The Chicago headquarters of DRIVIN has all the trappings of a young, up-and-coming tech company.
A mostly open-air format, with cityscape views, hardwood floors and even a bar for post-work gatherings.
And these digs are housed in a Windy City building known for companies on the cutting edge of data science: 600 West.
Or, as KAR Auction Services chief operating officer Don Gottwald put it, an “incubator of data science talent and probably the strongest hotbed of that anywhere in the country.”
This kind of data science savvy is part of what piqued the auction services company’s interest in the first place, eventually leading to KAR buying DRIVIN in a $43 million deal.
Shortly after the purchase was announced Wednesday, Auto Remarketing caught up with Gottwald and DRIVIN chief executive officer and co-founder Kayne Grau by phone.
‘Part of that fabric’
KAR’s focus on building analytics capabilities, Gottwald explained, is a three-prong process: build, partner and acquire.
The relationship with DRIVIN started off with a partnership, after KAR got to know the young company better.
“They had put their finger on a real opportunity for improvement in the space, and they were going to be laser-focused on that,” Gottwald said of learning about DRIVIN’s leadership. “They basically said, ‘We can move quicker than a larger organization can at a niche issue,’ and we said, ‘Show us.’”
And that’s exactly what DRIVIN did through its initial partnership with KAR. And now with DRIVIN in its portfolio, the company can “syndicate those capabilities throughout our broader KAR platform,” Gottwald said.
It was important for DRIVIN, particularly as it was getting its feet wet, to quickly “anchor around strategic partners,” Grau said.
For DRIVIN, those partners were Cars.com on the retail data side, along with KAR on the wholesale side.
DRIVIN has maintained relationships with both companies from the get-go. (Grau is a former executive with Cars.com, whose former CEO Mitch Golub was named to DRIVIN’s board in 2015).
DRIVIN teamed with KAR not just around data but also to be able to have an “ecosystem” that the young company could utilize for its dealer partners to access such wholesale amenities as transportation, auctions and salvage services.
“We could represent our services via KAR and not have to reinvent the wheel,” Grau said.
And in becoming part of the KAR family, Grau said it’s not only clear where DRIVIN fits into the company’s “ecosystem” at the moment, but also where KAR leadership envisions vehicle wholesaling should be in the near future.
“And I love the fact that DRIVIN can be a part of that fabric, and use our data analytics, use our service, use our people and our passion and our culture to really help effect change,” Grau said.
Relationship with TradeRev
The inevitable question about this purchase might be this: is there overlap between the services of DRIVIN and the TradeRev smartphone-based auction that’s already in the KAR portfolio?
Some, the execs say, but it’s more of a “complementary” environment.
“Their original operating model, if you will, at DRIVIN is definitely a dealer-to-dealer-facing capability. I would say they are more complementary than overlapping,” Gottwald said. “There are multiple options to serve that space and the different segments of customers that have different needs. And they’ve taken two very, very different approaches to making that dealer-to-dealer transaction more efficient.
“So, we do believe over time, they will be very complementary,” Gottwald said. “But I think of TradeRev more as a transactional marketplace, and DRIVIN as a data science organization. And certainly the combination of those in the KAR platform is exciting.”
Grau added: “I think we can complement a lot of different solutions that they have. I think we were out in front on certain things that it’s ultimately going to just expedite the process. And I think that we can be nimble; we can take advantage of a lot of the assets that we have here in house and be able to get them integrated very, very quickly into the KAR ecosystem.”
Asked how DRIVIN might continue to develop and change under the KAR umbrella, Gottwald said that KAR’s infrastructure, data and scope can certainly help the original business model of DRIVIN. But the biggest opportunity will be in “syndicating the capabilities” that DRIVIN has developed.
“So while DRIVIN does have one primary customer-facing tool, most of their capabilities are used internally by their team members to effectively match, say, supply and demand,” Gottwald said. “And we believe we can take those tools and put them in the hands of employees that are elsewhere within the KAR family, say, at ADESA or other parts of the organization, and make them more effective at doing that as well.
“So for our large commercial sellers, for instance, as the marketplace maker, we’re trying to constantly match supply and demand,” he said. “Supply (is) rising, making that a bigger and bigger challenges. These tools are aimed right at the challenge.”
Integration & expansion
DRIVIN should also be a fairly solid complement to KAR’s Data Science team, Grau said, and its products can likely be integrated quickly into KAR’s offerings.
Such integration with KAR’s portfolio — which includes everything from inspections and floor planning to auctions and vehicle transport — can help DRIVIN accelerate growth plans.
“We should be able to scale our business pretty dramatically across various different markets that we haven’t been in yet, really because of the need of inventory,” Grau said. “Being able to tap into Texas, being able to tap into northern Florida or areas that we really want to do business was just from a scalability perspective, we had a finite (amount) of resources to be able to go get the inventory. Being able to utilize KAR and their backbone, I think we can do that fairly quickly.”
For more on DRIVIN, see our podcast below, recorded prior to the announcement of the purchase.