Digital-Lending Platform for Car Dealers
10X Capital is a venture capital firm with an impressive track record. Among its early investments are software company Palantir Technologies (seventeen-billion-dollar market cap), sports-betting app DraftKings (nearly seven-billion-dollar market cap), and genetic testing service 23andMe ($1.4 billion market cap).
Now it's identified another promising startup, one targeting the trillion-dollar auto financing market. It’s called Automatic, and it’s created a digital platform that connects independent car dealers with lenders.
Independent car dealers are often in a bind. There are 55,000 of them nationwide, and they service more than $225 billion worth of auto loans. Yet these dealerships lack the financial infrastructure to efficiently source lending options for potential buyers.
The result is a car-buying process that takes hours instead of minutes, and one that costs dealerships as much as thirty percent of potential revenue due to inefficiencies.
Automatic was created to assist these dealers. Its financial technology, or “fintech,” platform streamlines the entire loan process, helping dealerships boost vehicle sales and maintain transparency at every step.
As mentioned, the current loan application process can be tedious and time-consuming. There are sixty data points that must be submitted with each application. And paperwork can take two hours to complete, on average. Automatic can complete the entire process in about 30 minutes. Here’s how it works:
First, an application is submitted with all loan/buyer details. A minute later, loans are run through traditional and alternative data algorithms to assess their quality and determine the most competitive pricing available.
From there, lending documents are provided to the dealership so a deal can be closed. It’s at this time where dealers can use Automatic to add on any additional services like insurance, warranties, or accessories.
Finally, once the deal is signed, the dealership uploads all documents and the loan is processed for funding the same day.
To generate revenue, Automatic earns .35% of each loan’s market value, as well as between fifty dollars and $100 for each ancillary product added. It also earns twenty-five dollars for every aftermarket product lead — for instance, adding satellite radio or floor mats. On average, Automatic brings in $285 for every loan funded.
More than 1,400 dealerships use Automatic. And the company facilitates between twenty-five million dollars and thirty million dollars in monthly deal flow.
Deal flow is growing fast, going from twenty-four million dollars in Q4 2021 to thirty-eight million dollars in Q1 2022. In Q2 2022, deal flow reached sixty-three million dollars.
Within the next three years, Automatic projects to facilitate 368,000 credit applications. At $285 per loan, that translates to more than $105 million in potential revenue.
Longer-term, the company’s platform has the potential to disrupt markets including the auto-resale market, and aftermarket products. Automatic may also explore creating white-label solutions for foreign markets and small, national lenders.
Prior to starting Automatic, Eric spent more than twenty years as an auto lender and broker.
He began his career as an auto loan portfolio manager with IFS Financial Services. He then spent thirteen years with Signalending, an auto lending company working with dealers in Connecticut, Florida, and New Jersey.
More recently, he founded Anchored Finance, a financial services company. He holds a Bachelor’s degree in Communication from Franklin Pierce University.
Max has spent more than two decades in the banking industry. In addition to his role with Automatic, he is co-founder and CEO of the Automotive eXchange Platform, a marketplace aiming to disrupt the car buying process.
He studied at Florida State University.
Alex has spent a decade in finance and marketing.
Most recently, he was a marketing advisor with ANSTitle, a real estate title insurance agency. Before that, he held the same role with Syndicate Profile, a real estate investment marketplace.
Earlier, he worked for Sharestates, a real estate investing platform. Prior to that, he co-founded Global Bitcoin Solutions, a financial services company focused on cryptocurrencies.
Alex holds a Bachelor’s degree in Design and Environmental Analysis from Cornell.
John has nineteen years of strategy and financial technology experience.
In addition to his role with Automatic, he works for Amazon Web Services (AWS), managing blockchain services. Previously, he spent six years as an advisor to companies with respect to product strategy and marketing.
Earlier in his career, he was Chief Product Officer with UNN Finance, a financial company targeting the insurance market. Before that, he was a credit portfolio manager with Capstone Investment Advisors, as well as King Street Capital Management.
John began his career as an IT analyst with Barclays Capital, an investment bank, before becoming a portfolio manager with Artesian Capital Management.
He earned a Bachelor’s degree and Master’s degree in Environmental Engineering from the University of Michigan.
A VC fund whose portfolio incudes 23andMe, DraftKings, and Palantir Technologies.