vAuto Founder Shares his Journey to Success With MBA Students

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For the past several years, one of the hallmarks of the Kelley Evening MBA program has been the opportunity that students have to hear business executives and successful alumni speak about their industries and careers. As part of the Enterprise Lecture Series, students are regularly exposed to leaders from all walks of the global economy.

Dale Pollak, the Kelley School of Business Poling Chair of Business and Government, was the latest guest of the highly-touted series, sharing the story of his entrepreneurial journey – a trek that began in the spring of 1980 after he graduated from the Kelley School of Business with a Bachelor of Science degree in business administration.

As chairman and founder of vAuto, Inc., Pollak today leads a company that boasts annual revenue of $150 million and nearly 7,000 customers. It’s a long way from his days selling used cars at his father’s Cadillac dealership in Elmhurst, Ill. Along the way, he has experienced the highest of highs and the lowest of lows, overcoming the pitfalls of losing his eyesight and being fired.

During his undergraduate days in Bloomington, Pollak was diagnosed with Stargardt Disease. The early onset macular degeneration left him with few viable career options after graduation, so he returned home and began working for his father.

“Those were really difficult times from an economy standpoint,” Pollak said. “Imagine a world with the prime interest rate being 21 percent, and then imagine trying to sell cars in that environment. Needless to say, it couldn’t have been a tougher time.”

Pollak took over the management of the used car inventory, but the introduction of desktop computers into the business environment in the 1990s quickly made him realize that he wasn’t made to be a car dealer. Pollak would sit in his office with an assistant for hours on end tinkering with the computer, all the while paying less and less attention to the responsibilities of the dealership.

“It was really the first sign that perhaps I was doing something I wasn’t meant to do,” Pollak said. “And I would give everyone this advice as early in their careers as possible: Be attune to how much you really enjoy and how much you really absorb the work that you’re doing.”

Pollak’s first break as a young entrepreneur came in 1997 when Digital Motorworks (DMI) sold him a kiosk to display his dealership’s new and used car inventory. A year later, the Chicago Tribune launched Cars.com and Pollak had the vision to use the DMI technology to move his inventory to the Internet.

The idea was a huge boon for Pollak. He cut himself into the middle of the deal between the Tribune and DMI, agreeing to a 20 percent take. When the Tribune and DMI inked a five-year deal worth $6 million, Pollak started getting monthly checks “that were larger than we might have made in that dealership in an entire year.”

With the launch of the successful partnership, Pollak convinced his father to sell the dealership. Pollak started negotiating deals with all of the major automobile manufacturers to put car inventory on the Internet. Money was flowing in, and for the first time in his life he discovered that work really isn’t work when you love what you’re doing.

In the early 2000s, ADP approached DMI about acquiring the business. As part of the deal, Pollak was offered a three-year contract to go work for the New Jersey-based company. His time there, though, would be short-lived. After a year of being part of senior executive meetings where he found himself criticizing one decision after another, Pollak was fired with two years left on his contract.

It was a devastating time for Pollak. He was in his mid-40s, married, had three young kids, and because of his blindness, no job prospects.

Tips for Success - Take inventory of your skills

Unemployed and wondering how he would support his family, Pollak started to take inventory of his skills and what he knew about the automotive industry. The way he saw it, three things were happening: 1) The Internet was changing the used car business; 2) Dealers had to price their inventory correctly, which meant purchasing them for the right price; 3) Those same dealers were still making gut decisions and weren’t attune to the true market value of their vehicles.

His time of reflection led him to develop a software tool called mPower Auto, which was designed to deliver real-time feedback to dealers who were purchasing used car inventory. The raw score related to the purchase would tell a manager if the car was “acquired on the money.” It also provided daily scores for the dealer’s entire used car inventory.

But selling the software wasn’t as easy as Pollak expected. Much of that had to do with his approach. In dealership after dealership he would walk in and tell management how they were doing it wrong, and in dealership after dealership he was quickly asked to leave. And fairly rudely, he says.

“I can remember the day after being thrown out of maybe the third dealership, calling my wife in tears and apologizing that I had made a terrible mistake,” Pollak said. “Nobody would buy this. As right as I thought it was, they just wouldn’t have any part of it.”

Tips for Success - How to tell someone you're wrong

With all of his money invested in the product, Pollak had no choice but to keep trying. After nearly two years of pounding the pavement, he eventually was able to sell the software to about 40 dealerships. “They became my oxygen,” he says. To his dismay, though, those dealers weren’t having sales success. Pollak discovered that while his clients were buying cars at the right price, they weren’t pricing them right for resale. The unearthing of that information led to another “aha” moment. He would develop software that gave dealers access to market information to help them price their vehicles correctly.

“The only problem was that I was out of money,” he said. “I had no money. I owed money! I didn’t have any access to capital, and yet I had to build this software in order to straighten this problem out.”

He decided to raise money through venture capital and caught the attention of Bain Capital. The $6 million he received allowed him to hire developers to take his vAuto software solution to market. Though he wasn’t ready to give up his mPower Auto business, he eventually followed the advice of his Bain advisors and reluctantly shuttered the company.

“A good venture capital partner should give you more than just money,” Pollak said. “They should also give you insight and expertise.”

As the vAuto venture started to take hold with dealers, it became apparent to Pollak that he didn’t have enough money to scale the marketing message to a nationwide audience. While considering a second round of venture capital funding, Pollak had a “fortunate stroke of luck” when he picked up a book by Michael Lewis called Moneyball.

The 2003 New York Times bestseller told the story of how Oakland Athletics general manager Billy Beane used sabermetrics to field a competitive team even though the franchise was at a competitive disadvantage in terms of operating revenue. The book spoke to Pollak, and despite being strongly discouraged by his Bain partners, he decided to write his first book.

“Some of the smartest guys in the world up there at Bain Capital said, ‘No Dale, that’s really not a very good idea. In fact, it’s a really dumb idea,’” Pollak said.

Tips for Success - Ideas: When to let go, when to pursue

Pollak released his first book, Velocity: From the Front Line to the Bottom Line, in January 2009 and it vent viral within the automotive community. A year later, vAuto had amassed a dealer network of more than 3,000 customers. Pollak hired a CEO to help manage the explosive growth and once again started to feel that same thrill he had during the early days of the DMI and Cars.com deal.

In October 2010 Pollak and his partners sold vAuto to AutoTrader.com for $230 million. Nearly five years later, Pollak and all of his original employees are still working for Cox Automotive, a subsidiary of Cox Enterprises, which includes AutoTrader.com, vAuto, and Kelley Blue Book. The vAuto client base has more than doubled since the sale, bringing in nearly $150 million in revenue annually.

And unlike his days at ADP, Pollak now enjoys working for someone else.

“If you’re true entrepreneur, the thrill of the money comes and goes,” Pollak said. “True happiness is not about money. True happiness is about being able to fulfill yourself with meaning. For me, and I think it’s the case with most entrepreneurs, that’s the ability to continue to create.”