Shaking up the U.S. auto credit market

Ophir Dor January 19, 2021 Elie Wurtman founded and invested in used car app Vroom, which is currently trading at a value of $ 4.8 billion • His new startup Fuse, which tries to fix the world of loans automobiles in the United States, is still small but it is sure that the potential is huge. Walser is a client of one of the portfolio companies of Wurtman’s venture capital firm, PICO partners, and a visit to Israel was aimed at improving their business relations. “He’s a CEO who runs a $ 1.5 billion a year business and at first he wanted to spend a night in Jerusalem. It wasn’t until he realized it was too short that he agreed to come for two nights, ”says Wurtman.

During the visit, Wurtman befriended Walser, who told him about software his car dealership had developed in-house and used at its 27 branches. The software allows dealers to identify the best financing option for the vehicle buyer from among the loans available in the market. “In the United States, 90% of car purchases are made with a loan, and the auto loan market is the third largest retail credit sector, after mortgages and student loans,” says Wurtman. “It’s a very old fashioned $ 900 billion a year loan market.”

When Wurtman heard about the software, he was immediately thrilled. He himself had a similar idea that he had started to think about years before when he founded Vroom (Nasdaq: VRM), an online used car platform that went public this year on Nasdaq. . Wurtman suggested that Walser join forces to create a startup to develop a similar system that could be sold to dealerships across the United States.

“I thought that instead of just an internal tool [at Walser] or an idea in my head, we could build it together. Fortunately, Walser thought I fully understood his idea, even though I am not from the auto industry. It’s a great honor, because usually people in the auto industry think that if you didn’t grow up in the industry, you don’t understand a thing. He was also convinced that the best programmers are here in Israel, ”says Wurtman.

After delays following the coronavirus epidemic, the launch of the joint startup Autotech fuse began to take shape in August, when Wurtman’s fund invested $ 5 million in the new company in exchange for 20% of the joint venture. Wurtman and Walser are both executive chairmen of the company, and the startup is led by an American, Colton Ray. “He’s been selling cars for 20 years and I’m sponsoring him to become a software startup entrepreneur,” Wurtman laughs.

Fuse currently employs 20 people. The Tel Aviv development center employs four people but is expected to increase by 20 employees this year. “I’d like to go up to 200, but let’s start at 20,” Wurtman projects.

Finance people are the most expensive employees

Wurtman’s love affair with the American automotive retail world began after he stumbled upon a local car dealership and discovered the outdated work processes in place. In 2013, he was one of the founders of Vroom, which currently trades at a market cap of around $ 4.8 billion. Vroom is a used car sales app that eliminates the need for you to visit a physical dealership. The company collects vehicles from customers, purchases and repairs them, then delivers the vehicles to the buyer’s home. Wurtman served on Vroom’s board but left before the June IPO.

“I remember asking a friend in the US what it meant to buy a car. He told me it was a whole day’s affair. You arrive at the dealership with food in a cooler from home and you feel like someone going to war. First you have to negotiate the price and then deal with the finance manager to discuss the funding, “says Wurtman.” At Vroom, we have addressed the issue of price transparency, assuring customers that the price paid for the vehicle would be transparent, without the negotiation games. We are now dealing with the second part, the loans. “

Wurtman says that auto dealers in the United States these days typically work with a senior lender and offer their financing terms. “On the other hand, we are looking for the best loan in front of the client’s eyes. We are not working on the basis of which the bank gave the agent tickets for a weekend game.”

There are many tools to compare prices, what is your uniqueness?

“It’s not just a price comparison. In fact, we go into the dealership’s systems, check what car the customer has bought, what it’s worth and who the customer is, and close the deal until the end of the day. It’s not like looking for a plane, it’s not that simple, it’s more like taking out a mortgage. We look at offers from banks, financial institutions and sometimes also car manufacturers who are ready to give a loan to induce the purchase.

What is there for the dealer? Why should he pay for this system?

“First of all, there are operational savings here because the finance people are the car dealer’s most expensive employees, and now we’re replacing them with an automated process. Plus, the world has become more pampered and lush. focus is on the customer experience Instead of the customer spending three hours at the dealership, filling out forms with information that needs to be entered into a computer, and then waiting for a response, everything is done digitally in fifteen minutes. average ten vehicles per month.With a system like ours, it sells seventeen vehicles because it takes less time to complete each transaction.

“In this market, even moderate success will be formidable”

Wurtman was a serial entrepreneur, with several exits to his credit, and even in his investments he continues to occupy an occasional managerial position within the company, as happened with Vroom and as is also the case here. Fuse is still in its infancy and product development is not yet complete. The company’s partial solution is being implemented at 67 car dealerships in the United States, 27 at Walser and 40 others – another drop in the ocean of 17,000 dealerships in the United States. Despite this, Wurtman is convinced he has a great future. “Once every five years, I have a hunch I’m watching something big, and it usually works quite well. You can check my history.”

Where do you still see risks in this business?

“The market exists and is real and we are already starting with a first client. The risk here is the software world. We are the first on the market, but others can be smarter. However, even moderate success in a market of this size, that is, if we take 1.5% of the market and manage $ 10 billion in loans, would be a huge success. Vroom didn’t even reach 1% of the market. “

At the Israeli level, Vroom’s success also came with a bitter taste, when in 2016, after Allon Bloch was replaced by an American CEO, the company moved the development center from Israel to the states. -United. Around 30 Vroom employees in Israel have been made redundant and the company currently has no local presence. This time, Wurtman is hoping the outcome will be different. “I decided to do it in Israel and not the United States because I want the next thing to be here and be personally involved in it. The point, unlike Vroom, is to stay here.”

Elie wurtman

Founding partner of Pico Venture Partners, specializing in early investments? 51 years old, lives in Jerusalem with her three children? BA from Columbia University and Jewish Theological Seminary? Founded a number of companies, including Deltathree which provides Internet telephony services, went public on the Nasdaq and became the first unicorn of Jerusalem? Creation of the Bat Shlomo wine estate

Posted by Globes, Israel business news – en.globes.co.il – on January 25, 2021

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Priscilla C. Carnegie