Cazoo boss: How I built THREE UK tech titans
As Cazoo heads for record $1 bn revenue, boss reveals...
MOST entrepreneurs spend a lifetime trying to convince the world that one of their ideas will work. Just a fraction manage to turn their vision into a business worth hundreds of millions of pounds – and even fewer hit the jackpot twice. Against that backdrop, Alex Chesterman is a quite extraordinary businessman: he’s just scored a hat-trick of major successes.
His online car dealer Cazoo is set to list on the US stock market with a valuation of around $7 billion (£5 billion). That follows the sale of DVD-by-post firm LoveFilm to Amazon for £200 million in 2011 and the float of Zoopla, the online property agent, which was subsequently bought in 2018 for £2 billion by US private equity firm Silver Lake.
The float later this year is expected to value his stake in Cazoo at around £1.5 billion, pushing him well into the billionaires club. And it’ll make the firm, which was only launched in late 2019, his biggest success to date. It’s rapidly become the quickest company in the UK to achieve so-called ‘unicorn’ status (a company valued at more than $1 billion).
Now, Chesterman reveals that Cazoo is ‘aiming to do almost a billion dollars of revenue this year’. He adds: ‘I’m told that is the fastest that any company – not just a UK company but any company globally – has ever reached that landmark.’
It will be welcome news for the group of investors who got behind Cazoo in its early days. The list includes investment group Octopus, Fidelity, BlackRock and DMGT, the parent company of The Mail on Sunday. So what’s Chesterman’s secret? His modus operandi is as a tech ‘disruptor’. In other words, he finds ways to harness the power of technology and the internet to turn an entire market on its head. He’s not interested in merely grabbing a small slice of large sectors.
‘If I had a skillset, it’s being able to start with a blank sheet of paper and figuring out how I want to solve a problem, whether it’s through transparency, convenience or efficiency,’ he says.
Chesterman openly describes himself as a ‘copycat’. Not in the sense of stealing other firms’ unique selling points, but in identifying successful ventures overseas and translating their model to appeal to the UK consumer.
For example, his blueprint for Cazoo was Carvana, a $46 billion American internet car retailer launched in 2012. His foresight was to spot the same growing appetite among Britons to buy cars online without haggling on the forecourt.
‘In the case of LoveFilm, Zoopla and Cazoo it was seeing a model in the US that was really solving a problem and improving a market... and then bringing that to the UK,’ he says.
But as any entrepreneur will testify, turning the germ of an idea into a major UK company isn’t quite as simple as Chesterman has made it look. ‘These are long journeys,’ he concedes. ‘None of these are overnight successes. So you have to be prepared to put in the effort.’
A key piece of the puzzle, he says, has been building a loyal team of people and a ‘supportive investor base’ around him. Several backers – including DMGT – have invested in his businesses multiple times. Chesterman, however, reveals Cazoo is likely to be his final venture.
The 51-year-old spent lockdown in London, where he dyed his distinctive beard celadon (the greenish colour in Cazoo’s branding) for charity. Other than his facial hair, he is notably different from the image of a hipster tech entrepreneur on the West Coast of America. He’s suited (no jeans, T-shirt or black polo neck for him), older and more plain speaking than the evangelical cohort based in California.
However, he reckons Britain’s tech start-up investors are starting to become more like their gung-ho counterparts in the States: ‘One of the historic differences was that every idea got funded in Silicon Valley. That wasn’t the case here. But now a lot more businesses are getting off the ground and getting that opportunity.’
The result of better access to capital is that more companies are staying private for longer, he says.
Chesterman believes the UK and US are still miles apart when it comes to investing in larger tech firms, though. It explains why he snubbed London for a US listing of Cazoo, which lost £19 million last year. ‘I took my last business [Zoopla] public in the UK, so I’m a fan of the UK market,’ Chesterman says. ‘But that was six years into the journey and it was profitable and it was very well received. That’s the type of businesses that UK investors typically like – those that have got a longer track record, are profitable, paying dividends and so on. The right type of investor for our business at this stage are US investors, who know the kind of model we have very well.’
His argument appears to be validated in Cazoo’s $7 billion valuation, which compares to the £250 million price-tag on traditional UK-listed car dealers Lookers and Pendragon.
Chesterman admits he could have given up work after the LoveFilm deal, thanks to the money he made. His three main ventures have made Chesterman a wealthy man. He gained £20 million when LoveFilm was sold, £200 million from the Zoopla deal and he’s already sold shares in Cazoo worth £100 million.
He describes the money as a ‘nice by-product of the hard work and effort’. Aside from holidays with his boys, the main passion he invests in is bets on other earlystage companies. ‘I describe it as sort of backing myself 20 years ago – I’m trying to find those guys, or gals,’ he says. ‘It’s really about finding the right people and then giving them enough oxygen and capital to be able to build a great business.’
Among his higher profile investments have been travel specialist SecretEscapes, snack box firm Graze and online grocer Farmdrop. Recently he has backed mental health app Mindlabs, payments firm Trustshare and Fenton, an online jewellery business.
Chesterman was named an OBE for services to digital entrepreneurship in 2016, but his arrival in the car industry has ruffled feathers. One industry CEO told me he was livid when he read bold statements in Cazoo’s prospectus claiming market leadership in a string of areas. He also questioned the lack of auto experience among Cazoo’s directors – including the boss himself.
Chesterman hits back: ‘Going in as a disruptor gets people’s backs up because what you’re saying is, “We think there’s a better way.” And I have always found that when you’re looking to do something different and transformational, the less knowledge the better – the less baggage you bring, the more you’re looking at every problem from a completely fresh angle.’
As if to underscore the point, when I ask him what he drives he replies: ‘A Range Rover. It’s black. And I don’t know the model.’
The car salesman who readily admits he knows nothing about cars. Now there’s something new.
‘I have a blank sheet... then solve a problem’
‘Going in as a disruptor gets people’s backs up’