Two years ago, ACV Auctions was just an idea for a better way for car dealers to sell the used vehicles that they weren’t going to put on their lot.
Less than a year ago, the idea for online car auctions through a smartphone app turned into reality. ACV held its first auctions, and it moved into the spotlight when it won the $1 million grand prize in the 43North business plan competition in October.
Since then, ACV turned into the kind of fast-growing business that 43North’s organizers hope for from its winners. For example:
• The company’s workforce has more than tripled to 37 people, including 28 in Buffalo.
• ACV, which started out in Buffalo and steadily pushed across upstate since last fall, now plans to move into even bigger markets in Cleveland and Pittsburgh.
• The company now has the money for even more growth after raising $5 million from a group of venture capital companies this month.
• To guide the company as its growth accelerates, ACV has brought on an experienced entrepreneur, Synacor Inc. co-founder George G. Chamoun, to take over as CEO.
Beyond that, ACV’s growth is a sign that the efforts to nurture the local startup community – from the creation of the Z80 Labs incubator to 43North and the support services they offer – are starting to bear fruit, said Jordan A. Levy, whose venture fund, Softbank Capital NY, was one of ACV’s investors in the latest round of raising capital.
“This is beginning to be the validation that we are creating an ecosystem in Buffalo” for entrepreneurs, said Levy, who co-founded Z80 Labs and is the former chairman of 43North.
“People realize they can start a business in Buffalo and get funding,” Levy said.
“That’s what makes ACV’s success so gratifying,” said John T. Gavigan, executive director of the 43North contest, which was created by the administration of Gov. Andrew M. Cuomo as a way to spur entrepreneurship in a region that generated comparatively few startups.
“Now, they’ve got the capital they need to expand,” Gavigan said.
“And they’ve found a proven leader who will be able to guide their ship through the next stages of their growth.”
Neiman stays onboard
ACV was launched two years ago with a plan to shake up the way that car dealers sell their unwanted vehicles by creating a smartphone app that allows those cars and trucks to be sold in 20-minute online auctions, rather than through conventional auctions that are typically held weekly.
ACV, which earns a fee from each sale, says its online auctions are much cheaper, faster and more efficient than in-person auctions that require them to truck the vehicles that will be sold to a centralized auction site.
They say ACV’s smartphone app puts a 21st-century spin on a business that runs much the same way that it did 50 years ago.
“It’s a modern way of doing it,” said Chamoun, who joined ACV on Friday. “I fell in love with the idea that is ripe to be disruptive.”
Chamoun succeeds ACV founder Joe Neiman as CEO. Neiman will remain with the company, focusing on market development.
His appointment puts ACV in the hands of an experienced entrepreneur who has experience starting and building a technology company.
Chamoun co-founded the business that grew into Synacor, a Buffalo internet content provider, from his University at Buffalo dorm room in 1998. Chamoun had been Synacor’s executive vice president of sales and marketing until he left the company last week.
He said his appointment isn’t a reflection on ACV’s management to this point. He noted that at Synacor, the company brought in Ronald N. Frankel to serve as CEO, with Chamoun focusing on sales and marketing.
Chamoun’s appointment at ACV does the same thing that Frankel’s hiring did at Synacor, Chamoun said.
“The concept is working. We’re growing very well,” he said. “The founders proved the riddle. Now, the question is how to scale this thing.”
The business, which focused initially on dealerships in Western New York, has since pushed into markets in Albany, Syracuse and Binghamton. It started auctions in the Rochester market last month. With the new funding in place, Chamoun said he expects ACV to be in up to 10 markets in the coming months.
More than 800 dealerships registered to use its mobile service. Dealers list vehicles on the site, much like consumers do with eBay. They can post dozens of pictures to show the vehicle inside and out. They include a description of the vehicle’s condition, prepared either by the dealer or ACV’s staff.
The company earns a fee from both the buyer and the seller. For the seller, the fee can be as low as $100. For buyers, fees range between $50 and $300, depending on the sale price.
The venture capital investment vastly expands ACV’s financial resources, which include the $1 million that the company won in the 43North contest.
Before that, ACV had landed $1 million in funding from local angel investors, including Z80 Labs’ state-backed Innovate NY seed fund.
“ACV has already proved in its first year that it can transform the wholesale automotive sector,” said Brian Hirsch, Tribeca’s co-founder and managing partner.
With the investment, Hirsch will join ACV’s board of directors, along with Levy, who still serves on the 43North board of directors. Other investors in the fundraising include Syracuse-based Armory Square Ventures and Rand Capital Corp., a Buffalo venture capital firm.
“They’ve made great progress,” said Levy, one of the most ardent advocates for creating a better environment for entrepreneurs. “But don’t think they still don’t have a long way to go.”
Chamoun, who was an early stage angel investor in ACV, said he quickly became intrigued by the company’s potential, believing that the online auctions could reshape the wholesale car market.
Planning ‘big business’
“I realized what technology can do, and how we can enable a more streamlined and a less risky way of buying a car,” said Chamoun, who also is chairman of Launch NY, a nonprofit group that supports startup businesses across upstate. “ACV Auctions is to car auctions what broadband was to dial up – a superior experience by every measure.”
Gavigan said what ACV has accomplished in the last year is impressive. Chamoun said that’s just the start of what ACV can become.
“We’re still small,” Chamoun said. “We’ve got to turn this into a big business.”