ACV Auctions' founders explain why demand, not supply, was their hardest problem. They launched in Buffalo with a dealer event and manually stocked cars, growing from 50 vehicles in month one to a $24 million GMV run rate by month four at a 2-2.5% take rate.
Chapters
I guess, you know, as marketplaces, you typically, you know, kind of solve for one of the hard sides, right? So what was that kind of hard side for ACV Auctions?
I gotta say, I think that the team we put around it, I give a lot of credit to Joe on this 'cause he was the industry guy in the beginning. The hard parts are the things that I think we did really good, right? Demand generation is important and trying to create an event when There's nothing there for a while and build anticipation for something that doesn't exist yet is big. So, I mean, look, when we launched, people were ready. They were ready. Like we had, you know, it had almost been like, you know, there had been this priming of the pump of people kind of getting ready for it. I think we did a nice job of generating an event where it was like, all right, June 1st. I remember the product was barely ready and we were like, June 1st, we're running cars no matter what. There's going to be cars on the system. And we had, You know, gone to every dealer because it was primarily between dealers and Buffalo at that point. We had got them so mad at what they were currently using. You know, like I remember all of us were spending time talking to dealers being like, how was the auction this week? Knowing that it didn't go well. Oh, it sucked. Well, I was like, well, you know, two more weeks, two more weeks you won't have to do. And so I I would have thought the really hard part was getting demand on there because the supply side we were going to dealers saying. We're gonna make this as easy as possible. Take a picture of your car, put it on the system. It wasn't very long before we were the ones taking pictures, but we were really helping them a lot. So we could kind of create the, you know, we were creating digital twins of what already resided on their lot. And these guys' job was to get numbers on the cars, numbers that people would pay for the cars. So we were like, hey, let us come and we'll give you a bunch of numbers on all your cars. So the demand side was the side I was most concerned about. Because we started so regionally, like, you know, we almost didn't need to know, like payments wasn't an issue. It was like, oh, someone hasn't paid us. We'd drive to their place and be like, you owe us for 3 cars. You know, there were times when we would send 2 people out to actually drive a car from one place to another because they hadn't moved yet. Right. When everything's really close, it makes it really easy. And then as it got bigger, that's when we started, like we gave ourselves time in the womb before we went into the real world. And so, you know, I'd seen so many other people. One of our biggest competitors was out of Toronto, was a company called TradeRev. And US and Toronto, there's a ton of laws around moving cars across borders. So they kind of stayed north and we stayed south. But when they came to the US, I saw them come to so many different disparate locations. They were like in Washington, but then they were in Florida and then they were in, you know, Cleveland. And I was like, this doesn't make any sense. And I saw the pains that they had because they started so stretched out. So I actually think most of the problems that we would've faced were the fact that we were, got mitigated by the fact we did this in sleepy little Buffalo, New York, where the auction there sucked. And we just kind of said, we're going to dig our way out of whatever hole we get in. But the demand side, I would definitely say I always tell people marketplaces are like grocery stores. If I walk in a grocery store that's massive, or at least believed to be massive, and there's only one thing on every shelf, I walk out. It doesn't matter if everything on every shelf is what I need, I walk out. So I, we always tried to make things seem very small, very tight, you know, like we wanted there to be a small opening and then seem grand once we actually had the ability to fill the thing out. So, you know, using that grocery store analogy, it'd be like if you just hung sheets and only showed people 5% of it, but the shelves were packed. So we really tried to create events around things, you know, and so I think we ended up alleviating that biggest concern. And then like anything, growth is tough because, you know, we have heavy seasonality in our business. We grew, we sold 50 cars 53 cars our first month and then grew by 50 cars a month, month over month. So by month 4, we were doing 200 cars, right? So at $10,000 a car, that's a $24 million GMV run rate in month 4. Pretty impressive for marketplace, right? Doesn't matter, our take rate was like 2 or 2.5%. And then all of a sudden we started to hit the lull that comes with the like late fall, early winter, and things slowed down. And I would say one of our biggest things was not keeping the momentum up, keeping, especially in those early days when things haven't clicked yet, and trying to make sure that things kept seeming up because it was all about, you know, these were all new people that really trusted us. Hardly anybody in our team had ever come from a startup. We were pulling them from really traditional businesses. And it was keeping that momentum that got them so excited so there wasn't a letdown or a crash because it's tough, you know. And it happened several times in our first couple years before we really, I think, really had product-market fit.
