The mobility industry is rapidly shifting to readjust for an electric and autonomous future.
Automotive companies are increasingly looking outside the manufacturing sector to fuel growth, and companies that used to bank on selling vehicles are now building mobility apps, scooters, and subscription services. Detroit is turning to to Silicon Valley for fresh ideas while Silicon Valley is studying Detroit for proven methods.
We surveyed top VCs in the mobility sector to see where they’re putting their money, and one thing quickly became apparent — investors are funding startups that bring connectivity to mobility. From automobile components to social apps, connectivity is critical to investors and the industry alike.
Reilly Brennan, general partner, Trucks VC
Michael Granoff, managing partner, Maniv Mobility
Jim Adler, founding managing director, Toyota AI Ventures
Dr. Ulrich Quay, managing partner, BMW i Ventures
Answers were edited for clarity.
Reilly Brennan, general partner, Trucks VC
Where are you investing in the automotive space?
We invest in startups that make transportation safer, cleaner, and more accessible. Anything that moves goods or people is interesting to us. We are first interested in exceptional founders, then exceptional ideas. For example, we just invested in a new type of car wash that doesn’t use any soap or chemicals; although it was never our intent to seek out that idea, we really believed in the founders’ vision for making it happen.
Which areas in automotive offer the most opportunity for startups?
There are many big opportunities across transportation — such is the case when you’re operating in markets measured in trillions. Right now, I am more convinced than ever that there is a 10-figure opportunity for a new navigation app — it’s one of the few/only transportation-related apps on everyone’s home screen. Still, the leaders are mostly incumbents (Apple Maps, Google Maps), where the products are good but haven’t made fundamental leaps in years or an app like Waze, which is high utility but low user experience. Other than YouTube, Waze is probably Google’s only social network, although I doubt they think of it like that. For how important navigation is and will be, we’ve been surprised more founders don’t create more there because the value is high. If you are working on something in this space, please email me! rpb@trucks.vc
What makes a startup attractive for investment from OEMs?
Most OEMs are interested in companies that support their future product vision. Every once in a while, you will find an OEM with an alternative strategy that does not invest in supporting their products, but these are quite rare. As a result, startups who are actively selling in the auto supply chain are the best positioned for auto investment. Remember that many OEMs passed on investing in Uber in the early days.
Dr. Ulrich Quay, managing partner, BMW i Ventures
The automotive space is going through an important transformation driven by four key trends: autonomy, sharing, electrification, and connectivity. In line with the ongoing transformation, we, here at BMW i Ventures, find and grow cutting-edge technology companies redefining the automotive industry. Our fund focuses on eight key areas of investment, where we believe the most opportunity for startups are: autonomous driving, digital car & automotive cloud, e-mobility, AI/data/cybersecurity, industry 4.0, shared and on-demand mobility, customer digital life, and energy services.
There are currently close to 40 portfolio companies, including Carbon, Chargepoint, Fair, GaN Systems, Graphcore, Proterra, Ridecell, Scoop, Shift, Urgently, Xometry, Yellowbrick, and Zum. We invest in all stages from seed to growth companies, and we’ve been fortunate to see early success stories in our portfolio: Blackmore was acquired by Aurora recently and Life360 went public in May. For more information, please visit www.bmwiventures.com.
It’s also important to highlight our unique structure: compared to other corporate VC funds, BMW i Ventures is set up to have a widened scope of investment and greater independence. This unique structure gives us the best of both worlds: speed and flexibility of an institutional fund (where we can lead rounds) along with deep domain know-how, strong capabilities and a large network of a leading premium OEM. As a result, in order for a startup to be attractive for us, there needs to be a strong financial return and strategic value potential. We are convinced that financial return and strategic value go hand in hand. Given the long product development cycles in our industry, we believe that a startup should be financially sustainable for it to create any potential strategic value down the road.
Jim Adler, founding managing director, Toyota AI Ventures
Toyota AI Ventures invests in early-stage startups that are developing disruptive technologies and business models in mobility, autonomy, robotics, AI, data, and cloud. While we do not focus exclusively on the automotive space, we are interested in autonomous vehicles (AVs) and advanced driver-assistance systems (ADAS) solutions.
We’ve invested across the autonomy stack in perception, prediction, planning, and simulation, and our portfolio includes companies like Cartica AI, Recogni, Metawave, Blackmore (acquired by Aurora in May 2019), Perceptive Automata, Realtime Robotics, and Parallel Domain. ADAS is where we’re seeing the most short-term revenue opportunities, given how challenging it is to develop AVs.
We’re also actively engaged in moving up the autonomy stack and investing in AV services and applications, like self-driving shuttle startup May Mobility, logistics company Boxbot, and fleet safety management platform Nauto.
Finally, we’re interested in supporting a wider variety of mobility solutions, including urban air mobility (Joby Aviation), autonomous marine technology (Sea Machines), and micromobility players like Revel and Skip.
Which areas in automotive offer the most opportunity for startups?
We look in areas where OEMs would rather buy than build. Under insurgency from big tech companies, the automotive industry is becoming more high tech. Even if we’re years away from mainstream autonomous vehicles, startups can sell into this great automotive transition to artificial intelligence, big data, and mobility services.
What makes a startup attractive for investment from OEMs?
We look for talented teams that have identified a business model that delivers real value to real customers. Big ideas are important, but it’s the execution that ultimately matters.
From an OEM perspective, startups that are addressing a major pain point, experimenting with a completely new business model, or accelerate high tech adoption are the areas that get our attention.
Michael Granoff, managing partner, Maniv Mobility
We founded Maniv Mobility on the premise that after information and communication got digitized over the last few decades, that a preeminent theme in the next decade will be the digitization of transportation. The overwhelmingly dominant form of mobility for 100 years from the launch of Ford’s Model T was the individually-owned and operated internal combustion engine car. The companies that fueled those cars were the most valuable businesses in the world for decades. The next era of mobility is characterized by greater connectivity; by a fewer vehicles sold but more individual trips purchased; by less ownership and more sharing; by less combustion and more electrification; by less manual operation and more operation.
Digitization begins with the car, and we have found opportunities in-vehicle communications, in over the air updates, in monetizing data from connected cars, in automotive cybersecurity, and more. The digital transportation era also includes increased automation of driving systems. While fully automated “robotaxis” are not likely to see meaningful commercial deployments for some number of years, advances in automation are already bringing improvements to safety and adding convenience.
One globally universal trend, which is very much at odds with the individual car ownership is urbanization. Whether in China, Europe, or the U.S., we see a steady increase in the density of cities. In many of them, congestion and air quality are already reaching epidemic proportions. That’s why when companies like Bird and Lime offered electric kick scooters and e-bikes for short-term rental, they quickly racked up trip numbers even faster than ride-hail startups like Uber had just a few years before. Maniv led the seed round of the New York micromobility provider, Revel, which has so far deployed street-legal electric mopeds in three U.S. cities this year. We believe that the impulse for residents to find more efficient ways to move around their cities will lead to the continued proliferation of form-factors and business models, making the 2020s a time of more change in the ways we move around than maybe the 100 years that preceded it. Finally, the “last mile problem,” whether for moving people or moving food or goods, is being addressed by startups with everything from ground drones to specialized bikes (such as those offered by Maniv company Bolt Bikes).
Through all this, challenges and opportunities await city planners and local officials. When does the throughput and the demand for smaller vehicles reach the point at which some of the roadways designated only for cars begin to get repurposed? What Infrastructure changes will help increase movement within the city? Should the scarce real estate represented by city streets be dynamically priced, and on what criteria?
As officials grapple with these questions, the opportunities for startups will proliferate. Future mobility is not about a single mode of transport as the past century has been. It’s about a rich diversity of vehicles and business models suited for specific use cases. And the hardware and software of these vehicles and their networks will get built out over the next several years. That’s the opportunity that we continue to be excited about, and that’s why we have such a singular focus on the sector.