The Five Gates

Hi Friends! 

A few months ago, I revealed the five-component tool that Motorwerks Marketing uses to determine if we have interest in getting involved with new auction company concepts and I laid out the questions I think anybody should answer before attempting to start a (online especially) collector car auction company.

The list was deliberately designed not to be encouraging. Starting an auction company is expensive, complicated, brutally competitive and for the most part already pretty thoroughly thought out and worked through. When we first assembled the list, basically nobody we could think of had ever really cleared all five gates. Most potential founders were eliminated almost immediately. Now we have a new company to run through it though and I’ll say, I’m actually feeling pretty hopeful for these folks.

Final Lap is a new dealer wholesale type auction but for collector cars and straight to the public. The idea is being built by Marshall Haas, Hazem Giballi and Courtney Guertin. The company is currently listed as “coming soon” but plans to hold a weekly internet car auction every Friday at 1:00 p.m. Eastern. The format is straightforward. Cars can be researched throughout the week through full listing pages with photos, videos, documents, history and seller questions. Bidding does not open until the live Friday event. Once the auction starts, cars run one at a time for a few minutes each. Late bids extend the clock, so a car cannot be sniped at the last second. Again, very similar to a Manheim or local dealer type auction situation. Final Lap describes the concept as “a show, not a listing page” and I honestly think that’s kind of an overshoot (Russo and Steele was a show…), but still a fun way to try and sell the idea.

As good as that description is, the more important question is whether it is a good business model.

Bring on the five gates……

Gate One: Notoriety and audience

Does the team have an established presence in the collector car world and an audience they can reach directly?

Marshall Haas is a known collector with a large following. His Instagram and other social channels reach hundreds of thousands of people, many of whom already know him through car and business content. He collects Porsches, Ferraris and McLarens and has spent enough time in the hobby to understand how enthusiasts talk about cars, what they value and what makes them pay attention. That matters. An online auction company is not simply a website with listings and a payment system. It is a trust business. Buyers are being asked to spend significant amounts of money on cars they may never see in person. Sellers are being asked to hand over valuable inventory to a company that has not yet established a record of results. A founder with no public profile has to build trust and an audience at the same time. That can take years and a tremendous amount of money. Haas starts with both an audience and a level of credibility in the car world. His audience however, is not yet specifically a collector car auction audience, which is an important distinction. Still, it is an audience and it belongs to him. With a couple of notable exceptions, that is more than nearly anybody else who has approached this idea has had.

Gate one: cleared.

Gate Two: Real experience in the specific space

Does the team have people who understand collector cars and the mechanics of this business?

From where I sit, this looks like this is probably their softest spot. Hazem Giballi brings real credibility on the dealer side. He founded Trofeo Collection, which specializes in investment-grade supercars. Before that, he spent nearly a decade as an NBA agent and business manager working with elite athletes, entrepreneurs and entertainers. Those backgrounds are relevant. Buying and selling high-value cars requires product knowledge, relationships and an understanding of how wealthy buyers make decisions. Giballi appears to have those qualities, but dealer experience and auction operations experience are not the same thing. Running a live auction block that closes lots on a clock every week without errors is its own discipline. So is managing consignors, titles, shipping, payment processing, compliance, arbitration and post-sale problems at scale. The best online auctions make the process look simple because so much work happens behind the scenes. The question is not whether Final Lap can find people with this experience. It probably can. The question is whether the company can hire and retain them. People with serious auction operations experience are already employed somewhere more secure than a startup. They are not inexpensive and they may not be interested in joining a company that has not yet proven its model. This is the gate I will be watching most closely.

Gate two: partially cleared, with a clear path to completion.

Gate Three: Technical infrastructure

Can the team build the technology required to support the business?

Final Lap clears this one comfortably. Courtney Guertin co-founded Ease.com and served as its chief technology officer. The company grew to serve more than 60,000 businesses as part of Employee Navigator. Guertin was also an early employee at Digg and has raised more than $100 million across his ventures. This is not somebody learning on the job what a bidding engine needs to do. The technology behind an online auction is much more complicated than a listing page with a countdown clock. The system has to manage accounts, bidding, security, payments, communications, documents, comments and records. It has to remain stable when a valuable car is closing and a large number of people are logged in at once. Final Lap’s concept adds another layer. The platform is not only processing bids. It is producing a live sequence of auctions that moves from one car to the next. A delay, malfunction or unclear result does not affect one listing. It can disrupt the entire event. For a company whose premise is that a six-figure or seven-figure transaction can close reliably on a Friday afternoon, Guertin does seem to be the right kind of person to have in charge of the technical side. (and we didn’t even touch on Haas’s experience with somewhere.com here either).

Gate three: cleared.

Gate Four: Differentiation

Is this actually different from what is already available?

This is the most interesting part. When we published the original list, most people who wanted to start an auction company did not have a different idea. They wanted to be another version of an already existing platform, just with their own stink on it. That was a difficult proposition even several years ago. It is far less viable now with established online auctions, legacy auction houses and specialized platforms all competing for buyers and sellers. Final Lap is not presenting itself as just another listing site.

The Friday format addresses two common complaints about the standard online auction model. First, week-long auctions can create a lot of dead time. A car may receive most of its attention near the beginning and end while spending several days sitting quietly among dozens or hundreds of other listings. Second, the conventional model spreads the audience across many cars at once. A good car can get lost in the volume.

Final Lap concentrates the room’s attention on one car at a time. Five focused minutes may be more valuable to a seller than seven quiet days in a crowded marketplace. The clock extension also directly addresses last-second sniping. Whether buyers and sellers want this format remains an open question. Some people enjoy the slower pace of researching and bidding over several days. Others may prefer a scheduled event with a clear beginning, middle and end, but it is a real idea (at least in this space). It is not a rebrand of the same product.

Gate four: cleared.

Gate Five: Willingness to lose eight figures

Can the founders absorb the cost of building this over several years without any guarantee of success? On paper, Final Lap clears this one too.

Haas sold Somewhere.com after growing the company to more than 150 employees. The transaction was reportedly valued at $52 million and Haas is believed to have received a payout well into the 8-figure territory. That gives him something almost nobody else entering this market has: the ability to personally fund substantial early losses.

Still, a personal fortune is not the same thing as unlimited institutional capital. Eight figures is a meaningful amount of money even for somebody who received a payout of that size. Marketing costs, engineering costs, staff, legal work and bidder and consignor acquisition can compound quickly. The company may be able to fund its first several years, but it probably cannot personally fund a decade of losses without eventually needing outside capital or a major change in strategy.

The money removes one of the biggest barriers. It does not remove the business risk. This said, Haas has proven that he is comfortable in a startup environment and he undoubtedly understands the risks. He’s most assuredly not walking in blindly and knows he’s going to have to take a beating for a while on this.

Gate five: cleared on paper.

The Hypothesis

As interesting as this is, the reality is that we see far more folks walk into this and fail brutally. We even see established players throw up their hands and bail too. It’s a useful reminder that the market does not owe anybody a soft landing because they have credentials, capital or a good idea. Online auctions remain difficult even for companies that appear to have many of the necessary pieces in place. Still, Final Lap is different from most of the companies we have discussed in the past. Marshall Haas clears the audience and notoriety gate, he has the technology side covered, the money to fund a serious attempt and he appears to understand what it takes to get a real startup moving.

The weakness is direct auction experience. Giballi brings valuable dealer and relationship experience, but that is not the same as running an auction operation. Final Lap will need to bring in people who understand the less visible parts of the business and can execute them consistently. Four gates appear to be cleanly cleared. The fifth has a reasonable path to being fixed. That does not make Final Lap a certainty. Nothing is guaranteed in the online space and the market is more crowded than it has ever been. Either way, Final Lap is the first company I have seen in a while that plausibly gets through the entire list. That does not mean it will succeed. It means the people behind it appear to understand what they are signing up for. If the question is who has the best chance of making a new collector car auction company work, in my opinion, Final Lap is the best answer we have had in a long time.

The remaining question is whether the format itself is something buyers actually want….

Would you bid in a weekly live auction where the cars run one at a time on Friday afternoon? Does concentrating everybody’s attention on a single car solve a problem you have with the current online auction model, or does it create a new one?

Let me know your thoughts!

That's it for this week…

Darin Roberge

(Learn More About Me Here)

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