HONK. The startup disrupting AAA

Posted by: Paige Craig

Posted on 07/22/2015

HONK. The startup disrupting AAA

Corey Brundage is dressed in his uniform of dark jeans, purple HONK t-shirt and grey HONK hoodie, sipping coffee from a “Baltimore Towing Company” mug. We’re sitting on the couch in the lobby of his company’s new Los Angeles office - home to a team of 50 with enough space to handle their expected doubling in headcount over the year ahead.

Founded only eighteen months ago, HONK is one of the fastest growing technology companies in LA and already competing head-to-head with the dominant player in its industry: the American Automotive Association, better known as AAA. HONK’s mobile app provides on-demand towing and roadside assistance services at the press of a button: open the app, tap the type of issue (accident, dead battery, out of gas, etc.), and a tow truck is dispatched in minutes for a fraction of the typical cost.

Most of us don’t think much about towing services, we just pony up for the annual AAA membership alongside our car insurance because it seems like that’s what everyone does, and we hope we never need to use it. We legally have to have insurance and therefore look into auto owners insurance reviews, hoping to find the best rates. But, we don’t legally have to pay for the AAA and how many times has our membership actually come in useful? Since its founding in 1902, AAA has built a near-monopoly over the roadside assistance market in the US, collecting lucrative membership fees that mostly go unused by the members. Still touting a call center, manual dispatching of trucks, and physical storefronts (with paper maps and human travel/insurance agents), it has barely changed in decades.

By contrast, HONK is rebuilding the roadside assistance experience from the ground up for a new generation of consumers who are used to their smartphones instantly matching them with anything they need. Most of HONK’s primary users are in their 20’s and 30’s (versus the 57-year-old average age of AAA members) and HONK’s technology connects them with towing services directly through a straightforward mobile app. Instead of requiring annual membership, the company charges for help solely when users need it. It has response times twice as fast as the industry standard nationwide and provides much lower pricing as a result of being a tech company without the overhead of competing bureaucracies.

With 35,000 tow trucks in its active network, HONK is already on pace to surpass AAA’s 40,000. When you look at the the benefits to towing companies, it’s no surprise why they have been so quick to adopt it either. AAA pays them roughly $23 per incident on average, and sometimes as low as $13 for basic roadside assistance like unlocking doors or delivering gas. By comparison, HONK pays towing services twice as much, gives them full transparency into how much customers are paying on the other end, and leverages technology to keep the process efficient for both sides.

Corey grew up outside Washington DC in the Dulles tech corridor during the Dot Com boom of the late nineties. His older brother was the one who stood out as the computer wiz of the family though, minting himself a young multi-millionaire after joining America Online (AOL) as one of the earliest employees. Corey would tinker with the hand-me-down computer parts his brother gave him, developing an intense drive to learn software programming on his own.

At fifteen, he built a MUD (multi-user dimension) game online that gained a following among the small community of other internet enthusiasts. There were so few websites at the time that it was primarily found by browsing the Internet Yellow Pages book of websites at Barnes & Noble. As the game grew, Corey was soon spending his time after school learning about churn rates and how to scale the site’s infrastructure instead of hanging around with other teenagers at the mall.

He also stumbled into the darker side of the internet, ingraining himself in online hacker forums and forming his own group of hackers dubbed “the Internet Destruction Division” that embraced the challenge of breaking into high-security government databases. In the process, he developed a friendly rivalry with another young hacker using the alias “dob” who turned out to be a fellow student at his very high school - a boy in his English class named Sean Parker. The two challenged each other’s autodidactism and technical chops at every turn - from the hacks they led to the sites they built to the offers they would receive when skipping school to scope out IT job fairs.

Before even finishing high school, Corey became a full-time software engineer at a local tech company, and in the years that followed, he moved between a variety of engineering roles around the country. He eventually became too frustrated with building products for other people who he felt had either designed them or brought them to market poorly, however, and transitioned to product management and product marketing instead - focusing on the iterative process of finding “product-market fit”.

In 2012, he set out on his own again in Los Angeles, sporting the multicolored hair of a punk rocker. He co-founded two startups - the first a social network and the second a platform for hourly workers to easily trade shifts - both of which ultimately closed shop. Through them, however, he gained a sharp understanding of techniques to rapidly test product ideas in a chaotic startup environment - a skill he would leverage again soon after.

In December 2013, Corey got a call from his fiancée Celine. Her car’s battery had died and she was stuck in a parking garage, so Corey ordered an UberX and rode over to help. Unable to figure out the car’s set-up under the hood, however, they searched for roadside service brands and local tow companies to help, repeatedly reading bad reviews and getting expensive quotes or long wait times.

Over the week that followed, Corey kept thinking of the dichotomy between his Uber ride and the hassle he and Celine went through to get towing: “it kept running through my head - if you can get a taxi with the press of a button, shouldn’t you also be able to press a button for help when you need it most?” he explains.

Corey started investigating the opportunity. Rather than seeking out market research, focus groups, or even tow truck companies, he instead started experimenting with people’s behaviors online. He created a series of Google AdWords campaigns and landing pages to test user acquisition across the country. He used AdWords to specifically target distressed motorists on their cell phones at their moment of need, and through the landing pages he would show them different versions of potential products (with various features, prices, etc.) to determine what drivers had the most interest in. Even before there was specific product in mind, it became clear to Corey there was a market opportunity; the data showed that drivers disliked their experiences with roadside assistance and were eager for a better option.

That January, he put everything else aside and made the prototyping of an on-demand towing platform his full-time focus. Working around the clock, he built a basic version of the app, bought several tablets to install it on, and went around LA trying to sell tow truck operators on the benefits. “I put on a blazer and was walking into these towing garages with a bunch of guys working in denim and t-shirts,” he recalls, “it was bad - they were like ‘who the hell is this guy?’”

Nonetheless, he signed up nine trucks to pilot HONK in Los Angeles. The first few weeks proved there was strong interest from drivers but he ran into several issues. “It seemed like every time a request came in from a driver, the trucks were on the opposite side of the city,” he recalls, “Or the trucks would occasionally vanish from the map entirely.”

Visiting the tow truck operators who were participating, he quickly found part of the problem: “the drivers would shove the tablets under their seats or unplug them and let them die, because they were often paid hourly with no commission…my service was making them do more work for the same pay.” He dug further into the supply side of the marketplace to understand their perspective - visiting local towing companies, hearing their genuine pride in being the first responders, and listening to their complaints about the way they get paid by intermediary companies. Corey says that when several revealed how little those companies pay them, “it really clicked how inefficient the way things are done in this industry is and how disenfranchised the providers of these services have become.”

He redesigned the technology to better benefit the owners and operators of the towing companies, expanded the scope of operations, and in April 2014 started more serious marketing efforts to attract motorists. That’s when he took his initial traction to investors so he could finance the hiring of an initial team; his seed round was six times oversubscribed within just seventy-two hours.

Scaling a company this quickly can present major challenges. When HONK started eighteen months ago, it was just one man in his home office in Hermosa Beach.

As a marketplace, HONK has had to scale the supply and demand sides evenly to avoid either user base having a poor experience. As the app took off among drivers, the HONK team was forced to aggressively build relationships with towing companies around every part of the country from Brooklyn to rural Montana.

“Hiring an exceptional team enabled us to scale our operations quickly while maintaining a high level of service,” Corey notes. Rob Snodgrass, the Sr. Director of People & Culture, adds “we’re fortunate to have a ‘growth centric’ culture, and are obsessed with finding great folks who share our experiment-driven philosophy and will raise the bar further.” HONK is attracting talent not just from the tech community, but from those in their industry eager to break the traditional mold: Corey says in the last couple months his interviews with job candidates included one with a former CEO of AAA who reached out on their own.

Rob includes the tow truck drivers using HONK among the talent who have enabled the company to grow as quickly as it has too. “The response from towing companies we work with has been exceptional and validating. Most really love HONK and are excited for change.”

Unlike other on-demand marketplaces that use everyday people as their workforce (drivers, couriers, etc.), tow drivers in HONK’s network are all highly trained professionals. After all, as Corey points out, “how many everyday people have a tow truck laying around?” That element has allowed smoother growth by ensuring a quality customer experience and avoiding the regulatory battles other marketplace startups have run into. It’s also pushed the company to invest in building genuine, long-term relationships with the towing services.

While it is still a behemoth in relative size to HONK, AAA has certainly taken notice in response. Last December, VentureBeat revealed that AAA staff had been requesting and canceling services via the HONK app - a move mimicking the tricks Uber and Lyft infamously waged on one another. The tech news site also quoted a cease-and-desist letter that AAA’s legal department - apparently missing the irony - sent HONK demanding they stop claiming AAA had lost touch with Millennials.

Despite competitive interference and the pressure just to keep pace with the first year’s growth, HONK has nonetheless managed to bring its actual times of arrival (not merely ETAs) to well under 30 minutes across the board - urban, suburban, and rural areas of the United States. In roadside assistance, those response times fundamentally matter too.

Corey recalls a case in Massachusetts during one of this past winter’s storms where a woman was stuck in the snow at night off a quiet road. She had contacted AAA, but they informed her that it would be a 3 hour ETA due to the weather. As the night wore on, she searched for alternatives on her phone and stumbled across HONK; she downloaded the app and requested help. Less than 30 minutes later a truck dispatched by a HONK partner arrived to pull her car out and get her out of the cold. (Amusingly, it was a AAA-branded truck.)

While confident in the team’s ability to tackle them, Corey emphasizes that the challenges, and corresponding excitement, of rapidly scaling the company are just beginning however. HONK has several major partnerships in the works and is already preparing to roll out new products and expand to international markets.

Asked how he sees the startup evolving as they take these next steps, he doesn’t mince his words. “We are hyper focused on dominating the towing and roadside market,” says Corey. “But this is just the first step towards our longer term vision of on-demand automotive services. In the future, HONK will be the fastest way to take care of all of your car’s needs - whenever they arise and wherever you are.”

Paige Craig

Managing Partner, Outlander VC

Paige invests in brilliant founders from across the US, using his Outlander Founder Framework to drive returns in the top 5% of VCs globally.


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