ACV’s IPO Draws Attention to Transformative Tech Beyond Usual Hubs
Reflections on collaboration as the first unicorn in Buffalo, NY goes public
MARCH 23, 2021: Armory Square Ventures congratulates automotive tech platform ACV Auctions (NASDAQ: ACVA) on its $414 million public offering today.
Founded in 2015 in Buffalo, NY, ACV provides an online platform that leverages data insights and technology to power digital marketplace and data services, enabling used car dealers and commercial partners to buy, sell, and value vehicles with confidence and efficiency. ACV’s mobile technology solves the challenges that the used automotive industry has faced for generations and makes the process of buying used cars far easier and more efficient — enabling dealers, usually tied to local markets, to buy and sell used vehicles from anywhere.
As one of ACV’s first institutional backers, our team has witnessed this company’s capacity to transform an industry and drive regional growth — attracting capital, talent, and a sense of possibility to Upstate New York and beyond. ACV has not only reimagined how used car dealers operate but has also become an example of how a great company can be created outside of Silicon Valley.
We are thrilled to be celebrating this watershed moment alongside the company and wanted to take a moment to reflect on some lessons we have learned from our work together.
Seek Opportunity in Overlooked Places
When we started our fund in 2014, with offices in Syracuse, NY and New York City, our mission was to open up access to venture capital funding in overlooked regions, understanding that Upstate New York and surrounding areas have historically been one of the most underfunded parts of the country. Our goal was to invest early and deeply in promising B2B companies using technology to transform traditional industries in these overlooked regions.
In 2015, the year ACV was founded, nearly 10 million used vehicles ($25 billion) were sold between dealers in the U.S., the vast majority of which occurred at physical auctions. Meanwhile, most online marketplaces in the used car industry were (and still are) direct-to-consumer sales, not dealer-to-dealer transactions. We soon understood that ACV’s unique technology and data platform provided considerably more value to dealers than the incumbent auction providers.
Since its founding, ACV has gone from operating in three markets to 125 markets selling more than 390,000 vehicles on its platform in 2020. COVID-19 accelerated a shift to digital for used car dealers, who could no longer go to physical auctions.
Despite well-publicized movements towards ride sharing, autonomous vehicles and shared car ownership, most Americans still buy cars. And in fact, the used car market is twice the size of new car sales in the US.[1] It just needed better tools, an opportunity perhaps harder to recognize from the perspective of Silicon Valley.
[1] See: https://www.cnbc.com/2020/10/15/used-car-boom-is-one-of-hottest-coronavirus-markets-for-consumers.html
Look for Innovation Close to Home
The success of ACV has become a proof point. Ambitious entrepreneurs can build and scale companies outside of the major hubs, and founding a startup ‘elsewhere’ has significant benefits for entrepreneurs, including access to skilled labor, lower costs of living and often strong infrastructure.
ACV currently employs over 1,500 people across the country, including several hundred in Buffalo. Upstate New York’s ties to the automotive sector created an ideal opportunity, one that nurtured ACV’s growth. That Armory Square Ventures came to partner with ACV exemplifies the adage that even with the much-discussed “rise of everywhere,” venture is still a local business.
In late 2014, our managing partner, Somak Chattopadhyay, made a trip to Buffalo and met with Jordan Levy, Partner at Softbank Capital New York who had launched an incubator called Z80 Labs. They discussed how founding teams might energize a startup ecosystem in Buffalo. We then heard from Eric Reich, founder of Campus Labs an ACV angel investor and Chairman of 43North, that there was a burgeoning company called ACV Auctions intent on transforming the used car industry. Nicole Camarre, ASV’s first associate, was friends with ACV Co-Founder, Dan Magnuszewski.
At first, ACV’s founding team was apprehensive about meeting with investors and did not believe they would need external financing. After a connection from ACV angel investor Ashok Subramanian, one of the founders Joe Neiman, met with Somak and Nicole in the spring of 2015 to solicit advice on building the company.
Somak spent time with the ACV founders, encouraging them to raise venture capital. Over the next couple of years, we maintained an active dialog and encouraged the ACV team to identify a strategy that would allow it to expand into a national platform.
Connect Talent to Drive Growth
During those early conversations, we advised the ACV founders on potential CEO candidates who could take the company to the next level, and encouraged George Chamoun, then founder of Synacor, a communications firm that went public several years earlier in 2012, to think about the opportunity. George was already an angel investor in the company and knew Dan because they had worked closely together at Synacor. In spring 2016, Somak met George, Joe and Dan in Rochester. He learned George was raised in Syracuse, New York and imbued the opportunity at ACV with a deep sense of mission to the region and community. His enthusiasm reverberated, and Somak helped persuade George to join ACV.
We were confident that the company now had the senior team in place to become a large, high growth company. Somak called George to tell him Armory Square Ventures would be one of the first institutional investors in ACV. We continued to fund and advise ACV following ASV’s initial investment, facilitating customer and investor introductions, and participating in five rounds of investment.
In 2019, we led the recruitment of Vikas Mehta, an eBay executive who moved his family from Silicon Valley to Buffalo. An MIT classmate of Somak’s, Vikas was not immune to our enthusiastic endorsement of ACV and the Upstate New York community at large. We see it as part of our role to encourage people to relocate to locations outside the bubbles and share their expertise. We are especially proud of having done so in the case of ACV.
Recognize Startups as Community Stewards
At Armory Square Ventures, we firmly believe that driving growth through innovation also spurs the development of robust entrepreneurial communities. The success of model startups like ACV fosters civic pride, attracts more founders and startup companies and encourages potential employees and investors to take a concentrated, hard look at Buffalo and surrounding areas.
Having a major tech exit in any ecosystem mints a new generation of founders with managerial experience to scale the next company. Just as George Chamoun’s experiences with Synacor informed the growth of ACV, so too do we expect new companies to emerge in the wake of this milestone.
We have been honored to partner with ACV. This public offering sets the stage not only for a new chapter in the company’s evolution, but also in the story of Upstate New York and other burgeoning tech ecosystems. There is a virtuous cycle emerging, with greater momentum and potential for investment. We offer our sincere congratulations to George, Vikas, Joe, Dan and the team on this major milestone and couldn’t be happier to have been a part of their journey.
We send our gratitude to our co-investors including Jordan Levy at Softbank NY, Bob Goodman at Bessemer Venture Partners, Brian Hirsch at Tribeca Venture Partners, Brian Goldsmith (formerly at Bain Capital Ventures) and Matt Witheiler at Wellington Management. We also appreciate the early advice and guidance from ACV angels Ashok Subramanian, Eric Reich, and the team at 43North.
About Armory Square Ventures
Armory Square Ventures is a seed and early-stage venture capital firm, a community catalyst and an optimism engine for the region. With offices in Syracuse, New York and New York City, the firm invests in software and technology-enabled services companies in emerging entrepreneurial ecosystems like Upstate New York that are often overlooked by other investors. The fund’s investments include ACV, Agronomic Technology Corporation (acquired by Yara), Bentobox CMS, Clerio Vision, Good Uncle (acquired by Aramark), Jorsek, RealEats, Squarefoot, StorySlab, Vengo Labs, Vizbee and UCM Digital. www.armorysv.com.
