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British used car startup Cazoo was once worth $7 billion. It’s since lost nearly 100% of its value and is flirting with bankruptcy—what went wrong?

Prarthana Prakash
By
Prarthana Prakash
Prarthana Prakash
Europe Business News Reporter
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Prarthana Prakash
By
Prarthana Prakash
Prarthana Prakash
Europe Business News Reporter
Down Arrow Button Icon
May 10, 2024, 8:26 AM ET
cars lined up in a cazoo showroom
Cazoo's customer center in Southampton, U.K. pictured in March 2021.Chris Ratcliffe—Bloomberg/Getty Images

Cazoo’s growth was spectacular, even for a tech platform. The British used car startup achieved unicorn status only months after launching in 2019.

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High demand for second-hand vehicles helped deliver a $7 billion valuation when Cazoo listed via a SPAC at the New York Stock Exchange in 2021, making it one of the most valuable tech startups in Europe. 

It was a big milestone for the British auto industry—and indeed, the rest of Europe, to which it sold cars—even if the company’s listing was across the Atlantic.  

But Cazoo’s dream run didn’t last very long. In a complete reversal of fortune, the company has lost well over 99% of its value—its stock is currently worth about $35 million— amid mounting financial woes and is now toying with bankruptcy.

Earlier this week, Cazoo said it was considering administration as an option, according to an SEC filing. It sold its remaining stock of cars in March and is now considering changing its business model to keep it going.

It raises the question of whether Cazoo grew too fast or was simply one of the many unicorpses left in the wake of the post-pandemic bust. 

Cazoo’s acceleration to the top

The British startup was founded by veteran entrepreneur Alex Chesterman, who also launched the residential property platform Zoopla and video streaming service LoveFilm. Cazoo managed to raise funds from venture capital firms like General Catalyst and DMG Ventures to help it target a market that had low digital penetration, Chesterman said at the time.  

The startup aims to make car purchases as easy and accessible as shopping online for anything else. It delivered used cars and offered a 90-day warranty, which worked well for the company during the pandemic as people were confined to their homes. 

Investors saw the success of Carvana, Cazoo’s American competitor, and were keen to enter the industry.  

It launched in the U.K., and with the funds it raised, financed its expansion across Europe. 

Cazoo’s expansion also came when the market for SPACs was hot. But while its 2021 listing was expected to accelerate the British startup’s growth further, things soon began to go awry.

Through 2021, the appetite for used cars drove Cazoo’s business—in just the first half of that year, its vehicle sales skyrocketed by 400% compared to 2020. But the following year, the value of stocks (particularly in tech) began to plummet, with the U.S. stock markets experiencing their biggest-ever loss in 2022 following the 2008 financial crisis. 

Cazoo’s shares went into freefall. The car retailer announced layoffs and plans to scale back its expansion that year. Eventually, much-needed funding began drying up. Interest rates and inflation inching upward only made matters worse. 

While Cazoo’s 2022 sales of £1.3 billion ($1.6 billion) were up 90% from the previous year, its losses increased 30% to £704 million ($880 million).

Cazoo flagged in December last year that it was running low on liquidity and would need more capital to fuel its operations in the latter half of 2024. It also underwent a debt restructuring and appointed a new board of directors to look into its options. 

Despite the rollercoaster ride that Cazoo has endured, the British retailer is far from alone. The U.K. has minted fewer unicorns recently, partly because of slowing funding activity and lower valuations amid economic uncertainty. And many once-unicorns in the U.S. are now no more.

Cazoo may have fallen a long way, but it still has time to turn things around. Whether it can clear the considerable roadblocks in its path remains to be seen.

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About the Author
Prarthana Prakash
By Prarthana PrakashEurope Business News Reporter
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Prarthana Prakash was a Europe business reporter at Fortune.

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