How this ex-investor identified his $1 billion business idea

It's one thing to come up with a $1 billion business idea. It's quite another to come up with a string of them.

But for entrepreneur Aaron Tan, it was fundamental. If he was going to start a business, it had to have room to grow.

That's a strategy instilled in him in his early career, the 36-year-old co-founder and CEO of autos marketplace Carro, told CNBC Make It.

As a former venture capitalist who spent his twenties investing in start-ups across the U.S. and Southeast Asia, Tan learned early on to evaluate businesses based not only on their current model but also on their ability to scale.

So when he saw momentum growing in the autos industry in the mid-2010s, he saw huge potential.

At that time, ride-hailing was taking off in the U.S., and so were auto trading platforms and sophisticated financial services around car ownership. Yet in Tan's native Southeast Asia, the industry was still nascent.

For him, it was an opportunity waiting to be taken.

"Really, what drew me into this whole industry … the opportunity that I saw was the neighborhood," said Tan.

"When we talk about neighborhoods, we are talking about the adjacencies that we can get into. For instance, financial services, insurance, warranties, loans. Or after sales, things like the fixing and repairing of vehicles," he said.

So in 2015, Tan teamed up with his college friends to launch Carro, as an artificial intelligence-enabled car trading platform that would allow buyers and sellers across Southeast Asia to compare the best deals.

Then, in the years that followed, the company expanded into end-to-end financial services, like loans, insurance and aftercare products, as well as a car subscription service.

"All those opportunities by themselves are [$10 billion to $20 billion] vertically, across the region. I think it is a given. That is what really drew us to actually do something in this space," he said.

It wasn't just Tan and his co-founders who saw potential, either.

Initially, Tan pulled together $1 million from four friends to kickstart the business. Since then, the company has raised more than half a billion dollars, including $360 million in recent funding from Softbank and Indonesian-based fund EV Growth. The six-year-old company is now valued at $1 billion.

Tan said the latest investment will help Carro further expand into each of its "neighborhood" services.

"Going deeper in each of the neighborhoods is the number one thing I will do. Number two [is going] broader into other countries. And number three, as we're in markets, we need to make sure that we get more of a market share," he said.

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