Finn raises $109 million at a $658 million valuation, taking its car subscription platform into high gear

Finn, a Munich startup that runs a platform for new car subscriptions – an alternative to buying or leasing for those looking to drive new vehicles – has raised a significant round of growth funding, money it plans to use to expand is expanding its technology and reach, with a move to more electric vehicles and cloud-based tools to manage its services. The company, which currently manages 25,000 subscriptions in Germany and the US, has raised €100 million ($109-110 million), a Series C that values ​​the company at €600 million post-money ($658 million at current rates).

Planet First Partners, a European growth equity firm that says it focuses on sustainability, is leading the round. At Finn, this emphasis on sustainability translates into the goal of having 80% of its car inventory electric by 2028, compared to 40% now.

“The transition to electric vehicles is one of the major societal shifts happening worldwide and is crucial in our move toward a more sustainable economy,” Nathan Medlock, managing partner at Planet First Partners, said in a statement. “With road transport accounting for around one-sixth of global emissions, electric vehicles are key to decarbonising society.” He will join the board this round.

Previous backers such as HV Capital, Korelya Capital, UVC Partners, White Star Capital and Picus Capital are also participating. It has now raised about $250 million in equity, and about $1 billion in debt, offered on a revolving facility where Finn repays amounts based on the cars he sells.

It’s been a bumpy road for the car subscription market in recent years. High-profile startups like Fair.com raised hundreds of millions of dollars before going bankrupt and eventually folding. One of the larger players in Europe, Onto in Great Britain, filed for bankruptcy in September 2023. Cazoo, which has acquired a number of car subscription companies in its growth strategy, shut down that business in 2023 amid its own struggle to get its finances in order. to avoid his own failure.

The idea of ​​car subscriptions is nice, but the execution is not. Boston Consulting described it as a “passing fantasy – a product in search of demand.” That meant disastrous unit economics, and of course a lot of uncertainty about who will want to own subscription model cars in the longer term.

Maximilian Wühr, CEO and co-founder of Finn, believes that his company’s relatively late entry into the market (it was founded in Germany in 2019 and expanded to the US in 2022, the only other market where it currently operates) has led to it provides a better insight into what hasn’t worked for others, to avoid making the same mistakes.

The formula is based on offering new cars – which make up about 97% of the company’s inventory, Wühr said – typically offered on subscriptions of around 12 months (longer than a rental period, shorter than the average lease period) .

New cars are purchased directly from OEMs and purchased in bulk. It has about 350 different permutations of configurations that it offers to users, but it doesn’t give them any options to customize themselves further. And agreements are made in advance with car dealers to buy the vehicles when the subscriptions have expired.

It also sells to both individual consumers and companies that use multiple vehicles for their employees. It does not allow customers to use the cars for certain things, especially ride-hailing.

The vehicles are supplied all-in, with insurance, tax and technical inspection (but excluding maintenance) included in the monthly costs. There are different prices, but popular models range from €430 to €1,200 per month.

That effort, he said, has led to the company reaching annual recurring revenues of €160 million in the two markets (the vast majority of which, €150 million, in Germany). Although Finn is not yet profitable overall, he said that “the core product is profitable,” meaning the company has developed unit economics that some of its less successful peers did not have.

Today, Finn already has some strong data science trends at work, helping the company figure out what people are interested in about driving and how much they’re willing to pay for it.

It has also already built an e-commerce platform aimed at maximum efficiency. Online car transactions suffer from the same shopping cart abandonment issues that e-commerce retailers regularly face. Too many barriers to buying what they want online usually results in people changing their minds and leaving sites. That is why the company has optimized the process of finding and purchasing a car.

“You can order the subscription in less than five minutes and it will be delivered to your home within a few days,” he said.

The plan, Wühr said, is to create a deeper and more “seamless” experience in its app for those who already subscribe to cars, to trade in vehicles for new ones, to contact customer support, to purchase additional services, and more. Support can be one of the most expensive aspects of any service-based model, so the goal is to take the humans out of the chain as much as possible, he said, to reduce that further.

“We want to make sure the companion app works really, really well for subscribers,” he said. “If something has to do with the car, you basically never have to talk to a human again.”

The company is also trying to leverage the evolution of connected cars, albeit more slowly: although the goal is to better diagnose the extent to which its customers are actually driving cars, in real time, and perhaps provide services they can while they are subscribers, for now Wühr said not enough of its existing fleet has the facilities to manage that – and those that do typically all have proprietary systems – in a useful or cost-effective way for Finn to implement.

Finn’s expansion into the US is more recent, and that company is smaller and faces its own challenges. So one thing to watch out for is whether it manages to scale there like it did in its home market. Wühr said that in Germany it has managed to build strong relationships with OEMs for vehicle sourcing, to the point that it covers more than 80% of the most popular makes and models on the market (consisting of 30 brands, he added to it). That’s not exactly the case in the U.S., he said, where discussions with OEMs have been slower to translate into deals.

“The US works very well from a consumer perspective, but it’s a little bit harder to reach the right OEMs and just because you need more scale in the US, it becomes a harder market to get into.” Wühr admitted.