(Photo Source: Shutterstock, Photographer: Jaguar PS)
July 28, 2021 — Hollywood actor and noted comedian Kevin Hart sees the upside in automotive digital retailing and has decided to ride along with a group of investors putting $18 million into Rodo, a mobile app that lets customers lease, purchase, or sell a vehicle online.
Hart’s investment firm, HartBeat Ventures, joined lead investors Holman Strategic Ventures and Evolution VC Partners in the Series B financing round. Other investors include IAC — which invested $23 million in Rodo’s Series A round in 2018; Mack McLarty, Vice Chairman of RML Automotive; Franklin McLarty (Mack McLarty’s son), Chairman and CEO of McLarty Diversified Holdings; and Ken Schnitzer, former Chairman of Park Place Automotive Group.
Rodo, which was advised by investment bank The Presidio Group LLC in the latest round, has now raised a total of $46.5 million since Nathan Hecht started the firm in 2016. Based on recent deals in the sector, along with the capital Rodo has raised coupled with its recent growth — which the company pegs at more than 10x the last two years, the current valuation is likely between $300 million to $400 million.
Rodo originally launched branded as Honcker, the only online mobile car leasing marketplace in the industry. It has since expanded to being an end-to-end leasing, buying, and selling solution, with more than 1,200 dealership customers.
The deal is the latest in what has been an active summer for M&A and investment activity into digital retailing companies.
There were at least four acquisitions over a five-week period beginning June 2 this year of companies offering digital retailing solutions. The acquisitions totaled approximately $1.2 billion.
(TBR subscribers can read more about these deals here: J.D. Power’s Acquisition of Darwin Shows a Sector Moving into Acquisition Phase).
The deals include:
- CDK Global acquired Roadster.
- Reynolds and Reynolds acquired Gubagoo.
- J.D. Power and Associates backed by private equity owner Thoma Bravo) acquired Superior Integrated Solutions (Darwin).
- PureCars (backed by Diversis Capital Partners and Stage 1 Ventures) acquired automotive and power sports fintech and digital retailing firm truPayments from Tarry Shebesta.
Other acquisitions this year include fintech company Upstart’s purchase of digital retailing company Prodigy in March.
A second deal in May, while not really positioned as digital retailing, but indicates a possible direction for SpinCar is its acquisition of Pulsar AI, an automated conversational AI platform. SpinCar, known for its vehicle imaging solution, likely will combine the Pulsar platform with its imaging platform and either create or acquire a digital retailing solution.
Investors and strategic players see conversational eCommerce as being a critical aspect of digital retailing. For example, Gubagoo leveraged its conversational platform into what has been pegged recently as conversational e-commerce, into a full digital retailing platform, which helped create its sale to Reynolds and Reynolds.
In May, CarNow, another firm known for its conversational platform, raised $30 million from Battery Ventures, an existing investor, bringing its overall total raised to about $55 million. Noted venture capitalist Robert Davoli (Sigma Prime Ventures and Gutbrain Ventures) also is an investor.
CarNow launched with a messaging platform while offering rich media applications, inventory integration, and build data solutions as part of the package. The company began with the conversation piece because Park believed — and still does — that the complicated aspect of a sales transaction requires human assistance.
But CarNow clearly is moving into the digital retail space. While playing coy about what they plan to create with the recent investment, Founder Andy Park, along with Co-founders Tim Cox, and Tom Palmer are looking to build an enterprise company and are not planning to exit via a sale to a larger player.
ActivEngage, the pioneer in dealership online chat/conversation (Ted Rubin founded the company in 2007) launched its digital retailing solution, Revolve, in June 2020. The company, though, is focused on being the conversational and chat engine serving numerous digital retailing platforms.
On the fintech side, Car Capital Technologies launched this year (founded in 2020) with an $8.8 million Series A round with investment firms FM Capital, Automotive Ventures, and Medalist Partners. Car Capital then secured a $20 million credit line with Medalist Partners. The firm’s software platform (Dealer Electronic Auto Loan System (DEALSSM) lets franchise and independent car dealers make 24/7 instant auto loan decisions while making immediate changes based on each customer’s unique situation. The company also says its platform should create access to loans for customers regardless of their credit history. Dealers also can profit from a sales-based performance with the loans without having to hit a minimum portfolio size.
Clearly, the pandemic has created the environment driving the acquisitions and investments into digital retailing. In early 2020, the long-term survival of several firms in the digital retailing space was questionable. But the pandemic jumpstarted the rise in dealership signups which led to revenue growth investors and buyers find attractive.
At some point, the idea that digital retailing is a separate category in automotive will fade into history — mainly because there are so many aspects to an online deal. It will become part of the overall sales process in the store. The trade, negotiation online (chat, conversational commerce), F&I, vehicle imaging and merchandising, data analysis providing the right pricing, vehicle delivery and transport services, titling, econtracting, billing, CRM — these all have a role in digital retailing. And that requires significant integration.
This dynamic is what led to the acquisitions CDK and Reynolds and Reynolds made this summer. The deals indicate that digital retailing is moving away from being a nice-to-have widget on a dealership website to instead being a critical integrated solution within the dealer management system.
The industry likely will see more acquisitions from DMS providers of digital retailing solutions over the next year.
Meanwhile, the digital retailing narrative should continue to resonate with investment firms. As Robert Roman, the president of Hart’s firm, said in the press release announcing Rodo’s capital raise, “Our team is passionate about cars and want to support platforms with transparency and an easy-to-use format that gives power back to the consumer. We believe Rodo does this. It’s a game-changer!”