When it comes to industries today that are being transformed by tech and innovation, used cars aren't exactly high on the list. In fact, the most innovative thing to come out of a used car dealership might be the inflatable arm-flailing tube man.
But Chicago's tech startups are known for tackling traditional and inefficient industries that are often considered boring by Silicon Valley standards. And a local startup, backed by the founders of Groupon, wants to use data to change the way dealerships find and sell cars.
Drivin is a tool for car dealerships to sell, source and acquire vehicles for their lots. It essentially wants to replace vehicle wholesalers by using data analytics to show dealerships what vehicles they should acquire. Drivin then buys the car and delivers it to the dealer, saving them from wasting time at vehicle auctions and buying makes and models that won't sell.
The idea is to help dealerships sell smarter, and spend less time with vehicle sourcing and acquisition. Drivin, which launched in 2015, says it's working with 35o dealerships, both independent and franchise, and had a network of 23,000 dealers it can source vehicles from.
"We can educate (dealerships) through data on what is needed on the lot, and what is not needed on the lot," Drivin CEO Kayne Grau said. "Right now they can pick up the phone, use mobile app, text one person and have one car or 100 cars delivered to their lot."
However, Drivin's business model doesn't come without challenges, namely that it requires a significant amount of cash to buy and deliver vehicles to dealerships at scale. To address this, the company has raised $17.5 million in equity, and another $6.5 million in debt from Silicon Valley Bank. Venture investors include Eric Lefkofsky and Brad Keywell's Lightbank, and Columbus Nova Technology Partners.
Lefkofsky and Keywell have not only funded Drivin, but came up with the idea. Lefkofsky, as the story goes, came up withe the idea when trying to sell his car in Chicago and discovered that he could get 12% more for his vehicle in California, according to Grau.
They've housed the startup at 600 W. Chicago along with Groupon, Lightbank, Uptake, Tempus and other ventures founded by the serial Chicago entrepreneurs.
After deciding they wanted to move forward with the business, Lefkofsky and Keywell brought in Grau to be the company's CEO. Grau was previously the CEO at Music Dealers, and prior to that spent time as the CTO of Apartments.com and Cars.com.
There are a handful of used car startups (Shift Technologies, Beepi, Vroom and Carvana) looking to disrupt the car shopping experience on the consumer side, but none are operating in the B2B space, Grau said. While some startups try and eliminate the dealership from the car buying equation, Drivin wants to give dealers more resources.
"We think the dealer model will be around for a long time," Grau said. "We’re trying to make the dealer more efficient and be able to work with the consumer who has more data than ever at their fingertips when buying a vehicle."
Drivin has over 70 employees in Chicago and plans to continue growing, Grau said. The company expands to enter more markets and roll out new products, like the ability for dealers to remarket unwanted inventory on Drivin's platform.
It's still too early to tell if Drivin will be the next tech success story from Lefkofsky and Keywell, but with more than $20 million in funding and growing quickly, Drivin is off to a fast start.
"We're going to be able to utilize our analytics and really educate the dealer in real time on what is happening in their market," Grau said. "We’re really looking to build and validate that this is the best way for dealers to source, acquire, and potentially sell inventory. This is where the world moving to."
