Innovation and Investment in Automotive

An interview between Atul Patel, CEO and Co-founder of Orbee, Bill Carris, President & CEO at Holman Strategic Ventures, and Ron Frey, Principal of RL Frey Inc.

In my recent panel at CXAUTO 2023, I had the privilege of discussing innovation and investments in automotive with industry veterans Bill Carris and Ron Frey. We explored their history of innovation at CDK Global and Holman, the significance of due diligence for startups, the transformative journey that follows, and the role dealerships can play as investors. Their profound insights into investment and entrepreneurship offer valuable guidance for aspiring entrepreneurs and investors alike, illuminating the path to success in the dynamic world of technology-driven businesses.

Why does Fortellis matter, how does it present an exciting opportunity for startups looking to innovate in this industry, and could you share your experiences with CDK when Fortellis started?

Ron: Fortellis was a pivotal moment for CDK, opening up their APIs and enabling product integration. This created a gateway for not only startups but for the entire industry to innovate on an open and agnostic platform, similar to Salesforce and Google. Fortellis allowed for the connection of different data sets, supporting the integration required for AI and advanced technologies. It presented an exciting opportunity for startups to tap into CDK's ecosystem and enhance their offerings. Overall, Fortellis marked a significant development in the industry, fostering integrations and connectivity that will be even more critical in days to come.

How did the innovation journey start at Holman Strategic Ventures?

Bill: The innovation journey started with the need to figure out how to keep the company relevant for generations to come. The idea was to innovate outside the core businesses, which led to the formation of a group that built platforms and started investing heavily.

How can dealer groups formalize the idea of using their capital to provide capital to startups that serve them, and what's the life cycle for that in the context of their investments in the venture space?

Bill: The lifecycle is currently in a phase where dealer groups, sitting on a lot of cash and interested in buying more stores, are progressively investing more in their businesses and becoming involved in the venture space. An organic community has developed where dealers discuss deals and invest together. This venture space is enjoyable as it involves interacting with smart, innovative entrepreneurs. It's not competitive in a negative way; dealers often work together on deals, investing side-by-side. The chances of success go up dramatically because they're going to give the startups they invest in business. They are in it for a return, among other reasons.

How do you balance providing advice to large companies like CDK and smaller startups? What can startups and entrepreneurs learn from that?

Ron: I foster an intellectual balance by sitting on boards of both large and small companies, which provides a perspective of the industry at that level, and being involved with innovative startups, which provides a different vantage point of where the industry is heading. This balance helps to deliver a meaningful perspective that supports all my interactions across the industry.

What is the relevance of automotive-focused capital for startups looking to innovate in this industry?

Ron: Automotive-focused capital is highly relevant because traditional VC firms may not understand the specifics of the automotive industry. Going to investors who operate these businesses or have been involved with tech and dealerships provides a different perspective that can be more insightful for startups in this industry. With that said, there are quality VC’s such as FM Capital that only invest in auto and mobility.This is what you should be looking for.

Can you discuss the due diligence process in your model, its importance for startups and entrepreneurs, what happens after the process, and the role of the investment committee in this process?

Bill: The due diligence process involves a thorough review of companies we invest in, increasing their chances of success and aiding in the diligence process. For example, with Orbee, we engaged our digital marketing experts to assess its business potential. Startups should understand and organize their business early on, anticipating what investors will scrutinize. After due diligence, startups transition into more structured organizations, and the investment committee holds the final decision. Being well-prepared is crucial to avoid surprises during the process.

What does it mean for dealerships to become smarter than vendors, and how has this shift, along with the evolution of technology, impacted the automotive industry, particularly in the context of digital retail and the current inflection point in auto retail?

Ron: Over the years, dealerships have transformed how they are embracing technology. This shift is fueling new innovation that is being driven by the dealers. They are now driving much of ideation of how to unlock value and solve pain points. Rather than waiting on what comes next to the industry, I see them driving the innovation.

What is the significance of data in the development of your applications, and how do you envision the future of the industry in terms of data integration and experiences?

Ron: The data underlying our applications is what will truly help create efficiencies, better serve our customers and unlock real value going forward. Having middleware for connecting data, will play a crucial role in connecting components and fueling transformative change. Controlling the top layer of the experience and integrating data will unlock the next wave of industry value, creating unique and differentiated experiences. Data integration experiences are shaping the future of the industry.

What are the trends or innovations in adjacent industries that could be applicable to the automotive industry, and how does the industry's uniqueness affect the application of these innovations?

Ron & Bill: There are trends and innovations in adjacent industries that mirror what's happening in auto retail, such as IoT and telematics in fleet management. However, the unique complexities and pace of innovation in the automotive industry require careful consideration when applying these innovations. While it's important to stay informed about external innovations, it's equally crucial to translate them appropriately for the automotive context.

Overall, it seems like there has never been a better time to join the automotive industry. There have been a variety of factors that are forcing the industry to innovate, from the pandemic lockdowns to direct-to-consumer competition. This has inspired people like myself, other entrepreneurs and even dealerships themselves to meet the evolving demands of the customer.