Startups Don’t Need Product Managers & Other Lessons Learned from CarGurus Langley Steinert
Meet Langley Steinert at Founder Dialogues, May 12 at 6PM. Tickets are free, but going fast!
When most people sell a company for a couple hundred million dollars, they take a little time off for a victory lap. Not Langley Steinert. Just months after selling TripAdvisor (a company he co-founded with Stephen Kaufer) to IAC, Steinert revved his entrepreneurial engine and founded CarGurus.
In the ten years since, CarGurus has become the #1 car shopping site on the web. Today, it employs over 280 people and is growing 100% year over year — profitably. On Monday April 4th Founder Collective’s Eric Paley, recently named to the Midas List, will be interviewing Langley Steinert, an entrepreneur with the Midas Touch, to learn about how he’s managed to build two businesses, worth a combined $10 billion dollars with under $10 million dollars of venture capital in the tank. Here’s the roadmap of what will be discussed:
Math beats media spending
In a market dominated by massive television media campaigns, CarGurus succeeds by leveraging math. “With all due respect to our competitors, they’re newspaper guys who morphed their products onto the internet, but never applied math or technology to make things better for their customers,” says Steinert. “They’re big businesses so they’ve done some things right, but they’ve never done the consumer experience right.”
For instance, Steinert’s competitors make customers click through pages of ads before finding the model they searched for. CarGurus uses linear regression models to help users figure out whether a given listing is a good or bad deal based on recent historical data for their area and shows sponsored ads separately, like Google. This gives customers an honest third party assessment of the various options in their area and provides an incentive to buy.
Focus on your customer’s ROI
In the early days, some car dealers originally balked at being included on CarGurus and asked to be removed from the site. Steinert obliged, but also trained his team to walk through the math with dealers, showing that CarGurus was sending them up to 100 leads per month — for free. With a 10% conversion rate and an average profit of $2,500 per sale that meant $25,000 in free revenue. Once the dealers did the math it left them wanting to buy more leads.
No product managers required
Steinert started his career as a product manager, but there’s not a single PM to be found among CarGuru’s 280ish employees. Instead, the company tries to hire engineers who can build features, but who also think about what those features should be. The freedom to change lanes from product to code ensures that everyone is steering towards what customers really need.
“I could give a $#!+ what you think, what can you prove?”
Steinert has little patience for people who make product arguments based on their feelings, but come to the table with data to prove your theory and he’s all ears. “It’s just the nature of our company, we believe in healthy debate grounded in data.”
Also, with 20 million shoppers a month CarGurus operates on a scale where there’s no excuse for not making cases based on data. “With the amount of traffic we get we can get an answer to an A/B test in six hours,” says Steinert. “We don’t even need to wait the full day.”
CarGurus once lost its biggest customer in one month — and survived
In its early days CarGurus partnered with a much larger site that aggregated car listings info. CarGurus provided significant shopper traffic to this site which in return accounted for a large % of CarGurus revenue. Revenue concentration is unsettling, so Steinert hired a VP of sales to help diversify this mix — which put him in conflict with his biggest customer.
The customer “fired” CarGurus, right before Steinert was about to head out on a vacation with his wife. Fortunately, the VP of sales was able to close the gap and within a year they had surpassed their old revenue, with a much more sustainable customer mix.
TripAdvisor has a YCombinator connection
Early in his career, Steinert was VP Marketing for a small startup called ViaWeb which was run by a then unknown founder named Paul Graham. Graham sold the company to Yahoo, which gave him the capital to found YCombinator. He also introduced Langley to Stephen Kaufer, an intro that ultimately led to the formation of TripAdvisor and created billions of dollars in value.
VC is optional
Despite working as a venture capitalist and initially raising money for TripAdvisor, Steinert decided to self-fund CarGurus. He just didn’t see the need for VC. “There are industries where it’s necessary, like hardware and biotech, but I don’t understand why consumer software companies raise money at billion dollar valuations,” says Steinert . “Unless you’re brilliant, your first couple iterations will fail, you need to be able to tinker until you find something that works, then you can raise a monster round. Otherwise it seems kind of silly.”
Low burn rates = Longer runway
Today, Trip Advisors is worth $9.5 billion dollars, but it nearly went out of business after 9/11. Fortunately, a last minute pivot paid off and paved the way for startling success. The process repeated itself at CarGurus — the company struggled to get traction early until it shifted into gear. In both cases, having a low burn rate allowed the companies to survive the early struggles and get to a sustainable point sooner. “Maybe I’m more risk averse,” says Steinert. “I like to get to profitability as fast as I can — it lets me sleep at night.”
Sometimes it takes an outsider perspective to drive change
Many startup gurus say you need to work in an industry you love or know a lot about, but that’s not been the case for Steinert. “I’m not a travel aficionado and I’m not a gearhead, but the market dynamics of both industries intrigued me, and I knew there was room for innovation” Says Steinert. “If I rent a bad movie, I can see a new one the next week. Even if I have a bad vacation, I can take another one the next year, but if I buy a bad car I can be stuck with the decision for 4–5 years.” It turns out mitigating that risk can lead to a pretty exciting startup.
If you’d like to learn more about Langley Steinert, CarGurus, TripAdvisor, or linear regressions (just kidding) join us on April 4th at the Davenport Atrium.