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It is a highly disruptive concept to say you are going to sell cars differently.
There is a $550 billion new car market and a $500 billion used car market.
On top of those businesses you also have financing and leasing (how you will pay for the car), peace of mind (warranties, road side assistance, etc.), insurance, maintenance/repair, refueling, and accessories.
This results in an ecosystem that in some way touches about 20% of the economy and it is highly inefficient.
Nobody has been able to really solve it and bring it all together.
When TrueCar started publishing the prices that people were paying for cars it was highly unpopular.
The idea that you can be a first time car buyer and be an expert in 60 seconds or less is really what TrueCar is about.
TrueCar is a very big data driven marketplace that touches about 2 billion different data points every day.
They are trying to bring together an ecosystem between the manufacturers, car dealers, and customers.
They are trying to triangulate all of those and bring them together at the same time.
Publishing the price they paid for a car was very provocative concept to car dealers.
TrueCar got boycotted in 2011 and at that time they were a profitable business.
So they went from being profitable to being very unprofitable very fast.
Within about 60 days TrueCar lost almost 1/3 of all the car dealers on the program.
TrueCar was a consumer driven company that was focused on solving a problem.
People would hear about TrueCar and say, “I love it. Dealers must hate you.” That is exactly what happened to them.
The company was completely tone deaf when it came to the issues of dealers.
It turns out that the issues facing car dealers are actually bigger than the problems facing car buyers.
Consumers believe that car dealers make about 20% profit when they sell a car when in fact they make closer to 2%.
They may not feel bad for them, but there is a moral to the story.
Fundamentally, TrueCar believes that truth is a more profitable business.
A lack of trust is friction, and in the car business friction is something that can be measured.
It costs money to sell a car because people don’t have trust.
When you can introduce trust through objective data you can lower the cost of selling and retain more margin.
Scott has always believed that truth is a better way of doing business.
He also believes that great companies solve real problems, and this is a real problem.
He loves the car business, but is also a data geek.
For Scott, this was the perfect challenge because he understands it.
Even in the face of a boycott and the company almost dying, there was a real belief among the core group that they were going to make it.
Scott chose cars because he understands it.
It starts with a car as an appliance that is fungible and mass-produced that is predictable from one to the next, but yet you can have a very different experience by going from dealer A to dealer B.
The delta between what one customer pays versus another can be as much as 30%.
So for a $50,000 product you might be getting $40,000 for it and another person might be paying close to $60,000 for it.
This is where all of the anxiety comes from.
Understanding that and building a brand around the fact that TrueCar now has the transaction data that allows them to study that market live and in real-time is really the issue.
Scott grew up on things like Kelly Blue Book, which was started by a car dealer in southern California who was a market maker that put a price on a car.
It wasn’t based on transactional data.
Knowing that the data is there today, and TrueCar can use that as a real market dynamic to find a market-clearing price.
They believe this is a great place to start but True is much bigger than TrueCar.
To the extent that you can be a beacon for trust in a really murky market (like auto), you can not only go in to different adjacencies (like TrueLoan, TrueLease, TrueQuote, TrueTrade, etc.), but you can also go geographically and also look at other big categories (like homes, insurance, healthcare, financial services etc.).
Scott raised quite a bit of money for his custom car company called Build To Order.
It was really about understanding the problems with how cars are sold which starts with the fact that we have a “build to inventory” system not a “build to order” system.
In a build to order system you get to take all of those efficiencies back in to manufacturing.
This is what Tesla has done from the ground up, which is to not build a car until there is demand for it and a customer has placed an order.
That efficiency hits the bottom line for the consumer, and that was the whole idea behind build to order.
The industry really needed an external catalyst like an alternative to the internal combustion engine with the electric car.
This took somebody like Elon to take that kind of a risk.
The build to order system was operating on the premise that the auto industry has evolved to a point today to where the things that go in to a car are being done to a larger degree than ever before by the supply chain.
Build to Order was an idea that you can have a mass customizable car.
Jason mentioned that he switched to Zenefits last year amd the $100/employee/month he used used to charge went away, which equated to around $20,000 in savings per company.
Zenefits makes money in a bunch of different ways, but the biggest source of revenue is as a broker on your insurance policies.
The carriers pay brokers and those rates are built in structurally to the system so it doesn’t really change the end consumers price.
Zenefits has also built a lot of technology around the connection of these systems so there is less paper pushing on Zenefits’ end, which makes it more efficient.
There are about 800 employees now, and they are hiring about 100 people per month.
They have hired Mike Leary who used to run recruiting for SAP, and he has embraced the scaling project.
About 10,000 companies are using Zenefits now.
The sweet spot is companies with 5 – 500 employees.
You would definitely want to have a dedicated HR person once you get to be a larger organization, but what you ideally want is someone in HR who is really strategic in who to hire/promote, how to think about performance, etc.
It is not ideal for that person to be spending all their time doing the administrative and paper-pushing role.
So that person could use Zenefits for this.
What happens with Zenefits is people hire HR a little later in the company life cycle, but when they do hire someone it is a person who can be a real advisor to the business.
The reason this hasn’t existed before is because there is a lot of complexity around the insurance side.
No one has really given a bear hug to that part of the business before.
One of the pieces of advice that people give startups that is wrong in Zenefits case is to focus and do one thing.
A lot of companies have focused on one spoke in this hub and spokes ecosystem, which has resulted in all of these other companies ending up with 20 different systems (one for payroll, insurance, 401K, etc.).
You need a company that brings all of that together and unifies it.
Salesforce for employment is an interesting analogy for the Zenefits business.