Carputty: Reimagining Automotive Financing
Grand Ventures is thrilled to announce our recent investment in Carputty’s $12.3M Series A funding. Carputty is led by an elite team of founders and employees that we believe are set to reinvent the massive automotive financing market. Let’s dig a little deeper into why we love the team and the market movement they are leading.
Team: Patrick Bayliss, Carputty’s CEO, brings decades of experience leading automotive dealerships, including dealership financing…he’s the “car guy” you dream of for a company like Carputty. Alongside Patrick, Joshua Tatum as CPO brings the veteran fintech perspective, making Carputty the next chapter of a career that includes leadership roles at SoFi and Guaranteed Rates. From engineering and product to finance and sales, the Carputty team is led by individual contributors that as a VC, I would love to back as founders. At Grand Ventures, we’re excited to back a team with this level of incredible domain expertise and multiple track records building world-class companies
Market: I love Fintech because it touches on almost any industry if there’s an exchange of goods and services. Within Fintech, I look for applications where the status quo is antiquated because those are use cases that technology is so good at automating and optimizing. I financed a new car in the last 12 months and was surprised to see the financing experience was roughly the same as when I did it last…in 2006. “Need financing? Fill out this application, and we’ll see if you can get approved.” A totally opaque process. Paper forms. No options on rates, loans, repayment. Overall, a terrible user experience. And most likely, the loan will be sold to a big bank when it’s all done, and then I’ll have to open another online banking relationship, get paper statements, and I’ll have yet another impersonal digital relationship with little value added.
If you’re buying a new vehicle, there are dozens of additional questions. What’s the new car worth? Is this a good value? What’s my trade-in worth if I’m turning in a lease vehicle, or should I buy out the lease?
Meet Carputty, the future of automotive Fintech. Like a tech mash-up of Zillow, Rocket Mortgage, and Plaid for the Automotive market. The perfect solution!
Carputty simplifies the buying experience by providing a credit line for every vehicle in your life, allowing you to manage your cars like assets. Beyond the flexline, Carputty’s valuation tool provides the data required to determine when to buy or sell a vehicle. The process is easy, with a beautiful UX and powerful back-end support that supports you over multiple vehicles and their lifecycle.
“But what about all of the banks and auto lenders out there? They’re not going away!” -> I agree…We’re getting there.
Status Quo, Fear Aversion, and the Innovator’s Dilemma -> the perfect environment for innovation. Twenty two years ago, when I started my career in banking, we ran all of the lending operations on a mainframe and if I needed to review a large file, it was sent by courier on a magnetic tape. Most of today’s largest financial institutions, by virtue of their age and staying power, were created on older platform architectures than today’s latest fintech companies. These platforms serve as the central nervous system and database of record for financial institutions and as such, they are guarded carefully. Any change could jeopardize stability so in many organizations, the status quo is the “safe option”.
As we’ve learned now thanks to Tversky and Kahneman’s famous works on Fear Aversion, there’s a natural bias to prefer avoiding losses rather than acquiring equivalent gains. The Innovator’s Dilemma also plays a real role here in that large banks already lending billions of dollars in the automotive market, have a hard time prioritizing new investments that are sure to start out with modest loans that may not impact quarterly results for years.
Large financial institutions are slow to change, but eventually need to adapt over time to keep up.
Earlier this year, we spent time looking at several SaaS companies innovating in the consumer mortgage sector. Based on our research, I was excited to see that most large banks are now using a hybrid of in-house systems and modern third-party Loan Operating Systems (LOS) and Point of Sale (POS) Systems to provide a better user experience and streamline operations. A key part of our diligence was to evaluate the same market trends in automotive finance, and we have not yet seen that same level of innovation and adoption in LOS and POS in automotive finance.
I think Carputty will be one of the companies to help create a better future for the entire auto finance industry as a lender, a change agent, a pioneer, or maybe someday as a platform provider to others.
We’re proud to support another awesome team on its journey to reinvent another giant market and create a better future! If you’re interested in being part of this renaissance, check out Carputty jobs!
If you’re a fintech founder, doing something similar in another “niche” antiquated market, please let us know! We’d love to learn more.
