Carvana, the Amazon of Used Cars, Just Bought a Competitor

August 8, 2017, 10:16 PM UTC

Carvana, the online marketplace for buying used vehicles, has acquired a rival startup called Carlypso.

The terms of the deal were not disclosed.

Carlypso started as an online used car site to help regular people sell cars to their peers. But it evolved into an online marketplace that gave consumers access to thousands of vehicles being sold by fleets or other wholesale markets. Carlypso would help customers find a car and then guide them through the buying process including acquiring the vehicle on the customer’s behalf and then inspecting it. The vehicle would then be shipped to customers, who would have seven days to test it and return it if they wanted.

Carlypso’s value is the data and analytical tools it developed to more accurately value cars without actually physically inspecting them (even they offered that guarantee to consumers). Those tools are used to capture and organize information on tens of thousands of vehicles being sold on the wholesale market, and ultimately place a value on them.

That’s a critical piece of technology for Carvana—a self-described “Amazon of cars— that lets buyers shop for, finance, buy, and trade in used cars online. Carvana bought Carlypso because of its underlying data and analysis technology, Carvana co-founder and CEO Ernie Garcia III told Fortune.

“You can’t learn anything without data, that’s the core ingredient,” Garcia said. “Then you have to have great analysis. So Carlypso was great at acquiring data using all these different tools, and they were great at analysis to figure what options were on these cars and what these options were worth.”

With the acquisition, Carvana gets more data about the features on vehicles, which, in turn, lets it make smarter bids for the vehicles it buys and later offers to consumers. For instance, a car with one kind of navigation system may be more valuable than if it had a different system.

Carvana has differentiated itself in the crowded online used car marketplace by developing—alongside its online business—multi-tiered glass buildings that are described as automated car vending machines. Customers can choose to pick up their purchased vehicle at these “vending machines” or have the vehicle delivered.

Carvana has facilities that let it offer free, next-day delivery to local residents in 33 markets, including Austin, Atlanta, Dallas, Pittsburgh, Phoenix, and Washington D.C. The company, based in Phoenix, has more than 1,300 employees.

Carvana filed for an initial public offering in March and made its market debut on the New York Stock Exchange in April. Carvana had an initial weak start on the NYSE, falling more than 17% on its first day of trading before it recovered slightly to close at $11.10 a share. Shares fell even further before gaining ground after the company’s June earnings report—its first as a publicly traded company. Carvana shares jumped after that report and are now trading above $19 a share.

Carlypso was founded by Chris Coleman and Nicky Hinrichsen. The pair started the company in 2014 while earning their MBAs at Stanford University. They will stay on at Carvana.