Zag.com Raises $37.4 Million

Zag.com Inc., a Santa Monica, Calif.-based provider of online auto sales, has raised $37.4 million in fifth-round funding. Insurance company USAA led the round, and was joined by return backers Capricorn Investment Group, GRP Partners and Anthem Venture Partners. The company previously raised over $60 million in VC funding, plus $21 million in venture debt.

PRESS RELEASE

Zag (www.zag.com) today announced  $37.4 million in strategic and venture funding – providing a ringing endorsement of Zag’s commitment to transparency and upfront pricing in automotive retail, and a reflection of the proven success of its model to drive sales through relationships with trusted affinity groups. 

At the same time, Zag reported its December 2008 automotive retail sales were up by 15 percent over November – and up by 130 percent over December 2007 – offering the automotive industry a singular shot of good news in the midst of reports of the U.S. auto bailout, double-digit sales declines from car manufacturers and the continued closing of dealerships.

The funding round was led by USAA, a Zag affinity customer that offers the company’s online auto-buying platform to its 6.8 million members nationwide.  Zag’s existing investors Capricorn Investment Group, LLC, GRP Partners and Anthem Venture Partners are also investing in the funding round. 

“We’ve introduced a shift in auto retailing by putting the buyer first, with a commitment to upfront pricing and transparency throughout the entire car-buying transaction,” said Scott Painter, Zag founder and CEO.  “As both this funding round and our sales growth during rocky economic times affirm, this approach works.  Zag is thriving and growing even as both the auto industry and the economy as a whole are struggling.  What the auto industry needs right now is innovation – not only in the products themselves, but also in the way they’re sold.  Our investors clearly see the value of what Zag is doing – challenging the status quo and giving consumers a much better way to buy a car.”

“Our No. 1 priority is to provide outstanding service to our members, and Zag is essential to helping us with that mission,” said David Bohne, president of USAA Federal Savings Bank.  USAA is a Fortune 200 financial services company that caters to the military and their families.  “Zag’s online car-buying platform is convenient and cost-effective, saves our members money and improves the experience of searching for and buying a car.   It’s a valuable service for our members.”

Zag operates an online car-buying platform that facilitates car sales by connecting buyers with its nationwide network of more than 2,000 certified dealers.  Zag structured its sales model in a way that departs from industry norms:  Zag uses group buying power to get lower prices for consumers, and employs innovative technology to give buyers guaranteed dealer provided upfront prices while those buyers are still online.  Zag provides its platform on a private-label basis to affinity buying groups – like USAA – that people already trust. 

“The challenges the auto industry faces are complex, but one thing is certain:  any attempt to save it will fail if the industry as a whole does not recognize and fix the fundamental problems of the way cars are sold,” said Painter.  “Pricing needs to be completely out in the open, and buyers should be able to purchase a car through organizations they already trust.  The fact that Zag is growing in the midst of an economic meltdown is proof that our approach truly does drive sales.”

About Zag

Zag (www.zag.com) has created a better way to buy a car. Zag operates a robust auto shopping, research and pricing technology platform that saves buyers money by concentrating group buying power, while providing a superior car buying experience by connecting buyers with select dealers that provide great upfront pricing and a no-hassle delivery process. Zag provides its platform on a private-label basis to affinity buying groups, such as USAA, 14 AAA motoring clubs, Overstock.com, Capital One Auto Finance, American Express and Administaff. The company’s approach to the car buying and selling process is garnering awards – Entretech gave Zag its 2008 Entrepreneurship Award for emerging companies, InfoWorld designated Zag’s platform as one of the 100 most innovative corporate IT solutions for 2006, and Entrepreneur Magazine named Zag in its 2006 “Hot 100” list of the fastest-growing companies.  Zag is based in Santa Monica, Calif.