This former Tesla CIO just raised $150 million more to pull car dealers into the 21st century

“I have to choose my words carefully,” says Joe Castelino of Stevens Creek Volkswagen in San Jose, California, when asked about the management software on which most car dealerships rely for inventory information, marketing, customer relationships and more.

Castelino, the dealership’s service director, laughs as he says this. But the joke has apparently been on car dealers, most of whom have largely relied on a few frustratingly antiquated vendors for their dealer management systems over the years — along with many more sophisticated point solutions.

It’s the precise opportunity that former Tesla CIO, Jay Vijayan, concluded he was well-positioned to address while still in the employ of the electric vehicle giant.

As Vijayan tells it, he knew nothing about cars until joining Tesla in 2011, following a dozen years of working in product development at Oracle, then VMware. Yet he learned plenty over the subsequent four years. Specifically, he says he helped to build with Elon Musk a central analysis system inside Tesla, a kind of brain that could see all of the company’s internal systems, from what was happening in the supply chain to its factory systems to its retail platform.

Tesla had to build it itself, says Vijayan; after evaluating the existing software of third-company providers, the team “realized that none of them had anything close to what we needed to provide a frictionless modern consumer experience.”

It was around that time that a lightbulb turned on. If Tesla could transform the experience for its own customers, maybe Vijayan could transform the buying and selling experience for the much bigger, broader automotive industry. Enter Tekion, a now four-year-old, San Carlos, California company that already employs 470 people locally and in Bangalore and has come far enough along that just attracted $150 million in fresh funding led by the private equity investor Advent International.

With the Series C round — which also included checks from Index Ventures, Airbus Ventures, FM Capital and Exor, the holding company of Fiat-Chrysler and Ferrari — the company has now raised $185 million altogether. It’s also valued at north of $1 billion. (The automakers General Motors, BMW and the Nissan-Renault-Mitsubishi Alliance are also investors.)

Eric Wei, a managing director at Advent, says that over the last decade, his team had been eager to seize on what’s approaching a $10 billion market annually. Instead, they found themselves tracking incumbents Reynolds & Reynolds, CDKGlobal and Cox Automotive’s Dealertrack — and waiting for a better player to emerge.

Then Wei was connected to Tekion through Jon McNeill, a former Tesla president and an advisory partner to Advent.

Says Wei of seeing how Tekion’s tech compared with its more established rivals: “It was like comparing a flip phone to an iPhone.”

Unsurprisingly, McNeill, who worked at Tesla with Vijayan, also sings the company’s praises, noting that Tekion even bought a dealership in Gilroy, Calif., to use as a kind of lab while it was building its technology from scratch.

It’s nice, such praise, but more important is that Tekion is also attracting the attention of dealers. Though citing competitive reasons, Vijayan declines to share how many customers have bought its cloud software — which connects dealers with both manufacturers and car buyers and is powered by machine learning algorithms — he says it’s already being used across 28 states.

One of these dealerships is the national chain Serra Automotive, whose founder, Joseph Serra, is now an investor in Tekion.

Another is that Volkswagen dealership in San Jose, where Castelino — who doesn’t have a financial interest in Tekion — speaks enthusiastically about the time and expenses his team is saving because of Tekion’s platform.

For example, he says customers need only log-in now to flag a particular issue. After that, with the help of an RFID tag, Stevens Creek knows exactly when that customer pulls into the dealership and what kind of help they need, making their arrival far more seamless.

Tekion can also make recommendations based on a car’s history. It might, for instance, suggest a brake fluid flush to a customer without an advisor having to look through that customer’s history, Castelino says.

As crucially, he says, the dealership has been able to cut ties with a lot of other software vendors, while also making more productive use of its time. Says Castelino, “As soon as a [repair order] is live, it’s in a dispatcher’s hand and a technician can grab the car.” It’s like that with every step, he insists. “You’re saving 15 minutes again and again, and suddenly, you have three hours where your intake can be higher.”

With converts like Castelino, it’s easy to image Tekion making serious strides in market share. And yet it does have rivals, some of which have long contracts in place with their customers.

Even steeper competition, should it come, might eventually be from Tesla itself.

In a Tesla earnings call earlier today, Musk told analysts that there are essentially a dozen startups housed inside of Tesla, including one centered on vehicle service. It’s the very business that Vijayan helped to create.

As for whether Musk might spin out any of these, he said Tesla currently has no plans to do so. He suggested it has enough on its plate for the time being. If Tekion takes off, however, that could well change.

Tesla is a chain of startups, Elon Musk explains

Today during a call with investors and journalists, Tesla CEO Elon Musk was asked to expand a tweet from yesterday. In it, he stated: “Tesla should really be thought of as roughly a dozen technology startups, many of which have little to no correlation with traditional automotive companies.”

In short, he explained there are over a dozen startups in Tesla, and he views every product line and plant as a startup. It’s an interesting point of view from the top of Tesla, a car manufacturing company that also builds batteries, home solar panels and, among other things, is looking to offer car insurance, too.

Outside of vehicle manufacturing, Musk points to insurance when asked about the growth potential. He says the insurance business could grow into 30-40% of Tesla’s car business.

This strategy seemingly works well for Tesla, which constantly rolls out updates to existing products at an unusual pace. New features arrive without much warning, and it makes sense when Tesla is treating different vehicle component divisions as a collection of companies instead of a collection of divisions.

According to Musk, some of the so-called startups include autonomy, chip design, vehicle service, sales, designing a drive unit, motors, supercharger network and, soon, insurance.

“The thing people don’t understand about Tesla is [the company] is a whole chain of startups,” Musk said. “And then people say, ‘well, you didn’t do that before.’ Yeah, well, we’re doing it now. I think we may have been a bit slower than other startups, but I don’t think we’ve really had anything fail.”

He concluded there are no plans to spin out any business, noting there’s no need to add complexity.

Daily Crunch: Quibi is shutting down

The end is in sight for Quibi, PayPal adds cryptocurrency support and Netflix tests a new promotional strategy. This is your Daily Crunch for October 21, 2020.

The big story: Quibi is shutting down

The much-hyped streaming video app led by Jeffrey Katzenberg and Meg Whitman, which raised nearly $2 billion in funding, is shutting down, according to reports in The Information and The Wall Street Journal.

Katzenberg, a longtime Hollywood executive, had blamed the coronavirus pandemic for a lackluster launch in May — an app designed for on-the-go viewing didn’t have much appeal when people were largely stuck at home. And whatever the reason, none of Quibi’s shows ever became a breakout hit.

Quibi executives confirmed the news in a post on Medium.

The tech giants

PayPal to let you buy and sell cryptocurrencies in the US — In partnership with Paxos, PayPal plans to support Bitcoin, Ethereum, Bitcoin Cash and Litecoin at first.

Facebook is working on Neighborhoods, a Nextdoor clone based on local groups — Facebook said that Neighborhoods currently is live only in Calgary, Canada.

Netflix to test free weekend-long access in India — The streaming service recently stopped offering a month of complimentary access to new users in the United States.

Startups, funding and venture capital

Syte, an e-commerce visual search platform, gets $30M Series C to expand in the US and Asia — Launched in 2015 to focus on visual search for clothing, Syte’s technology now covers other verticals, like jewelry and home decor.

June’s third-gen smart oven goes up for pre-order, starting at $599 — It’s been two years since the smart oven’s last major update.

Mine raises $9.5M to help people take control of their personal data — Mine scans users’ inboxes to help them understand who has access to their personal data.

Advice and analysis from Extra Crunch

Founders don’t need to be full-time to start raising venture capital — John Vrionis and Sarah Leary of Unusual Ventures told us that lightweight investing matters in the early days of a company.

Dear Sophie: What visa options exist for a grad co-founding a startup? — The latest edition of immigration lawyer Sophie Alcorn’s column answering immigration-related questions about working at tech companies.

Lessons from Datto’s IPO pricing and revenue multiple — How do you value slower, more profitable software growth?

(Reminder: Extra Crunch is our membership program, which aims to democratize information about startups. You can sign up here.)

Everything else

Sam’s Club will deploy autonomous floor-scrubbing robots in all of its US locations — Sam’s Club parent company Walmart is already using robotics to perform inventory in its own stores.

AOC’s Among Us stream topped 435,000 concurrent viewers — The purpose of the stream, which drew a massive crowd, was to get out the vote as we head into the general election.

Coalition for App Fairness, a group fighting for app store reforms, adds 20 new partners — The coalition claims that both Apple and Google engage in anti-competitive behavior.

The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 3pm Pacific, you can subscribe here.

4 quick bites and obituaries on Quibi (RIP 2020-2020)

In memory of the death of Quibi, here’s a quick sendoff from four of our writers who came together to discuss what we can learn from Quibi’s amazing, instantaneous, billions-of-dollars failure.

Lucas Matney looks at what the potential was for Quibi and how it missed the mark in media. Danny Crichton discusses why billions of dollars in VC funding isn’t enough in competitive markets like video. Anthony Ha discusses the crazy context of Quibi and our interview with the company earlier this year. And Brian Heater looks at why constraints are not benefits in new products.

Lucas Matney: A deadpool company before it was even launched

There will be dozens of post-mortems on Quibi, but the fact is there were dozens of post-mortems written about Quibi before it even launched. The whole idea was, to be kind, audacious, though it was also clear to most people that weren’t personal friends with founder Jeffrey Katzenberg that it was doomed from the start.

Quibi’s death is an important moment for streaming, largely because it’s a pretty strong rebuke of services trying to one-up the Netflix model by solely focusing on high-dollar original content. I think Quibi made several mistakes, but its most pertinent ones can be tied to a lack of flexibility in vision.

The startup insisted that all of its titles were mobile-only, high-production value and relying on Hollywood star power when they probably could have succeeded by keeping a closer eye on what kind of quick-bite content was succeeding elsewhere. Snap has seen success with Discover after years of attempts, and there is space for a dedicated player here, but Katzenberg tried to level-up by throwing checks at his friends and not doing the hard work of scouting out rising trendsetters in the creator world.

There are other lessons here that apply to other streaming new-comers like Apple. Namely that creating a hit TV show is hard and buying a hit TV series is easier if you already have the money. Quibi and Apple TV+ both launched with plenty of new series and no back libraries of beloved legacy content for users to spend time digging into. There’s just so much good stuff out there already. Apple has shifted strategy here, but Quibi boxed itself in and probably couldn’t afford to play here once its error was made clear.

Quibi showcases how the streaming wars’ upending of Hollywood has probably eclipsed reason at this point. Players like Apple don’t belong here, and there’s just too much money pouring into original content that loosely fits the Hollywood mold.

Netflix stock is down 7% today after earnings yesterday showcased slowing growth. With HBO Max, Disney+, Peacock and Apple TV+ all launching in the last 12 months, the streaming market’s cup runneth over. And while I don’t think a Quibi death spells the end for innovation here, I think that the market is ready for some 2021 consolidation.