Nov 26, 2020 · 30m · top-founders
Shift Sells $200m Worth of Cars, Makes $30m, $225m Equity Raised, IPO Next?
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
Nathan Latka interviews Shift co-founder and co-CEO George Arison about the online used car marketplace's unit economics, 65% financing attach rate, and inventory turn strategy as the company scales past $200 million in revenue ahead of a planned IPO.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Nathan holds 28.5% of the talking time here. How this is scored →
Nathan as informed peer 4.8 Guest teaching 4.0 Guest disagreement 2.1 Nathan pushing back 3.6
speaking balance: gold is Nathan, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 24:35 Rejection of the GMV terminology claim
George firmly rejects Nathan's premise that Shift's car volume is merely GMV, asserting that GAAP accounting strictly requires reporting full vehicle value as gross revenue.
Hardest push from Nathan ▶ 15:37 Pressing on why Shift leaves lending margins on the tableNathan cuts into George's explanation to demand why Shift hands lending revenue over to third-party banks rather than raising debt to capture the spread directly.
Biggest teaching moment ▶ 17:47 Economics of securitization and captive lendingGeorge educates Nathan on why captive auto financing is cost-prohibitive until a platform reaches at least one billion dollars in sales and one hundred million in quarterly securitization.
Nathan holds their own ▶ 26:36 Deconstructing Shift's true margin and gross profitNathan cuts through the two hundred million top-line gross figure to calculate Shift's real gross margin profile of thirty million from metal spread plus fifteen million from warranties and financing.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Nathan as informed peer | Guest teaching | Guest disagreement | Nathan pushing back | Why |
|---|---|---|---|---|---|---|
| Previewing Shift's Pre-IPO Year and Growth Strategy | 3 | 2 | 1 | 1 | Nathan introduces the interview and uses a hypothetical 2009 Prius transaction to establish Shift's direct-to-consumer and pickup/delivery logistics. | |
| Vehicle Pricing Algorithms, Unit Margins, and Value Cohorts | 5 | 4 | 2 | 4 | Nathan presses on unit gross margins and asks why interest rate cuts wouldn't ease consumer lending, prompting George to explain credit risk and value-cohort economics. | |
| Historical Growth, 2020 Projections, and COVID-19 Operational Adjustments | 4 | 3 | 1 | 2 | Nathan calculates historical volume metrics while George outlines the operational reality of managing retail and tech workforces during initial pandemic shutdowns. | |
| Revenue Benchmarks, Used Car Market Fragmentation, and Carvana Parallels | 5 | 4 | 1 | 2 | Nathan calculates Shift's top-line car transaction volume, and George contextualizes their scale against Carvana's pre-IPO benchmark and overall market fragmentation. | |
| Consumer Financing Technology, Bank Partnerships, and Captive Lending Strategy | 6 | 6 | 4 | 6 | Nathan aggressively asks why Shift does not capture lending margins directly, prompting George to push back on the interruption and explain the high scale threshold required for captive lending securitization. | |
| Capital Structure, Inventory Turn Times, and Capital Raising in a Downturn | 6 | 5 | 2 | 5 | Nathan drills into capital raising timing and valuation multiples, while George details why auto retail multiples trade far below SaaS benchmarks. | |
| Revenue Accounting Breakdown, Gross Profit Realities, and IPO Milestones | 7 | 7 | 5 | 7 | Nathan challenges George for calling gross transaction volume revenue rather than GMV, prompting George to firmly correct him on GAAP auto retail accounting before Nathan calculates true gross profit. | |
| The Famous Five Rapid-Fire Questions with George Arison | 2 | 1 | 1 | 2 | Nathan runs through his standard Famous Five rapid-fire questions, probing George on hypothetical acquisition offers, sleep, and background. |
Statements from this episode (23)
Shift operates vehicle pickups in California and Oregon, shipping nationwide
“That's available in all of California and all of Oregon. And then if you want to buy a car, you have three ways to buy a car. You can either have a test drive be brought to you at your house or your office or you can come to our warehouse to look around, kind …”
Shift sees twice as much demand for sub-$12k used cars
“You would be surprised, but the twice as much demand is for the happens for those cars. That's where everything else even though they're older.”
Shift: Value Auto inventory represents 20% to 30% of sales
“And that was a pretty big part of our business is about 20 to 25 to 30% of our business.”
Used car demand will jump over the next two quarters
“So my hunch is that demand for used cars over the next couple of quarters is going to jump because of everything that's kind of going on.”
Arison: Shift sold 11,500 cars in 2019
“And if you could take our Cager in terms of volume, and we finished last year with 11,500 cars.”
Arison: Shift has served 60,000 lifetime buyers and sellers
“We've serviced about 60,000 customers in the life of the company on both the sell side and the buy side.”
Shift's average vehicle selling price ranges between $15,000 and $17,000
“Our average price ranges by time of year and kind of how we manage the inventory, but somewhere between 15 and 17,000 dollars.”
Carvana sold 17,000 cars and generated roughly $300M in 2016
“In 2016, they did about 17,000 cars. And about three hundred million in revenue.”
Shift's unit economics are much stronger than Carvana's were pre-IPO
“Our unit economics generally have been a lot stronger than theirs were prior to IPO.”
Arison: 45 million used cars worth $750B to be sold in US in 2020
“Forty-five million used cars are going to be sold in the U.S. This year. Yeah, it's about 750 billion dollars in used and another six hundred million in new.”
Top US car retailers hold less than 1% of the overall market
“The largest car seller that sells new, new and used sells about a million cars a year. I, AutoNation. So like, and then CarMax is a used car only seller, also does about seven and 50,000 used, right? So the largest players have like sub one percent of the mark…”
Captive auto lending requires $100M in quarterly securitization
“Until you're doing about a hundred million dollars of securitization every quarter, it's too expensive to do your own loans.”
Arison: Shift Will Launch Captive Lending by 2024 or 2025
“So eventually, you know, out in 20, 24, 25, we will do capital loans, but we just need to grow to be large enough before we can do that.”
Arison: Shift has raised $225M in equity and $75M in debt
“We raised about two hundred twenty five million in equity and seven family in debt.”
Shift's inventory turns over in 30 to 55 days
“It varies between low and fit, 30 days, high end, 55 days.”
Arison: Carvana averaged 120 days to sell inventory at IPO
“When they went public, I think it were at a 120 days.”
Arison: VC market will face a 60-to-90 day fundraising freeze
“I think in practice, there's going to be a bunker mentality out there for 60 to 90 days. And so nothing's going to happen.”
Arison: Companies should avoid captive lending in weak economies
“That's actually another reason not to be doing capital lending right now is because when the economy's weaker, you don't want to be doing your own loans because you just don't know what's going to happen.”
Arison: Shift Targets 60/40 Revenue Mix from Cars Versus Financing Products
“We are trying to probably trying to get to a place where 60% of our revenue comes from the cars and 40% comes from loans and warranties over the next 1824 months.”
Online auto retailers become IPO-ready at 15,000 cars sold annually
“I think what really matters is volume. Like once you're past 15,000 cars a year, I think it's credible to go out public. At least based on what I'm hearing from investors, right? I've spent a lot of time with public market investors, and that's kind of their g…”
Arison: Shift Made $10M to $15M in Loan and Warranty Revenue Last Year
“No, we made probably, like, 10, maybe fifteen million in loan and warranty last year.”
George Arison says he would pay $5,000 per year for LinkedIn
“Oh, I don't think I could function without LinkedIn. I say this a lot, actually, like, I don't know how people founded companies before LinkedIn existed, because I go to it, like, so often. Literally, you know, I pay, what, a thousand bucks for a year? If they…”