A Shift representatives with a customer.
Courtesy of Shift

Facing rivals like Beepi and Vroom, Shift raises new funding in the race to make buying and selling used cars more efficient.

By Kia Kokalitcheva
September 1, 2015

Shift Technologies, an online marketplace for used cars in San Francisco and Los Angeles, said on Tuesday it has raised $50 million in new funding.

The San Francisco-based company is operating in an increasingly crowded market, with competitors like Beepi, Carvana, Vroom, and Carlypso, among others, vying for the same business.

Shift’s pitch to people looking to sell their cars is simple: using data and algorithms, Shift guarantees a minimum price. After sellers submit a car for sale, a company representative makes a house call to conduct an inspection, takes the car to a storage facility, and lists it for sale online. The company handles marketing and test drives for potential buyers. Sellers are paid after the car is sold.

Shift keeps half of the difference between the minimum price it quoted the seller and the final price, meaning it has an incentive to sell the vehicle for as much as possible to maximize its commission. The company gets nothing for a sale at the minimum price.

Moreover, although it takes less than 30 days to sell a car on average, Shift’s co-founder and CEO, George Arison, told Fortune that his company keeps cars on the market for a maximum of 60 days. If it doesn’t sell a car during that time, which Arison said has happened only a few times, it looks to alternatives like auctions and still pays out the guaranteed minimum to the seller even if that means a loss for the company.

Using a warehouse to store the cars while they’re on the market sounds a lot like what traditional car dealerships do, and raises questions about how Shift can afford to run its business. But Arison said that dealerships have to maintain an attractive lot and office in an easy-to-reach urban location, while “we just have a warehouse that’s very far-removed from foot traffic.”

As the competition stiffens, Shift plans on using its new funding to expand to new cities—Arison says it will be in 20 by the end of 2016—and will soon implement in-house financing services for its buyers. Currently, Shift connects them with third-party financing partners.

Goldman Sachs Investment Partners led this latest round in Shift, with existing investors DCM, DFJ, and Highland Capital also participating. This brings Shift’s total funding to $73.8 million. Arison co-founded the company in 2014 with Christian Ohler, Morgan Knutson, Joel Washington, and Minnie Ingersoll.

For a dive into the some of the challenges of expanding online marketplaces, watch this Fortune video:

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