What a coup for Redfin! The founder and former CEO of CarMax, Austin Ligon, joined Redfin’s board of directors this week, and also made a small investment in the company. The note we sent out Monday night to everyone here at Redfin captures some of our excitement at Austin’s arrival:
The big news this week is that Austin Ligon, founder and former CEO of CarMax, is joining our board of directors! The board’s role is to ensure the management team makes money for shareholders over the short term and long term. The board meets quarterly to see whether we’re making money, and to go over any big initiatives we have planned.
A board usually consists of major shareholders and one or two folks known as outsiders, who have extensive operating experience but a very small stake in the company. Until now, the board has consisted of venture capitalists from firms like Madrona, Vulcan, DFJ and Greylock. I’m also on the board.
Austin is an ideal outside board member. CarMax, which opened its first store this week in 1993, is in many ways the Redfin of used cars, building trust with consumers by being honest and open with information in an industry that people haven’t always trusted. Like Redfin, CarMax is complicated, with huge analytical and online components, and operations spanning many locations.
Austin helped build CarMax into a company with $7.5 billion in 2006 sales, and retired a few years ago. He’s participating in Tuesday’s all-day board meeting. The board will join the Seattle employees for lunch, so if you have any questions, grab a chair next to Austin and fire away.
What does this mean for Redfin? Well, it’s a big vote of confidence in our business that someone of Austin’s caliber wants to get involved. Beyond that, Austin should help us figure out some tricky issues around managing a field organization, building a consumer brand and scaling a business. And he is a firm advocate of taking a long-term view and building a customer-driven business, both consistent with our values.
If you want to read more about Austin’s perspective, check out his presentation to Redfin when he visited our Seattle office this summer. We’ll announce the news publicly this week or maybe next!
The morning after we sent this note, we had our first board meeting with Austin; his insights were even better than we expected. Over the course of the day, it became clear just how relevant Austin’s experience is to Redfin — it was almost as if he were genetically engineered to be able to help us — and how much inspiration we can take from CarMax’s success. Here are some of the similarities between Redfin and CarMax that Redfin’s management team was talking about long after the meeting was over:
- CarMax focused first on building consumer trust, in an industry where consumers were skeptical, and no brand was well-trusted.
- CarMax pays its field organization to do the right thing, not just sell cars at any cost.
- CarMax is unapologetic about offering low, no-haggle pricing. The industry in which it operates has been unapologetic about trying to maximize per-transaction profit, and hostile to the ideas of value or efficiency.
- CarMax believes that only way you can disrupt an industry is by being better and cheaper, not just one or the other.
- CarMax grew slowly, market by market, perfecting the customer experience before expanding.
- CarMax builds competitive advantage by gathering data about inventory, customers & operations that individual dealerships can’t match.
- CarMax accumulated operational expertise in a complex business that eventually created barriers to entry so deep that the company now has virtually no competition.
- CarMax’s first contact with customers is online, in an industry where the in-person salesman had been king.
- CarMax’s online competitors are lead-referral sites, which send customers to dealers of varying quality, operating in a broken system.
- CarMax has always focused on the long-term, limiting its initial appeal to investors, but maximizing return on invested capital over time.
- CarMax built a culture of respect for its employees, despite competing in a dog-eat-dog industry. For the sixth consecutive year, Fortune just chose CarMax as a Top 100 company to work for. No auto dealer or manufacturer has ever made the list.
- CarMax lobbied Congress to override anti-competitive state laws, and failed.
The only argument I’ve gotten in with Austin so far is whether the largest class of American state legislators consists of car dealers or real estate folks. Welcome Austin. We’re glad to have you aboard!