A technology company in Springfield’s eFactory business incubator might be on the brink of rapid revenue growth after securing a pilot deal with General Motors Co. (NYSE: GM).
The newly inked deal allows Springfield-based CellARide LLC to provide text-message marketing to GM dealerships across the country, and the automaker intends to foot a portion of the bill. With CarFax Inc. founder Ewin Barnett III among its investors and $75,000 in 2013 revenue, the deal could be a step from startup to scalability as founder Josh Holstein says the GM-dealer connection has the potential to increase revenue to $4 million next year.
A former officer with the Springfield Police Department, Holstein started CellARide over three years ago to provide car buyers more detailed information from the sellers.
“I came across a vehicle that had the old-school For Sale By Owner sign in orange and black, and it has that little white space for you to write your novel about year, make, model and a phone number – all that stuff you need to put in there. I thought, ‘There has to be a better way,’” said Holstein, who holds a computer science degree from Missouri State University.
He worked to develop a basic service for car owners, called Cell By Owner, but it wasn’t long after Holstein realized he could do nearly the same thing for people who visited car lots while helping car dealerships capture information from potential buyers.
Through his dealer-focused service named CarInfoToGo, a potential car buyer can review a Ridetag window sticker, text a short code listed on the tag and receive details that inform the buying decision. The text service sends dealers contact information for those looking at vehicles as well as the specific cars they’ve scoped out digitally.
“You ‘text the car’ and receive all the pertinent information about the vehicle including photos, videos, CarFax reports, vehicle reviews, financing and insurance information through what we call a mobile brochure,” Holstein said.
The lead-generation information was the real draw for GM. He said car manufacturers and dealers spend millions of dollars attracting customers to their lots, but once they arrive, they generally know next to nothing about the potential buyers. Holstein has noticed some customers even avoid talking to dealers and visit lots after hours to browse.
“I ask, ‘Who’s on the lot when you’re not?’” Holstein said, adding the CellARide platform allows customers to learn about vehicles in their own way while giving dealers a way to follow up.
Holstein said dealers pay between $300 and $900 a month, based on inventory levels.
Ryndee Carney, manager of cross-brand communications with GM, said the deal with CellARide is only a first step.
“It’s a pilot. And we run pilot programs all the time in various parts of our business. Based on how the pilots work, we make a decision on whether it’s something we want to do permanently or not. We have not made that decision in this case,” Carney said.
The currently temporary nature of the business relationship is not discouraging to Holstein.
“It is pretty common for a company like GM to walk before it runs,” he said in an email.
Through the automaker’s pilot program, Holstein said CellARide is now approved to market to some 4,000 GM dealers, which are eligible to receive reimbursements on the money they spend with the tech company. For every $100 dealers spent with CellARide, GM has agreed to spend an additional $80 toward the total cost.
Before Holstein fully understood how he would get his product out to the masses, he was introduced to CarFax founder Barnett around the start of 2012. The Columbia native soon became a partner in the fledgling company.
“We sat down and literally spoke for five hours the first time we met,” Holstein said, noting another investor had met Barnett through a different project and was able to help arrange the meeting. “After that, I was able to see the massive value that the technology we created could bring to the dealership space.”
Around the first of the year, with guidance from investor-partner Barnett, Holstein secured a $50,000 investment from St. Louis-based tech accelerators Capital Innovators LLC. That relationship helped Holstein connect with an undisclosed Cleveland, Ohio-based marketer that ultimately put him in front of dealer advertising executives at GM.
Locally, CellARide offers its services at two Youngblood Auto Group dealerships on South Campbell Avenue and Jamie Hathcock Auto Group on South Glenstone Avenue.
Youngblood General Manager John Widiger said in the two years the dealership has used the CellARide service, there has been some trial and error.
“Initially, we were calling the people back, and it freaked them out,” he said. “It just came across as too aggressive.”
Now, Widiger sends a personal text message to people who have utilized the system – based on a template he set up in his phone – letting them know the Youngblood staff is available to assist them.
“It’s just a way to start a dialogue with the customer,” he said, adding about one out of 10 will respond with additional questions.
CellARide is among 12 tenants at The eFactory inside MSU’s Robert W. Plaster Center for Free Enterprise and Business Development.
Now 15 months in operation, eFactory coordinator Brian Kincaid said over a third of the center is occupied, and he expects two more startups to sign on by the end of the month.
Last month, Springfield-based microincubator Originate opened in nearly 1,100 square feet. Owner Jeremy Adams said four businesses, including his Verv tech design firm, currently operate within the open-office environment that caters to college students. The concept, seen as a first step for startups, costs $120 per month, and daily rates are available, he said.
Kincaid said The eFactory is evolving to meet the needs of startups through the Originate arrangement to help generate future successes for other ventures.
“We kept hearing that we needed something like this to be here, so like the startups themselves do, we’re adapting to meet the needs of the people we serve,” Kincaid said.
The GM deal, Holstein said, could be the tip of the iceberg for his company.
On June 11, Holstein returned from a trip to Los Angeles where he me with Toyota officials, who are considering a pilot program for its dealers.
“We could get picked up by Toyota,” he said.
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