investors. Stepped up of the plate. So it was like, Golden and FJ Labs

Dan Park: Canan stepped up in a big way as well.

Fabrice Grinda: Exactly. We’re like, we love the company, we love Dan. We want it to survive. Because the more capital’s available, but we’re trying to get it to profitability, what is the amount of money? And I think if I recall correctly, we did 5 million pre-money valuation.

Dan Park: 15,

Fabrice Grinda: We looted the founders from 5 75 looted, the founders and raised, I don’t remember, 15, 20 million, the amount you needed to get a profitability.

Dan Park: Yeah. And that’s, and we delivered on that. So that was the goal of that capital. We got to net income positive. And then very quickly thereafter. The beauty of this business is that once you’ve built the infrastructure, our ability to scale is, I don’t wanna call it easy, but very I mean, there’s a playbook to that.

Right.

Fabrice Grinda: Did you change anything in the pricing to help out? Like did you buy the cars for less? Did you sell them for more and increase the margin as well?

Dan Park: No, the fundamental thing that we did was we changed our supply acquisition channel, and so we were acquiring from auctions for the most part in wholesale, which if you think about it, there’s a few layers of cost that go into that and a few people that have their hands in the pockets to take margin away. And so what you end up with is very slim margin on what we call the front end, which is the, what we actually make on the car itself. So the front end margin and when you go direct to consumer.

And acquire their car. You actually can offer higher price, but also eliminate a lot of those costs. It’s also a better car. And so a better car at a better price. And so we’re able to then take those cars and that built margin there. And then we are also able to offer better backend project products that actually we sold, like we didn’t spent a lot of time selling financial services products. Like insurance and warranty to the consumer, because at that point it was all about scale and velocity.

Fabrice Grinda: Okay. But you started adding that. And financing.

Dan Park: And financing and so on the surface, we are a car seller and retailer. Behind the scenes I would say half of our business is financial services.

Fabrice Grinda: Okay. So when did you reach profitability? And then what was the path after that?

Dan Park: In July of 2024.

Fabrice Grinda: Yeah. So to me my most memorable moment in my career is actually not the day I sold OLX or Zingy or whatever.

It’s actually the day my second startup became cashflow positive. After I’d missed payroll, like for four month in a row, I was like a hundred thousand dollars in debt, et cetera. I was like, you are the master of your own destiny. The future now, yeah, you’re safe, your default alive.

Dan Park: I mean, it’s this magical shift.

And you know, as a founder and CEO, the weight of the world, somewhat like, I won’t say lifts, but certainly is lightened because. You know, when you’re burning five, 6 million a month, that’s $200,000 every day. You know, you wake up and you say, tell yourself, is this business gonna add $200,000 in value somewhere today?

Whereas when time is then on your side, when you start making money, which is a nice feeling to have.

Fabrice Grinda: So tell us where we’re at now.

Dan Park: So now, I mean now we’ve, that we’ve proven you know, profitability. Our intention is to continue to operate the business at breakeven.

You know, we have a lot of scar tissue at burning mass amounts of capital. And so we’re very conscious of setting the goalpost around growth slightly ahead of us, not like two, three years ahead of us, which I think if you really think about like, one of the mistakes maybe we made back then is I think we put the goalpost too far ahead and scaled too quickly ahead of our demand.

And so now we’re doing a little bit more thoughtfully and methodically around growth, which I think is healthy and being a lot more kind of capital-efficient. The way we launch markets is more capital efficient, the way we process and recondition cars is more efficient.

Kinda everything we do is more capital efficient just by force because we’ve had to. We had a forcing function that forced us to do it. But as we sit here today, I think we’re in a much, much healthier position to scale. And at this point, you know, even if you take those down years into consideration, where we are today, back from, five years ago, we’ve grown the business at a hundred percent CAGR.

And so the growth still is there, but now with much stronger profitability.

Fabrice Grinda: You mentioned or share more or less what scale you’re at right now

Dan Park: Yeah, we’re starting to approach like half a billion in revenue now.

Fabrice Grinda: Half a billion. Okay, so you’re way past the peak?

Dan Park: Yes.

 Way past the peak.

Fabrice Grinda: Okay. Yeah. That’s amazing. And I guess the fundraising environment is probably improving, so, so how big do you think this gets, like how big is the used car market in Canada? And like is this a billion dollar company, is this a 10 billion dollar company?

Like how big can, can this be?

Dan Park: I think the unique thing about the Canadian market is that you can just get higher relative market share ’cause it’s less competitive than the US. And it’s more of a winner take most, if not all type of market. Maybe I’m naive, but I think this the sky’s limit here.

You know, I think if you kind of proxy it to even Carvana. You know, 10% Canadian market versus the US kind of gets you to 5 billion in terms of like terminal exit value for us. But because we can later on so many other components around the car buying journey, particularly around financial services, you know, we’re pretty ambitious.

 I firmly believe that this might be the only company that I, or the last company that I work

Fabrice Grinda: Look, if I didn’t need to sell OLX, I would not have sold it. Like I didn’t wanna sell it. It was once you have scale on a platform, you can just keep expanding and doing more and more.

And you’re already at a position of strength and like, it’s way easier to like multivariate tests when you have scale. When you’re launching, and VCs are like AB tests like N equals 2, AB test doesn’t mean anything. It’s like random. When you have millions and millions in revenues, then it really actually is scalable, sustainable, and it’s an amazing platform to keep expanding.

So I could, I totally commend that. I agree that if you have a platform that’s amazing, keep going with that.

Dan Park: Yeah. Yeah. So that’s the goal. We’ll see what the future brings. I’ve tried to stop predicting things because I’ve been throwing curve balls a million times over the last couple years.

So but I think today, foundation is strong, the team is great, and the business works.

Fabrice Grinda: And we have a question how did you, in the down round, et cetera, like prevent being wiped out completely as you know, as a founder and do you still have like enough equity that you feel motivated on a go forward basis? How do you think about dilution?

Dan Park: So we did something really interesting. So because it’s capital intensive, there’s the kind of number that needs to exist so that we’re motivated and you need to have folks that are in the business that are motivated to go and build.

And so we, we negotiated a pretty significant management carve out of that round. But what we really did, so Steve and I didn’t really change ownership that much. But we really juiced the ownership of everyone else. We, we’d reduced the company down to 87. There, there was a lot of great people there that were committed.

And part of the criteria was just how committed and how passionate were you about this business? And so what we’ve got is that core group still for the most part is still here today? I’d say that maybe there’s like two or three people that have left from that group.

But yeah, that core group is there and we for most people at least doubled or tripled their equity ownership.

Fabrice Grinda: Amazing. Look, this is an incredible rollercoaster ride, right?

Like the ups, the downs, to the back up and to the right again, and now. You know, despite like some I guess macro and geopolitical and trinity with tariffs, et cetera things look pretty rosy.

A few questions knowing what you know now, would you have done anything differently?

Dan Park: I mean, look, like if I had full hindsight, I’d squirrel away that a hundred and or that 75 and, you know, not touch it, ride the storm out, not scale as quickly. I think, this is what I tell myself to make myself feel better at night.

Fabrice Grinda: How did your competitor raise? Like, would that have been an option? Because of course if a competitor raised and was spending, it’s kind of hard to do that if they had not raised than the other a hundred maybe. It’s easier to do that.

Dan Park: Well, they had just raised before us and so, yeah.

Fabrice Grinda: Okay.

Dan Park: And so we, and we were kind of raising in parallel and, you know, they put a hundred million dollar number out on the press. We didn’t know if it was entirely debt or equity, so we were like, we need to go like match that. And there was a lot of dynamics. I mean, it was a fierce, competitive kind of dynamic.

Fabrice Grinda: What happened to them, by the way, they just died.

Dan Park: What saved us is, I think we moved and we reacted really quickly. In early 2023, they are still holding onto 750 people. And so, and they weren’t, they were slightly bigger than us, but we were a third of the people. And so they basically declared bankruptcy in March of 2023.

Fabrice Grinda: Okay. Yeah. No, I mean, that’ll probably helps dramatically as well. Yeah. And the competitive pressure goes down and then you can be in a position to win.

Dan Park: Yeah. And there’s lot of flywheel benefits to just being the category leader. That I just did not fully appreciate back when we were kind of like fighting neck and neck.

Fabrice Grinda: So this category has had a lot of like, you know. Horses over the years especially globally, like you look in the UK there’s a company that went public, I think was, were like seven or 8 billion pounds. Like, so like $10 billion was called Cazoo. Like many of them, if not most of ’em failed.

What happened to the ones that failed? How are you different? And then what are the examples of people that are doing interesting things?

Dan Park: Yeah. I think the key thing for, and this is where a lot of people, again, kind of alluding to it at the beginning of the broadcast. There was this camp do full vertical integration or asset light, right?

Like, this is a classic VC thing, right? Like, you know, I love what you’re doing, but like, can you just do it a little more asset light? Right? And the winners today are now the ones that have the full vertical integration. Carvana is a winner. They’re now at 10% EBITDA margins are back to 50, $60 billion market cap. Stock went from $3 and 60 cents now back to 300.

And so that’s, I mean, that’s been an equivalent at a much, much bigger scale bounce back for them as well. But Vroom and shift in the US we’re more focused less on the infrastructure, more just on kind of being more asset light. Cause it was the same and they spent almost too much. They spent an exorbitant amount on marketing and brand, which is helpful, but you need the product as well.

And the core of the product is the quality of the vehicle. You know the folks in Australia I think are doing a really great job. They’ve kind of adopted a similar mentality around vertical integration. The folks in Mexico, Kavak, they’ve got some nuances around the market there, but I think they’re on a good trajectory now as well.

But that’s like the core. To be able to control the reconditioning and the cost of that reconditioning is so critical for this business. And that’s what really provides the value to the customer is the ability to provide a better quality vehicle.

Fabrice Grinda: Have you seen interesting developments in like the adjacent categories?

Like, bring my trailer for like the collectible car seen the US or like even the eBay integration of Caramel to try to fulfill post-closing. And do you have any perspective on these?

Dan Park: Yeah, I think there’s some good point solutions that make the consumer experience better. I think our approach to this is just, yeah, I wanna, we wanna own everything.

We wanna own it end to end, to make it seamless. And in order to do that and to make it truly seamless you need to own it, end to end. Otherwise you have these like interaction points. And you know, a couple of examples around the financing or even insurance. We’re not a p and c insurer.

And so what does that mean? Well, in Canada, once you go through this amazing experience that you got out with us, super seamless, all digital, you get kicked out, and you’re told to go talk to your insurance brokers. You gotta gotta get this new car registered. And that can take a day, it can take three days. Right. And so that’s, that puts this like point of friction in our process that we can’t really control. You know, eventually we’d like to be able to control it.

Fabrice Grinda: Even if you’re not the one doing the financing, the insurance, et cetera, like yeah, it should be an API.

Dan Park: Where they integrated. Right.

Fabrice Grinda: Yeah, exactly. Yeah. It’s integrated. They get the financing, they get insurance, they get the registration, like everything’s done. You’re just delivering the car and they can go drive it.

Dan Park: Yeah. We’re not gonna be underwriting, you know, car insurance anytime soon, but you know, again, it should be.

Seamlessly integrated into our process so that you’re not kicked out to this.

Fabrice Grinda: Is there path through that happening?

Dan Park: Yes.

Fabrice Grinda: Is that 12 month, is that 24? Is it 36?

Dan Park: It’s probably 12 to 18.

Fabrice Grinda: Is anyone doing that yet? I don’t mean in Canada, I mean globally.

Dan Park: Yeah. There’s certainly kind of like embedded insurance providers. But the challenge is.

Fabrice Grinda: Yeah. Vacation of your partners.

Dan Park: Well, not only that, if you want, if it’s just one quote, then the customer’s like, you know, if I don’t like the quote, they get to blame you. Right? Yeah.

Yeah. And so you wanna offer multiple quotes, and so it do become like a little bit more of a brokerage. And so there’s some nuances there, but yeah, certainly there’s a path towards that.

Fabrice Grinda: So you think this goes public, you think like, like what’s the path?

Dan Park: The path we’re on right now for the next three to four years is to be able to put us in a position to go public in three to four years. And so whether we do or not is a function of the capital markets and function of what’s available privately. It’s what if the IPO markets are even open? But I think in a world where you have limited strategic acquirers, you want to create another alternative for us would be going public.

And so the mentality around. Everyone is to be able to level up and mature the business to a point where in the next three to four years, if we have that option or if we wanted to, and that was the right decision, at that point, we would could go public.

Fabrice Grinda: Do the tariffs impact you in any way?

Because, I mean, these are used cars. They’re ready in Canada. They’re not being brought from the US.

Dan Park: They will be downstream impacts. I am more optimistic about tariffs. I do think that eventually we’ll land in a place where it’s not gonna be that’s significant of a cost to consumers just because, we’ve spent the last 60 years building a pretty efficient global supply chain around auto.

Unwinding that over one, two, even four years is not easy. I think it takes a lot of planning and, decision making from the OEMs to decide to actually put a factory in wherever. Indianapolis or Indiana or wherever it is. And so I’m optimistic that one, it won’t be as bad as it maybe is right now.

And then kind of longer term, shorter term, there will be some downstream impacts. If the price of new cars goes up, then demand starts pivoting and pivoting into used cars, which puts price pressure on used vehicles. And so we’ll see probably some of that, but we haven’t seen it yet really.

Fabrice Grinda: Have there been funnel changes in used car prices? I mean, obviously they went up during, dramatically during. Did that retrench completely. Are they depreciating faster than before or is it kind of like the same as it’s always been?

Dan Park: Yeah, we’re still, I think we’re still up about 10, 15% above pre pandemic levels, but car prices, as if you recall jacked, I mean, it’s different between US and Canada, but they went up anywhere between 20 to 40%.

And then they’ve come down. I think the interesting phenomenon that’s happened there is that a lot of people that bought cars, a couple years ago have a lot of negative equity in their vehicles now because the price has come down more drastically than, than is typical. And so you’re left with a lot of consumers that have a significant amount of neg negative equity in their vehicle.

Fabrice Grinda: I see and what’s been the EV impact, like what percentage of used cars right now on your, on your platform that are sold or EVs And do they behave any differently from gasoline cars, from a pricing or whatever perspective?

Dan Park: I mean, right now we’ve got some interesting price movement on Tesla.

Mostly because of some of the stuff that Elon’s been doing, but the bulk of our, I would say about 80% of our EV inventory is Tesla. Okay. Somewhat reflective of the market. About 10%, 12% of our cars are EV so kind, reflective of the market today. Canada EV infrastructure is probably less built out than certainly like California and there’s some nuances with the cold weather up here that make it less popular.

But I think the trend will continue, technology will improve and, ranges will get better. And adoption slowly kind of continue up the curve.

Fabrice Grinda: Okay. Have you put any thought at all in the long, long run? Like things to keep you up at night is like, do we get to a world where the Waymo’s of the world, you know, they’re self-driving cars, is kind of everywhere available on demand and you don’t need to own a car anymore.

Like is that something that you even worry about or is that like sci-fi for 20 years of the future and therefore not something to worry about all that much?

Dan Park: I was in a Waymo in San Francisco. It’s incredible. Like it’s an incredible.

Fabrice Grinda: Yeah, it’s great.

Dan Park: It’s an incredible product. I think car ownership might change. What generally happens when technology gets better and the costs come down is that instead of being accessible to the masses, the consumers just want it for themselves, right? So like, I want a Waymo for myself.

 At the point when it comes reasonable and priced for consumers. Everyone will just want a Waymo car in their garage. And sure there’ll probably be a network circulating in the same way that there’s an Uber circulating. But I think that car ownership may come down, but the fundamental need to have a car, I mean, you have kids and to like take the car seat in and out and like to worry about the Cheerios on the backseat.

And like, I put my kids play hockey and consumers I think will want to continue to have the convenience but not have to drive. And so I think maybe the cars will change. But ownership won’t necessarily change. And I think we’ve also had a bunch of infrastructure that could be helpful for like a massive network of cars.

So I don’t know if it necessarily keeps us up at night, but if you continue to evolve and have enough kind of irons in the fire different parts of the ecosystem you will be able to adapt.

Fabrice Grinda: I’m shocked. It’s interesting, like when I invested in Uber, I was worried that, oh, self-driving is gonna decrease the mode, et cetera.

It was like 10 years ago, right? Over 10 years ago. And it was like 2012 or 13. Yeah. And I’m shocked that it’s taken together at any point where self-driving is meaningful. But now, like you go to SF or Austin or LA and it’s like prominent, prevalent, and it’s accelerating.

It’s gonna come more and more. So that’s why. Yeah, and I, I think about it, but to your point, you know, now with like three kids, I’m hoping a fourth, and not to just the future of the dog, the car seats, the toys, the diapers. It’s like, that’s why I would need two way, like, I need a car that’s ginormous.

There’s not even a car in the market that like fits us right now. I have one from acid light to acid heavy.

Dan Park: I mean, maybe you might drive it less because there’s Waymo’s driving around, but you’ll still like the, you’ll still own one. Right?

Fabrice Grinda: Yeah, that makes sense. Yeah.

Anything we didn’t cover that we should cover?

Anything you wanna share or mention or anything?

Dan Park: Yeah, I think, I mean, the thing that that I probably appreciate the most from my last five years is just the team piece of it and the going through hard things with other people. When I was in VC, I don’t think I spent enough time diligencing the teams.

You know, you look at the numbers, you look at the business, but I mean, at the end of the day, it’s all about execution, right? Like this what we’re doing from a business model perspective isn’t that, new or, frontier, like, there’s been, like BPU of reference, like people have tried to do it this before.

I think team is so important and just the trust that you have to build with people over time and how hard that is and how much like infighting and, political kind of dynamics and relationship management that has to happen. And I think that just gets better over time. And so maybe the advice or like the take away is that, like that’s a constant and that never goes away.

And that’s something that maybe I took for granted and now I appreciate like how important having a great team that trusts each other is, and, the battle testing of that team. Our team now having gone through what we’re gone through, it’s like I. You know, we have, there’s a lot of confidence.

There’s a lot of confidence that like, yeah, sure, we might get thrown some curve balls, but we’ll figure it out.

Fabrice Grinda: So basically, VCs should not just suck at the founders, they should not team writ large. And two, and I agree, if like you’re fighting in the trenches and you have a near-death experience, those who survive it, like you’re bonded, you’re your brothers in arms, you know, bonded forever.

Dan Park: I mean, you’ll just like, you know, 2010, whatever the year is, like, you’ll sit down, you’ll grab a beer and you’ll, you’re gonna tell those war stories. Like those folks, and I mean, that’s like half the fun for me. Right. It’s like being able to tell those stories. cause that’s like, that’s kind of why we do it.

Right.

Fabrice Grinda: Perfect. Well, amazing.

Thank you for joining. Thank you everyone watching us and I’ll see you guys on the next one. Thank you.

Dan Park: Awesome.