In this episode of the Used Car Dealer Podcast, Zach sits down with Matt Watson, a very successful serial entrepreneur in the software space and co-founder of Vin Solutions CRM (Acq. Autotrader/Cox Automotive). They discuss the evolution of automotive retail, the impact of EV technology and direct sales model, and the unique approach to identifying and capitalizing on new business opportunities in the tech world.
Zach: Zach here. Happy New Year. Back from a long break in another episode of the podcast with an amazing guest who's been pretty influential in my career, Matt Watson, who's a serial entrepreneur.
His first exit was nine figures with VIN Solution CRM, which had a lot of parallels to my company, Selly CRM, which I founded and since then, he's gone on to found Stacy, which was acquired by private equity and he also recently acquired back Full Scale an inc 5000 company that he co-founded that offers offshore development services to tech companies.
So, Matt, thanks for being on the podcast today.
Matt: Yeah, thanks so much for having me. You know, I we've known each other for a few years and I, I love automotive software and, and serum software is fun. So excited to be here today too.
Zach: Awesome. And so Matt, for those who might not be as familiar with your first company, Vincue CRM. Can you tell us a little bit about the entrepreneurial journey going from your early twenties, working at Sears and meeting a car dealer to co-founding one of the largest automotive CRM companies which was ultimately sold to Cox Automotive, a huge player in the auto software space. So Matt, what was the problem for the dealer that helped launch the early version of Vin? And how did that evolve?
Matt: Yeah, so you mentioned Sears. So the way that I originally got in automotive is a car dealer, an independent dealer came in to Sears to buy a computer for his, his dealership. And I, you know, like everybody else asked him, what do you need the computer for trying to figure out they need a laptop, a desktop, an expensive one, you know, what, what am I selling them? And he told me about some little database he had and he was needed some help with it. The developer that had worked on it before he had some issues with. And, you know, I just always been opportunistic and always looking for things to do, looking to help people. And so maybe I can help you and I ended up helping him rewrite that system. And for those who are familiar with automotive software, it ended up being kind of ad MS like a dealer management system that at the time I didn't know what it was, but it was a little, a little database. But fast forward a couple of years. This was 2003 when we actually started what became the solutions. My co-founder at the time was ironically working at Autotrader and, you know, he was under a lot of pressure to sell listings for autotrader.com. So back then Auto Trader magazine was the big thing like autotrader.com was free. It was this new thing. They were trying to get dealers to use it. And he was under a lot of pressure to get dealers to use it, as you can imagine. In 2003, not a lot of people had digital cameras and it was hard to get the car dealers to take pictures of the cars and upload them to the internet. So basically the dealers would told him like, hey, I'll sign up for this Auto Trader magazine thing and autotrader.com thing, but you gotta take the pictures. So he started taking the pictures and quickly realized that was a huge pain in the neck. And that dealership I mentioned earlier was one of the customers he was doing work for, you know, he mentioned them, he needed some help, you know, you know, somebody knows a computer programmer or whatever. And so that's, that's how him and I connected. And yeah, it started out as a simple idea of how do we take pictures of cars and upload them to the internet kind of vehicle merchandizing s data syndication kind of software. Now, you have, you know, people in the industry like home net and you know, all these other people dealer specialties that, that did this service, right? Going around taking pictures of cars, uploading the internet. That's kind of how it started in 2003 and then eventually grew into CRM and all these other things.
But so from Vin Solutions, what were some of your observations of dealers and how they thought about marketing, customer outreach versus maybe other industries?
You know, one of the things that was interesting to me in, in those years, like I would go to the dealerships and you walk into this, you know, beautiful Ford store or whatever it is. And the sales people are sitting there playing cards, like they're just sitting on the showroom playing cards. And part of the reason I'm there is to figure out why they're not using our software. Like why are they not taking pictures of their cars, uploading the internet doing like all the kind of online merchandizing stuff that they could be doing. Why aren't they following up with customers? Why aren't they calling customers or leads or whatever? They're just playing cards? Like, what, what in the world? But they, you know, they felt like it wasn't their job, they didn't get paid to take pictures of the cars and put them online, right? And, and that's why eventually we got internet managers and all this stuff kind of changed back, you know, before 2010 kind of time frame. You know, and I'm sure a lot of it is, is different today, but, you know, from my days back then it was infuriating, it's like you guys could sell a lot more cars, if you would do more work to generate leads, talk to prospects, do all this kind of stuff. But there was such a, you know, bifurcation of the dealership at that point where like, who handled the internet leads versus who just sat there all day waiting for somebody to drive up. You know, it was, it was crazy to me and, and those guys, those people didn't have the mentality of like, well, they could at least go take pictures of the cars to help drive more leads, but, you know, they didn't get commission for that, right. So it was always infuriating to me.
But, the, the serum technology, you know, there's, there's hubspot and sales force and all these different things that exist out there and automotive, you know, I, I don't work in automotive s Serum Day, right? It's, it's been a while but,, you know, what we need, what they needed was to have more people, honestly, what they needed was to eliminate the sales people in the showroom. I'll be honest, they should have all been basically internet managers. Like everybody should be working internet leads,, and needed to train all of them to do more follow up like salespeople in other industries, right? Where they can use these kinds of CRM technology today. Like I said, I don't work in the industry right now, so I'm not exactly sure what they do, but I'm curious what, what do you think Zach, what, what do, what do most of them do today or do you feel like it's still very bifurcated?
Zach: Yeah. I mean, it's definitely really all over the place, especially in the independent space where I play in. So you'll have dealers and some of them have built their own version of a CRM using Microsoft, like Excel for instance. Or Google Sheets. You have some that use like mainstream CRM vendors, some are using like generic products like a HubSpot for instance, or a Salesforce. But the big thing is there's not a lot of connectivity, there's not a lot of integration in automotive. It's like, all right, I have this one product that does CRM but it doesn't integrate well with the DMS and we might, you know, get our inventory management from another product that sort of integrates the DMS. So there's just a lack of connectivity compared to I think other verticals and CRM.
Matt: Well, those are the problems we were trying to solve at Vin Solutions, you know, heck almost 20 years ago. So that, that's what made us unique, you know, that long ago is we did the inventory management. We did really good like internet lead management, all the internet leads were handled CRM. We built websites for people. We had a desking system, we built all these things that were integrated together and, and that was one of the things that people loved about our product and I think the industry is slowly went that way, right? But you're, you're saying there are a lot of people today that still have all these isolated products.
Zach: Definitely. And you know, I thought another interesting part of the Vin Solutions journey was even though you guys had amazing revenue, like for a SaaS company and you weren't like based in a huge kind of target market, like a San Francisco for instance, but it was hard to raise kind of venture capital. People didn't get, I guess back then that like dealers need software. Any thoughts about like kind of that process of trying to raise capital and selling and kind of how, how the markets changed so much since then.
Matt: Yeah. So if you think about it, we started a company in 2003 and I was 23 years old. I didn't know what I was doing. I definitely didn't know what a startup was. I didn't know what it meant to be an entrepreneur. I didn't know any of that stuff and maybe that was part of our advantage. We were just trying to build stuff and sell stuff and make money. We never raised any money. We, you know, we built our own like little on the lot service sort of dealer specialty business. And at some point in time, we sold that and got like $100,000 or something. For selling it. Outside of that. We had one of our customers slash friends invested a very, very tiny amount of money. That was it, the rest of it was, you know, Visa and Mastercard, not paying our bills, not paying ourselves, like just bootstrapping, just making it work, like whatever we had to do to make it work. But we tried to raise money. We really, we actually wanted to raise money. Not that I, not that we knew how or what we were doing. But we, we actually hired a CFO who came in that we thought would help raise money. But you have to remember what it was. This was like 2008, 2009 GM goes bankrupt. Chrysler goes bankrupt. Ford closes all these stores, the bad economy, right? This was like the worst possible time to raise money. But yeah, we were growing like crazy, like we, we were doubling in revenue like year over year, over year and the bad economy actually helped us. It actually helped us. Like we, we were one of the, the, the companies that really benefited from it because when the dealerships were losing a lot of money, they're not like, hey, we're not gonna spend $25,000 a month advertising in the newspaper anymore. We're not gonna do TV ads anymore. We're not gonna do radio ads anymore. Instead we're gonna sign up for autotrader.com for $3000 a month and we're gonna buy this VIN solution software for 1000 or $2000 a month and we're gonna figure out how to do, you know, more digital marketing and more internet leads and cut all this traditional marketing. So we were in the right place at the right time. You know, when we started in 2003, autotrader.com was this kind of weird little free thing, will buy 2008, 2009.
Matt: Like it was Gangbusters, it was, you know, Auto Trader is doing like a billion dollars a year in revenue then and then ironically, we sold the company to Auto Trader. So that, that was the ironic part of the story. Yeah, we were in the right place at the right time, but we had to bootstrap it like even we wanted to, to raise money like we were in a terrible economy. And when we sold the company in 2011, you know, we were going through that process like in 2010, kind of still just right on the end of this bad economy. We, we thought we would sell, you know, 30% of the company, 40% of the company, something like that. And, you know, the management team, the owners would take some money off the table. You know, we, we would, we would take some money off the table and then grow and keep, keep going. But honestly, we got such a good offer. It was, it was hard to say no. And we just took the money and ran at that point and sold a amazing story, especially the bootstrapping element. I think, you know, in, in Silicon Valley where people will raise like a $5 million precede round and plan to burn, you know, 250,000 a month. It's just unable being, being in Kansas City had a lot of advantages to us because it's lower cost of labor. You know, it's easier for us to find software developers hire, you know, hire for anything like the cost of labor is lower. In Kansas City. It was also really strategic being in the middle of the country because when we sold the company, we had over 50 employees at the training, we flew trainers all over the country every week to go out and install our software. That was one of the advantages of being in Kansas City work 2 to 3 hours from anywhere you wanna go by flight. Versus if everybody was in San Francisco, like that's a long haul to the other, you know, to the east coast. So it was, it was a great advantage for us being in Kansas City for, I think a few different reasons.
Zach: Definitely. And since then you've recently started at capacity which is targeted at like home services space. What are some of the crossover problems you've seen with car dealers and home service providers?
Matt: Yeah, so actually some friends of mine from Vin Solutions got me into at capacity and what we're doing. So at capacity started with how do we help home service companies? So like plumbing HVAC electrical manage their digital marking ads. So primarily their Google ads because as you, as you imagine, Zach, if you have a plumbing leak today, if you call a plumber and they say, hey, we can't be there for three days. You just hang up the phone and call a different plumber. Like they just wasted whatever money they spent on advertising was a complete waste. Because in, in this kind of industry, there's a lot of urgency and either you have the capacity to service the customer or you don't and the customer is probably gonna call somebody else, especially if it's an emergency. So the there's a lot of capacity constraints and the idea was how do we, how do we use capacity in their schedule? We basically look at their schedules and control their advertising spin based on their schedule. So if they need a lot of business today, how do we ramp it up if their schedule is full? How do we turn it off? So it's very dynamic and traditional marketing companies don't like these kinds of customers that have dynamic changes every day. Well, now we are in the process in 2024 of taking the same technology and going into the automotive industry. Actually, we want to work with automotive service for the same reasons. Right. If your service bays are, are very scheduled and very full for the next couple of days or the week, it doesn't make as much money. It doesn't make sense to spend money on Google ads and advertising. Like your schedule is very full, you know, you're full with recalls or whatever it is. Like, you're, you're really backlogged versus the, the days were like, hey, we don't have a lot of customers. We'll do a lot of oil changes or tire rotation, whatever it is, bring them in, we need work to do, right? So we're, we're able, that's our goal is to help those kinds of customers with that waning, you know, kind of supply and demand as it, as it ebbs and flows. Our software can help them bring in new customers. So we manage their specials and promotions, their budgets, all that kind of stuff.
Zach: Really cool. And I definitely see some parallels with auto, especially within service. And Matt, you've been an early EV adopter like a V1 Tesla guy. And what have been your thoughts on the charging networks servicing EV vehicles. What do you think about their direct to consumer kind of sales experience? Very curious.
Matt: Yeah, I've caught a lot of heat for this from some people because, you know, I built a company that sold software to car dealerships and then I went and bought a car from Tesla. So some people, some, some people don't like that. I've owned a lot of other cars today. I, I don't own all EVs I own also a traditional combustion engine car. I own a hybrid hybrid. , I, I have the dream car. I got my dream car, the plug-in hybrid minivan. So that, that is my dream car.
Matt: I do have one of those, the Chrysler Pacifica. But, you know, I first bought a Tesla, I think it was in 2012 and it was a Model S and I've owned a couple of different electric cars over that time period and they've always worked great for me. I've always bought it because I'm a very high tech person and I really love the technology and they have definitely led the way in a lot of ways and, you know, even my Chrysler Pacifica today, it has some goofy issues in the dash software and all that, that just kind of boggled my mind that I can't believe it has issues with, but Tesla is definitely led the way, right? But EVs aren't for everybody. I understand like if you live in an apartment or a condo, like trying to charge your car would be a nightmare. In the Philippines where I have a lot of employees like I have no, they don't have the infrastructure to charge electric cars. They most people that don't even own a car, most people own motorcycles, they're starting to see more electric motorcycles. There are very, starting to become more and more common. So, you know, different countries are gonna have different issues with these things. But for a lot of American homeowners that own a house and have a garage, electric cars are great. I love my electric car. Takes me a few seconds to plug it in and use it. You talk about the EV network, you know, I have more than one car. So if I'm doing road trips, I don't always need to take my electric car. I've only driven my Tesla out of Kansas City, I think three times over the last 10 years and the supercharging network work had worked great, has worked great for me. What I would tell people is if you're gonna take a road trip a couple times a year, it's not that big of a deal, you know, in, instead of stopping at the gas station, you stop somewhere else, there's usually something nearby, you can go and go to the bathroom, get lunch, whatever. It's not really that inconvenient. It's not that big of a deal to charge for 30 minutes or so. Like you want to stop and take a break anyways, you may have to stop one extra time maybe than you normally would stop. It's not that big of a deal. It, what I would say is if you were a traveling salesperson and you traveled like that every day, it would be kind of an inconvenience and a pain in the neck. Sure. But for once or twice a year on some kind of road trip, I don't think it's that big of a deal. I understand in certain places around the country, a lot of people going from like L A to Vegas and trying to get those superchargers is a problem. There's a lot of congestion, like, understand in certain places, there's more problems than, than others where I live here. I've only used the super chargers once or twice and I one time I was going to the airport to fly out. I totally forgot to charge the car. So I'm like driving to the airport, I'm gonna be late to my flight, you know, if I turn around and go home. So I like stopped at a supercharger for like 10 minutes to charge the car enough. So that when I got back into town I'd be able to drive home. Like I've had a couple of those moments, but that's over like 10 years, like, you know, range issues and all of that. I have not had a lot of problems. So I've, I've enjoyed having an EV and, but, but I understand they're not for everybody. And one of my three cars is an EV. So with your extensive kind of experience in automotive special CRM and experience buying a Tesla, you know, kind of online. What do you see is in terms of like the future of like digital car buying and that evolving over the next decade as well as like customer data and how that plays a role in like customer experience.
Yeah, so I've bought 22 Teslas brand new, actually three, I think, I think I bought three brand new Teslas and I bought a used one and it's definitely a different process, you know. So you, you largely, you know, do it all online. They'll email you at some point and say, hey, we need you to fill out this paperwork and you fill out some paperwork and mail it, mail it back, you know, just throw it in a FedEx envelope or, you know, scan it and send it back. And one of them I even did a trade and they use some random third party. I don't know who it was that like came to my office, looked at my car in the parking lot and, you know, verified the trade information. It was pretty easy process. I mean, I think the most important part was when I went to actually pick up the car, I was there for like a few minutes, like in and out, you know, Mr Watson, here's your Tesla sign a couple of times for delivery and go, what do you know, let me show you how to turn on the, you know, the dash and do a couple things. But after I owned the first one, like second time, I didn't care, I knew what I was doing anyways. It was a simple, a very simple process. But if you compare that to the Chrysler that I bought, I wanted a very specific Chrysler Pacifica high end version plug in hybrid pinnacle edition. So it was kind of a rare car. It was kind of hard to find. I had to call all over the place trying to find a dealer to find it.
Matt: And I had to go all the way to Oklahoma to finally find the car and negotiate with the price and deal with all this kind of stuff. And then I had to go get it and drive it back and then they didn't know how to do a lease to somebody in Kansas. So that was a problem. They had to figure out how to do a lease and just everything about the process is like clunky, right? Like spend, you know, what feels like hours at the dealership trying to do paperwork, all this kind of, you know, more the traditional, you know, process a lot of dealers do versus a Tesla, like I just showed up sign, boom, go. And that was it. And it was like down the street from my house. You know, I think what if you want my opinion, what the dealers need to do is some of it is, they gotta change how they do dealer trades and stuff like that where it needs to be less about like what dealer has what car and the trades and all that. Like, I just wanna buy a Chrysler Pacifica Pinnacle Black and it just shows up at my house. I don't care where it came from. I don't care what dealer it came from. None of that matters. Right. Like I just want the car and they, they've got to figure out how to smooth some of that out, like across the dealers would help a lot, I think from a consumer experience as it just creates a lot of friction with the dealers, like who has the car and the dealer trades all that when you're buying a new one, right? Because they're very possessive about some of the inventory that they have. But some of that's kind of like creates a really bad consumer experience as well as just some of the traditional, like sitting in the box and going to finance and all this stuff and being pressured on the menu and finance menu, like all this kind of stuff. It's just a different process. Like I know, I know there's some dealers out there that do better with these things but a lot of them don't, there's, we gotta figure out how to smooth some of that and some of that I know is fixed pricing. Some of them OEMs are going to more fixed pricing to eliminate, the negotiation. You're still gonna negotiate the trade. But I, I still think there's work to be done to make it more consumer friendly. I think some of the OEMs and some of the dealers do better job than others.
Zach: Definitely. And, and you're right about trades and I've also seen a lot of OEMs let their franchise dealer, like someone could literally order online and then they go up to the dealership to kind of pick up. So they're trying to have a more Tesla like experience for like EV buying specifically, which right now is more of a niche. So it's interesting to watch.
Matt: Yeah, it's like, you know that this is the dealer trade part, but I feel like is the challenge is, and you gotta figure out how to, how to get those allocation of units across the dealers in the city, like in Kansas City is not a giant market, we're not LA or San Francisco or whatever. But you know, it's, it's sort of like you have some infighting amongst the dealers if they want to trade or whatever and is the consumer just wants to buy the car? You know?
Zach: And throughout your career, Matt, you've successfully identified and acted on multiple entrepreneurial opportunities from Vin Solutions to Full Scale and beyond. What key factors do you consider when deciding to pursue a new business idea? How do you evaluate it for potential success?
Matt: Yeah, there's a couple of things. It's, it's understanding the addressable market. Like, is there a bigger, is there a big opportunity for this? You know, I honestly, on the I capacity side, my business partner, Meg, like the first few times I, I met with her, I wasn't, I didn't get it. I didn't get it at first and then eventually after meeting her with her a few times, I'm like, you know what? This is a big problem. Like I understand like how this could be a big problem, understand how it could affect even different industries, you know, besides just home services and just understand it's a big enough problem that there's enough people that are willing to pay for this thing. And then the second is knowing how to sell it. How do we sell this thing? And so many entrepreneurs, they build something and they don't know how to sell it. Like a lot of times the, the go to market strategy, the network effect, the, the, the network that you have is, is a big part of it. You know, like if I want to create automotive CRM software, I would have like a huge strategic advantage from the network. I have the people I know all that kind of stuff versus somebody who somebody else who have may know, have no ties at all to automotive. They know nothing about automotive that wanted to create automotive CRM. Software doesn't mean they couldn't do it. I did it the first time 20 years ago. But the point is like in that example, people, if you play to your strengths and your network effect and, and all of that dramatically impacts your likelihood of success, right? Like are you the right person to do this versus somebody else being the right person to do this because they have some of those other connections or network effect, that might be the difference in success or failure, you know. But so, so to me, I think it's understanding is there big enough kind of addressable market to grow this like and then how do I reach those people? How do I sell this thing?
Matt: You know, saying I'm a technologist. So to me, building the technology is the easy part. Versus I know other people that are like, "Oh, I know how to sell this thing, but I don't know how to build it." So they're scared of how to build it. And that's where the magic happens. When you get both of those people together. You get me that knows how to build the technology. And you get me that like then they can identify the market, they understand the problem, they understand how to reach the customers. Like you put two of those, both of those people together and that's where the magic can happen.
Zach: Definitely agree.
Matt: And the other thing, channel sales strategy where someone else will sell your product for you and you'll magically tex doesn't usually work. Right. No, but that's actually kind of our strategy at that capacity. You know, we're, we're looking to partner with other marketing agencies and people in different verticals that, you know, we don't want to go sell to an individual plumber, we want to sell to the market, same thing for car dealers. We don't want to call each car dealer. We wanna partner with somebody that maybe creates like, you know, service repair ro related, you know, software of some form or they're a marketing agency that already works for car dealers, you know, how do we partner with them? So like, so we would actually like to have those channels work, but it's, it's understanding the go to market strategy, right? Every business has different go to market strategies definitely.
Zach: And now I want to get your thoughts from a CTO perspective, but a 30,000 ft view, you know, for the audience, what are your thoughts on the AI hype of 2023 and the outlook for AI in 2024?
Matt: Yeah. So at my company full scale, we build software for other people. We have like 300 employees, we work for over 50 different companies. And you know, one of the things that we're working on is training our developers more and more on how to use AI to be more efficient, their job all that kind of stuff. But I've used AI quite a bit for some programming technology related tasks myself. I would say once or twice a day, it maybe saves me 15 minutes of work. That's it. It's not like it re, it doesn't replace me, it doesn't replace a developer. It's more of a shortcut, you know, like one of our developers today was having problems with how to call some API and it's not working and he's not, I can't help. So I just go to Chat GPT and I, and I give it the exact API and the method that it was being called and say, well, why wouldn't this work? And it just gives you like 10 ideas like, oh, it could be, this could be, this could be this like, did you sign up for the API or this problem with your account? You're over your limits or whatever in end up being one of those items like Chat GPT correctly identified one of the one of the potential issues that could be causing it not to work. And so it's just kind of a shortcut, right? Instead of spending, you know, more time banging your head on the wall trying to figure out what's wrong. It kind of led you in the right direction. It, it can be very helpful, but it's more of a productivity tool. I don't really honestly see it as replacing software developers, I think over time it'll be able to do more and more like code refactoring and different things like that. But there's tools have been around to do a lot of this stuff before, before AI as well.
Zach: Yeah. So that, that's good to hear. Developer jobs won't be replaced by AI in 2024. And I agree, like I use it several times a day usually for business emails to maybe improve spelling, grammar check, stuff like that. But I want to take a quick off ramp. You mentioned your company full scale in the Philippines. And I remember when I was meeting you that that was early on and you've scaled that to over 300 employees briefly kind of talk about that company and the experience in the Philippines, both of us have gone to the Philippines, you know, many times. You know, curious about that too.
Matt: Yes, my so I had a company called ST Five, that was a software company and I needed to hire a bunch of developers and there was just no way that we could afford to hire them all in the United States. And for those that are listening, that may not realize this 90% of software developers don't live in the United States, they live all over the world and that the percentage of software developers in the world that are in the United States, that number is going down every year. They there are actually more software developers in Singapore per capita than anywhere else in the world, like the greater percentage of their population as software developers. And India is on track to have more developers than the United States will in another couple of years. So there, there's talent everywhere and a friend of mine had employees in the Philippines and really liked having loved his team in the Philippines because they're there. If you know anybody, any Filipinos just stereotypically, they're just some of the nicest, friendliest people in the world. But there's very talented workforce there. Their English fluency is extremely high. I always tell people there are twice as many people in the Philippines that speak English than there are in Australia. There's a huge population of English speaking people in the Philippines and great, great, amazing employees, love, love the team there and I've been there 14 times. My wife is from there, Zach. I know you've been to Manila a few times yourself and it's, it's an incredible place to go and, and absolutely amazing people
Zach: Definitely agree, Matt and thanks so much for coming on the podcast. Great way to kick off 2024 and any last thoughts for our audience.
Matt: No, I think, you know, I, I love being an entrepreneur and, and if anybody is listening out there and, or thinking about being an entrepreneur, my, my suggestion for you is, is just to do it just, you know, get started. And if you ever want somebody to talk to you, you can look me up on LinkedIn, just look for Matt Watson on LinkedIn. Always, always happy to chat with other entrepreneurs. And I also host a podcast dedicated to entrepreneurship called The Start Up Puzzle that people can listen to for other inspiration. So thank you so much for having me today.
Zach: Awesome Matt, thanks.