The future of car-buying is opening up your phone, picking specs and having a new car delivered to you.
So says, at least, the founder of a Brooklyn startup dedicated to doing just that. He’s Nathan Hecht, his company is Honcker and they just raised a $23 million Series A round led by media company IAC.
“I think it will fundamentally change the dealership business,” Hecht said of his startup by phone Thursday. “The fact that it’s 2018 and we are only one of a handful of companies that have brought the transaction to the web… this is an industry that needs to go online.”
The way Honcker works will be familiar to anyone who has used apps like Seamless or Postmates, you plug in your location, peruse a menu of specs, make your choice and it’s delivered to your door. In this case, however, the product is a new car on a three-year lease.
The idea came out of Hecht’s own annoyance at the marketplace. A few years ago, he was in the market to lease a car and had the experience of going around for a full day to several dealerships, hearing different prices and offers in person than he’d heard on the phone. A startup veteran (Hecht has three prior startup companies), he thought he could make the systems work better.
Hecht said one of the biggest challenges Honcker faced at the start was getting info from disparate sources in the automotive supply chain on what cars were in the lot, what they had in them and what their prices were. The specs on a car in a lot can be quite complicated, more so than whether or not you’d like to add sour cream for $0.50 extra. Fundamentally, he explained, the dealerships are in charge of updating in real time their inventory, prices, credit requirements and the rest of it. The cars and leases still belong to the dealerships, Honcker merely facilitates the transaction. If the customer is within 25 miles of the dealership, Honcker will arrange for it to be driven to their doorstep.
More than 300 dealerships have signed on to use the app, according to Hecht, and we wondered if the industry had any resistance to, well, being disrupted.
“No, we have not gotten pushback from dealerships and I think dealerships are actually craving a platform like this,” Hecht replied. “Most of our 300 dealerships have actually been inbound request to partner with us.”
Hecht said the transaction via the phone offers enough ease, time and labor savings, and access to a wider market, that it outweighs for the dealerships whatever margin they might make in haggling over price.
Hecht was born in Forest Hills, Queens to an Orthodox Jewish family (his government name is Noson rather than Nathan). He worked in the tech sector in Jerusalem in the tech boom of the late ’90s then returned to New York, where he started three companies, including a very early digital currency called Kurrenci; a startup that would allow anything, not just photos to evaporate, Snapchat style, called Dstrux; and an electronics company called Components International. Honcker is based in Crown Heights.
Starting a business is always a question mark but the biggest question facing Honcker is whether or not consumers will leave one of the biggest transactions they’ll make up to the swipe of an app.
Honcker is not alone in making the bet they are, in fact its West Coast rival Fair has raised more than a $1 billion working on a similar product. Hecht argues that this is the right time in the industry. Just as Uber wouldn’t have worked before the invention of the smartphone, Honcker couldn’t have existed before the adoption of ecommerce. But now people are used to it, he argues.
“To order a box of diapers on the internet, that didn’t take much,” Hecht said. “But it got more and more difficult as we move into more complex industries. The last three or four years, entrepreneurs have tackled the more difficult industries. Jewelry is great example. You would think you’d need to walk into a store and see and feel the jewelry you were going to buy. But jewelry has become a massive industry on the internet.” (According to McKinsey, the ecommerce market for jewelry is growing at about 5 percent a year and will reach more than $300 million in sales by 2020).
Honcker will focus on growing its 25-person staff and building its marketing with the cash infusion. Marketing is always crucial for new products, but it would seem to be particularly so in changing this consumer behavior.