Qanda’s acquisition of DriveMyCarRentals was just the beginning of its plan to dominate Collaborative Consumption
DriveMyCarRentals.com.au, a service that offers users a private car rental marketplace may have officially been acquired by ASX (Australian Stock Exchange) listed Qanda Technology Limited in February this year, but things have been kept under wraps in terms of what that means for Qanda Technology and its long term goals.
Based in North Sydney, Qanda Technology first got into the game of online marketplaces by buying 43.3 percent of its first portfolio company Marketboomer – which provides an online trading platform that allows hotels to view offers from multiple suppliers in real-time. Recently Marketboomer completed an additional funding round of AUD$250,000.
Learning from their experiences with Marketboomer, the Qanda team began to gain a deeper understanding of buyers and sellers, owners and renters. Now they are aiming to be the leading company on the ASX in the collaborative consumption space.
The initial acquisition involving DriveMyCarRentals came about when the directors, founders and major shareholders of the business were looking at a number of options to grow the company. Some of these options included raising capital privately, a sale of the business and a public listing.
“Given the business still had (and still has) significant growth opportunities, a number of shareholders wanted to continue to maintain an interest in the business. We saw the opportunity to merge DriveMyCar Rentals with Qanda Technology in exchange for shares in Qanda. Qanda was a great fit as [we understand] online marketplaces and transaction models,” says CEO of Qanda Technology, Chris Noone.
“Being listed has a number of advantages so [DriveMyCarRentals] pursued that option versus staying private. The deal was negotiated over several months and all DriveMyCarRentals shareholders received shares in Qanda.”
The acquisition was for 100 percent of the DriveMyCarRentals business and the consideration was paid all in shares, according to Noone. He said 75 percent of shares were issued upfront and 25 percent were deferred to be issued upon achieving agreed performance milestones.
DriveMyCarRentals shareholders hold a bit under 50 percent of the total capital of the merged group following the acquisition. There was an additional capital raising following the transaction. Some DriveMyCarRentals shareholders participated in that rights issue and some didn’t.
Though Qanda never revealed to Startup Daily the amount that was raised, documents filed with ASIC in 2013 state that the company had secured an underwriting commitment of AUD$250,000 and were seeking to raise AUD$750,000.
Noone told Startup Daily that the acquisition was anything but traditional: “It wasn’t really a sale in the normal sense as all shareholders received shares in Qanda. All DriveMyCarRentals shareholders agreed to be escrowed for 12 months so are all still very much invested in the business.”
“The ongoing involvement and sale into the listed group was driven by the strong benefits the directors and shareholders saw from being part of the listed group. These include the improved access to capital, increased credibility in the market due to the compliance and governance required as a listed company, easier ability to use shares for acquisition and an increased ability to make strategic hires for the business when it requires it,” he added.
There are a number of advantages for startups being publicly listed, including building relationships with other publicly listed companies. In some cases, larger potential clients that see a startup being part of an ASX listed company gives them the confidence that the company has already passed significant validation and compliance hurdles.
And whilst Noone told Startup Daily that DriveMyCarRentals can now close deals at the big end of town that would have been very difficult previously, the notion that seeking an ASX listing is something that all local startups, especially early stage ventures should be actively seeking, is implausible.
Although we are starting to see some great examples, like the recent Tagroom.com acquisition by ASX listed Moko Social and the successful ASX listing and subsequent AUD$4 million oversubscribed raise by Rewardle, for every success story, there are ten unsuccessful ones that we never hear about, so due diligence before exploring this path is imperative.
For Qanda Technology however, the focus is firmly on becoming the leading publicly listed company in the area of collaborative consumption and peer-to-peer marketplace opportunities. DriveMyCarRentals along with the acquisition of Rentoid and Caramavan mean that Qanda now operates what it claims will be the future leaders in the peer-to-peer marketplaces for cars, caravans as well as household & commercial items.
“We’re now focused on driving the performance of our peer to peer marketplaces and delivering functionality that builds trust and long term engagement within the marketplaces including online ID checks and persistent reputation profiles,” says Noone.
In a recent market update to shareholders Qanda said the following regarding the recent performance of DriveMyCarRentals and the synergies between the companies as well as Qanda’s new acquisition of Caramavan;
Qanda is pleased to confirm that initial trading for the Drive My Car Rentals online marketplace has commenced the financial year with a very strong performance. Transaction days via the marketplace continue to grow and for the July-August 2014 period, the performance was above budget and more than 100% ahead of the same period in the prior year. This revenue growth was delivered with only a minor increase in costs for the business.
Drive My Car continues to work on a number of vehicle supply initiatives to satisfy the demand for vehicles that is not currently able to be satisfied. Qanda Non-Executive Director, Adrian Bunter said “The acquisition of Caramavan continues to build on Qanda’s marketplace strategy tapping into the high growth collaborative consumption sector.
There are strong operational synergies between the businesses and Qanda’s knowledge and experience will greatly add to the development of the Caramavan business. The high growth being delivered by Chris Noone and the team in the Drive My Car Rentals business further demonstrates the growth potential of the sector.”
It also seems that the purchase of Caramavan was very similar in structure to that of DriveMyCarRentals.
Given there is yet to be an Australian startup that solely operates in the collaborative consumption / peer-to-peer marketplace, one that emerges from the pack as a significant market leader in terms of both traction and revenue, perhaps there is merit to Qanda Technology’s strategy in owning a little bit of every vertical to see what takes off.