Successful IPO for CarGurus

CarGurus has had a successful initial public offering (IPO). The Boston-based online marketplace for new and used cars got a price of $16 per share, well above the proposed range of $13 to $15 per share. Multiplied by 9.4 million Class A shares, that translates into a total of capital raised of $150.4 million. 

CarGurus was founded in 2006 by Langley Steinert (pictured), who had previously started up TripAdvisor. By the middle of this year, it had become the most visited online automotive marketplace in the U.S., with more than 5.4 million car listings and about 61 million average monthly users and a network of more than 40,000 dealers. The company also has operations in Canada, the UK and Germany. 

Venture capital

Remarkably, the company managed to grow from startup to market leader without raising any venture capital – until recently. Only after angel investors put up $6 million in funds for the company in 2015 did Wall Street heavyweights like T. Rowe Price funnel hundreds of millions into CarGurus.

It's an alternative path to the better-publicised strategy preferred by many other startups: raise large amounts of cash from established venture capitalists in order to generate strong, early growth. With that strategy come greater expectations, and a higher risk of failure. Other startups have therefore chosen to grow organically, or raise funds via crowdfunding. 

60% voting power

In the case of CarGurus, founder and CEO Langley Steinert has chosen to retain over 60% voting power in the company, in part because of his unwillingness to take on board venture capital, and still holds 29% of the company's stock.

It's a strategy that seems to be paying off. In the first six months of this year, CarGurus reported a 70.1% increase in total revenue to $143.3 million. Net income over the same period increased more than sixteenfold, to $8.6 million. Following the successful IPO, the company's value is expected to exceed $3 billion. 

Image: CarGurus