For our 20th episode of Full Throttle, we are joined by Chase Fraser, Managing Partner at Fraser McCombs Capital. Topics of discussion include Chase's history with Red McCombs, pattern recognition, Fraser McCombs' fourth fundraise, and more. Subscribe and don't miss our upcoming automotive industry interviews!
0:00 Intro
3:05 Chase's History with Red McCombs
7:19 The Previous 3 Funds
11:55 Pattern Recognition
15:04 Why Dealer Technology
Check out The Presidio Group on Linked In - https://www.linkedin.com/company/the-presidio-group-llc/
And The Presidio Group's Website - https://thepresidiogroup.com
For our 20th episode of Full Throttle, we are joined by Chase Fraser, Managing Partner at Fraser McCombs Capital. Topics of discussion include Chase's history with Red McCombs, pattern recognition, Fraser McCombs' fourth fundraise, and more. Subscribe and don't miss our upcoming automotive industry interviews!
0:00 Intro
3:05 Chase's History with Red McCombs
7:19 The Previous 3 Funds
11:55 Pattern Recognition
15:04 Why Dealer Technology
Check out The Presidio Group on Linked In - https://www.linkedin.com/company/the-presidio-group-llc/
And The Presidio Group's Website - https://thepresidiogroup.com
Welcome to the 20th and final episode of season one of Full Throttle, the Presidio Group's automotive industry podcast. I'm your host, Jason Stein Presidio's Managing Director. On a regular basis full throttle serves as the industry's meeting point for great conversations with leaders across the automotive world.
You had websites and dealers had websites, and they were just so wowed by this thing that was people were going to shop on online. And so you had this whole proliferation of website companies. And then all of a sudden, you had leads from these websites, and you had to find a way to manage the leads. And dealers weren't good at that. And then a lot of cases are still not good. So you had lead management systems that were created. Alright. And maybe this is controversial. I actually think there's a bit of a renaissance going on right now with DMS.
The world of venture capital is a fascinating place, especially at this time in the industry. Technology is moving into auto retail at a blinding pace. Dealer valuations are changing quickly. The market is changing at an even quicker clip. So how does someone who is around deals all the time evaluate deals? How do you evaluate it when your inboxes jam daily with prospects for the next big thing? And there are 1000 Next big things every year. Today we hear from someone who has become a surgeon when it comes to analyzing deals, and looking at technology and picking winners and losers even if sometimes, he doesn't bat 1000 Chase Fraser's history is as interesting as his present day. Born and entrepreneur and raised at the right hand of Red McCombs, Chase has seen more than his share of twists and turns and ups and downs. He got into venture capital, when few if any, were considering it in automotive. What he has seen since in just the last 15 years has been dizzying, to say the least, with a lot of talk focus around startups and VC money and opportunity, who better than to talk about the space than Chase? He's the insider's Insider. Today we get a glimpse. So what has he learned from the 1000s of deals that he said no to? What about the ones where he said yes. And where is Chase placing his bets with dealers in the future. Today, we talk pattern recognition, getting married, and a fourth fundraise, all in one JAM PACKED episode of Full Throttle.
Hello, I'm Chase Fraser and this is Presidio's Full Throttle Podcast.
What a pleasure to have Chase Fraser on the program, we've been in similar rooms together. I know that he has, he has been an enormous supporter of everything that has gone on within the Presidio group. And it's just great to see you again. It's great to have you on, welcome in.
Great to be here. This is going to be fun. Thanks for having me.
It will be fun because of your history and where you are today. So let's start with the history because some may not know your rich history with a fellow named Red McCombs, tell me a little bit about that and everybody listening, of course, knows who Red is, but share.
Yeah, I'm gonna, I'm gonna go back in time a little bit right before I met Red because it makes sense to this story. So I was a was an entrepreneur in the space in the automotive space. And it was kind of I called myself a quiet company in the sense that we didn't have the big booth at NADA and the way we sold was through resellers. And so we ended up having a good good business we've had we had an exit, but in that process, I met Red and read Red at that point was probably in his late 80s. And he loved technology. And so I have this meeting with him. And he says, Hey, I really like your business. I'd like to buy your business. And I'm kind of thinking, Whoa, okay, no, but I want to get to know you
right
And so through these, through these conversations, I'd meet with Red. And I didn't know if it was going to be literally three minutes or three hours. Because when you sit down with Red, it was kind of like sitting down with the King and His Kingdom, right? Like, he was the guy. I mean, at one point, Red had 76 stores like he was a big, big dealer people people forget how big he was it at one point. And so this relationship with Red blossomed, and I get this idea after I sell my company, I get this idea to get into venture capital, because there weren't a lot of people doing venture in automotive. In fact, that was nobody doing it.
This is around what timeframe?
That was? So I sold my company in 98. And so this would have been, no, I'm sorry, I've sold my company in 08, 08 09. And so this would have been right after that.
Okay.
And so I go have this meeting with Red. And I say, hey, he was my first call on the fund. So I'm like Red's gonna love this, he's going to invest in the fund. And I have this meeting. He's like, Yeah, this is a good idea. I leave and one of his people he's got, you know, he had lots of people, it was Tony Remise. Guys on this phone, know who Tony Remise is great, great friend. And one of one of my favorite folks in the industry. Tony called me and he goes, Hey, Red, wants to invest but he wants to be your 50/50 Partner. And that was, my brain, I was like, what? And I hung up the phone, I said, You know what, I'm crazy not to have Rad as my 50/50 partner. So I gave Red half of what I was building, this kind of there on the spot. And kind of the rest was history. And so when you look at the name, we're FM Capital. It's Fraser McCombs. Capital is what it was originally. And we just changed the name in the last three years to FM Capital.
Yeah. Would you learn from him?
Yeah, you know, I, I'd sit down and have these meetings. And he was so optimistic, like all the time. And even when he would have failures, he was just still incredibly optimistic. He always believed. He talked about winning, right? And he always believed he was going to win. He told me once that he was involved in 400 different businesses. And I'm not talking about rooftops counting into that number, 400 businesses. So he was very much a deal junkie. But he loved the process, and he loved people. And that was the other thing, you'd sit down with him. And everyone was important to Red. Like he had your I mean, I was a nobody. And I'm still a nobody. And I'd sit down with Red and he'd focus on you and he just give you complete and total attention. And it was it was phenomenal.
Yeah. You have taken what is now FMC into a whole new level. And we'll get into the fourth fund here, but let's talk about the previous three. How much capital Have you raised to date?
Yeah, so on those three funds, 300 million.
Yeah, amazing. Congratulations.
Thank you. Thank you and what's what's the Interesting to a lot of the people listening is most of that money has come from the industry. In fact, the vast majority, it's we've got dozens of dealers, big dealer groups, OEMs, tier one suppliers, tech suppliers, vehicle distributors, kind of that ecosystem. And we were really specific, we wanted people in that room that could help us make better decisions. And there's been so many times where I've been in love with a deal, I've taken it to that group. And they've been like, that's not going to work for these reasons, because they know something that I just don't know. And so the group has been really, really important, what I what I see as our success.
What have you learned from the entrepreneurs that you've been surrounded by?
I love tenacity, it's part of the reason I do this, it's two things. My favorite thing about the entrepreneur is just seeing their dream, you talk to them, and you feel that energy, and you fall in love with them in some ways. And bluntly that was my problem in the beginning, I would, I would fall in love with the idea and the entrepreneur. And I've had to become a little hardened, actually, over a 12 year period.
What and you must have had so many deals too, right? I mean, the
771 deals last year,
last year, and you pick how many?
I will do four, five deals a year.
So how do you not fall in love with the 768 others?
It's really hard? Well, you know, it's FOMO, this whole Fear Of Missing Out just that's where as a VC, we're going to miss a couple of deals, right? And that's very hard. It's just the nature of of my industry. But I still fall in love with these guys. Like I because it's it's the creation, it's beautiful to see it. In my mind. It's kind of the bedrock of what America is. All these big tech companies that are that are owning the the the s&p right now they were all little tiny companies at some point, some some guy or gal with a dream, man, is that cool? I literally think what else would I be doing in my career right now? I wouldn't. I don't know what it would be. I mean, this is just, it's just too fun. It's it's too fun being around entrepreneurs.
How many companies have you funded?
Oh, in total? 60 plus.
Okay. And out of I mean, 1000s?
1000s Literally, our CRM is just filled with companies.
And have you honed the skill of narrowing the funnel? Describe to me the funnel process.
Yeah, so we've got a team of three that take the first look. So this is just general kind of a general numbers, about a third of that 770, are just deals that aren't gonna even make it to the second cut, it just, you can just tell from looking at them they're not going to get there. The other two thirds, the team digs in, and they have the call, they may go look in a data room and spend some time trying to understand what's going on with the company. And then the way our process works is we have a weekly call where those three people present to us about five companies a week, five, you know, four to seven call it. And they create a it's just one PowerPoint slide with a lot of information on it. And they essentially pitch us, which is pretty powerful. Because we can teach our folks to pitch us it means they understand the business pretty thoroughly. Right? And so we always though in that meeting, go okay, got it, interesting, go back and find out a little bit more about this one thing, this this other thing, this thing. So they've always got homework. And then after the homework, they come back and we turn it over to a partner. So that's a lot of details for you, but that's how our process works internally. And then the partner runs with the deal to the place where we decide whether we're going to invest or not.
Tell me that moment, Chase, when you're listening to one of the 1000s and your team has boiled it down, and they're doing the PowerPoint. And you go whoa, we got it.
Yeah, one of the things that's happened that I didn't know was was going to happen is just and I guess it's obviously the way the human brain works is pattern recognition. I see so many deals that you know quick. In 10 minutes into it is just icing on the cake. I kind of know in 30 seconds. Generally. I generally know what I got in 30 seconds, because of seeing a lot of deals, and it's actually it's a challenge when we hire new people, because we've got to teach them pattern recognition. And it doesn't it, you can't teach it. You can only learn it through the school of hard knocks, you've got to do it. And so every time we bring somebody else new, and we've got an employee right now, that's been here for a year plus it. She's great. And she's still learning, pattern recognition.
Wow. Pattern Recognition over time. And all of the all the failures, right? I mean, the mistakes make you where you are right now it's the shots you miss.
Yeah, we've we've got is a little biblical and kind of funny, and but you know, the 10 commandments, we've now got our 14 commandments. So every time we make what we consider to be a big mistake, we add it to our list. And in the early days, it was less than 10. And now we've exceeded the commandments. But it's important for us to know, you know, hey, don't do this again.
We got to learn. Like what?
Yeah, I've just a very random one, we don't do well, when their spouse is working in the same business. Where you've got, the guy's a CEO, and his wife is something there ends up being this really interesting, and it's never worked honestly, relationship, where I think they don't ever get a break. I think they go home, and they talk about it. And it's 24/7. And it becomes overwhelming, and it just doesn't work. So we don't tell our entrepreneurs up front that, okay, your husband, wife, team, now or
Word to the wise, if you've got a great idea, don't get married?
Or don't tell me
Or don't tell you, right. She's involved, but you'll never know. Or he's involved. Well, that's fascinating. That's a mix of just human behavior in the confluence of great ideas
It is and because this is their baby, going back to the creative process. They take it so serious, this isn't, like they just love this thing. And it becomes a part of them. They psychologically tie themselves to this startup success or failure.
It's it's great.
Wow, dealer technology.
Yeah.
Why?
Yeah, you know, you've been doing this, you've been walking around the NADA floors, as long as I have and you've seen the cycles. This is an exciting time. I mean, I really feel like we're at kind of the next renaissance of new tech. So like, help me think through this, because you've been there with me, you had, you had the websites and dealers had websites, and they were just so wowed by this thing that was people were going to shop on online and so you had this whole proliferation of website companies. And then all of a sudden, you had leads from these websites, and you had to find a way to manage the leads. And dealers weren't good at that. And then a lot of cases are still not good. So you had lead management systems that were created, right? And then all of a sudden, Salesforce and Siebel create CRMs outside of the industry, and the really good entrepreneurs in our space, which they're phenomenal, great sales guys in our space, right? They're like, whoa, we need to do that. But we need to build something that's purpose built for automotive. So there were 10 15 of those guys that just sprouted up over a three year period for CRM. Think about what what Dealertrack did what Mark O'Neil did with with with finance and the ability to kind of lending tree finance. So I think that was a big, big deal in our space. And Mark O'Neal's phenomenal. And I I'm maybe this is controversial. I actually think there's a bit of a renaissance going on right now with DMS. We're an investor in Tachyon. So I'm biased. But I'm super close with Cox and Reynolds and CDK. All those guys are great, great buddies. All ships rise. I think everybody's a little better. And it's because I think Tachyon raised the bar of
It the competition, isn't it?
Yeah. And it's healthy.
Yeah.
Maybe dealers are listening right now going, oh, there's no Renaissance. It's gonna get better. I really believe over the next five years, you're just going to see better products out of all of them.
What do you think about when you consider investing in dealer technology? What are you looking for?
We like traction. So we'd like for a guy to have 100 plus stores. So that guy or gal right. So that's important because it's one to have an idea it's two for dealers to be using it. We really like I told you, we have dozens of dealers that are investors, we really like for our dealers to be using it our investors. And so let's we're looking at a deal right now just to get into the weeds called Even Flow. And even flow is a way to do dynamic pricing in fixed ops, so they've been doing dynamic pricing in the airline industry for decades, prices change, you think about a service department. Yet, it ebbs and flows, super busy from 7:30 to 10:30, super busy at lunch, super busy at the end of the day, but you have these lull periods. So what if you could overlay pricing that said, hey, it's gonna be more expensive at the busy times, it's gonna be less expensive, in the less busy times to try to even that out a little bit. We have not invested. But I'm giving you that as an example, as I'm testing that at a few stores, or I'm introducing that to some of my LPs, because I want them to give me really, really good feedback. And they're gonna, they'll come back to us and say, Hey, this works or it doesn't work.
And that's an important point you some of your LPs, you mentioned, there's a strategy for investing for dealers, that it's not just strategically investing, but it's commercially investing. And it's being vested, if you will, in the product. That's critical, isn't it? Chase?
Yeah, dealers, dealers are such good entrepreneurs, that it's, I don't know that they would say this, I'll say it because I know they think it, it makes them a little crazy that they've spent so much money with all these vendors who went off and had exits. And they look at it and go, Okay, I was writing that guy of $500,000 Check a year across all my stores. And he just went and sold the CD CDK for 75 million bucks. So they look at me and they go, I want to be part of that. And I want to I want to have ownership in that company that just sold the to CDK. And so it's this really nice marriage, they get to be part of it. And they get to help me make better, better, better decisions.
Yeah, that's amazing. And there's so much skin in it from both sides. But there's also practical daily usage. And that leads to just better iterations of the products doesn't.
For sure.
Yeah.
And my LPs are hard on these companies, which is good. We want that. Because we know it's going to be battle tested.
You're you've been involved with the company that the Presidio group knows well. Orbee, Can you talk about that investment? Why Orbee?
Yeah, glad glad to be working on that with with you guys. Obviously. And just a plug for Brody, just Brody started Presidio as you obviously know, and the industry knows people on this podcast know, Brody is phenomenal. He's a good friend, but he's also just a really, really good human being. And he's good business guy. So just a side note on on you guys. I'm proud, proud and happy to be part of
Well, thank you.
What you guys do. Yeah. When I talk to think about Orbee we have a category where we call it borrowing from the outside. And what's what's happening in the industry is I watch what people do outside of it the industry. And I'm like, at some point, we're going to do that in the industry. Much like my example of CRM, Siebel and Salesforce started the game. We didn't start that. But really good entrepreneurs said, hey, I want to do what those guys are doing. But I want to do it very purpose built for us. That's what Orbee is. HubSpot has been around for a decade plus, probably more than a decade. So this whole idea of marketing automation software, I was just waiting for somebody to show up in the industry, who had a HubSpot-like product, and Orbee was the first to do it. It's an interesting story in that we talked Orbee for two and a half years before we actually did the deal. It was a it was a process of going back to two things. Proofpoint, he was figuring out his model, but more especially, you can't talk about HubSpot and marketing software automation, in the same way you do outside of the industry. You have to use dealer speak. And so Atul is the CEO at that company. It took Atul a couple of years to really learn dealer speak. And so we'd have conversations, I'm like, Man, I wouldn't position it that way. And I would really talk about this and now he's got his pitch dialed. Dealers really understand what he's doing. And the business has gone crazy. So going back to pattern recognition, we waited until those those things were aligned. And then we're like, okay, we're in and we're in that with the Holman family they're an LP in our fund and we're really, really close to those folks. So, you and there's a lot of dealers actually in Orbee, as as you know, as to our direct investors, big big dealers.
That's right.
So it's, it's, I got a lot of belief that Orbee is going to end up being a really nice exit for us.
Let's talk about your fourth fund for a minute. Give me some highlights. Where are you right now? What are you looking for?
Yeah, we're trying to raise 200 million. So we're 100 million into that 200 we'll raise this fund for the remainder of this year. So we'll close it and q4 and what that means to those on the listening. When we close the fund, I can't raise money for another couple of two, three years. So it's closed means like, that's yet you know that that is the fund size. It's going really well. It's as I said earlier, it's a lot of strategics. It's a lot of people that really, really know the space. If there are those that are listening that want want to know more, in our website, go to go to contact us find me on LinkedIn, I bet I know, a lot of the people that are listening to this call me we'd love to, we'd love to have you involved.
We'll flash the number up on the screen.
Yeah, exactly.
That's good. Just a final thing here, Chase. When you think about what's going to move the needle on dealer tech, what really gets you excited right now.
It's so overused, because we just have worn AI out. And so we're all tired of talking about it. It is one, AI is going to change the world. We got so excited about EV and autonomy and mean they're all great. But those are like incremental movements in just what goes on and just the general world scope. AI is just it's incredible what's going to happen to to all of us. And so I mean, there's a couple of AI, there's more than a couple, there's probably five or six companies right now that are doing AI like things in the space and there's some good ones out there. But they're just dipping their toe in the water. Right? There's going to be gigantic movement in AI. And I was I was actually thinking this morning, before we get got on this call, I thought is there going to be a period where AI sells a vehicle better than a human? I think the answer is yes. Because if I can, if if I could psychologically profile you while you're talking and understand why why you buy it really be a lot of science behind it. On what you're saying to me and what that actually means and how I changed the way I sell to you. I think that they may be better salespeople, ultimately. And what is that do to our industry? And that's I'm talking such future here, right? But we shouldn't underestimate the power of what's coming with AI. It's, it's incredible.
Is there a day that it's going to take your pattern iteration 30 seconds and knock it down to about two seconds to be able to figure it out?
You know, I've thought about am I going to be a dinosaur at some point. And I can't believe I'm saying this on a podcast, maybe not in my lifetime. But I think venture ultimately is run by AI. Because I think that pattern recognition is it took me years to learn it. It would take AI five seconds because it would just be part of the program. Right?
Yeah.
And then at some point they're going to AI will see something that I don't see. So the answer is I turned 52 yesterday. So I've I don't think it happens while I'm doing this. But it's going to happen. And it's going to happen all over finance. This whole Robo investor idea. There's just no reason to go call your your Edward D Jones broker in the future, because AI is going to be so much better
Well and AI will ask the question in the room. Are you married? And is your spouse involved?
That's true. I mean, it's right. It's just going to know so much more about us. And the other thing it doesn't it doesn't even have to ask the question. It goes and profiles us.
right
The way we shop, on the your income levels, on the neighborhood you live on. I mean, just think about the data that's going to aggregate to to completely and totally meet your needs.
What would Red say about what you've done?
He'd be excited. He, he. every time I'd meet with him he'd he'd literally pat me on the leg like I was 12 years old and say I'm proud of. And in those instances I was 12 years old, right? Because I liked hearing that from from Red McCombs, the answer is I think, I think it'd be proud. And the family is still, his daughter is still running in the stores and she's phenomenal. Great. There's still you know, he passed away, obviously but yeah, he, he loved this. And even at 95 He would have still been in this and excited about it. He'd have been all over AI, I promise you.
Oh, yeah. Well, Happy belated birthday. He can pat your he would have patted your leg not like you were 12 But you were 52. And thank you for sharing your story on a fascinating, fascinating journey, here through the world of everything that you know, really appreciated Chase, and thanks for being part of the program. Thanks for making.
This was fun.
Yes, thank you.
Thank you. Thanks again to my guest Chase Fraser, managing partner at Fraser McCombs capital, and thanks for listening to Full Throttle. Come back to us later in the month for our next interview on this platform. Email me with suggestions JStein@thePresidiogroup.com or go to the website, thePresidioGroup.com. You can follow us on LinkedIn and thanks for listening to the program. We'll see you next time.