Aug 21, 2019
EP017 - Founder/CEO and VP of Sales & Business Development at Rodo, Nathan Hecht and Patrick McKeever
Episode 17 is an interview with Nathan Hecht and Patrick McKeever, Founder/CEO and VP of Sales & Business Development at Rodo, respectively; recorded live at the Automotive Intelligence Summit in Raleigh, NC on Wednesday, July 24th, 2019. Scot and his guests discuss a variety of topics, including:
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The four pillars of Vehicle 2.0 are electrification, connectivity, autonomy, and changing ownership models. In the Vehicle 2.0 Podcast, we will look at the future of the auto industry through guest expert interviews, deep dives into specific topics, news coverage, and hot takes with instant analysis on what the latest breaking news means for today and in time to come.
This episode was produced and sound engineered by Jackson Balling, and hosted by Scot Wingo.
Scot: Welcome to the Vehicle 2.0 podcast. We are at the 2019 automotive intelligence summit here in Sunny Raleigh, North Carolina. It was rainy yesterday. So you guys are getting to experience the, the real Raleigh. It's July 24th. And we're really excited to have on the show. A couple of folks from Honcker. They're from Manhattan, so excited to have folks from the big city down here and in Mayberry of North Carolina. So we have Nathan Hecht. He is the founder and CEO. Welcome.
Nathan: Thank you. Thanks for having me.
Scot: And he brought along his partner in crime, Pat McKeever, who is VP of Sales and BD.
Patrick: That's well said, Scott. That's correct. Thank you.
Scot: Also in our pre discussion in charge of keeping Nathan out of trouble. So it's good to have a,.
Patrick: That's my main job actually.
Scot: You go with, come with security.
Nathan: He's not kidding.
Scot: Uh so Nathan, tell us about you know, the founding, I'm a fellow entrepreneur, so I'd love to hear the founding story and all the background on yourself and how you got into this.
Nathan: Sure. Thank you. So the founding of the company is actually real interesting. It was actually from a personal experience in trying to lease a car in New York. I went into a local car dealership and basically went through the runaround of trying to choose and price of vehicle for a monthly lease. It took about five hours to ultimately realize that I don't, I don't even think I'm going to take this car after, after this whole experience and during, during the five or six hours that I was in the dealership I was searching for a way to do the same thing online and quickly realized that there was no way to do a new vehicle transaction on the Internet. And in my case specifically at least. So at the end of that day did a little more research and I I committed to trying to do this and that's how the company started and as they say, the rest is history. Cool. How long ago was that? That was about two and a half years ago. Half years ago. Cool.
Scot: Awesome. And then Pat, how do you intersect into the story?
Patrick: Oh I had met Nathan from a previous my previous place of work where we played in the, in the automotive data dms data space and actually had approached Nathan had learned about the company in today. If you have a need for dms data, we can help you. He said, no thanks. But we kept in touch and at that point kind of kept an eye on him and he was starting to get some, some traction, a real traction and I immediately saw sort of the need or the hole if you will.
Patrick: There had been other services out there that could present a savings to the consumer, but at the end of the day, and I'm a huge leasing fan, both of my cars are currently leased and have been leased for the last 10, 12 plus years. I saw kind of the fit immediately. So we met in Brooklyn about a year and a half ago and I think I made an offer at that first meeting. I'll pretty much maybe the next day. I think it was the next day. We, we had a really good sort of connection where similar but very different at the same time. And we work well together. So it's been a, it's been a blast. It's all, it's been about a year and a half. It feels like 10 years, but but it's been an awesome ride so far.
Scot: Awesome. So I, I also have a lot of co-founders and partners. Usually I'm described as the arsonist and they're the firefighters that kind of what you guys have going on here, probably like the fires you get to put them out.
Patrick: That's pretty well said. Yeah. Yeah.
Scot: So Nathan, you had the idea you wanted to solve this. So give us kind of some highlights. Over the last two years,
Nathan: I knew nothing about car leasing, car financing almost zero about the overall industry. I actually was an investor in a, in a solar panel integration business right around 2008. After I sold my previous company and one of the companies that we did this solar panel array for was a very large Mercedes Benz, Mercedes Benz dealership in Queens. And the owner Michael Cohen was just a really friendly guy and as I started to think about this business, I said, who do I know in auto? And I knew nobody. And I said, okay, well I'll reach out to this Guy Michael Cohen. I went to one of the operators of that business that I was in investor and I said, can you make this introduction? He said, sure. I met Michael and I told him about what we were doing and I'll never forget it.
Nathan: I think this is the first time I'm actually saying this publicly. We were sitting around his board table and he goes, you sure you want to do this? And I was like, no. He goes, I'm warning you. This is really, really hard. And I don't, I don't even know if anybody can solve it. And by that he meant providing an accurate monthly lease payment for a consumer in real time on an app and then actually giving the consumer the Amazon experience of completing the transaction. And that just fired me up and I was like, Yup, I'm going to do this. I had already spoken to my team that was working on me with something else and I said, we're going to sort of pivot into this. And again, most of the team were actually based in Israel engineers, developers and so on.
Nathan: And they were like, Carly seeing what there is no car leasing there. They had no idea what I was talking about. And we just dove into the deep end of the pool from day one and started to figure it out. And Michael made some introductions and very quickly learned how this works. We understood, but we, we started to focus on, on the, on the technology side of it and we then focused on the brick and mortar side of it and then the consumer side of it and so on and so forth. And slowly over time things started to come together. And finally we needed to sign up a few dealers because we're a marketplace. And I was like, okay, so this is like an entirely new beast. How am I going to do this? I'd never come in, you know, face to face with a, with trying to sell something to a, to an owner, principal at a dealership.
Nathan: And myself and my creative director said, you know what, let's do this. We took screenshots of the app, we put them onto a big whiteboard type of placard and we printed them. And I walked into these car dealerships in Brooklyn, New York, a a fine Jewish kid with the Omnicon has had into these car dealerships. And I said, can I speak to the owner please holding up this big placard of screenshots of an app? And they was like, you need a car, can I help you with a Honda? And I was like, no, no, no. I want to show them something. And believe it or not. Some first general managers came out and they looked at it for a mint and they said, what are you selling? And then I eventually got to own our principals. They looked at it, they immediately saw the value prop and what we were doing and how different it was. It was available on the Internet at the time. And some of the largest regional dealer groups in New York and New Jersey and Connecticut signed up very, very quickly once they saw the value prop. And then we slowly grew from there to where we are today over a thousand dealerships and approximately 15 markets and hundreds of thousands of consumers using the app. And it's still really, really early days. So there's a, there's a long road ahead.
Scot: Awesome. So so I'm gonna ask a bunch of Newbie questions to make sure I understand. So you guys go into the dealers are you competing with their alternative leasing thing or are you partnering with that? We're part, we're completely partnering with them. So, if I'm a Mercedes and I have a Daimler finance thing that's doing the lease, you guys partner with those guys to make it easier for the consumer. You're not, you're not competing with example.
Nathan: So we’re a marketplace where there’s the dealership on one side offering their vehicles and their consumers on the other and our technology right in the middle that sort of makes this an incredibly fast, seamless lease transaction without ever talking to a dealer without ever walking into the dealer. So we're really the first company to take what is normally such an arduous brick and mortar process and, and turn it into a seamless online experience.
Scot: Do I have to be kind of like outside of the dealership to do this or can I be in the dealer using the app?
Nathan: You can be anywhere is when, as long as you've got Internet you know, and you can download the app or go to the website. You can be anywhere you want.
Scot: So I go to the dealer and I say, I want that car. And then they say how do you want to finance it? And then if I choose lease, then I have to download your app.
Nathan: No very different. So we're like imagine you wanted to buy an airline ticket and you went to Expedia. So you'd see basically an aggregation of all of the airlines and flights. If you were flying from let's say JFK to Raleigh and you'd see a list of flights and prices next to it, it's essentially a marketplace for airlines and for hotels and what have you. So we do the same thing. You don't need to go into the dealership, you download the app or go to our website, you type in the vehicle that you're looking for or the vehicle type. And you will see actual vehicles from dealers near you with pre-calculated monthly payments that are probably unbeatable as far as price goes.
Scot: I gather enough information about me that you're using that as an input into the underlying credit scores and all that kind of jazz. Exactly. So when you register,
Nathan: We gather some personal information on you. And then behind the scenes were taking all of the necessary industry data about the vehicle from the dealership. You know, from the manufacturer, so you know, you know, rebates and incentives that may reduce your monthly payments and reduce the selling price of the vehicle or what have you. And in real time in the background, we're calculating all of that to show you a monthly payment with an actual due at signing and you shop the way you would shop on a regular ecommerce site. You choose what you like, you put it into your cart, you place the order, you upload your driver's license and answer some credit questions. The dealer then gets that transaction, that order, and they process the order for you and deliver the vehicle to you the next day.
Patrick: Oh, so I don't have to sit there for 12 hours telling them a million times. I don't need this.
Scot: Exactly. Exactly.
Patrick: Wow. That's awesome. So you've kind of taken that Carvana level experience, applied it to leasing. Okay. I got it. I didn't, I didn't realize this direct to consumer on the front end. That makes a lot more sense now. Yeah. Cool. And then the so, so padded, it sounds like dealers are gobbling this up. Is it, you're just essentially an order takers? Am I understanding that?
Scot: I wouldn't, I wouldn't call it order just yet. We've got a, it's my favorite thing to say. It's got a lot. Hilary entailed interests, great dealer in that interest.
Patrick: We've got, we have built a good sales team that is, is literally boots on the ground knocking on doors, you know, very similar to what Nate did in the very early days. But yet to your point, we've got five of the 10 largest national auto auto dealer groups on the platform today, including Lithia and Asbury. So there the dealers are seeing the value pretty quickly when we, you know, have 10 minutes to sit with a dealer, principal and owner GM. Because really for, for them it's a similar experience to a consumer where by the time we pull a dealership into the fold or alert them on a, on an order, it's a VIN-specific structured lease with a driver's license and a credit app. So it's essentially here, Mr Julia, here's a silver platter, confirm inventory, get the credit approved and we're off and running. So it's a really pretty hyper efficient process for both consumer and dealer. Yeah. Awesome. So I looked at crunchbase. Looks like you've raised according to crunchbase, they're not always right at about $30 million. Yup. Tell us a little bit about the, had you raised venture capital before? Is this your first venture back to business?
Nathan: I had raised early stage venture capital in the past in two previous startups that I founded. And in this specific instance we've raised just under $30 million to date in a friends and family seed round and then a series a and
Patrick: Do series a series a in North Carolina was like $1 million.
Scot: Okay. It's a bay area. Susan.
Nathan: We did a, our series a was 23 million. And actually it was interesting because we had a lot of interests a lot of inbound interest. And then one company took the entire series a IAC, which is the a, which is a, a media and, and a technology conglomerate out of New York City. We're very lucky to have them as investors. At this early stage, they just invested a big chunk. And Toro I saw that. Yes, they just invested about a quarter of $1 billion in Touro.
Scot: Nice. Good. You can get get series being wind up. The so it seems like you're at the sweet spot, so you're kind of like, you're in this, you're you're, you know exactly what investors are looking for. So you're, you know, don't have a lot of employees or marketplace. You're a Fintech, you kinda check and then you're in the auto category. So you're, you check a lot of boxes there. Congratulations on figuring that out.
Nathan: Thank you. I, I can't take all the credit for that. And I also would say investors will never tell you you're exactly what they're looking for. We were lucky enough that, that things sort of clicked for the, for the right investor group at the time that we were looking for capital.
Scot: Cool. So, so I get the supply side and the dealers are there. Do they help you bring consumers into the app or do you have to promote the app yourself?
Nathan: We have to promote the app ourselves. And that's not an easy task. As you know, customer acquisition is is difficult, especially when they're bombarded with, with so many ads and so many people, so many companies trying to get their attention at the same time. So we're out there, you know, grinding every day for recognition.
Scot: So you're doing the traditional Google and all those kinds of aspects. Yep. But I'm an internet marketer at heart and so while you may have a high CAC LTV of Elisa's, like pretty substantial, which was helps on the front end of that, right?
Nathan: Yeah, that's exactly, that's exactly correct. There is a very large LTV, even if, whether it's one lease or the lifetime value of that consumer, if they start leasing in their mid twenties and they listen to their seventies yes. While the CAC is hefty right up front, there's some fantastic payback over the long term.
Scot: Awesome. Cool. So I think that's super helpful to kind of frame the rest of the discussion of kind of going up to 30,000 feet and you're, you're in the thick of it. In the vehicle 2.0 podcast, we talk about connected car changing ownership, Evie Nav. I'm going to spend the bulk of our time on changing ownership cause you guys are Kinda like, you know, sitting right there and in the sweet spot of that. Do you the big trend right in your space is this subscription kind of model. It seems like that would be a natural kind of element for, you know, so you have some people looking at subscriptions, kind of almost like a rental model and then others kind of extending a lease and kind of providing some flexibility inside of Elise w you have any kind of point of view of where we're going to go as far as ownership.
Nathan: I think subscription as a category is a very interesting category. And there's a ton of opportunity there and there are some significant players already that are getting customers and traction and funding and so on. But the economics behind that are still a bit foggy, if you will. A lot of it is around used car vehicles. A lot of this credit, credit risk there. There's inventory risk. You know, there's, there's a, there's a tech risk there is how do we value the residual value of a vehicle if a consumer uses it for a month and then returns it and then I need to release it or resell it and so on and so forth. So it's an interesting category. It has a future, no doubt. But I, I would, I would compare it to, you know, web 1.0 mid nineties when sort of e-commerce was just trying to find traction.
Nathan: Travel was fine trying to find traction. There were a lot of companies that fell out and failed in trying to, you know, figure this stuff out until ultimately it was figured out and you have the you know, those that have succeeded. So that's possible that, that will happen here as well. But it's certainly a category that we keep a close eye on. And in what we're doing in particular we're thinking about these things as well and we're trying to make the, the, we look at ourselves as sort of an ecosystem for if you're going to have a car in your driveway, where did you get it? How did you insure it? How are you how are you servicing it? What are you doing with it when you're not using it? You know, can you capitalize on that? Can you make money on it? How are you paying for it and so on and so forth. So what be it, subscription or modernizing the transaction slash ownership you know, s [inaudible] and everything else that goes around it. It's really interesting and it just needs, it needs hard work, execution capital and time to prove it.
Scot: Does two goods, consumer to kind of download your app and they're active in there. You know, you don't want them to just kind of come back four years after the lease is over. So. Exactly. So I can imagine you guys have a lot of ideas around how to extend that. Precisely. Yep. Interesting. So, so pat, you're out there calling on dealerships. Are they, are they so distracted by these changes going on that they don't have time to think about something tactical like, hey, how do I make leases better? Or, or is this really, they're so transactional driven that you can get their attention?
Patrick: Yeah, it's a bit of both. So they're certainly transactional, right? Where they're still, depending on the audience, also still a bit shortsighted where they're worried about today, this week, what does my month look like? I gotta I gotta move units. Which is good. They're also, they're also aware of what's going on in the space, but I think a lot of them just are a bit I don't want to say confused, but there's so much, they hear so much and they have so much stuff thrown at them that they don't, many cases they just don't know what to do and what, how to do it and how to change the process in the store. This, some of the stores that we're working with, they're really super successful with us. It honestly just comes back down to the people in the store, right? So there's a great store outside of Philadelphia that we use sort of as our poster child. There's two people in this store that take honker orders all day having, I mean every day long and they're moving 20 plus units a month through us. And that's been consistent for the last year and a half. It's at Chrysler Dodge jeep store and it really comes down to their process and the
Scot: And they, they, they were very progressive and came on board very early on. So I think some dealers are still sort of catching up. Some are ahead of the curve. It really comes down to the ownership. And how kind of plugged in, they are really cool. One thing that we've seen in the ecommerce world as a marketplace, we'll come out and do some really innovative stuff and then the rest of the world it'll, it'll kinda raise the bar and then the rest of the world has to kind of react. Yet if you guys felt that where the traditional dealer is now feeling, you know, because you've created this seamless experience I kinda liken it to the Starbucks app. Like would you use the Starbucks app and then you forget to use it and you're in line buying two people and you're like sticking a needle in your eye. You're like, well, I forgot the Starbucks app. So then I imagine you're going to cause the whole leasing thing to get easier at dealers over time. Are you starting to feel that happening?
Nathan: Absolutely. I, I'd say from the consumer side for sure. I think it's it's fair to say that once a consumer has leased the car through our app, they will never do it the old way. So that's for certain, once they experienced this, this this digital experience on the dealership side as well. I think to Pat's point, the dealers that are embracing this and putting resources behind that and realize that this is the future, just love it. You know, and they, they, they rave about knockout deals in, in, in a few minutes and, and, and so on. And so forth. So yes, but again, to be clear, it's still very early and there's a lot that we have to prove and still a lot of adoption necessary.
Scot: Cool. I know you guys are busy out there conquering the world. So final question. If folks really want to learn more, obviously they can download the app and look at some leases that, that seems to be like an obvious one. But then maybe online. Do you guys, other than the honker website, do you guys publish any thought leadership or active on Linkedin or Twitter, any of that kind of stuff?
Nathan: Very active on linkedin and Twitter. And other social media platforms. The Honcker.com is now Sim similar to the app. You can do a transaction, you don't need to download the app if you don't want to. Most of our customers prefer to, to transact through the app. And yes, there is some thought leadership. There is a blog where we're posting stuff too on okr.com/blog. So there's a, there's a lot out there and we encourage engagement. Feedback and other communication. We've learned more from, from listening and being attentive to our customer base and our dealer base and the broader industry than we could ever have possibly figured out on our own. So we encourage our consumers, whether they've done a transaction or not, or just browsing or otherwise have thoughts to reach out and, you know, tell us what you think.
Scot: Awesome. Nathan, Pat, thanks for joining us.
Nathan: Thanks so much. Appreciate it.