Shaking up the US car loan market

Elie Wurtman  credit: Israel Hadari

With automated loan finder Fuse, VC and former entrepreneur Elie Wurtman hopes to repeat his success with Vroom, but to keep it made in Israel.

Ophir Dor January 19, 2021 Elie Wurtman founded and invested in the used car app Vroom, which is currently traded at a value of $ 4.8 billion • His new startup Fuse, which is trying to fix the world of car loans in the US, is still small but he is sure the potential is huge • This time he hopes the company stays in the country In November 2018, entrepreneur and investor Elie Wurtman invited Andrew Walser, CEO of the Walser Automotive Group from Minneapolis, Minnesota, to visit Jerusalem. Walser is a customer of one of the portfolio companies of Wurtman's venture capital firm, PICO Partners, and a visit to Israel was intended to enhance their business relationship. "He's a CEO who runs a billion-and-a-half-dollar-a-year business and at first he wanted to hop over for just one night in Jerusalem. Only after he realized that that was too short did he agree to come for two nights," Wurtman says.

During the visit, Wurtman befriended Walser, who told him about software that his car dealership had developed in-house and used in its 27 branches. The software allows dealerships to identify the best financing option for the vehicle buyer from the loans available in the market. "In the US, 90% of car purchases are made with a loan, and the car loan market is the third largest retail credit sector, after mortgages and student loans," explains Wurtman. "It's a $900 billion-a-year lending market that's very old-fashioned."

When Wurtman heard about the software, he was immediately excited. He himself had a similar idea that he had started thinking about years before when he founded Vroom (Nasdaq: VRM), an online used car sales platform that went public this year on Nasdaq. Wurtman suggested to Walser that they join forces to build a startup to develop a similar system that could be sold to dealerships across the US.

"I thought instead of it just being an internal tool [at Walser] or an idea in my head, we could build it together. Luckily, Walser believed that I completely understood his idea, even though I don't come from the car industry. It's a great honor, because usually people from the car industry think that if you didn't grow up in the industry, you don't understand anything about it. He was also convinced that the best programmers are here in Israel," says Wurtman.

After delays following the coronavirus outbreak, the launch of the joint startup Fuse Autotech began to take shape in August, when Wurtman's fund invested $5 million in the new company in exchange for 20% of the joint venture. Wurtman and Walser both serve as executive chairpersons of the company, and the startup is managed by an American, Colton Ray. "He's been selling cars for 20 years and I'm mentoring him to become a startup entrepreneur selling software," laughs Wurtman.

Fuse currently employs 20 people. The development center in Tel Aviv employs four people but is expected to grow by 20 employees this year. "I would like to grow to 200, but let's start at 20," Wurtman projects.

The finance people are the most expensive employees

Wurtman's love affair with the American auto retail world began after he stumbled into a local auto dealership, and discovered the outdated work processes in place. In 2013, he was one of the founders of Vroom, which is currently traded at a market cap of about $4.8 billion. Vroom is a used car sales app that saves you from visiting a physical dealership. The company collects vehicles from customers, buys and repairs them, and then delivers vehicles to the buyer's house. Wurtman served on Vroom's board of directors but left before the June IPO.

"I remember asking a friend in the US what it means to buy a car. He told me it was a whole day affair. You arrive at the dealership with food in a cooler from home and feel like someone going out to war. First you have to negotiate the price and then deal with the finance person to discuss financing," says Wurtman. "At Vroom, we dealt with the issue of price transparency, assuring customers that the price paid for the vehicle would be transparent, without the negotiation games. We are now dealing with the second part, the loans."

Wurtman says that nowadays, car dealerships in the US usually work with a preferred lender and offer its financing terms. "In contrast, we go looking for the best loan right in front of the customer's eyes. We don't work on the basis of which bank gave the agent tickets for a weekend game."

There are many tools for comparing prices, what is your uniqueness?

"It's not just a price comparison. We actually go into the dealership's systems, check what car the customer bought, what its value is and who the customer is, and complete the deal all the way to the checkout. It's not like looking for a flight, it's not such a simple process; it's more like taking out a mortgage. We examine offers from banks, financial institutions and sometimes also car manufacturers that are willing to give a loan as an incentive to buy."

What's in it for the dealership? Why should it pay for this system?

"First of all, there are operational savings here because the finance people are the most expensive employees at the car dealership, and now we replace them with an automated process. In addition, the world has become more pampered and the emphasis is on customer experience. Instead of the customer spending three hours at the dealership, filling out forms with information that has to be entered into a computer, and then waiting for an answer, everything is done digitally in fifteen minutes. In dealerships that use outdated systems, the salesperson sells an average of ten vehicles a month. With a system like ours, he sells seventeen vehicles, because completing each deal takes less time."

"In this market, even moderate success will be tremendous"

Wurtman was a serial entrepreneur,with several exits to his name, and even in his investments he continues to occasionally occupy an executive role within the company, as happened with Vroom and as is also the case here. Fuse is still in its infancy, with product development yet to be completed. The company's partial solution is implemented in 67 car dealerships in the US, 27 of Walser's and 40 others - still a drop in the ocean of the 17,000 dealerships in the US. Despite this, Wurtman is convinced he has a great future. "Once in five years I have a gut feeling that I'm looking at something big, and it usually works pretty well. You can check my history."

Where do you still see risks in this venture?

"The market exists and is proven and we are already starting with a first customer. The risk here is the world of software. We are the first in the market, but others may be smarter. However, even a moderate success in a market of this size, meaning if we take 1.5% of the market and manage $10billion in loans, would be a tremendous success. Vroom has not reached even 1% of the market."

At the Israeli level, Vroom's success was also accompanied by a bitter taste, when in 2016, after Allon Bloch was replaced by an American CEO, the company moved the development center from Israel to the US. About 30 Vroom employees in Israel were fired and the company currently has no local presence. This time, Wurtman hopes the result will be different. "I decided to do it in Israel and not in the US because I want the next thing to be here and for me to have personal involvement in it. The goal, unlike with Vroom, is to stay here."

Elie Wurtman

Founding partner at Pico Venture Partners, which specializes in early investments ? 51 years old, lives in Jerusalem with his three children ? BA from Columbia University and the Jewish Theological Seminary ? Founded a number of companies, including Deltathree which offers Internet telephone services, went public on Nasdaq and became Jerusalem's first unicorn ? Established the Bat Shlomo boutique winery

Published by Globes, Israel business news - en.globes.co.il - on January 25, 2021

© Copyright of Globes Publisher Itonut (1983) Ltd. 2021

Elie Wurtman  credit: Israel Hadari
Elie Wurtman credit: Israel Hadari
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