Max Brun discusses ACV Auctions' challenges as a B2B marketplace for used cars. The company faces seasonality swings, low take rates that pressure margins, and the difficulty of building trust with sellers in Buffalo, a less tech-enabled market. ACV must prove itself as a revenue engine for dealers, not just a sales channel.
You mentioned as far as some of the specific challenges, you know, with the business such as seasonality, right? But were there any others that kind of come to mind with it specifically as a B2B marketplace?
I mean, we had positive working capital days, right? So our average ticket was 10 grand. You would think, okay, well, what would happen? And there were times when people didn't pay us. And so we'd be on the hook. Like a 2% take rate means I have to do 50 things right to make up one thing wrong. Right? Like that's kind of how it works. And that's part of the problem with the really low take. So there were times when those issues happened, but I think we did a good job of putting mitigation plans in place, you know, pretty early. The marketplace, it's, I think in Buffalo we came from a lot of, we have really thick skin. Like people said no a lot in the beginning. No, I don't want to do this. No, I don't want to buy a car when I don't know who I'm buying it from. No, I don't trust you. And we just said, okay, well, what does it take? Do we have to give you money? All right, here, I'll come to your lot. When a car sells, I'll literally write you a check and hand it— I'll walk with you to the bank and we can cash it.
Right.
So we got a lot of pushback on stuff like that. You know, it was getting people to trust in a high-ticket environment in a city that wasn't that tech-enabled to be able to be doing something like this. But I think one thing that we did was instead of making it all about the marketplace, We made it all about them making money and the marketplace was just one of the tools in our toolbox. So we actually made the marketplace the cart, not the horse. And I don't see that as much now. It's like people go, this is the marketplace that we have, right? Like it's the center of our universe. And it's really like, no, no, the center of the universe is these guys all, Dan, Joe, and I had all grown up in households with family, our fathers that all ran small business. And it was appreciating the fact that what we were doing was we were a revenue engine or an inventory engine for small business. So, but honestly, I mean, this sounds ridiculous and, you know, if anybody from like Bessemer is on the call, they'd probably laugh. But like, we didn't think we were that capital efficient and we didn't think it was that hard, you know, but we ended up being very capital efficient. They used to, love how capital efficient we were. And I mean, I don't know if we missed our numbers one month once we started having numbers after the first year. I don't think we missed them one month the entire time I was there. You know, it just was about, it was an amazingly linear business. We did not assume there was going to be economies of scale and there wasn't economies of scale. Matter of fact, it got harder when we got bigger. It did not get easier. And I think we just kind of, we kind of made these assumptions like, this is like every day this entire thing is gonna fall apart. And if it doesn't, we just pray to God every night and thank him. But it wasn't that bad. I mean, I think that there was, I think I don't give us enough credit on how quick we had product market fit. We very well could have had it on day one, if that really is a thing. You know, I will say that It's a very simple business in, as long as you're honest, right? And our biggest thing was how do we be as honest as possible? You know, and that cost us a lot of sellers. They were like, well, why did you say this and this and this about this car? And it was, well, because I don't work for you, I work for the market, right? I work for this entity in this organization. So we ended up cutting a lot of sellers, which was tough. You know, and look, I mean, ACV is not the greatest. There's a reason why it is one of the few B2B marketplaces that went public. You know, massive market, big ticket, kind of in a place where they're, I mean, for how big automotive is at the time, there hadn't been a lot of innovation on the remarketing side, on the wholesale side. It was very evolutionary, not revolutionary. I mean, I can show you pages and pages of companies that could kill ACV. That, you know, I had dreamt up. It just— nobody ever made one of them. And we just got— we just got lucky. We were the apex. We were the apex predator by default is maybe a good way to put it. So
