Shortly after the first Model Ts rolled off the Ford assembly lines in 1908, the first auto repair shops began to open. Over a hundred years later, most of these shops are still run the same way, depending on pencil and paper, or at best, outdated software from the 1990s, predominantly sold by Mitchell1 and a host of other legacy companies. The automotive repair and maintenance services vertical is predicted to grow to over $800 billion by 2026, and shops are struggling to operate on this legacy software stack.
The automotive repair and maintenance services vertical is predicted to grow to over $800 billion by 2026.
As with other large verticals, customers increasingly demand a more modern tech-enabled experience interacting with auto shops, including mobile interfaces, text communications, and integrated payment options. Similarly, the mechanics themselves and shops they operate, desperately need a more straightforward and more effective way to manage their daily workflows.
As the cloud’s power rolls through and revitalizes the auto repair industry, we’re excited to announce that Bessemer is leading Shopmonkey’s $25 million Series B financing. This capital will help accelerate an all-star team in fulfilling their vision of delivering the platform shop owners and their customers expect and deserve.
The opportunity of Shopmonkey
As an avid motorsports enthusiast, who experienced first-hand the challenges auto repair shops struggle with daily, CEO Ashot Iskandarian founded Shopmonkey in 2016. His vision is to enable the 230,000+ auto repair shops in the U.S. to run more efficiently while delivering better service, powered by an easy-to-use platform that can handle everything from the most rudimentary to the most critical tasks for shop owners. By using Shopmonkey, shop owners can easily manage their order workflow, inventory, customer communications, and invoices and collect payments while seamlessly integrating with QuickBooks.
Shopmonkey is gaining traction at a time when Millennials are taking the reigns of businesses; as the average mechanic in the US was born around 1980, Shopmonkey possesses the once in a generation opportunity to revolutionize an entire industry through software.
In getting to know the company, Ashot and his team are a focused, skilled, and an inspired set of leaders and operators, who have a clear vision for the automotive repair industry when it’s a growing sector of the cloud-first economy.
The massive second wave of vertical software
For years, industry and vertical software were viewed as small and sleepy markets. But with the rise and successful exits of companies such as Veeva (2013), Shopify (2015), MINDBODY (2015), and more, the vertical software market is beginning to reveal its true potential. The entire vertical software industry’s market capitalization stood at just $50 billion in 2010 but has ballooned well past $600 billion today, amounting to a 12x increase in less than ten years. And we believe 2020 is just the beginning of vertical software’s second wave.
Vertical software founders have the ample opportunity to sell more than just software, which is a driving motivation behind our investment in Shopmonkey.
For example, layering on a tightly integrated payment processing product has proven to be a significant driver of value for many of our companies. Shopify, which stands at over $120 billion in market capitalization, generates more than 57% of its revenue from its payments product. Toast, the restaurant POS, earns over half of its revenue from payments as well.
Once vertical software companies earn their customers’ trust, they are in a unique position to serve them on a deeper level and explore other monetization opportunities along with a broad range of financial, people management, and operational products.
Innovative cloud startups build the enabling infrastructure, which allows vertical software providers to become the one-stop-shop for all business needs.
As Shopmonkey continues to add more product modules like the ones referenced above, the company will become the core operating system for auto repair shops, allowing mechanics and shop owners to focus on their expertise and offload rote operational details. Plus, auto repair businesses powered by Shopmonkey will see a dramatic improvement in digital customer service, from scheduling appointments, transparently reviewing quotes, communicating via text, and paying, all with a few taps on a mobile device.
With a history of investing in category-defining companies, we, at Bessemer, are confident that Shopmonkey is poised to modernize the auto repair industry and usher these businesses into the cloud-first world.