Behind the headlines about a shortage of new cars and spikes in used car prices is a Massachusetts startup most people have never heard of: CarNow.
But in nearly 4,500 dealerships around the country, the Burlington company provides software that streamlines the sales process, from facilitating live chats to checking a buyer’s credit to assessing the value of a trade-in vehicle. Since its founding in 2015, CarNowhas grown to more than $44 million in annual recurring revenues, according to Bob Davoli, founder of Gutbrain Ventures and an early investor. “The pandemic,” he says, “actually sped us up.”
One big reason: dealerships that had to shut down showrooms in 2020 realized they needed to get more digital, and fast. No more asking customers to come into a dealership and sit at a salesperson’s desk for an hour or two.
Andy Park started CarNow after a previous startup, the mobile app Wikets, shut down in 2013. (Wikets investors got a stake in CarNow, Park says, since some of Wikets’ key team members went to work on the new idea.) “I felt there was a need for better innovation and software in the automotive industry,” says Park. When the company started, it was common to visit dealers’ websites, only to be asked to fill out a form so that a salesperson could call you on the phone. “That’s not the way the consumer wanted to interact,” Park says. “We’re constantly texting and chatting with our family and friends, on Whatsapp, Messenger, and Snapchat.”
But car-buying can be a complex process, with lots of options, price comparisons, and financing scenarios. And there’s a natural tension involved, Park observes. Consumers didn’t always trust dealers, and dealers didn’t want to provide a lot of information to consumers before they physically came into the dealership, lest they take that knowledge and go to a competing dealer to get them to beat the price.
Before the pandemic, fast-growing players such as Carvana and Vroom were digitizing the car buying process, and even delivering vehicles directly to people’s driveways. (Tesla, which operates its own dealerships, and has fixed prices, without room for haggling, does the same.) But last year’s lockdowns around the country got dealers focused on integrating technology into the sales process, says Ron Frey, a consultant to the auto retailing sector — and an investor in CarNow. “It was no longer about tinkering with different solutions and software,” says Frey, a former AutoNation exec. “It was, ‘Either we do this, or we don’t survive.’” Car manufacturers were also leaning on their affiliated dealers to get up to speed — finally — with digitization, Park says.
CarNow offers a range of different software products that integrate into a dealer’s website to help it do things like run live chats, share videos of a specific vehicle, serve up prices and financing options, and schedule test drives. CarNow also has a team of agents who can respond to buyer inquiries when a dealership is closed — or when its sales staff gets busy. In the early months of the pandemic last March, April, and May, as CarNow’s own team was figuring out how to operate remotely, the company was also fielding calls from dealers who wanted to go live “as quickly as possible,” Park says. “In one month, we’d have to get 500 dealerships live.” The company now has 170 employees, spread around the United States, with offices in Massachusetts and the Atlanta area, where much of its sales force is based.
At Planet Honda, a New Jersey dealership, general manager Bill Feinstein saysusing the CarNow software has “been a big part of our online success,” as customers have shifted from e-mail to texting as their main mode of communication. “It takes blind shoppers you don’t know who are visiting your website and turns them into leads,” says Feinstein.
But while customers may want to use their mobile phone or computer to research vehicles and understand pricing and financing, Feinstein says “they still primarily want to transact in person,” which involves visiting a dealership at some point. “They want to drive the vehicle, and get the exact model, options, and features they want,” he says. “Most customers walk in wanting to buy a specific car, and walk out with something different — they get something with all-wheel drive, or a sunroof.”
But Frey, the former AutoNation exec, says that dealerships are “quickly becoming warehouse and distribution centers, not destination businesses.” During the pandemic, many dealerships “got very comfortable with executing the transaction and bringing the vehicles to consumers on their turf” — offering touchless home delivery. “They found they could do that profitably, and at scale.” Consumers liked having that option, and while Frey isn’t predicting the death of the dealership, he says that they’re in the midst of a major transformation.
US car sales slumped nearly 15 percent in 2020 compared with 2019, according to the National Automobile Dealers Association, but sales in 2021 look to be revving up. At many dealerships, a shortage of new car inventory has forced them to shift their emphasis to used cars. And there’s intense competition for new cars that do come in, Park says. Neither dynamic is bad for a startup that pitches its software as helping dealers sell more cars, faster, while reducing costs — though CarNow does have competitors that include PERQ, DealerSocket, and elead.
Later this month, CarNow plans to announce a new infusion of venture capital in the $30 million range. It has previously raised $24 million, from Gutbrain Ventures and Battery Ventures, among others.
Park acknowledges that Massachusetts is not exactly a major hub for the automotive industry, though it did spawn CarGurus, a car shopping site that went public in 2017, and now has a market capitalization of $3 billion. CarNow may be traveling that same road.
Scott Kirsner can be reached at firstname.lastname@example.org. Follow him on Twitter @ScottKirsner.