He Wanted to Reward His Hard-Working Employees. So He Took His Company Public for $3.5 Billion
CarGurus founder Langley Steinert had no intention of ever going public. But a compelling interest changed his mind: his employees.
CREDIT: Tony Luong
Langley Steinert, a co-founder of TripAdvisor, is taking a different route with CarGurus, which ses proprietary algorithms to better match car buyers with car dealers. Following last year's IPO, the Boston area-based company is valued at more than $3.5 billion.
You made a successful exit at TripAdvisor. What did you envision when you started CarGurus?
When I sold TripAdvisor, I wanted to start another company, but I wanted to start with a few investors I knew. So there were no VCs; there was no institutional money. It was essentially me, my partner from TripAdvisor, and a couple of friends and family. We raised $4.5 million--from a handful of people, really. The idea was to build a big, profitable business and just dividend the money to everyone, and that'll be great. In many ways, thankfully, this became bigger than I'd envisioned.
What went "wrong"?
I was being a little naive to think I could just dividend the money to the shareholders, because there's this thing called employees--they don't like working for monarchs. To attract great employees, you have to give them equity. And once you start giving people equity, you have to provide a liquidity path for them.
What's the idea behind CarGurus?
At CarGurus, the original idea was to create the TripAdvisor of cars, a site where people could read reviews from other users about their experience with car XYZ. So we allowed user reviews, and we actually had a wiki model where people could edit articles about certain cars. And at the end of it all, it didn't work. I mean, we had some traffic, not a lot of traffic. We weren't generating much revenue, and we certainly weren't, at least by my measurements, gonna be able to build anything of any substance. So I think we were about a year and a half into it, and I huddled with the six developers we had at that point and said, "Guys, this isn't working. We've gotta try something else."
CREDIT: Tony Luong
How were you able to chuck the business plan yet stay solvent?
At both TripAdvisor and CarGurus, we kept our burn rate low, so we had the luxury to change course and the cash to survive it. I always tell people, "Keep your burn rate low." Be flexible with your business plan, because there's a very high probability your original plan is not gonna work. We looked at Kayak and said, "Well, they're doing flight search. And they're doing this thing where it helps people find the best deals for flights. Why don't we try that for cars?" That's how it all took off.
At what point did you decide on an IPO?
I did very well financially when we sold TripAdvisor, so if it had been solely my decision, CarGurus probably wouldn't have gone public. I went to the board and said, "I'm willing to do this for the sake of the employees, but there are a couple of conditions." We did put a dual class voting structure in place. So, for the foreseeable future, I have and will maintain the majority voting protocol so we can think long term. And I coached everyone in the company to pretty much ignore the stock price. I don't care about the stock price. What I care about is, what does the company look like in 2020?