From: myfirstmillionpod
Cars and Bids is an online auction platform specializing in enthusiast cars from the 1980s, 1990s, and early 2000s [00:01:16]. Founded by popular YouTube car reviewer Doug DeMuro, the company rapidly grew and was sold to The Churnin Group for approximately $40 million within two to three years of its launch [00:02:24].
Origin Story
Doug DeMuro, a journalist turned YouTuber with millions of subscribers [00:01:10], conceived the idea for Cars and Bids out of a personal concern about the longevity of content creation [00:30:00]. He believed that content creators needed to start businesses because audiences might eventually fade [00:30:05].
The opportunity arose when a viewer named Blake, who had a background in tech, emailed Doug and later met him in person [00:17:27]. After hearing about Blake’s experience selling a car on a competitor’s platform and recognizing its deficiencies, Doug proposed the idea for Cars and Bids [00:18:03]. Seed money from Blake’s company helped get the venture off the ground [00:18:07]. Doug secured a substantial majority ownership because he brought the crucial audience to the partnership [00:18:41].
Business Model and Early Growth
Cars and Bids operates as an auction site for cars [00:01:16]. Its primary business model involves sellers paying nothing, while buyers pay a 4.5% fee on the purchase price [00:20:35]. Additional revenue streams include a shipping component and inspection services, which have been shown to increase bids and sale prices [00:20:41]. Doug’s YouTube channel content revenue is also now integrated into the business [00:21:03].
The platform launched in June 2020 during the COVID-19 pandemic, with operations initially managed from Doug’s back patio [00:22:10]. To incentivize early sellers, Cars and Bids offered 500 for the next 50 [00:20:00]. This strategy generated immense immediate interest, leading to a thousand submissions on the first day, creating “absolute chaos” and unexpected success [00:21:54]. Doug personally approved or denied all initial car submissions [00:19:37]. The company quickly became profitable [00:18:17], achieving $75 million in gross sales in 2021 [00:21:12].
Competitive Landscape
Cars and Bids entered a market with an established player, Bring a Trailer, which was significantly larger [00:15:10]. Doug and his partner recognized some dissatisfaction with Bring a Trailer, noting its massive size led to longer listing times and functional issues with its WordPress-based platform [00:15:42]. Their strategy was to offer a modern website focused on a more modern audience (cars from the 1980s and up) [00:16:01].
Many other auction sites launched and failed to compete, largely due to a lack of audience [00:18:53]. The success of Cars and Bids highlighted the crucial role of a pre-existing audience in building and selling successful companies [00:19:11].
Acquisition by The Churnin Group
The company attracted numerous inquiries from private equity and venture capital firms, especially as the car market boomed and Bring a Trailer was acquired by Hearst [00:23:46]. Cars and Bids initially ignored these offers, feeling too small [00:24:06]. However, The Churnin Group was persistent and gained an introduction through a mutual friend [00:24:16].
A key factor in the deal was The Churnin Group’s specialization in “creator-led businesses” [00:24:30]. This understanding alleviated Doug’s fear that investors would interfere with his YouTube content [00:24:37]. The negotiation process, which took six to eight months [00:28:11], led to The Churnin Group acquiring a majority stake for approximately $40 million [00:02:24].
Doug took some money off the table, allowing him to purchase his dream car, a Carrera GT [00:25:24]. He noted that having financial security has made him more relaxed and enables better decision-making for the business [00:25:37].
Future Outlook
Doug believes there is a clear pathway for Cars and Bids to reach a valuation of $500 million or more, drawing parallels to Bring a Trailer’s growth [00:50:56]. He highlights that online auction sites for cars provide significant value by amplifying sellers’ reach and offering buyers a broader selection than traditional methods [00:51:24]. The market for online car sales is growing, and these platforms are becoming the “new way” to buy and sell vehicles [00:51:45].
Creator-Led Businesses
Doug emphasizes the importance of content creators building and selling successful companies and brands, advising his peers to leverage their audiences while they last [00:30:19]. He notes that while some creators may find it challenging to add a business venture to their already busy schedules, it is essential for long-term sustainability [00:30:40].
The model of private equity investing in creator-led businesses like Cars and Bids is seen as “crazy” by Doug due to the inherent risk of the creator’s personality being central to the business [00:27:53]. However, he acknowledges that such investments provide benefits, such as reduced marketing costs due to the built-in audience [00:29:00].