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Monday, January 17, 2022

Estonian car subscription startup raises $30M

Planet42, the startup fighting transport inequality by putting cars in the hands of people unfairly ignored by banks, has raised $30 million in equity and debt funding. The $6m equity round was led by Naspers, with existing investors Change Ventures and Startup Wise Guys also participating alongside unicorn founders like Martin and Markus Villig (Bolt) and Ragnar Sass (Pipedrive).  Existing debt investors, such as Lendable, added $24m. Planet42 will use the additional funds to buy cars and continue its rapid growth in the South African market, as well as kickstart growth in Mexico.

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Across the developing world, people struggle with access to a personal car despite having stable incomes. At the same time, public transport is often unreliable, inefficient, and unsafe. A personal vehicle can be life-changing – the easiest way to level up quickly. However, conventional lenders tend to be extremely risk-averse, with loans offered to only the wealthy elite or to those with sterling and robust credit histories. This leaves vehicle finance – and therefore vehicle ownership – out of reach for most working and middle-income people, such as teachers and nurses. The lack of access to transportation can present an enduring obstacle, perpetuating inequality and restricting economic mobility. 

Planet42 combats transport inequality by offering an inclusive car subscription service. The company makes more cars available to more people thanks to its proprietary scoring algorithms that are superior to traditional credit scores in assessing risk in this underbanked customer segment. Planet42’s proprietary algorithms determine a suitable budget for each customer, and subscribers can choose any new or pre-owned car from Planet42’s network of more than 700 dealerships. Planet42 buys the car and rents it out to the customer on a subscription basis, allowing them to become the owner of the car by buying it out at any time or returning it to Planet42. Of the customers served so far, 89% would have had no other means of gaining access to a personal vehicle.

“Having access to a personal car may be a needless luxury in London but change your life in Johannesburg. A personal car means that you can get to work reliably, you can apply for that job that is farther away from your home, you can drop the kids to school, and go visit grandma. Planet42’s take on car subscription is unique because we focus on the underbanked customer and the second-hand car. This has allowed us to outperform peers who operate in markets like Europe and the US, where car subscription is a solution to a problem that doesn’t really exist – most people can get a bank to buy a car for them. This funding is further proof that we’re on the right path in fighting transport inequality and promoting financial inclusion,” said Eerik Oja, the co-founder and CEO of Planet42. 

Since its founding in 2017, Planet42 has purchased nearly 7,000 cars for people unfairly ignored by banks. The simplicity and convenience of Planet42’s subscription model provides significant advantages over the traditional car retail approach for customers and dealers alike – dealers who work with Planet42 experience an average increase in sales of 26%.

In addition to its rapid growth in South Africa, Planet42 recently bought its first cars for clients in Mexico, a country of over 128 million people who face similar challenges stemming from transport inequality. Mexico is a drastically under-banked country, with limited access to credit and 63% of the population dealing with only cash.

The funds raised in this round will be spent on additional cars for the company’s international portfolio in both South Africa and Mexico, putting the company on track to achieve its ambitious global goal of providing 1 million cars to people facing transport inequality by 2025. 

“We are delighted to be the first South African investor supporting Planet42 with its next phase of growth. Planet42 is an innovative solution to addressing transport inequality in South Africa and beyond, and has the potential to unlock further economic participation. This fits in with our focus of backing purpose-driven technology businesses. Investing in Planet42 is consistent with the portfolio we’ve built to date and Naspers Foundry’s healthy pipeline of potential future investments,” said Fabian Whate, Head of Naspers Foundry.

“Better access to mobility can improve the lives of millions of people in the emerging middle classes. Planet42’s rapid growth in South Africa is proof that their business model is making a real difference in addressing the issue. We are excited to see them expanding into the Mexican market, which offers similar conditions to South Africa but with a larger population. We’re proud to support Planet42 in bringing about this change to a more global scale,” said Hani Ibrahim, Chief Investment Officer at Lendable. 

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