Featured Article

What drove online used car marketplace Shift to file for bankruptcy

Down goes another SPAC

Comment

parking lot full of cars
Image Credits: Jason Hawkes / Getty Images

Shift Technologies, the San Francisco-based online used car startup turned publicly traded company, filed this week for Chapter 11 bankruptcy.

The short story, according to recent filings, is that the company’s deteriorating cash position and inability to obtain further financing drove the company to file for bankruptcy and begin the process of closing down the business and liquidating assets. About 144, or 80% of the company’s employees, were terminated last week and 24 are remaining on to wind down operations. Shift has estimated that process will cost between $4.1 and $5 million, according to SEC filings.

Of course, there are a few twists and turns that may have accelerated Shift’s demise.

The company announced Friday it would file for bankruptcy and said it was shutting down its two physical locations in California. Shift filed Monday its petition with the U.S. Bankruptcy Court for the Northern District of California.

How did Shift get here? Let’s turn to the bankruptcy filings.

Shift was founded in 2014, an era when a number of online used car startups launched in a bid to disrupt the traditional dealership model. Carvana, Shift, Vroom and Beepi, which shut down in 2016 and merged with Fair, were among the buzziest. Money was raised, valuations popped and some, including Carvana and Vroom, took the road to IPO.

When the SPAC boom arrived in summer 2020, Shift jumped at the chance to access more capital. George Arison, a co-founder and co-CEO of Shift at the time, even wrote a column in TechCrunch outlining how to navigate SPACs, a process in which a privately held company merges via a publicly traded blank check company.

The COVID-19 pandemic also arrived and turned used car sales into one of the hottest markets. The timing, it seemed, couldn’t have been better.

The past year, however, has delivered inflationary concerns, a slightly cooling used car market, higher interest rates, tighter capital markets and overall economic uncertainty. Even with these factors beginning to percolate, Shift was still investing “significantly” in its technology platforms and turning to mergers and other investments in an effort to drive growth through volume and presence, the company’s first day motion petition notes.

In spring 2022, Shift acquired competitor Fair’s dealer listing marketplace. It then merged with consignment-to-retail used vehicle company CarLotz by the end of 2022, pushing its employee count to about 590 people. Shift said the Fair acquisition was intended to help the company “build a digital marketplace where both dealers and independent sellers could list their cars alongside Shift’s owned inventory,” according to one bankruptcy filing.

Meanwhile, the CarLotz merger was designed to leverage its presence and dealer marketplace platform on the East Coast through a new omnichannel experience. But by February 2023, just two months after the merger had closed, Shift decided to exit CarLotz’s presence on the East Coast and shut down the Downers Grove, Illinois location in order to focus on core West Coast markets. One remaining CarLotz facility in Pomona, California remained open alongside Shift’s locations in Los Angeles, San Francisco Bay Area and Portland.

The cracks were clearly visible by the end of Q1 2023. Shift laid off 30% of staff and reported it had generated $65.6 million in revenue in the fourth quarter, a 67% drop from the same year-ago period. Shift also reported operating loss of $60.7 million in the fourth quarter, a 14% increase from the same period in 2021.

Shift may have been cutting costs through layoffs, but it was still spending its cash on developing its technology, a growth-over-profits strategy that Wall Street was rejecting.

Shift tried to shift gears altogether in June 2023. The company brought on new management and ditched its e-commerce development, instead pivoting to a dealership model focused on profitable growth.

Shift contends the move was too little, too late. Shift still would need more capital to institute these changes in a bid toward profitability. Despite “months negotiating with the holders of the company’s convertible notes and senior unsecured notes,” it was unable to reach an agreement to restructure the outstanding debt and gain additional financing.

More TechCrunch

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets

Featured Article

Two Santa Cruz students uncover security bug that could let millions do their laundry for free

CSC ServiceWorks provides laundry machines to thousands of residential homes and universities, but the company ignored requests to fix a security bug.

18 hours ago
Two Santa Cruz students uncover security bug that could let millions do their laundry for free

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

TechCrunch Disrupt 2024 is just around the corner, and the buzz is palpable. But what if we told you there’s a chance for you to not just attend, but also…

Harness the TechCrunch Effect: Host a Side Event at Disrupt 2024

Decks are all about telling a compelling story and Goodcarbon does a good job on that front. But there’s important information missing too.

Pitch Deck Teardown: Goodcarbon’s $5.5M seed deck

Slack is making it difficult for its customers if they want the company to stop using its data for model training.

Slack under attack over sneaky AI training policy

A Texas-based company that provides health insurance and benefit plans disclosed a data breach affecting almost 2.5 million people, some of whom had their Social Security number stolen. WebTPA said…

Healthcare company WebTPA discloses breach affecting 2.5 million people

Featured Article

Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Microsoft won’t be facing antitrust scrutiny in the U.K. over its recent investment into French AI startup Mistral AI.

20 hours ago
Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Ember has partnered with HSBC in the U.K. so that the bank’s business customers can access Ember’s services from their online accounts.

Embedded finance is still trendy as accounting automation startup Ember partners with HSBC UK

Kudos uses AI to figure out consumer spending habits so it can then provide more personalized financial advice, like maximizing rewards and utilizing credit effectively.

Kudos lands $10M for an AI smart wallet that picks the best credit card for purchases

The EU’s warning comes after Microsoft failed to respond to a legally binding request for information that focused on its generative AI tools.

EU warns Microsoft it could be fined billions over missing GenAI risk info

The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday.  The trustee is asking…

A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites ‘gross mismanagement’

U.K.-based Seraphim Space is spinning up its 13th accelerator program, with nine participating companies working on a range of tech from propulsion to in-space manufacturing and space situational awareness. The…

Seraphim’s latest space accelerator welcomes nine companies

OpenAI has reached a deal with Reddit to use the social news site’s data for training AI models. In a blog post on OpenAI’s press relations site, the company said…

OpenAI inks deal to train AI on Reddit data

X users will now be able to discover posts from new Communities that are trending directly from an Explore tab within the section.

X pushes more users to Communities

For Mark Zuckerberg’s 40th birthday, his wife got him a photoshoot. Zuckerberg gives the camera a sly smile as he sits amid a carefully crafted re-creation of his childhood bedroom.…

Mark Zuckerberg’s makeover: Midlife crisis or carefully crafted rebrand?

Strava announced a slew of features, including AI to weed out leaderboard cheats, a new ‘family’ subscription plan, dark mode and more.

Strava taps AI to weed out leaderboard cheats, unveils ‘family’ plan, dark mode and more

We all fall down sometimes. Astronauts are no exception. You need to be in peak physical condition for space travel, but bulky space suits and lower gravity levels can be…

Astronauts fall over. Robotic limbs can help them back up.

Microsoft will launch its custom Cobalt 100 chips to customers as a public preview at its Build conference next week, TechCrunch has learned. In an analyst briefing ahead of Build,…

Microsoft’s custom Cobalt chips will come to Azure next week

What a wild week for transportation news! It was a smorgasbord of news that seemed to touch every sector and theme in transportation.

Tesla keeps cutting jobs and the feds probe Waymo

Sony Music Group has sent letters to more than 700 tech companies and music streaming services to warn them not to use its music to train AI without explicit permission.…

Sony Music warns tech companies over ‘unauthorized’ use of its content to train AI

Winston Chi, Butter’s founder and CEO, told TechCrunch that “most parties, including our investors and us, are making money” from the exit.

GrubMarket buys Butter to give its food distribution tech an AI boost

The investor lawsuit is related to Bolt securing a $30 million personal loan to Ryan Breslow, which was later defaulted on.

Bolt founder Ryan Breslow wants to settle an investor lawsuit by returning $37 million worth of shares

Meta, the parent company of Facebook, launched an enterprise version of the prominent social network in 2015. It always seemed like a stretch for a company built on a consumer…

With the end of Workplace, it’s fair to wonder if Meta was ever serious about the enterprise

X, formerly Twitter, turned TweetDeck into X Pro and pushed it behind a paywall. But there is a new column-based social media tool in town, and it’s from Instagram Threads.…

Meta Threads is testing pinned columns on the web, similar to the old TweetDeck

As part of 2024’s Accessibility Awareness Day, Google is showing off some updates to Android that should be useful to folks with mobility or vision impairments. Project Gameface allows gamers…

Google expands hands-free and eyes-free interfaces on Android