Mar 18, 2020 · 29m · top-founders
1698 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
Shift co-founder George Arison discusses the company's digital used car marketplace, detailing its unit economics, contactless fulfillment logistics, algorithmic pricing, and strategic positioning ahead of an initial public offering.
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 27.1% of the talking time here. How this is scored →
Nathan as informed peer 5.4 Guest teaching 4.0 Guest disagreement 2.4 Nathan pushing back 3.9
speaking balance: gold is Nathan, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 23:29 Rejection of GMV framing
George directly dismisses Nathan's assertion that vehicle transaction value is merely GMV, explaining that GAAP accounting requires full car value recognition as gross revenue.
Hardest push from Nathan ▶ 14:37 Pressing on third-party financing referralNathan interrupts George to demand why Shift doesn't raise balance sheet debt and capture the full financing spread directly instead of passing referral fees to banks.
Biggest teaching moment ▶ 23:35 GAAP auto accounting lessonGeorge educates Nathan on why GMV does not exist in dealership accounting and how inventory-owning auto retailers account for full metal value plus ancillary fees.
Nathan holds their own ▶ 25:19 Nathan reconstructs Shift's actual gross profit breakdownNathan synthesizes Shift's pricing and take-rate metrics to separate the $30M margin on metal from the $15M in warranty and loan fees to evaluate true IPO readiness.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Nathan as informed peer | Guest teaching | Guest disagreement | Nathan pushing back | Why |
|---|---|---|---|---|---|---|
| Shift's Core Marketplace Model and Vehicle Logistics | 4 | 3 | 1 | 2 | Nathan guides the conversation through a practical roleplay to unpack Shift's end-to-end buying, pricing, and test-drive logistics. George provides clear, structured answers explaining how Shift operates across California and Oregon. The exchange remains collaborative and informative. | |
| Algorithmic Pricing Strategy and Value Auto Cohorts | 5 | 5 | 2 | 4 | Nathan drills into unit economics and margin optimization on vehicle sales. George explains the counterintuitive economics of the Value Auto cohort and reconditions, and counters Nathan's assumption that zero Fed rates automatically make consumer lending easier during a recession. | |
| Historical Sales Trajectory and Navigating Pandemic Disruption | 6 | 2 | 1 | 2 | Nathan performs rapid mental math to extrapolate historical volume and annualized top-line vehicle sales near $200 million. George explains the operational realities of retail logistics during emerging COVID lockdowns. | |
| Used Auto Industry Fragmentation and Carvana Comparison | 6 | 6 | 4 | 6 | Nathan aggressively pushes George on why Shift leaves money on the table by passing auto loans to third-party banks instead of taking on debt to lend internally. George asks Nathan to let him finish and educates him on the quarterly securitization volume threshold required before internal lending becomes viable. | |
| Inventory Velocity, Fundraising Plans, and Market Volatility | 6 | 4 | 3 | 5 | Nathan questions Shift's capital structure and asks whether revenue multiples should be viewed through a software lens. George differentiates auto retail multiples from SaaS and elaborates on inventory holding periods. | |
| Revenue Recognition Standards and Public Market Readiness | 7 | 7 | 5 | 6 | Nathan directly challenges George's revenue figure, arguing that gross car sales are essentially GMV rather than genuine revenue. George directly corrects him on GAAP revenue recognition standards for dealership inventory, prompting Nathan to recalculate the business model down to gross profit. | |
| The Famous Five Rapid Fire and Concluding Thoughts | 4 | 1 | 1 | 2 | Nathan conducts his standard rapid-fire Famous Five questionnaire, briefly teasing George about Amazon competition and buyout pricing before summarizing Shift's metrics in the outro. |
Statements from this episode (17)
Arison: Shift sees twice the demand for sub-$12k cars
“And we have a segment in our business that we call Value Auto. So these are cars that are below 12,000 dollars in price and over 80,000 miles on them. They're actually very, very popular. You would be surprised, but the twice as much demand is for the happens …”
Arison: Value Auto makes up 25% to 30% of Shift's business
“Now it's a pretty big part of our business. It's about 20 to 25 to 30% of our business.”
Arison: Used car demand will jump as consumers avoid rideshare
“And my guess is that people are also going to try to avoid transportation and avoid ride sharing, right? 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 grew 30% to 50% annually, sold 11,500 cars in 2019
“Overall we've grown roughly 30 to 50% every year we've been around. And if you could take our Cager in terms of volume, and we finished last year with 11,500 cars.”
Carvana sold 17,000 cars and generated $300M the year before IPO
“Carvana, which is a public company, they've been public for about three years now. They got started out of a larger dealership chain, kind of as a digital play. So they went public in 2017. In 2016, they did about 17,000 cars. And about three hundred million i…”
Shift targets a potential 2021 IPO based on revenue projections
“Because if we do the revenue and the volume that we're projecting, we'd be in fairly good shape to go public next year. Now, again, who knows what happens and things might get delayed and change and whatnot.”
Arison: Shift's pre-IPO unit economics are much stronger than Carvana's were
“Our unit economics generally have been a lot stronger than theirs were prior to IPO.”
Arison: 45 million used cars worth $750B will sell in US in 2020
“Forty-five million used cars are going to be sold in the US this year. Yeah, it's about 750 billion dollars in used and another six hundred million in new.”
Arison: Largest US auto retailers hold sub-1% total market share
“So the largest car seller that sells new, new and used sells about a million cars a year. 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…”
Arison: 65% of Shift buyers finance versus 80% at traditional dealerships
“Yeah, so we, 65% do financing, but that's actually low compared to a traditional dealer. Ok. A traditional dealer, that number's closer to 80%.”
Arison: Captive auto lending requires $100M in quarterly securitizations to be viable
“But what you learn over time is that until you're doing about a hundred million dollars of securitization every quarter it's too expensive to do your own loans.”
Arison: Shift's car inventory turnaround takes 30 to 55 days
“It varies between low and fit, 30 days, high end, 55 days. It depends on the type of inventory we're dealing with. More expensive cars take longer to sell.”
Arison: Carvana held inventory for 120 days at IPO
“I don't know what Carvana's read right now, but when they went public, I think it were at a 120 days. It was definitely, definitely shorter than their IPO”
Arison: Market will see 60-to-90-day fundraising freeze from COVID
“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. And I think we all need to bunker down and kind of get ready for that.”
Shift targets 40% revenue from financing and warranties in 2 years
“But I think, like, 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.”
Arison: Online Auto Retailers Can Credibly IPO at 15,000 Annual Car Sales
“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…”