What comes next for Tekion?

A question lingers about Tekion as it pursues market share for its cloud-based dealership management system: What happens next?

Automotive News recently told you how the DMS startup bought two auto dealerships and used them as laboratories for its Automotive Retail Cloud system. The system welds artificial intelligence and big data to streamline the retail sales process and interactions between automakers, retailers and consumers.

After three years, Tekion is putting those dealerships up for sale as the California company focuses on growing the commercial presence of its signature product.

It’s not an easy task. As a venture-backed company, Tekion must deal with venture capitalists who eventually want a return on their investment.

Tekion, launched in 2016 by former Tesla Chief Information Officer Jay Vijayan, employs roughly 3,000 people and has raised $451 million in venture capital.

Previously, companies of its size and equivalence in money raised gave investors exits through an initial public offering of stock or a reverse merger with a special purpose acquisition company, or SPAC — a publicly traded shell company. Hitting the public markets can be a dramatic way to give venture capitalists and others a strong return for their investment, but that may not be in the cards for Tekion. IPOs for technology companies all but collapsed in 2022 and there is no sign of a rebound.

Without the public markets, Tekion can theoretically give investors their exits by reaching profitability on its own. Selling itself to a company with larger purse strings or pursuing a merger are two more options. Tekion could theoretically raise more venture capital, but the current economic climate may make that less likely because of recession fears and general wariness of technology plays that haven’t shown solid financial returns.

A decision could happen in the coming months because Tekion hasn’t raised new venture capital financing since 2021 and it likely has experienced a robust cash burn rate from scaling up operations over the last two years.

As a private company, Tekion has remained mum about its financial situation or corporate plans. Let the guessing game about its future begin.