Automotive Ventures raised $13 million for a new fund backed by dealerships hoping to invest in novel technology that could help them do their jobs better.
The firm's DealerFund is much smaller than originally intended, however. When fundraising began more than a year ago, the goal had been to raise as much as $50 million. The fund closed in April.
"The fundraising environment over the past year has softened significantly," Automotive Ventures CEO Steve Greenfield told Automotive News. "We had one commitment of $5 million pull out and a couple of other softer commitments that failed to materialize."
Angel and seed-stage startups have been able to raise money, but investors are more risk averse than they were "writing checks only to companies with strong fundamentals, healthy burn rates and solid strategies to preserve" a growth path, PitchBook said in its Q1 2023 US VC Valuations report.
At the same time, Greenfield noted, DealerFund attracted 48 total investors including dealership groups and some single dealerships, representing hundreds of storefronts in all.
The typical participating investor is a mid-size group owner with an average of five to 25 stores, Greenfield said. The average investment size was roughly $250,000.
Jason Tamaroff, vice president of Tamaroff Group in metro Detroit and Eric Frehsee, his cousin and company president, jointly contributed roughly $300,000 to DealerFund after committing a similar amount to a previous Greenfield led venture capital fund, Tamaroff said.
Their participation reflects an attempt to be creative about developing new and useful technology, Tamaroff said.
"Eric and I are third-generation dealers. We’re trying to do things differently,” Tamaroff told Automotive News. “We’re progressive … and we don’t have a $12 million IT budget to come up with crazy new products.”
He explained that Greenfield’s approach to DealerFund is building a community that can help all dealerships in the long run.
“The community helps throw some ideas around, and through the funds, we can find new products,” Tamaroff said. “We can not only try them but we can invest in them and help make them better and participate in the rewards.”
Carter Myers Automotive also invested in DealerFund to help dealerships “stay on the forefront” of evolving technologies and assist the industry in developing new products while addressing changing customer expectations, Carter Myers CEO Liza Borches told Automotive News via email.
“DealerFund has eyes and ears on new ideas that we wanted to be involved in,” Borches said.
Other investors include Dinos Constantine, chief operations officer, Holler-Classic Family of Dealerships; Paul Antony, executive chairman of AutoCanada; Sam Slaughter, a personal investor and former owner of Sellers Auto Group, which sold its two dealerships in March; Bill Feinstein, president, Planet Honda in Union, N.J.; and Clay Cooley, CEO, Clay Cooley Auto Group.
Also investing are Adam Simms and Tom Price, of the former Price Simms Family Dealerships, Greenfield said. Price Simms now operates as Price Family Dealerships, of which Price is chairman, and Simms is CEO of newly formed Simms Automotive Inc.
Some other investors previously disclosed include Rick Ford, executive vice president of operations for the RFJ Auto platform within Sonic Automotive Inc., and Brian Godfrey, president of Pat Milliken Ford in suburban Detroit, who made a personal investment.
Stock market corrections prevented more investors from participating, Greenfield said, particularly when big technology companies saw their valuations tumble.
"All of us kind of look at the Dow Jones as a barometer of our personal wealth and savings," Greenfield said.
Other factors are revenue drops dealers are facing after a record few years stemming from the coronavirus pandemic and rising interest rates that make both new and used vehicles less affordable.
"On balance we had a really good environment for most of the year," Greenfield said. "Near the end, some of the big commitments that we had didn't come through, largely because of some of the general hesitation."
The fund initially has opted to invest in three portfolio companies: WarrCloud, Go Eve and Kinetic.
WarrCloud automates warranty processing for franchised auto dealers. Go Eve has developed its "dock chain" product that enables one DC fast charger to charge up to 20 vehicles at the same time. Kinetic Automation has put together a way to automate calibration for dealerships of advanced driver assistance systems such as automatic braking, adaptive cruise control and lane-keeping assistance.
WarrCloud also is part of an earlier Automotive Ventures fund focused on global mobility-related technology.