Despite all the advancements in technology we've seen over the last 20 years, there are still industries that seem archaic. These are typically old industries with people who have been working in them for decades, and who aren't going to change now. Eventually, though, someone does come along and stirs things up.
For the wholesale automotive space, that disruptive company is ACV Auctions, which announced new funding and a new CEO on Monday.
The company raised $5 million in venture funding, led by Tribeca Venture Partners, with participation from SoftBank Capital NY, Armory Square Ventures and Rand Capital. ACV had previously raised a $1 million angel round, and it was also the winner of the 43North startup competition in 2015, which came with a $1 million prize.
Along with the new funding, it was announced that George Chamoun joined the company as its new Chief Executive Officer. He is replacing ACV Auctions co-founder Joe Neiman, who will focus on market development at the company going forward.
Chamoun has many ties to ACV, and the team. Not only was he one of the company's angel investors, he also co-founded Synacor, a multiscreen technology and monetization partner, with ACV co-founder Dan Magnuszewski. Synacor went public in 2012.
"About a year ago, some friends, including Dan, came to me and said, 'Would you consider being an angel investor?' So, I helped them, coached them, and it turned out to be a special company," Chamoun told me in an interview.
"We kept in touch, and they came to me when they were looking for some growth advice. Eventually, Joe said, 'We really want you to join and come on board to help grow this thing.' So it was a natural thing that developed. They had an unbelievable business, and now I'll focus on scaling it."
ACV Auctions is a mobile platform that enables used-car dealers to view, bid and purchase car inventory via online auctions. These live auctions are conducted from franchise dealer lots.
"Typically, dealers get trade-ins from consumers, and half of them they don't want on the lot. It's either the car has too many miles, or it's not brand they want to sell, or whatever it is. So those cars historically have gone to a physical auction," Chamoun explained.
That means a truck goes around the country, picking up wholesale cars, which are then brought to a huge parking lot, and they're then auctioned off by the dealerships in person. All of this takes more time, and costs more money.
In all, there are nine million of these auctions going on every year, accounting for nearly half of all the wholesale automotive transactions that occur.
"This is an industry that hasn't yet been disrupted. We are saving dealers time and money, since they don't have to wait until days later to sell their cars. They can sell their cars right off the lot, all days of the week, for lower fees. Then, whatever doesn't sell they can still take to auction," said Chamoun.
There's a big benefit on the buyer's side as well, since ACV Auctions is able to increase transparency in terms of what they're actually buying.
As part of the app, the dealers are required to do a condition report, complete with 25 to 40 pics taken, including the inside of the car. ACV will even do some of these inspections themselves. This reduces the risk for the buyer, and potentially saves them hundreds in having to recondition the car after purchase.
Through ACV, cars can be sold in as little as 20 minutes, Chamoun said, compared to having to send to them around the country, which can take days or weeks.
ACV Auctions is currently in five different markets, all in upstate New York: Buffalo (where the company is headquartered), Syracuse, Albany, Binghamton and Rochester. It is just now beginning to enter two new markets, also in the northeast, Pittburgh and Cleveland.
By the end of next year it plans to grow to between 10 and 14 markets, which means growing its team as well. Right now it has 36 employees, and will have 100 by the end of 2017.
According to Chamoun, the company's primary goal is to help buyers know what they're getting before they get it, and inproving transparency is how it plans to get there.
"Purchasing a wholesale vehicle is all about trust. The car is being sold by a dealer to another dealer, and our product is here is to help create trust about what the consumer is getting. The more trust that's established, that helps increase sell-through," he said.
The company also revealed that it has added two new board members: Brian Hirsch from Tribeca Venture Partners and Jordan Levy from SBNY. Levy is also on the board of directors at Synacor.
"VCs help with relationships, networking, creditability, and not only the current round but with planning and growth," said Chamoun. "We're going to be in 10 to 14 markets, but we need to plan funding for markets 14 to 30. We need to how much to raise, and the extension of the team at every stage. It will help to get some really key VCs on the board."