Release Date: January 24, 2017
BUFFALO, N.Y. — A pair of University at Buffalo grads has launched a company that links mobile technology with the hectic, grimy “old boys business” of wholesale automotive auctions.
And it’s a hit.
ACV Auctions has been crushing it since it launched a year and a half ago. The company won the 43North business plan competition (which brought them $1 million) and has raised $6 million more from investors. The START-UP NY company now has 52 employees, most of whom are working at crowded tables in the Thomas R. Beecher Jr. Innovation Center on the Buffalo Niagara Medical Campus.
The company is bringing the efficiency and ease of technology to the fast-paced and sometimes frantic world of the wholesale automotive auctions. It has grown to more than 3,000 customers, but it is a company most of us will never see or use. It is only for licensed automotive dealers.
When you trade your car in at a dealership, the dealership can either sell your car on its used car lot, or sell it at one of the regional automotive auctions across the nation.
ACV Auctions instead posts a detailed condition report and numerous photos of a car, and holds a 20-minute online auction of the vehicle. Used car dealers can bid on cars without leaving their offices. They can set their auction feed to include only the types of cars they want.
For the sellers, ACV eliminates the need to move cars to the auction (and back if they do not sell). And it exposes the cars to many more potential buyers.
“We have taken a lot of the headache out of the process,” said Dan Magnuszewski, co-founder of the company, who graduated from UB with a computer science degree. “And by making it more efficient, we are saving sellers and buyers money.”
A car-guy’s idea
The company was born when co-founder Joe Neiman walked into the Z80 Labs technology incubator, which Magnuszewski was running, to talk about using technology in the wholesale car market. Neiman, a UB School of Management grad, had been selling used cars in Albany, and had returned to Buffalo to work at a large new car dealership. There he began to understand the inefficiency of traditional automotive auctions, which take dealers away from their shops and can make it difficult to inspect and bid on cars they may want.
“A car auction is an emotional roller coaster,” Neiman said. “It is absolutely gambling. Some vehicles I was buying completely ‘as is,’ and I got to see them for 60 seconds before I bought them.”
After hearing his idea, Magnuszewski said “I can build that.”
The two refined the plan and put it together. Investors have been impressed, and many tech entrepreneurs in the Buffalo Niagara region have gotten involved. George Chamoun, a UB grad and founder of Buffalo-based Synacor, became an investor and soon was named CEO of ACV Auctions.
How it works
The company has inspectors who file detailed reports on each vehicle. Sellers can do their own reports, and those cars are identified as “seller inspected.” Anyone filing incorrect car reports is taught how to make them accurate, or they are banned from the service.
“Trust is the key,” Neiman said. “The more you disclose about a vehicle, the more willing buyers are to part with money.”
The company handles the financial transactions and titles of every deal, and offers a link to transporters for the vehicles, if needed.
ACV makes $100 to $150 from a seller, and $50 to $350 from the buyer, depending on the sales price.
ACV now has about 3,000 users across New York, in Western Massachusetts, Pennsylvania and Ohio, and it plans to be nationwide “as soon as possible,” Neiman said.
Andy Lahti, sales manager at Garber Honda in Rochester, New York, said the quick auction capability of the ACV app can be very helpful. When someone thinks they are being low-balled on their trade-in, Lahti can quickly put it up for auction and show the customer what dealers are willing to pay.
“It helps me sell cars on the spot,” he said. “And I’m getting at least as much as I would at an auction without the expenses.”
For John Gambino, general manager at E-Z Loan Auto Sales, the app has made it easier to keep his three used-car dealerships in Western New York stocked.
“It’s a convenient way for us to acquire inventory without leaving the store,” he said. E-Z Loan only bids on cars that have been inspected by an ACV technician.
Gambino thinks ACV will take a piece of the wholesale business away from traditional auctions, but it will not take over the business entirely.
“There are just traditionalists who want to be there live and in person to touch, feel and smell the car and establish relationships with buyers and sellers,” he said. “And they want the confidence of looking at the car themselves before they bid on it.”
Magnuszewski said he stays in touch with the computer science department at UB, and has hired numerous UB students and interns.
The growth of the company is gaining momentum, and both founders see expansion happening rapidly.
“You have to add value,” Nieman said. “If you don’t add value, your business is not meant for this world very long.”