Keller, Mercer team up to advise startups

Veteran auto industry analysts and consultants Maryann Keller and Glenn Mercer are teaming up to help startups and investors in the auto sector.

"We've both had similar experiences over the last 10-plus years, where we have advised both potential investors as well as startups with respect to their business models," Keller told Automotive News. "Since Glenn would often call me and I would often call him, we thought, 'Why not just collaborate from the start?' We know each other very well and each other's skill sets very well."

The two decided on a formal collaboration a few months ago, Keller said, but will not start a new business. Both will work for their respective companies and will collaborate for startups and investors seeking their counsel.

Keller, 73, has more than 40 years of experience analyzing the auto industry. She is a former Wall Street securities analyst known for calling trends and developments in the auto world. She is a well-known consultant for dealership groups, startups and investors.

Keller is also an adviser and investor for the startup Appraisal Lane, is on the boards of DriveTime and AutoCanada and has advised or invested in dozens of other automotive companies. In 2001, she opened Maryann Keller and Associates, a consultancy.

Mercer, 62, spent two decades as a partner with McKinsey & Co.'s automotive practice and a decade as an independent adviser to venture capital, private equity and public equity investors. Mercer has also been on multiple automotive-related boards. In 2016, he completed a study on behalf of the National Automobile Dealers Association on the future of automotive retail.

Ken Elias, a partner at Maryann Keller and Associates, will head operations of the startup advisory practice. Elias was formerly a vice president of Priceline.com, an investment banker and an auto dealer.

Why the focus on startups?

"Startups in the automotive business are so popular and they often don't work because the individuals who are starting them up lack the real understanding of some aspect of the automobile industry," Keller said.

Keller pointed to the failure of now-defunct startup Beepi, an online used-vehicle retailer, as an example of a company that should not have gone to market or acquired the capital it did with a business model that lacked understanding of the industry.

Mercer said entrepreneurs can often misread the landscape, especially in online used-vehicle ventures.

"While these may attract funding as sexy, asset-light, app-based ventures, industry economics can become serious stumbling blocks," Mercer said in a statement. "For example, the allure of avoiding a physical car lot may fade as the firm realizes it has replaced costly real estate with costlier logistics, as cars are repeatedly shuttled from sellers to buyers. In the case of the physical car store, the customer takes on the burden of getting to the sales point, and of taking their purchase home later."

In the emerging world of technological advancement and simplification, startups are rampant, especially in the auto industry. But Keller said startups were common 20 years ago, although today's landscape and focus have changed.

"It's moved very much to the operation of the dealership, well beyond trying to figure out how to get people to provide an email and contact information and identify the car they want to buy, which is where we were two decades ago," she said. "Right now, it has moved to startups that are really focusing on the needs of the dealers to drive revenue and reduce costs."

Keller cited inventory management systems as an example.

"You think about the inventory management models that have been enormously successful, which is absolutely something that has been relevant in the last decade," she said. "Nobody had heard of inventory management systems for used cars prior to that. It has become much more sophisticated, much more targeted."

Keller and Mercer hope to steer investors away from "money chasing" startups that don't have a proper grasp of the "nuts and bolts" of the auto industry.

Elias said in the statement: "We can help them better understand the industry, outline where opportunities can be found, assist in the strategy development, and, sometimes, prevent investors from chasing projects that have fundamentally flawed theses."