SAN FRANCISCO (Venture Capital Journal) - Buying a new car usually involves haggling in a showroom with a salesperson. But Burlingame, California-based startup CarWoo! wants to reduce the hassle and transform the way consumers buy new cars in the process.
"Buying a new car is extremely painful," said Tommy McClung, co-founder and CEO of CarWoo! (carwoo.com), which came out of stealth mode this week. "Even with all the online sites that help you research the car you want, fielding calls and getting spammed and hearing pitches from car dealerships is inefficient. I knew there had to be a better way."
McClung said he launched the company, with co-founders Erik Landerholm, CTO, and Michael Young, vice president of product design, in early 2008 after he endured a horrible experience buying a new car.
After McClung researched his potential purchase online, he said he was contacted by multiple dealerships, but none of them answered his questions or listened to what he wanted.
“Rather than get the information I needed, I got hard pitches for me to come into their dealerships or alleged no-haggle quotes for non-existent cars,” McClung said. “We created CarWoo! to give consumers a great experience where they’re not just sold off to several dealers as a lead.”
Investors agree. CarWoo! raised a $4.5-million Series A round this week led by InterWest Partners with participation by Comcast Interactive Capital, Blumberg Capital, Accelerator Ventures and individual investors Raymond Tonsing and Dillon McDonald.
Previously the company, which completed the Y Combinator program in late 2009, raised about $1.5 million in seed funding from Comcast, Blumberg, Accelerator and a number of individual angel investors, including Paul Buchheit, an early Google employee who helped to create Gmail; Joshua Schachter, founder of Del.icio.us; Aydin Senkut, another former Google employee and founder and managing director of Felicis Ventures; and Dave McClure, founder of the 500 Startups fund.
In addition, a number of heavy hitters from the tech and automotive worlds are advising the 10-employee startup. Board directors include Rob Chesney, former VP/GM of eBay Motors; Dillon McDonald, former COO of Jumpstart Automotive; Tom Taira, CEO and founder of Honk.com and co-founder of Zag and TrueCar; Jeff Fluhr, founder and former CEO of StubHub; Tim Weaver, VP of sales for ResponseLogix; Niall Hay, e-commerce director for the Penske Automotive Group; and Michael Yang, former VP/GM of Yahoo! Autos.
McClung said once potential buyers have found the cars they want, they log onto the website (and pay a fee) to ask questions, communicate and negotiate with the dealers. CarWoo! never reveals the buyer’s personal information until they have selected the offer they want from the dealer they want to do business with. McClung described the process as putting the power of car buying into the hands of the people. He added that negotiations are stress-free because they are anonymous and happen outside pressure-filled showrooms.
Because the system is designed around openness and transparency, dealers know exactly what other offers the buyer is seeing, so there’s no guessing game and the offers become more competitive, according to McClung. He recommended buyers in the market come to CarWoo! after having test-driven a car. He said the process eliminates follow-up calls from dealers.
Currently, CarWoo! works with about 3,000 dealers nationwide, out of a possible universe of 19,000 or so. McClung said he hopes to grow the number of U.S. dealerships to 5,000 by the end of the year and eventually expand to Canada. He said Toyota dealerships outnumber all others in the company’s network.
But is now a good time to help sell autos, considering how the recession has hammered new car sales? McClung said even though the number of new cars sold is down from 17 million in 2007 to about 11 million expected this year (roughly 35 percent), the number of sales still represent a large market.