Founder Focus: How Bruce Thompson Created and Sold Several Thriving Tech Startups

Welcome to another episode of Founder Focus with Steve Greenfield, founder of Automotive Ventures. This ASBN original series dives into the inside stories behind some of the most impressive entrepreneurial journeys. In this segment, Greenfield sits down with Bruce Thompson, a serial entrepreneur in the automotive technology space. His companies include American Auto Exchange, sold to JM Family in 2005, Lanelogic, CarOffer, sold to CarGurus, and New Car IQ, sold to CDK Global, to name a few.

Transcription:

Steve Greenfield:
Welcome to this week’s Founder Focus segment, where we dive into the inside stories behind some of the most impressive entrepreneurial journeys. Founder Focus takes us on an intimate conversation with innovators and entrepreneurs and the great companies that they’ve built. This is Steve Greenfield from Automotive Ventures, and thanks for joining us.

Steve Greenfield:
This week I’m really excited to welcome to the show our guest, Bruce Thompson, who is arguably the most successful serial entrepreneur in the automotive technology space. Bruce founded American Auto Exchange, or double AX back, back in 2001 in the very early days of dealers adopting software tools. The preowned inventory management platform was sold to JM Family in 2005. That same year, Bruce launched Lanelogic, a preowned inventory market maker. In 2010, Bruce launched Red Bumper, and in 2013, he launched New Car IQ, both of which were sold to CDK Global.

Steve Greenfield:
Not one to sit on his laurels, in 2014, Bruce launched Pearl Technology Holdings, and then Trade-In Concierge in 2015. That same year, Vehicle Exchange was launched. In 2016, he launched ShowroomXpress, and 2017, Pearl Proximity, followed by Pearl 360. Finally, in mid-2019, Bruce launched CarOffer, which he sold 51% to late last year to CarGurus for a headline price of $275 million. Today we’re going to peel back the layers a bit to understand what motivates Bruce, how he thinks about innovation, and how he built his businesses. So with that, let’s welcome Bruce to the show. Bruce, thanks for joining us.

Bruce Thompson:
Thank you very much. All those companies, that actually ages me quite a bit, makes me feel exhausted.

Steve Greenfield:
Well, I can only imagine. It’s hard to keep up with you and all the news that comes out of things.

Bruce Thompson:
Well, thank you.

Steve Greenfield:
All right. So let’s get started. So Bruce, you’re an industry icon, truly. Everybody knows of you and the successes that you’ve had. Let’s start with how you originally got into the auto industry.

Bruce Thompson:
Yeah, so a friend of the family’s here in the Dallas market was a big whole seller, took me under his wing after I graduated school, taught me the wholesale business, and essentially, that’s how I got started in the auto industry. This is back, way back, when we had a book in our pocket and the old golden gun I called it, to value a car. And that’s how I got started in the industry, and then just really worked my way to just about every position at a dealership. But once it kind of gets in your blood, it’s hard to get out, so we’ve been in it ever since.

Steve Greenfield:
That’s great. So take us back to the early days. What sparked the initial innovation? And then take us through the evolution of your companies.

Bruce Thompson:
Yeah. So in the wholesales business in those days, you would get … It was all relationship businesses back then, which it is today, ironically with any business that you start. But you get to know a used car manager, you would buy his trade-ins, and we’d have lanes at the auction where we’d run those cars. And we’d get to know a used car manager, and inevitably, he would be fired every six to nine months. And that was just kind of the revolving door of that position at a dealership.

Bruce Thompson:
From my perspective, it was because they didn’t have any tools to help them make better decisions, and so I became a consultant helping dealers stock the right cars because they would just go to the auction and buy what they thought would work, but had no data to help them, guide them into what they needed to buy. And so went to one dealership in particular, Beaver Chevrolet in Lufkin, Texas. He challenged me, “Hey, Bruce. You just walked on my lot. You said my inventory mix is incorrect. You’ve got to prove that to me.”

Bruce Thompson:
And so the only way I knew to do it is go back through his DMS system, look at what he had sold in the past, break it up into price bands, and came back to him. And I said, “Hey, Mike. This is what you perform really well with, and this is what your lot looks like today. These two pictures don’t look anything alike.” And he said, “Okay, you made your point.” And we took that dealership, and 120 days and we almost tripled sales in gross. He said, “Now you’re making too much money.” I was going down there one day a week to Lufkin, Texas out of Dallas. And he said, “You need to move to Lufkin.” And I said, “I love you, Mike, but I can’t do that.” And I cam back to Dallas. And when I was doing all those little spreadsheets, we started to automate a lot of that and build it. That’s kind of how I got in the software side. And ultimately, that was what was American Auto Exchange.

Steve Greenfield:
Wow. So what’s the key to your success? In terms of, you obviously have a keen nose to understand where there’s friction or pain points that you can solve, but what do you attribute your success to in terms of, how do you figure out these solutions for the market?

Bruce Thompson:
I think any successful entrepreneur can understand and spot the problems. You really have to understand the industry really well. Right? So you have to dive in. You’ve got to understand the intimacy of the business, understand where the pain points are, and then if you can build a solution around that, then not only build the solutions, you’ve got to be able to monetize those solutions.

Bruce Thompson:
So a lot of solutions that are out there today, they may be great ideas. But how are we going to get them to the goal post, or actually be able to make money with those? They have to be good enough solutions that people are willing to pay for them. And when you build them, I think maybe from my perspective one of the most gratifying things is you take an idea that was in your head, you create a piece of software out of it, then people are willing to pay for it. Right? And then that’s a gratifying thing, especially if it helps dealers because ultimately, if we can not only solve the solutions, but help them make more money at the end of the day, we’re both on the same team.

Bruce Thompson:
And a lot of ideas that come to us I think are God given, especially myself, inspiration that you get. You’ve got to have your mind in the right place. And you can’t dwell on the negative. Right? You have to dwell on: How do we solve this problem and dwell on the positive?

Steve Greenfield:
That’s great. That’s great. All right. Let’s fast forward a big to CarOffer because I mean, this is an incredible story, incredible business that you’ve built. But tell us a little bit about the company first to level set us, and why the timing specifically was right to bring this concept to market.

Bruce Thompson:
I started American Auto Exchange in ’01, Auto Exchange, because I felt like not only was it inventory management solution, but if we knew what a dealer needed to buy and we knew what another dealer wasn’t likely to sell, we could put those two cars together, or particular car together, and make a transaction there. But we were just way ahead of the game. We didn’t have … The internet was just coming out at that time, and just too early.

Bruce Thompson:
And so we shifted to just inventory management. Whenever we sold that company, we started Lane Logic. Lane Logic is really the precursor to CarOffer, to be honest with you. We hit the great recession, wasn’t the right time for that company. Hey, you have to get up to the plate and swing. We swung and missed at that one. But I look back on it, and if we would not have gone through that experience, and it was a painful experience, but we came out of it and we learned a lot.

Bruce Thompson:
And so we made the decision to really get away from the SaaS subscription based businesses in ’19. It was a difficult decision. And felt like, “Hey, this is the time to move back with the transactional business,” and we launched CarOffer. And it was a risky proposition, just the way that the company is structured, it’s different. It’s very unlike any traditional auction platform that you may be familiar with. It operates much more like the stock market. And from my perspective, cars are commodities. And so in our system, dealers go in and they place limit orders for cars that they want to acquire, just like they might place a limit order for Apple stock, make, model, trims, colors, et cetera.

Bruce Thompson:
No one on our system looks at pictures on a car, or manually goes up and says, “I want to give X, Y, or X for that car.” All those orders, buy orders are automatically in the system. We take those buy orders, we call it the buy matrix, we take all of our dealers’ inventories and simply push those cars through the matrix, and it matches to the highest buy orders in the system. And all we do all day long is execute buy orders and fulfill quotas, just like a NASDAQ level two trading screen on the back side.

Bruce Thompson:
We felt like it was the right time, I did because I think the industry’s antiquated. We need better tools, not just spin off ideas off of older ideas or traditions, but really new technology in a new platform because once we have it established and in place, then we can take this instant liquidity that we have now and plug that into a number of different applications to drive additional transactions and efficiencies in the industry. So we couldn’t be more excited. I’m having as much fun as I’ve had in 25 years. And it’s just fun to sit back and watch dealers migrate to the tool and adopt it, and sign on with this. It’s just a lot of fun.

Steve Greenfield:
Great. Great. Well, since you brought it up, I mean, I think what’s often overlooked in the entrepreneurial journey is failure and the importance of failure. You hear these stories about Thomas Edison, for example, failing 1000 times before he figured out sort of the right formula for the light bulb. It sounds like you’ve learned from failure too. For those entrepreneurs out there, I mean, what have you learned specifically from failure? And how has it made you a better entrepreneur?

Bruce Thompson:
To be a successful entrepreneur, you have to be able to shift quickly and adjust quickly. And a closed door or a failure, the best advice I ever had was basically you can look at those as either a tombstone or a stepping stone. You know? And so from my perspective, when we do have a failure and Logic was painful, believe me, but we wouldn’t be here today had we not gone through that experience. And once we got through it, then the light bulbs come up. A lot of people that are here today were with me at Lane Logic, all of my developers. And we could not have built this, the idea wouldn’t have come to us for CarOffer had we not gone through that.

Bruce Thompson:
But I would tell any entrepreneur that nothing is going to work out 100% the way that you planned it, not one thing. You have to be able to pivot. And when you do pivot, you have to be able to find a solution to open the next door. And a closed door may be exactly what you needed to get you to the next level. And so that’s the way we look at things, and that’s what I would advise any young entrepreneur today.

Steve Greenfield:
That’s great. That’s great. And there’s a debate out there whether or not entrepreneurs are born or made over time. I mean, do you have a philosophy one way or the other?

Bruce Thompson:
Well, both my grandfathers were entrepreneurs. My dad was a preacher. I’ve never worked for anyone else. I remember when I was a kid, 14 or 15, I was telling my nephews this weekend, I’d paint addresses on curbs. And I could sell them, and my buddies on the football team would paint them, and we could make enough money to do whatever we wanted. I remember that summer, it was I think 1975, we saw Rocky Balboa just come out with the first movie, and saw it 25 or 26 times that summer.

Bruce Thompson:
But from my perspective, I would tell you I think it’s in bred in them. I think it’s also the way that you’re brought up, if your parents instill that in you and have confidence in you, I think it drives a person. And being able to see others out there that are successful I think is always an inspiration for a young kid that, “Hey, if he can do it, I can do it too,” especially with a pat on the back and a little bit of help.

Steve Greenfield:
Yeah. There’s no doubt at all. So what was the hardest decision you’ve ever had to make as an entrepreneur?

Bruce Thompson:
It was an inside story actually. But when we had Pearl Technology, in ’19, maybe ’18, end of ’18, we were going to do a deal with CDK at the time with that company. And they had a CEO shift. The day we were supposed to sign the paperwork on that company, they made a determination to just shut all deals down. We’d invested a lot of money in that partnership, and it was a very difficult decision to, even though we had that in place, I felt strongly that you go to NADA and they are probably 70,000 vendors out there selling 70,000 products at the same 17,000 franchise dealers in the country on a subscription based product.

Bruce Thompson:
And so I made the decision at that point, we’ve got to shift. And I really didn’t know where we’re going to shift to, but I just wanted to get away from the subscription based applications and move to a more transactional engine. And that was a very tough decision because we’re really walking away from a very good platform. CarOffer has acquired the Pearl Assets. We’ll do some things with those in the future that I think will be very exciting. But it was a decision that we made, and I think obviously now, it was the right one to make, but it was a hard one.

Steve Greenfield:
Yeah, I can only imagine. What was the highlight of your entrepreneurial journey so far?

Bruce Thompson:
I tell you, it had to been this deal with CarGurus. And it was really too early for us, to be honest. We’re not even two years old. I think our first transaction was September of 2019, so we’ll be two years old really in our first transaction in September. But I did it because, number one, I loved the people. They’re really great folks. But number two, they have 38 million consumers that visit their site on a monthly basis. And in my mind, that’s the holy grail. So in other words, we’re doing dealer to dealer transactions today, but we are announcing now that we are turning that buy matrix to the consumer.

Steve Greenfield:
Oh, wow.

Bruce Thompson:
And so we’re developing a brand new consumer inventory acquisition channel for our dealers. And we believe that we can level the playing field for them versus the non franchised big box retailers that are out there, that they really control that channel today. And because of the marketing reach and money obviously, but with our thousands of dealers on the platform, the buying power, and then with the consumer reach of CarGurus, we think we can deliver just tons of cars to our dealers and really help them.

Bruce Thompson:
I was telling somebody yesterday, I think the industry is changing before our eyes. I mean, as we speak. I was talking to a couple of the big box retailers, and they’re buying more cars from consumers than they’re retailing. And when you look at that, what implications is that going to have for the brick and mortar auctions down the road? If these guys can buy cars and they can buy them less expensive than I can get it at a brick and mortar auction, they’re obviously going to have an advantage.

Bruce Thompson:
So what we have to do for the local Chevy store sitting down the street is leverage our platform and what we have today, which is an instant liquidity application, and point that to these millions of consumers. And hey, you can go to one site and get an offer for a car. You can come to ours and thousands of dealers basically instantly compete to give you the highest offer. And we’re not a retailer, so all those cars will go back to our dealer partners. And that’s where I want to get to. I think it’ll actually dwarf the dealer to dealer business, ultimately because you’ve got an unlimited supply right from the consumer. So it’s going to be fun.

Steve Greenfield:
Yeah. It’s fascinating to see. I spent 10 years in the wholesale spot side working for Manheim. And these last few years, largely driven from folks like you, I mean, we’re seeing this blurring of the lines between retail and wholesale, where it used to be two different buckets. But now with CarOffer and what you’re proposing with CarGurus here, it really is becoming better, much better for dealers. I mean, dealers are going to be able to acquire more inventory, hopefully at a better price, and get better, more desirable inventory for their consumers on their front line. But it’s really quite amazing, the innovation that’s happening right now in automotive.

Bruce Thompson:
COVID obviously accelerated everything. Right? I remember hearing Jim Hallett, when he was CEO of KAR, basically talking about they had a plan to go to 100% digital auction sales in two years, and they accelerated that, did it in two months. I mean, that’s the type of acceleration that you had. I remember when COVID hit, I was scared to death. I mean, we were just trying to build the application and kind of going through that timeframe. And no one knew what was going to happen, and it really played right into our hands, as dealers didn’t have the traditional sources to go acquire inventory. They were looking for other sources to get that inventory.

Bruce Thompson:
And we just said, “Hey, every entrepreneur also should know it also takes a good streak of luck.” Right? You’ve got to be at the right place at the right time. And I think when we launched this company, I think it’s the right idea, the right technology, the right platform, but also, COVID really accelerated our growth exponentially and the adoption of the platform. So that’s what I would say, and I think it just continues today. But we’re seeing a paradigm shift, for sure.

Steve Greenfield:
Yeah. There’s no doubt at all. It’s amazing to watch and fun to be part of, frankly.

Bruce Thompson:
Yes, it is.

Steve Greenfield:
So let’s switch to mentorship. I mean, how have you looked at mentorship, the importance of folks who you surround yourself with? And how much of your entrepreneurial success do you chalk up to the people that you surround yourself with?

Bruce Thompson:
I tell anybody, you can’t be the smartest person in the room, at least you don’t want to be the smartest person in the room. Right? You want to surround yourself with people that are smarter than you. Willis Johnson is a mentor of mine, a partner of mine in the past. He’s a CEO, well, was a CEO. He’s chairman and founder of Copart. And he scrapped and scraped, and just like I have. And he’s a phenomenally successful entrepreneur. And I can get him on the phone at any time. And no matter what you’re going through, you’ve got to have somebody you can lean on at the end of the day.

Bruce Thompson:
And so find a mentor like a Willis Johnston in your life, somebody that has been through it, and listen to them. I mean, a lot of people, especially a lot of people that start businesses, they have ears, but they don’t hear. You know? So sometimes you wonder what they’re good for. You have to listen. And your ideas aren’t always the best ones. And so I might come up with 10 great ideas, and we get in a room, and I call it, it’s kind of an organized chaos, just kind of the way that it works with our team. But we’ve been working together for so long that we can have those type of healthy discussions. And they may shoot down eight of the ideas, and two of them are really good ones. And then they’ll take those two good ones and they’ll make them great ones because they just … You have to surround yourself with a team and really smart folks.

Steve Greenfield:
That’s great. What’s the best piece of advice you’ve ever received?

Bruce Thompson:
I would tell you that it’s … I think I alluded to it earlier, but it’s that a failure in your life, or a slammed door, can either be a tombstone to you or a stepping stone. And if you build on them, hey, you’re just going to be better. And the closed doors, like I said before, if you wouldn’t have had them, you wouldn’t have pivoted to the other door. Right? So the thing with Pearl, hadn’t have gone south like it did with us, with the CDK acquisition, we never would’ve probably pivoted to CarOffer because we’d have been on down the path with CDK, so it would’ve never started. So I look back on it, I go, “Man, those were really tough times.” But at the end of the day, they were the best of times because we wouldn’t be here today, had we not had those experiences.

Steve Greenfield:
So if you can go back and coach yourself 20 years ago and give some advice to yourself, what would it be?

Bruce Thompson:
I would tell you I think I was young and brash when I first started out. Right? And I wasn’t necessarily a good listener. I also thought I could do more by myself than I actually could. So what I’ve learned over the years is to hire great people and let them do their jobs. And why would you hire a great, smart person and then tell them what to do at the end of the day? So from my perspective, I’ll tell you, my early days, I was not a good manager. I was much more of a salesperson than I was a manager, leader.

Bruce Thompson:
But I think today, I would tell myself, “Hey, hire great people and set them on a course, and let them do their job.” And at the end of the day, you’re going to be able to sleep a lot better, and you’re going to be successful a lot faster.

Steve Greenfield:
Yep. That’s great. So we fast forward five years, where are we going to find you?

Bruce Thompson:
The way that we structured the deal with CarGurus is, we’ll last for years. Right? So we have the ability to put stock back to them over several years based on multiples. Where I would love to be is to change this industry fundamentally. I think as we’ve talked about, it’s undergoing changes today. But if we can modernize the way vehicles are bought and sold, just like the stock market, and you can translate that not only from dealer to dealer transactions, to consumers, and you bring everything together, I think ultimately everybody wins. The consumer wins. The dealer wins. It’s much more efficient a platform. The OEMs ultimately win because now you have such better, more efficient tools.

Bruce Thompson:
So I don’t think I ever retire, I just … I took a year or two off after I sold the company or so, and about drove my wife crazy, so that’s just not in my blood. But I see myself in five years really riding this CarOffer momentum. And sometimes you catch lightning in a bottle, and we’ve done it here. And we’re lucky to have it, and so we’re going to ride this momentum as long as we can.

Steve Greenfield:
Very cool. So last question, I’ve got to ask a car question. I assume you’re a car guy. Reflect back. Did you ever sell a car you regret, or was there ever a car that you had a chance to buy, that you let go, and now you’re like, “Oh, if only I’d bought that car”?

Bruce Thompson:
Yeah. The wholesale friend of the family’s that took me under his wing, I had bought when I was actually a kid, my dad helped me buy it, bought a 1960 Corvette convertible.

Steve Greenfield:
Oh, wow.

Bruce Thompson:
And I ended up trading that thing for a Mazda RX7, if you can believe that or not, when I was a kid. So yeah, if I had that to do all over again, I certainly would’ve, for sure. But yeah, it’s crazy. I bought one of those new TRX trucks, and 701 horsepower. That thing’s amazing. My wife has an electric Porsche, which is the fastest car I’ve ever been in. It’s just lightning. But from a combustible engine perspective, that TRX will about give anything a run for its money, I think.

Steve Greenfield:
Well, they say everything’s bigger in Texas. Right?

Bruce Thompson:
Exactly.

Steve Greenfield:
Well, Bruce, thanks for joining us today. I greatly appreciate you spending some time with us and sharing your entrepreneurial journey.

Bruce Thompson:
Awesome. Great to be here, and congrats as well on your fund that you put together.

Steve Greenfield:
Thanks, Bruce, very much. So that’s it for this week’s Founder Focus, our dive into the inside stories behind some of the most impressive entrepreneurial journeys. Please feel free to contact me anytime. I look forward to catching up to discuss the industry with you. Thanks for tuning in to this week’s Founder Focus, and we’ll see you next week.

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