Copyright Inc. Magazine
Going to a car dealer to purchase new wheels is generally considered to be unpleasant and stressful. “It’s not the most beloved consumer experience,” Ernie Garcia, Carvana’s founder and CEO, said last week at the Inc. 5000 Conference & Gala in Phoenix, Arizona. That dealership pain point is where Garcia saw an opportunity to do things differently—to create a purchase process that involves “way less pressure” and doesn’t involve a customer stepping into “the back room for three hours.” But along the way to providing an alternative more customer-friendly process, Carvana—which sells cars through an app and the web (no wheeling and dealing salesman needed)—hit some serious potholes. Founded in 2012, with its first car sale in 2013, it went public in 2017. “We were horrible at raising money,” Garcia reflected, as to why they went public when they did. “We couldn’t raise money in Silicon Valley and we couldn’t get press to save our lives.” Garcia was joined on stage by Ryan Keeton, the company’s co-founder and chief brand officer, and they both spoke with Alex Roy, who founded the transportation-focused website the Autonocast and is also a co-founder and general partner at New Industry VC. Featured Video An Inc.com Featured Presentation Looking back, Garcia said that he wasn’t aware of how much work the future held. “Like all entrepreneurs, we probably had no idea how much work that was going to be,” he said. “I think not knowing is like the best possible thing, because it causes you to jump, and then you’re kind of in too deep to do anything else. And I think that’s probably why our story has been such a roller coaster.” As for that roller coaster: The company’s IPO in 2017 was lackluster. As CNBC reported at the time, the shares fell around 14 percent at first. It was “one of the worst IPOs in history, bless your hearts,” Roy commented. Roy then explained that the company’s sales boomed during the pandemic, and its share price improved. It hit a high point in August of 2021 of around $370, but then later that year and into 2022 the share price flatlined down to around $4. By the end of that year, sales had slowed down and the company had accumulated $3.7 billion in losses. Today, the price has recovered to over $300, but the company still has reported “substantial indebtedness” as of the end of last year. Despite Carvana’s rocky public offering, savvy technology and branding have helped the company bridge the gap between the customer and the vehicles they’re considering. A visit to the dealer lets someone kick a vehicle’s tires and inspect it for dings, but you can’t really do that online. To solve that, Carvana introduced a way to show customers comprehensive views of the exterior and interior of the cars. Fire up the app today, and you can virtually spin a vehicle around to see what it looks like from all angles outside, and do something similar for the interior, too. Creating the system to make all that possible demanded a serious investment. “It was a significant amount of money to build these photo booths to capture these cars,” Keeton said, noting that they had to “create technology that stitches it all together so people can spin it around.” “And because we’re introducing transparency, let’s do imperfections,” Keeton added. “Let’s actually show the things that aren’t necessarily perfect.” The company is also known for its car “vending machines”—eye-catching towers full of cars that can distribute a vehicle to a customer after they feed in a coin, a bit like buying a supersized Coke. He said that if you ask people what they know about Carvana, “they know about the vending machines.” It may feel like a gimmick, he said, but it’s been a good way to acquire customers. Ultimately, Keeton noted that figuring what to prioritize has helped the company; that involved having the “harder conversations” surrounding Carvana’s objectives. Garcia agreed. “‘Do the fewest number of things that you have to do to deliver a great customer experience’ is the best advice we can give,” he said, speaking to the audience of founders, entrepreneurs, and business leaders in attendance at the Inc. 5000 Conference and Gala. “Because if you’re in this room,” he added, “you’re an entrepreneur, you’re dumb, you jump and you probably are going to keep wanting to jump at more things. That’s probably who you are inside. And I think that that is like the separation point. You keep jumping at more and more things, you’re going to just take on too much and you’re gonna fall on your face. Learning how to figure out what to jump at, and what not to jump at, I think is the hardest thing there is.” Watch the full panel below or at this link.
