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DrivingSales and private equity firm Fraser McCombs Capital have announced the automotive industry’s first conference to connect entrepreneurs, progressive dealer executives and leading vendors to foster and fund innovative young companies.
Twenty young companies will present their business propositions to compete for both recognition and investment … think “SharkTank” for gear heads. This will not be a typical industry conference, rather this will be an intimate event for current or prospective investors in automotive startups, and the progressive dealers looking to be on the cutting edge of automotive retail. If you are fortunate enough to qualify to be an “accredited investor” allowed by the SEC to invest in early stage companies, you will be able to make early stage investments in these companies for as little as $25,000.
Dealer attendees of the event will have an opportunity to vote on what they consider the best business ideas and meet 1:1 with the innovators to either consider investment or be an early adopter of their solutions. Dealers and dealer group executives who are potential investors or customers of these young companies can attend both AutoVentures and the DrivingSales Executive Summit at a very attractive combination rate. Registration for the event is at autoventuresconference.com
Why now? There has never been a more lucrative time to be an automotive entrepreneur or investor. There have been 33 major transactions in automotive with $35 billion in equity changing hands over the past 18 months, per The Banks Report. Industry analysts and savvy investors believe the environment is only getting better for both entrepreneurs and early stage investors.
What is behind this surge of interest in automotive innovation? Savvy entrepreneurs and investors see a convergence of factors creating opportunity.
Foremost is the gap that has emerged between the consumer experiences delivered in other retail sectors and in automotive. Recent consumer research by both DrivingSales and AutoTrader reported that 99 of 100 auto shoppers approached the purchase process with the expectation that it would be a hassle, a truly stunning statistic. The Internet has profoundly transformed consumer expectations of convenience, transparency and service – expectations not being consistently met in automotive retail today. Franchise laws, regulatory and financing issues, and the sheer complexity of the second largest purchase many consumers ever make, have acted to insulate automotive retail from some of the forces that are disrupting other sectors of retail. An increasing number of entrepreneurs are betting that automotive will succumb to the same forces that have disrupted other sectors. As a result, they are looking to invest in solutions that will drive that disruption.
The customer service innovation theme is driving many other entrepreneurs. Some are looking to use technology to streamline the traditional buying process of 3-4 hours – both by enabling parts of the transaction to occur online as well as smoothing the workflows in the store. Others are looking at the ownership experience, exploiting increasingly intelligent and connected cars.
Smartphones and location awareness have opened many opportunities to engage shoppers and owners in smarter ways. Being able to push specific offers to targeted shoppers driving past their store in the auto mall or while walking the lot are just the tip of the iceberg of what valuable solutions are being developed.
It is doubtful anyone knows more about innovation in automotive than Tony Rimas, managing partner of the private equity firm Fraser McCombs Capital. He has not only originated investments in companies like HomeNet, ClickMotive, Dataium and Autoniq but is director of operations for a $1B 10-store dealer group.
Rimas sees automotive investing at a turning point. “Historically, the automotive sector has both been under-funded and has lacked mentors for young companies,” said Rimas. “Many promising companies have failed because they lacked experience in navigating the structural and regulatory peculiarities of the industry.”
To help fill this void, DrivingSales, the leading automotive retail community, Fraser McCombs Capital and MicroVentures, a crowdfunded investment bank, have partnered to create a novel new program that brings together entrepreneurs, dealers and other investors, as well as leading automotive technology companies to jump-start innovators with access to industry knowledge, advanced customers and smart capital. Called AutoVentures, the program kicks off with automotive’s first dedicated startup conference front-ending the DrivingSales Executive Summit at the Bellagio in Las Vegas October 18-20.
The conference will include content on achieving success in the automotive sector and lessons learned by successful automotive entrepreneurs. The meat of the event will be short onstage pitches by 20 young companies in three categories: Early Stage [$0-0.5M], Mid-Stage [$0.5M-$2M] and Growth [$2M+].
A panel of experienced automotive investors will question companies in the two larger categories onstage. The best investment ideas will then be determined by the conference audience, voting through their smartphone. All presenters plus an additional 10 or more companies will be accessible for 1:1 demos and meetings with interested investors.
Perhaps the most novel aspect of the program and the conference is the integration of a mechanism for any accredited investor to not only vote for good investment ideas, but also invest in them. MicroVentures will both administer an angel fund portfolio investors can participate in as well as enable investors to build their own portfolio with investments in any of the 20 or more companies participating in the program. Accredited investors will be able to acquire an equity stake in one or more young companies for a minimum investment of $25,000.
“The idea of an automotive-specific startup conference is fantastic,” said Mark Boyd, "Dealers will have a unique opportunity to invest in their future… gaining a competitive advantage for their store by working with cutting-edge vendors, moving the industry forward and then profiting from their equity stake. Its a win-win-win."
Jon Lancaster, a prominent former dealer and active automotive investor, says the rewards of investing in your industry can be more than financial. He finds mentoring young entrepreneurs with fresh ideas and approaches to be stimulating and personally rewarding. He also feels a sense of mission on behalf of his friends and colleagues in automotive retail.
“There is no doubt that automotive retail will look very different 10 years from now than it is today,” said Lancaster. “I believe that everyone can win – the consumer, the dealer and the entrepreneur – by the retailer being part of the business transformation, rather than its victim. I do this by investing in, and mentoring, these innovators.”
For dealers new to early stage investing, Lancaster’s advice echoes that of the legendary mutual fund manager Peter Lynch – invest in what you know, diversify and be patient. Being immersed in the industry dealers and automotive vendors will have a leg up on other investors, and even the entrepreneurs, on which ideas will work best. Getting access to and influence over the evolution of a compelling new innovation can be both profitable to the dealership’s P&L as well as a dealer’s investment portfolio.
Registration for the AutoVentures conference is at autoventuresconference.com.