PE investment Solter Capital in a startup


Carsmile is a startup founded by two former bankers who offer long-term leasing and car leasing online. Although the company started in early 2018, it has already acquired a serious investor – the private equity fund Solter Capital. It is rare when startups enter into cooperation with private equity capital, let alone after half a year of operation. What made the fund enter into this type of investment?

As we have described, Carsmile was founded by two former managers of the banking industry: Łukasz Domański and Michał Knitter. They have noted a gap in the domestic automotive market and have simplified the process of leasing or renting a car to literally over a dozen clicks in the application. The launch of the company cost about 1.5 million zlotys, but among investors there were no venture capital funds at the time, as usually happens in startups.

Carsmile acquired the PE fund as an investor

In about a dozen months, Domański and Knitter wanted to acquire a total of about 1,000 customers, while in the meantime after half a year of activity, they have about 100 new customers a month. They also increased employment to about 50 people and, as of January 2019, Robert Rodek joined the board, which is responsible for risk management. This is crucial for the company, as the pillars of its business model are long-term leasing and leasing, which means that, on the one hand, Carsmile should focus on rapid sizing and, on the other, create a business insurance on the side of financial risk.

Currently, the average value of rented and rented cars – according to the catalog value – is about 150,000. PLN gross. Clients, like Domański and Knitter tell us, have no problem with payments, and if they do, they are minor delays. "Fraud cases have not yet happened," Domański emphasizes. As he announces, "At zero" Carsmile is expected to leave in 2019, and close the year with a number of about 300 new customers per month.

What is the most important, the company acquired – and only after half a year after the start of operations and one year after the registration of the company – a large investor, the said fund, Solter Capital. Its portfolio includes companies in the food industry – Bakalland, Delecta or United Beverages, but also insurers working for the communications industry and companies dealing with the real estate market or asset management. Apparently, Carsmile is unusual in this puzzle.

Why, then, Solter joined Carsmile, although PE funds rarely invest in startups? – We are not a traditional private equity fund, nor are we a venture capital fund – we are answered by investor Tomasz Witczak, one of the partners of Solter Capital, a member of the board of directors of Bakalland. And he adds, "I would describe you as a group of entrepreneurs who invest their own money and through the so-called" Smart Money "builds investments that add value.

As Witczak explains, Solter invests in companies that meet the three pillars of fund criteria: have good lasting relations with the founders of the fund; has potential for further development and can create synergies with other entities in the portfolio. It's true that Solter has no investments in companies in the strictly automotive industry, but as Witczak points out, the potential and synergies lie somewhere else – in Carsmile's technologies and artificial intelligence.

It's about three algorithm systems, which are at the heart of Carsmile's technological activity: the first is used to price vehicles, the second to manage the fleet of cars and the third to manage credit risk.

These technologies, as Witczak points out, are likely to be used in other industries as well. – especially real estate (valuations, credit risk, sales platform) and car insurance (vehicle valuation) – the fund portfolio includes, among others, MJM Brokers and Atis, one of the largest entities of its kind in the market.

Carsmile database

In addition, there is a large database that Carsmile already has and can be used synergistically in other Solter businesses. "Everything makes the investment in Carsmile follow the fund strategy," says Witczak. He explains that. Solter targets companies that offer modern services or technologies in markets dominated by the "traditional" sales model,These industries are automotive, insurance and real estate.

As the investor adds, Carsmile is also a valuable investment – on the one hand, it has technology, but on the other hand it also registers rapid growth and, more importantly, there is no direct competition in the market at the moment. Which does not change the fact that Domański and Knitter had to convince themselves of the bottom line – and they did so, according to Witczak, using, among others, good business plan and numbers, showing the potential for growth.

The money obtained from Solter, as Knitter and Domański tell us, Carsmile wants to spend on technology investments – including improving algorithms and developing the existing platform – and raising awareness of the market by educating potential customers about a relatively new solution, which are signatures of cars. The company should also extend the offer to so-called polluting vehicles – another niche that currently operates in a very "traditional" way.

However, these are plans that Solter Capital does not expect to accomplish in the coming months. Witczak emphasizes that the fund does not have a potential exit horizon specific to Carsmile. We are a patient investor. We give time – He marks. "And we do not mean dominance in the market, but it's important in that," he emphasizes.



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