The Internet was supposed to make car shopping easier, Tommy McClung is explaining. Back in the 1990s, sites like Vehix.com, Cars.com, and Autotrader.com promised a future where you wouldn’t have to haggle with a salesman, and where you didn’t have to drive from dealer to dealer just to see who could offer the best price or who had the model and color you wanted in stock.
Well, it didn’t quite work out that way. The major car shopping sites, McClung argued to me yesterday, have turned into little more than lead-generation engines for car dealers, where shoppers are enticed into handing over their personal information and are promptly buried in spam and phone calls from pushy salespeople. “The industry has started to realize that they have created a disservice to customers,” McClung says. And it’s not like dealers are profiting either: McClung says they’re lucky if five out of 100 leads results in sale. At $20 to $40 per lead, that’s an expensive form of marketing.
Naturally, McClung has a solution. It’s called CarWoo, and it goes national today after no-publicity launches earlier this year in California and Florida. It’s a website where you can go online, select the make, model, year, and color of the car you’re looking for, and, for $19, get two to three price quotes from local dealers vetted by CarWoo. For slightly more money, $49, you can get three to five quotes. You stay anonymous throughout the process, and the dealers can see each others’ bids, so they’re incentivized to lower their asking price. The quotes come along with all the information you need to make a decision, and once you accept an offer, the price is final.
McClung says CarWoo is great for consumers because it finally makes buying a car online faster, easier, and cheaper than doing it in person (the average CarWoo user ends up paying $3,000 below the sticker price, the company claims). And he says dealers like it because they don’t have to pay for the leads—CarWoo makes all its money on the up-front fees from car shoppers.
“What the $19 plan and the $49 plan do for the dealer is eliminate the tire-kickers, the people who aren’t ready to buy yet,” says McClung, who’s CEO of CarWoo. “As soon as the consumer pays the $49, they’ve got some skin in the game, and 85 percent of our customers buy a car within two weeks.”
The prospect of free bidding opportunities has attracted 3,200 dealers nationwide to the Burlingame, CA-based startup’s network. And the idea of a system that would leave no room for dealers’ occasionally sleazy antics has attracted thousands of beta users, as well as a stellar list of Silicon Valley investors.
CarWoo got its first seed funding from Y Combinator, the Mountain View, CA-based startup incubator where McClung and his co-founder Erik Landerholm, the company’s chief technology officer, were part of the Summer 2009 class. This January, they pulled in $1.8 million in seed funding from Comcast Interactive Capital, Blumberg Capital, Accelerator Ventures, angels Paul Buchheit and Joshua Schachter, and super angels Aydin Senkut and Dave McClure. And the 10-employee startup announced today that it has closed a Series A funding round amounting to $4.2 million. Interwest Partners took the lead, with
