No one wants to go to a car dealership. We’re in the era where everything can be done online, so it’s crazy you can’t buy a new car straight from the web. Every site and startup that claims to help you do that just dumps you on a contact form to request more info or a meeting with a car dealer.
But Drive Motors does exactly what you imagine should already happen. It’s a plugin for car dealer websites. Pick a car you like, and Drive lets you configure options, set up a financing plan, and pay right there. Then all you do is drop by the lot and pick up your new car.
If it sounds simple, that’s because it is. But still, no one had built it right. Car dealerships don’t know their way around tech. Neither do the car manufacturers, and even if they did, the dealerships don’t want to give them any more leverage. Plus, dealerships would want a manufacturer-agnostic system.
So that’s what Drive Motors built. The startup is part of this season’s Y Combinator batch, and has raised a $1.5 million seed round from the accelerator, Khosla Ventures, and Gil Penchina. In something almost unheard of for fast-growing YC startups, Drive will profitable by Demo Day thanks to its uncomplicated $695 per month SaaS licensing fee it charges dealerships. They don’t have to give it a cut of sales. And since just a cars or two sold a month via Drive will cover the cost it’s a no-brainer.
Founded by Accident
“Do I love cars? Yes, I love cars”, Drive Motors founder Aaron Krane tells me. “I grew up in a culture where we fetishized cars. I had the car calendars. Anywhere I went that had magazines, I’d run right to the Dupont Registry and look for photos of Lamborghinis.”
Yet still, crashing into the idea for Drive Motors was a total accident. Krane had sold his fantasy sports startup Hitpost to Yahoo, and become an entrepreneur-in-residence at Khosla Ventures. But Krane lived in San Francisco and Khosla was down in Palo Alto. After months of bumming rides, he decided to buy a new car online.
The experience left him utterly confused. He couldn’t. “It became shockingly clear that ecommerce had not reached new cars” he says. So he set off to find out what dealerships actually needed.
Krane worked with someone who’s family owned a dozen dealerships in California and set up a pilot program with one. He built out the product over the next five months, then signed on over 50 dealerships in the six months after.
Consumers click a car and a panel slides out from the right. Along with configuring options and financing, they can trade in their existing car, buy upgrades and accessories, and see the real out-the-door price before they buy. Krane jokes “It’s everything you need to buy the car and get back to Netflixing or World Of Warcrafting…but maybe that’s just my life.”
Dealers dig how Drive jacks right into their existing system. They don’t have to change anything. Just sometimes, an order appears in their logs without needing a smarmy salesperson to coerce anyone in person. With about 15,000 new car dealerships and 30,000 used ones in the U.S. alone, there’s quite a market out there.
“Hagglers Are The Minority”
What Drive Motors made clear was that customers desperately wanted to shop at night when dealerships were closed so they could calmly research the purchase with their family from the comfort of their home. “My favorite story” Krane tells me, “was the customer who purchased a Prius at 3:20am on New Year’s Day, and picked it up from the lot at 9am.” Guess they got burned on New Year’s Uber surge pricing.
Krane mentioned a survey recently that said 75% of millenials would like the entire car buying process to be online. Surely there’s some risk of people impulse-buying a vehicle, but as long as it’s transparent about everything, it’s not Drive’s place to tell people to slow down. We’re in the age where you can get loans and mortgages and helicopter rides from your phone, so Drive Motors seems inevitable.
Plenty of other companies have tried to make buying a car as easy as ordering lunch, but none have gone the last mile to actually charging the customer.
Oldschool properties like Auto Trader, Kelley’s Blue Book, and Edmunds literally just put their magazines online. Then there are newer sites like TrueCar, Cars.com, and CarsDirect, plus the broker-based Cartelligent and BuySide Auto. But they’re all actually just for research, and still require consumers to fill out a contact form and talk to a broker.
Some people surely do want the in-person dealership or broker negotiation experience so they can get the absolute lowest price. But Krane believes there’s a much bigger market making car buying easier than that. “If I can get a good price with 10X to 100X the convenience, I’ll take it and I think 70% to 80% of car buyers will too.” He’s confident that people who enjoying haggling for sport are the minority.
Drive Motors will have to keep customer satisfaction high and fend off competitors who might try to cut in. But for now, it’s the most tech-centric approach to the problem.
A Beachhead To Maintenance, Insurance, And More
If Drive Motors can replace the dealership as the main touch point, there’s a ton of open road ahead. It’s easy to imagine how Drive could integrate car service and maintenance so you’d never have to talk to a mechanic. You’d just enter what you thought the problem was, authorize payment, and the service would get done. An integration with courier, valet, or tow providers could mean you don’t even have to take the car to the dealership yourself.
When people buy a car would also be a natural time to sell them car insurance. An alliance with innovative per-mile car insurance startup MetroMile could make it simple. For millenials who frequently augment car ownership with Uber rides and therefore drive less, per-mile insurance is a perfect fit. Plus, then people could immediately drive the car they just bought.
Krane dreams of Drive Motors becoming the “car ownership operating system”. It’s a lucrative prospect, and one he sees as addressing a fundamental challenge for humanity: the evolution of transportation. Yet at its core, Drive seems almost obvious. Software is eating everything, so why not dealerships?
Krane exhibits a nervous, almost manic energy when talking about his company. From the start, he says “I had a tinge of paranoia. There must be someone else trying to do this.” But that’s often where the best startups come from — a problem most people assume is impossible to solve in a new way, or it’d already have been done.