French startup Back Market has raised another mega round of funding. In May, the company raised a $335 million Series D round. Today, the company is announcing a $510 million Series E round, which values the company at $5.7 billion.
If you’re not familiar with Back Market, the company operates a marketplace of refurbished electronics devices — mostly smartphones. In other words, if you think smartphones are expensive, you can get a phone that is still in good condition without paying full price.
There are many reasons why consumers might buy a phone on Back Market instead of buying a new phone from a carrier or smartphone manufacturer. In addition to saving money, many customers think new phones only feature incremental updates compared to previous generation models.
Many customers also want to avoid generating additional waste and choose a used device for that reason. Many old smartphones simply end up in a drawer after all. A new battery and sometimes a new display might be enough to turn an old device into an attractive refurbished phone.
Back Market doesn’t refurbish devices directly. Instead, third-party companies act as the sourcing partners for Back Market. By listing their inventory on Back Market’s marketplace, they can find customers more easily.
On the other end of the transaction, customers buy devices through Back Market as there’s a 30-day money back guarantee. Overall, 6 million customers have purchased a device on Back Market.
Sprints Capital is leading today’s funding round with existing investors also participating, such as Eurazeo, Aglaé Ventures, General Atlantic and Generation Investment Management. The French tech ecosystem has been on a roll as PayFit, Qonto and Ankorstore also announced that they had raised hundreds of millions of euros each over the last few days.
“Our goal is to make refurbished electronics the first choice for tech purchases. We expect to see a similar development in the electronics market as we have witnessed in the pre-owned car market in America, where consumer confidence in buying second-hand vehicles has resulted in sales that have increased twofold compared to new car sales,” co-founder and CEO Thibaud Hug de Larauze said in a statement. “The support and confidence of these funds, together with our growing customer base, marks an important step in Back Market’s journey, and more importantly, for the circular economy as a whole.”
One metric that is particularly important for Back Market is the average failure rate. Right now, the company estimates that it has a failure rate of about 4%, which means that one in every 25 phones doesn’t work as expected in one way or another. That’s why customer service is key when it comes to customer satisfaction. The company also estimates that new devices have a 3% failure rate.
The startup expects to double in size with a specific focus on the U.S. market — it currently has 650 employees. Back Market operates in 16 countries, including many European markets, the U.S. and Japan.