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Steve Schwartz explains guiding a startup to acquisition

Just about everything with Carcode SMS sounds like an overnight success.

The Ann Arbor-based startup won the 2014 Edmunds Hackomotive contest in February. It racked up dozens of customers for its mobile software platform soon after. By October, Edmunds acquired it.

"It all happened pretty quickly," says Steve Schwartz, co-founder of Carcode SMS.

That's a pretty accelerated timeline for a profitable exit even by tech startup standards. However, there is a bit more to the story than just those key events.

"The funny thing is you always hear about the overnight success that took years to build," Schwartz says. "We have that sort of thing going on."

Carcode SMS built a website plugin that enables consumers to text automotive dealership staff and inquire about a specific car. The software assigns local cell phone numbers to dealerships so mobile shoppers can text them and provides the dealership with an app that allows staff to respond and manage conversations in a compliant environment.

That wasn't the genesis of Carcode SMS. The Tech Brewery-based startup got its starts a couple of years ago creating mobile technology for automotive dealerships that leveraged QR codes. It had some minor success with it before the three-person team pivoted a year ago to focus on the text-message conversations platform. It turns out those initial years of building up a reputation paid off when the startup found its true calling.

"We had the advantage of having our original product and having customers to talk to already," Schwartz says.

The pivoted version of Carcode SMS was a bit more focused. Instead of building its own customer base from the ground up again, the startup wanted to find a way to partner with a bigger firm with a built-in clientele. The 2014 Edmunds Hackomotive presented that opportunity. It was the company's first business plan competition and served as the launch site for its incubator, which Carcode SMS took one the first spots in soon after winning the contest.

"We always knew we wanted to get someone like Edmunds," Schwartz says. "We knew they would be our ideal customers."

Schwartz points out that there isn't a simple formula for hitting a success like this. There is a fair amount of good timing required to make it happen. Not to mention a lot of hard work and sacrifice over a long period of time.

"You can always do the right things and a lot of the time you won't have success," Schwartz says. "Often it takes a lot of luck."

His advice: Be in love with the problem.

"Founders always want to build something," Schwartz says. "It's easy to see what your building as an end when it's really a means."

Evolution is a key word in technology. New solutions to problems are being commercialized into new businesses everyday. It can be dizzying to keep up with at times. For Schwartz, it makes more sense to keep an eye on the problem than the solution you are trying to build for it.

"The solution often changes," Schwartz says.

- Written by Jon Zemke

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