INTERVIEW (Etop Ikpe, Founder/CEO, Cars45)
Driving Positive Disruptions to Attract Institutional FundingThe Fidelity SME Forum is a weekly radio programme organized by Fidelity Bank Plc to educate, inform, advise and inspire budding entrepreneurs in Nigeria with knowledge and expertise that will enable them build sustainable and successful businesses. The interactive radio programme features subject matter experts and model entrepreneurs as guests on a weekly basis to share their insight and unique success stories. In this interview, Etop Ikpe, Founder/CEO, Cars45 gives valuable insights on “Driving Positive Disruptions to Attract Institutional Funding”.
Q: Tell Us A Little Bit about Cars45?
Etop: Cars45 was started in July 2016. In Cars45, what we do is to solve two problems. On one end we help people sell their cars. On the average it takes about 15 to 45 days to sell a car. We’ve been able to help people do that in under an hour. On the other end, we connect the sellers to the car dealers who also want to buy their cars.
Q: How Did You Get to Cars45? What is Your Educational Background?
Etop: I went to the University of Lagos and that was where I cut my teeth in entrepreneurship. I have always done all sorts of businesses, but my first venture was in my final year. I had a bespoke software development company where the focus was on B2B businesses. We did that for about 2 years. I also had stints in the media where I had a TV production company. But I would say my first real foray where I built my career from was consumer internet. I founded one of the first ever consumer internet companies in Nigeria, which was called Three Stitches. It was an online fashion retail store. My cofounder in that business used to sell clothes and I figured out that there was a more efficient way to do this business than opening a lot of stores. It was quite successful days before some of the bigger ecommerce companies that we know now. That was how I got into the ecommerce space. In about 2011, my company was acquired by DealDay.com, which was one of the largest discount companies in the country. I moved on to DealDay where I was CEO for about 4 years, then moving on to Konga where I was commercial director up until I started Cars45 in July.
Q: Why Did You Move Through a Lot of Industries: Fashion, Lifestyle, Cars?
Etop: I am very adaptive; I like to explore and learn. It has to do with understanding some of the business dynamics. Going into all these industries helped me to understand the business dynamics across various industries.
Q: Why then Did You Decide to go into Cars and Stick with Cars Alone? Was there a Lightbulb Moment?
Etop: Funny enough, this was one of the things I’ve done in my life where there wasn’t a lightbulb moment. It was based on a close analysis of the market. I was particularly interested in solving a very big problem. We analyzed the market, looking at the various challenges across various industries. After looking at the market opportunities, we felt this was the best place we could extract a lot of value and create a lot of value for people. Of all the things I’ve done, this was where we analyzed the most.
Q: How Would You Explain Cars45 to the Layman? What Makes Cars45 Stand Out to the Layman?
Etop: If you want to sell your car, visit our website (Cars45.com), put in your car’s details on the platform. Our platform has a pricing algorithm that will give you an estimated value of your car. Once you’ve done that, you are expected to visit one of our inspection locations, that is, our physical inspection facilities where you can drive to and have our designated trained technicians inspect the vehicle to do the background checks on the car and verify it to ensure that it actually belongs to you. We also check the technical aspect of the car. The car’s history and state contributes to the valuation of the car. Once we are done with the inspection we tell you what the valuation of the car is. At the backend we have over a thousand car dealers who will place bids on the car real-time after it has gone live. In 30 minutes you will be able to get a bid. On the average we get about 11-15 bids on every car in our platform. If you like the value you receive for your car, you’ll get paid instantly.
Q: How Many Did You Start With and What Challenges Did You Encounter with Capital?
Etop: I’ve always bought and sold used cars so I understood the challenges of the market. We put together what we needed to buy one or two cars and we bought and sold, bought and sold, even before we had an app and the inspection locations. That was how we started out. We discovered that if we create solutions that were convenient for the sellers, with dealers who also needed those cars, there was a market there for them.
Q: What was your start-up team like? What number were you?
Etop: About 3 of them.
Q: How did you choose your team and sell the idea to the next person?
Etop: Everything else from that initial stage was built out of networks. Because we all had passion for the business, we knew the right people to bring in.
Q: What is the capacity of your team now?
Etop: In terms of structure, we have a technology unit, commercial unit that focuses on revenue, a commercial operations unit that focuses on the backend of the business, retail and storage unit that manages the storage and distribution of the vehicles and then we have all the regular business support. We started out without a center, but now we have 40 locations across Lagos, Abuja and Port Harcourt. We have 10 distribution and retail lots across Lagos, Abuja and Port Harcourt. We are going to be launching in Kano next month.
Q: What is your staff strength?
Etop: Right now, we are just about a hundred.
Q: When did you start to seek capital and funding?
Etop: It was about 6-7 months into our launch. Right from the start, I knew that it was going to be a very capital-intensive business and that it was going to be difficult as well raising capital as a Nigerian or African business. One of the things we had done from day 1 is to have good relations with potential investors. We let them know what we were doing. I always advise people, don’t wait till you are desperate. Let them feel like they are part of the business.
Q: What is the value of the first funding that you got?
Etop: Our first seed round was around $500,000 and about 8 months later we were able to raise another 5 million dollars.
Q: What do you think investors saw in the business to think you are due for funding and at what point?
Etop: First things first, you have to have a very good financial plan and a very clear and transparent business model. We knew at what point we would have improved the market and then begin to expand. It was very transparent for everyone to see, since we carried them along from day 1.
Q: Equity or Debt Finance: Which one worked for you and which would you advise entrepreneurs and start-ups?
Etop: It depends on the type of business. For us, we started with equity. Debt is not bad, but it depends on what kind of business you do. We are a trading business and we need working capital. Working capital is usually debt finance. But because we were going into a new industry, we had equity to understand what the margin structures would be and what our operating margins would eventually be. As you scale over time, you would understand what sort of funding will be best for you and what sort of interest rate your business can withstand. My advice is you will make mistakes and fail at times. Try as much as possible to plan your business in such as way where you give yourself room to understand the failures that would occur. At the end of the day, it is how your business is received that determines how you are going to grow in the business. Being able to adjust for those variations is the difference between surviving and dying.
Q: How do you ensure that these investments are properly utilized as the business expands?
Etop: Investments force you to be much more structured. Before anyone will give you capital, you must have a business plan of at least 3 years that puts the business on paper and your job is now to utilize the funds according to what is there. If you are going to get more investments in the future that means you are going to do better with what you currently have. It is your responsibility to utilize those funds judiciously. It is basically the business plan that keeps you in check.
Q: Did you have fears when you were starting the business?
Etop: Of course! Fears are just part of it and you have to embrace your fears. Your fears are your signals to keep you prepared all the time. Fear is not a bad thing and you just have to think about how you can solve the problem.
Q: Do you think that sometimes we ask for too much fund?
Etop: It depends on what you do. The capital you require is determined by the business you want to do and what you want to utilize the funds for.
Q: How do you know how much to ask for?
Etop: You need to look at the market and its potential. You need to test the market and improve on the model. It then depends on your appetite and how much you want to grow and how much market share you want.
Q: Have you ended up selling cars less than the amount you bought them?
Etop: Of course! It’s a trading business, you gain and lose through mistakes. Make fewer mistakes and you grow.
Q: What are your biggest pitfalls so far in the business?
Etop: One would be buying the wrong cars, that is, buying cars at overvalued prices. Some locations haven’t worked out as well.
Q: Are you on social media?
Etop: I am on Twitter @etopty and @etopikpety on Instagram.
Q: Do you have an email address?
Etop: Yes – email@example.com.