Finn, a startup based out of Munich, is revolutionizing car ownership with a new platform for car subscriptions. This innovative alternative to buying or leasing allows drivers to regularly upgrade to new vehicles. To support its expansion efforts, Finn has raised a significant amount of growth funding. With this financial boost, the company plans to expand its technology capabilities and reach a wider audience. Part of this expansion includes a focus on offering more electric vehicles, as well as implementing cutting-edge cloud-based tools to manage its services. The successful funding round, a Series C, has raised €100 million and values Finn at €600 million post-money.
Leading the round is European growth equity firm, Planet First Partners, who has a strong emphasis on sustainability. This aligns with Finn’s goal to have 80% of its car inventory made up of electric vehicles by 2028. Currently, only 40% of its fleet consists of electric cars.
“The transition to electric vehicles is one of the major societal shifts taking place globally and is crucial in our move towards a more sustainable economy,” explained Nathan Medlock, managing partner at Planet First Partners in a statement. “With road transport accounting for around one-sixth of global emissions, electric vehicles are vital to decarbonize society.”
He’s not just a financial backer, but also a new addition to Finn’s board of directors. Other previous investors, such as HV Capital, Korelya Capital, UVC Partners, White Star Capital, and Picus Capital, are also participating in this latest round of funding. In total, Finn has raised about $250 million in equity, and an additional $1 billion in debt, which they offer on a rolling facility and repay based on car sales.
A Rocky Road for the Car Subscription Market
The road for the car subscription market has been quite bumpy over the years. Despite high-profile startups like Fair.com raising hundreds of millions of dollars before ultimately failing and pivoting, the market is still gaining traction. However, notable players in Europe, such as Onto in the United Kingdom, filed for bankruptcy in September of 2023. Another big player, Cazoo, has also discontinued its car subscription business in 2023 in an effort to financially stabilize and avoid failure. Despite the challenges, Finn remains optimistic about their success in the market.
The concept of car subscriptions is intriguing, yet execution has proven difficult. According to Boston Consulting, it’s been a “passing fancy – a product in search of demand.” This has resulted in disastrous unit economics and uncertainty about who exactly would want to possess a car on a subscription model in the long run.
Insights, Mistakes, and Progress for Finn
Despite facing similar challenges, CEO and co-founder Maximilian Wühr believes Finn’s late entry into the market has given them an advantage. Founded in Germany in 2019, they expanded to the United States in 2022. This has allowed them to gather insights from other companies’ successes and failures, guiding them in making strategic decisions for their own growth.
Finn’s approach is to offer new cars to their customers. In fact, 97% of their inventory consists of brand new vehicles. Subscriptions are typically 12 months, longer than a rental but shorter than the average lease. These new cars are purchased in bulk directly from OEMs. With over 350 different configurations to choose from, customers have plenty of variety. However, Finn does not offer customization beyond their preset options. They have also established deals with car retailers to buy back vehicles once a customer’s subscription ends.
Customer Experience and Efficiency is Key
Finn caters to both individual consumers and businesses looking to provide their employees with vehicles. However, customers are not allowed to use the cars for ride-hailing purposes. The monthly subscription fee includes insurance, tax, and technical inspection but not maintenance. Finn offers a range of prices, but the most popular models typically go for €430 to €1,200 per month.
To ensure a seamless and efficient process, Finn utilizes data science to determine customer preferences and how much they are willing to pay for their desired vehicle. They’ve also built an e-commerce platform to optimize the buying experience. Similar to traditional online shopping, Finn has streamlined the process to avoid shopping cart abandonment, where potential customers give up on their purchase due to hurdles along the way.
“You can order the subscription in less than five minutes, and then within days it gets delivered to your doorstep,” shared Wühr, highlighting the company’s speed and convenience.
Future Plans for Finn
Moving forward, Finn aims to enhance the customer experience through their app. This will allow subscribers to easily exchange vehicles, contact customer support, and purchase additional services. Support can be a costly aspect of a service-based model, so Finn is working towards reducing the need for human interaction to further lower expenses. Their goal is to create a “seamless” experience for customers, where they rarely need to speak to a representative.
Finn is also looking toward utilizing the evolving technology of connected cars. With this, they can gather real-time data on customers’ driving habits and potentially offer additional services. However, this is currently a slow process, as not all vehicles in their fleet have the necessary technology to make this feasible. Wühr also noted that many car manufacturers have their own proprietary systems, making it difficult to implement a universal system across Finn’s entire fleet.
Finn’s expansion into the United States is a more recent development, with the business still in its early stages there. They face their own set of challenges in this new market, and success will depend on their ability to scale up like they have in their home market of Germany. Wühr mentioned that the company has established strong relationships with OEMs in Germany, covering over 80% of the most popular makes and models in the market. However, this is not yet the case in the US. “The US is working really, really well from a consumer’s perspective, but it is a little bit harder to get to the right OEMs,” Wühr admits. Obtaining the necessary scale in the US may pose a challenge for Finn.