What if buying a car was as smooth as shopping on Amazon? Or using an iPhone? This was Jay Vijayan’s thesis as the former Chief Information Officer of Tesla. A close associate of Elon Musk, he left the electric-car maker to start Tekion, a software technology firm that reimagines the car buying and selling experience for dealers, auto-makers and customers.
Last week, four-year-old Tekion became a unicorn (valued at a billion dollars) when it raised $150 million in a round led by private equity firm Advent International. Its other investors include General Motors, BMW, and the Nissan-Renault-Mitsubishi Alliance — all large car-makers who have been weighed down by lagging internal software for years.
“The bigger picture is that manufacturers, dealers and consumers all operate in silos even though they are connected. I want to create that ecosystem and bring these three together and make the consumer journey frictionless. Buying a car is still a very complicated process today,” Vijayan says.
In an exclusive interview over Zoom with M. Sriram, Vijayan opened up about his plans, the potential of the Indian market, and his biggest challenges today. The conversation has been edited for clarity.
You’re essentially a business-to-business firm, but what would the difference for a customer be if Tekion is involved in the process?
You sit at home and finish your purchase completely online. Or you go to a dealership, talk to a salesperson and buy. For the first one, we ensure seamless connection between an OEM and a dealership.
We also create a digital hybrid experience. Which means, generally you can schedule delivery online, upload documents, submit a digital signature etc. But if you are doing it all offline, and halfway through you realise this is not working out, you can do the process online, and a person will digitally handhold you through each step of the buying process.
Or for car servicing, we have a zero-touch system, where you don't even have to step out of your house. You can track when someone will come to pick up the car, ask for approval online for the pick-up, and at the dealership you can track the service process. You can approve each step or make changes if you want and videos and pictures can be exchanged on the platform. And because we run AI ML algorithms, you will get recommendations on new parts coming up, which you can add, and other options. If you drive to the dealership, when you enter the driveway, you will be welcomed personally and recognised.
For a short job, you can wait in a lounge while you can see your car’s status on a TV.
Where will you be spending the money raised?
Money goes to two areas mainly. We are launching a few new product modules. I can’t disclose more about these vertical modules right now. We also have a high demand, and our customers are very excited about the product. So, the money will also help us go to market faster, (and in) implementation, partner success, support. Our demand is far more than our team size right now, so we have to hire more to go to the market faster. But I think after all this we will still have a lot of money. Revenue is growing and our burn rate is low.
How has the pandemic affected business, given that people are seldom going to dealerships anymore, and that overall demand for cars may also be muted in the short term?
We have been accelerating growth during the pandemic because we are a digital product, and can help sell/buy a car with zero touchpoints. Our dealers have also been quite happy, because it is really unheard of to roll out products entirely digitally for such an offline-heavy industry, which we have been able to do. Automobile sales have actually recovered very well in the US and are increasing rapidly because people want to own a car rather than use ride-hailing apps or use public transport for the health risk they pose. So, with digitising dealers and growing customer acquisition, it has been good.
How do you look at global expansion? You’re not even in all US states and that’s a big market in itself, but software products can inherently be global?
We have a very unique opportunity. We are the only true cloud-native platform. There are a lot of legacy players with antiquated models who are migrating to Microsoft Azure or Amazon Web Services and call it a cloud. But taking that and deploying it world over is very difficult, compared to our model which is agile and built by us fully. In terms of platform, we are Salesforce but 20 years in the future.
Also Read: Tesla’s entry into India depends on the economics making sense: Tekion’s Jay Vijayan
While the US is a big enough market, we have had global ambitions from day one. Automobiles are 4 percent of the US GDP, and $850 billion in annual sales. So, there’s a trillion-dollar market right here. At some scale, the US can just grow systematically by itself but we already have interest from other countries because of the partnerships we have (automobile investors and dealerships in the US). We have good partnerships with manufacturers (OEMs), so we can expand broadly rather than one dealership at a time in a country.
This is also why we have so many strategic investors, from dealer networks to car-makers, because they give us much more than just capital, and provide all these networks around the world. So, they do recommend us to their outlets in other countries saying: “This is an option you can look at.”
Which countries would these be?
Europe is definitely the second biggest opportunity. There is also strong interest from Canada. In Asia, it is India and Japan.
Where does India stand in terms of your priorities?
It is important, but market size and return on investment-wise, the US is far bigger. The car-buying experience is very fragmented in India, and bringing those parts together represents a big opportunity for us. We could be in India as soon as next year. India is not our number one priority, but it is up there for sure.
What is stopping these multi-billion dollar auto companies from building their own software suite instead of using Tekion?
Unfortunately for them, and fortunately for us, innovation at that scale is very difficult. That is why this industry has not been disrupted for 50 years (barring Tesla). And it’s not for lack of trying. Some companies in various countries tried it and rolled back. Some are still running their software but it is a nightmare — very old and expensive — so they cannot maintain the platform like say a Salesforce does, with constant updates, etc. And in the US, one dealership works with multiple brands. So, if five brands give you five different systems to run on for five dealership outlets, you have no centralised system to work on. You as a business-owner need a 360-degree view, and you need common standard platforms. And despite that, we can give different brands different experiences.
As things stand today, what are your biggest challenges?
Right now the biggest thing for me is scale. I want to scale gracefully. I have done it before, but I still feel nervous about it. Different markets, different products, we need to create business centres, support structures… these are business-critical systems. From the backend, it’s not like WhatsApp to just download and use. I want to make sure we scale right.
How do you balance it against growth at all costs, which has been the undoing of many companies?
Yes, there are a lot of examples unfortunately of companies that spent crazy money to scale and revenues never came. But while I do want to scale fast, my philosophy is different. From the beginning we have been very disciplined financially. Our investors don’t invest lightly, and do gruelling amounts of due diligence. To the extent where one investor’s due diligence was so comprehensive, our auditors and lawyers asked whether they are acquiring us. But that indicates we run a tight ship and are clean.
Honestly, even though becoming a unicorn is a great milestone, I will be 100 times happier when we hit a billion dollars in revenue. So, that’s the mindset.Looking to raise the first round of funding for your startup? Moneycontrol, in partnership with Inflection Point Ventures brings you Pitch Right. Apply here to get funded by marquee investors: https://forms.gle/y4a7ohs4A56LKAkB7. Hurry! Deadline for entries is November 8, 2020.