Comcast, Blumberg, and Accelerator rejoining, and new angels Raymond Tonsing and Dillon McDonald, the former COO of Jumpstart Automotive, also chipping in. The company has now raised about $6.3 million altogether, McClung says.
CarWoo’s whole system is Web-based. Consumers log into their private accounts to make car selections and review offers, and dealers log into their own accounts to see what queries have come in, post bids, and review questions from potential buyers.
In contrast to most Y Combinator companies, which have working products on the Web before they even graduate from the program, CarWoo took more than a year to officially launch its service. That’s because it took a long time to build the needed network of dealers, McClung says. And that’s an effort that would have failed entirely if attempted only a few years earlier, he says.
“If you were to ask a dealer to log into a website even five years ago, they would have laughed at you—we still run into plenty of dealers who are on IE6 or lower,” he says, referring to Internet Explorer 6, a version of Microsoft’s Web browser released in 2001. “So you are looking at an industry that’s slower. But the dealers that are surviving today—and last year saw the lowest number of new cars sold in the last 26 years—are looking for new and innovative ways to grow their sales. We think that’s one of the biggest things we have going for us, that we have hit the market at the right time.”
CarWoo’s dealers don’t compete solely on price, McClung says. Details like how fast dealers reply to inquiries can also affect a customer’s decision. “If you have three, four, or five dealers to choose from, simple things like which one of these guys is the most responsive are a huge deal. If he comes back within minutes, he’s catering to my needs. If another lets two days go by, that says something. The progressive dealers who stay on top of technology and have good customer service are the ones who are selling cars, and over 50 percent of the time the lowest price is not what wins.”
CarWoo’s dealer network is strongest in the San Francisco Bay Area, McClung says. But with 3,200 dealers signed up to review queries, there are multiple dealers in every major metropolitan area. If an inquiry doesn’t bring in at least two bids at the $19 level and three at the $49 level, somebody at CarWoo gets on the phone to actively recruit dealers.
CarWoo got accepted to Y Combinator because founder Paul Graham “likes to invest in companies that make inefficient markets more efficient,” McClung says. While car buying has always been a competitive market where consumers typically compare offers from three to five dealers, it hasn’t been a consolidated one, where everyone has all the same information. “There’s never been a place where everybody could go to see where the pricing ends up,” says McClung. Now that customers can get firm quotes without the prospect of spam, and dealers can see how low they need to bid to entice customers, everybody should win, he says—and perhaps the car market will be rationalized again for the first time.
