A company headquartered in Raleigh and Seattle is helping car dealerships compete online

When Hunter Gorham was working at the car financing bank Ally Financial earlier this decade, he noticed that many of the car dealerships he worked with were struggling to sell their cars online.

For years, due to a lack of expertise or want, he watched as traditional car dealerships ceded ground to startups that were trying to make online car buying easier, while the dealerships themselves struggled with the simple fact of needing customers to actually show up on a car lot to complete a purchase.

So Gorham left the bank and founded Joydrive, a company he set up in Raleigh and then quickly expanded to Seattle, to see if he could change the equation for those dealerships.

Now the company has a marketplace of around 30,000 cars and partnerships with dealers in 14 states. Joydrive has also raised $10 million in funding, a number that has grown quickly in just the past six months. A few months ago, the company announced it had brought in a then fresh $3 million, raising its total funding to a little more than $4 million.

Most of the investors have been the large-scale dealerships the company works with, a statement of faith, Gorham said, that the Joydrive model can help keep local dealerships competitive in an environment where upstarts like Carvana are expanding and the e-commerce behemoth Amazon appears to be getting in the game.

“There are 17,000 franchise dealerships in the U.S. that need a digital answer and don’t have one,” Gorham, now Joydrive’s CEO, said in a phone interview. “Our view was, let’s unite them together.”

How Joydrive works

Unlike some of its e-commerce competitors, Joydrive doesn’t own any of the cars it sells. Rather it acts as matchmaker, connecting users with a dealership that has the particular car they are looking for.

“Just like Uber and Airbnb doesn’t own their cars (or homes), we shouldn’t own the inventory,” Gorham said of its asset-lite mentality. “Used cars depreciate 2% per month and all these other (competitors) own their assets.”

Instead it’s about making it easier for the consumers and the dealerships make deals. After a sale, Joydrive will arrange home delivery — sometimes as fast as one day — and gives buyers five days to return a vehicle after buying it. (The company notes that less than 1% of sales are returned.)

Deliveries are free for the first 100 miles; Joydrive charges a fee beyond that.

Founder Headshot.jpg
Hunter Gorham, founder and CEO of Raleigh startup Joydrive. Courtesy of Joydrive

In this way, it provides an outlet for dealerships to sell cars to a much wider audience than, say, just the Seattle area; Gorham noted that a resident of Portland, Oregon, could buy a car from a Washington dealership online and have it delivered the next day.

It is also streamlining a process that can be more confusing in person, Gorham said.

“New cars have a massive amount of incentives and rebates,” which can lead to two dealerships offering different prices for the same car, Gorham said. “So we only let (customers) see one price, so you don’t need a decoder ring to figure it all out.”

Another advantage to partnering with dealerships, Gorham said, is access to brand new cars. Because of state regulations, new vehicles usually have to be sold through a franchised car dealership, which is why Carvana only sells used cars. But because Joydrive is selling through franchises, its marketplace can sell new, used or leased vehicles.

For customers, no fee comes with the purchase. Joydrive brings in money by collecting a monthly subscription fee — which is “in the single-digit thousands,” Gorham said — from the dealerships.

The partnerships with dealerships are crucial to Joydrive’s ability to operate.

Gorham said Joydrive is very careful about which dealerships it partners with but that it is continuing to add new partners. It now works with dealers in 14 states, but Gorham hopes to have complete coverage across the U.S. in the next year, so that deliveries can become quicker and more efficient. No North Carolina dealerships are currently part of the Joydrive network — so if you bought a car on Joydrive it would be delivered from another state, like Virginia — but it could be part of the company’s expansion in the coming months.

Raleigh roots

The Joydrive team has 20 employees — a number it says is growing — split between Raleigh, Seattle and those who work remotely. About half of those employees work in the company’s office on Fayetteville Street in downtown Raleigh, Gorham said.

Gorham, who worked at Ally for 14 years before leaving in 2016, said choosing to start in Raleigh was a “key decision” for the company and that the expansion to Seattle was the result of an important relationship with some large dealerships in the Pacific Northwest.

“We can’t just be on one coast,” Gorham, who is originally from New Mexico, said. “But I knew I wanted (to start) on the East Coast. We looked at New York, Boston, Charlotte and Atlanta.

“But when I came to Raleigh and walked around downtown for the first time,” he continued, “I saw that this was a growing tech scene and it felt special to me. I think it is in a sweet spot ... where we are getting here still early in the game. It’s not like Seattle, where it is baked out now.”

An added bonus was that Raleigh had a strong contingent of developers who specialized in the coding language Elixir, which is critical to the company’s marketplace.

Early days

Gorham contends it is still early days for the online car sales market — and that the room for growth is tremendous.

There is little data available for how many cars are sold online or even how many dealers offer the option, The Wall Street Journal reported last year, in part because the definition of an online sale sometimes includes shoppers who processed just a portion of the sale online.

But it’s a market that is clearly growing fast.

Carvana said it sold around 94,000 cars last year, a 113% increase from the year prior. Amazon is also starting to get into the game, launching Amazon Vehicles, where it currently sells parts and accessories, though many think it will one day try to sell cars, too.

The Carvana vending machine tower seen off the Raleigh Beltline. Joydrive is helping dealerships compete with online startups like Carvana. John Murawski

Research from the Boston Consulting Group (BCG) found that car dealerships are becoming less important because their online presences are lacking.

BCG noted that while 95% of people spend more than four hours doing research online before they visit a dealer, overall visits to dealerships are dropping. “Over the past decade or so, total dealer visits per sale have dropped from about four to 1.4,” the BCG report says.

“Our view is that the customer is screaming that they want to buy from home,” Gorham said. But “the reality is that we are not selling deodorant, and a vehicle for most Americans is their second largest purchase. So you have to get trust and legitimacy right for the customer to buy into this.”

For that reason, the company is upping its marketing on the West Coast, where most of its current customers live, to increase its name recognition.

To bring in more revenue, Gorham sees the company taking a few different approaches in the next few years.

First, it believes it can continue to grow its subscription revenue by bringing in more dealers and slowly raising prices as online sales grow. And second, it plans to branch into more services for customers.

It recently launched the ability to sell your car to a dealership through its online marketplace. And Gorham said the company is also eyeing the possibility of adding a financing and insurance arm to its network.

“That is the goal that we are marching toward now,” he said. “We have been fortunate to make good progress on that.”

Related stories from Raleigh News & Observer

Zachery Eanes is the Innovate Raleigh reporter for The News & Observer and The Herald-Sun. He covers technology, startups and main street businesses, biotechnology, and education issues related to those areas.