Big Car-Auction Firm KAR Buys SF Mobility Support Startup Stratim

With an eye toward a greater role in the future of mobility services, the big Indiana used-car auction company KAR announced Wednesday it acquired Stratim, a software startup that organizes maintenance and repairs for car-sharing fleets.

Carmel, IN-based KAR (NYSE: KAR) says Stratim not only augments its core auction business, but also bolsters its advances into an automotive industry arena that could be dominated by self-driving cars, ride-hailing, and other on-demand car use rather than individual vehicle ownership.

KAR says it didn’t disclose the price it paid for San Francisco-based Stratim, which emerged from stealth mode in November, because the purchase wouldn’t affect the interests of its shareholders.

“The financial terms of the deal are below the material disclosure threshold for KAR, but we view this as a very meaningful investment in our mobility strategy,” KAR said in a statement shared with Xconomy by a company spokeswoman.

The acquisition delivers a quick exit for Stratim investors, who backed it in its original form as a consumer car valet app founded under the name Zirx in 2014, and saw it through a significant pivot in February of 2016. Renamed Stratim, the company abandoned the unprofitable valet app and repurposed its software to help on-demand car services to find, schedule, and pay for services such as repairs, gas fill-ups, and tire changes.

“Our investors are very pleased” by KAR’s acquisition, says Stratim founder and former CEO Sean Behr (pictured), who will now serve as president of Stratim as it continues to operate in San Francisco as a unit of KAR’s digital services group.

Stratim had raised a total of $36 million from investors including Bessemer Ventures, BMW iVentures, Norwest Venture Partners, and Trinity Ventures. The startup operates in 25 cities in North America, including San Francisco, New York, Austin, Los Angeles, and Chicago. The startup attracted customers such as Ford Smart Mobility unit Chariot and on-demand car rental company Maven, which was launched in 2016 by General Motors.

Behr’s reworked business strategy for Stratim was based on his belief that the profitability of any transportation business in the crowded mobility sector would hinge on securing quick, low-cost vehicle maintenance services to keep cars on the road, earning money. As fleets expand into the thousands, or even hundreds of thousands of cars, meeting that logistical challenge requires sophisticated software, he says.

“As urban fleets scale up, our technology will become more valuable,” Behr says.

Stratim’s acquisition arose from discussions with KAR about a working partnership, Behr says. The two companies realized they had customers in common as well as a shared vision of the automotive future.

The international KAR group of companies operates marketplaces aimed at streamlining the buying and selling of used vehicles in 110 countries. In its third quarter earnings report in October, KAR reported more than $2.5 billion in revenue for the nine months ending September 30, 2017.

The company, which has 17,500 employees, offers a dealer-to-dealer digital mobile auction app called TradeRev 4.0. It also provides services such as dent repair and detailing to prepare cars for auction, Behr says.

With the acquisition of Stratim, KAR can extend the reach of its services into the working lives of cars after they are sold into a fleet. Stratim, in turn, gains access to new customers through its position as a KAR unit, and adds KAR’s service operations to its stable of maintenance vendors, Behr says. All of his 36 employees will keep their jobs, and new positions will open up, he says.

In a statement announcing the acquisition, KAR’s CEO Jim Hallett said, “Stratim’s first-of-its-kind mobility management solution is already supporting the fleets of some of our commercial customers, and this is a natural extension of those relationships. We look forward to delivering integrated products and services through Stratim and fortifying our presence in the mobility space.”

Photo credit: Stratim

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