It’s no secret that data is the hot new revenue source for automakers, who are seeing additional profit opportunities bloom as vehicles become more connected and they can retrieve a ton of useful data that’s incredibly valuable when deployed correctly. Israeli startup otonomo has been on top of that trend since its founding in 2015, with nine automakers worldwide using its platform to feed a marketplace that connects car makers and drivers with service providers, optimizing the monetization of that data.
Otonomo just raised a new $25 million Series B funding round, provided by strategic investors and led by leading automotive supplier Delphi. The round also included participation from existing investors, including Bessemer Venture Partners, StageOne Ventures and Maniv Mobility, and will be used to help otonomo accelerate the pace of its global expansion plans.
The company now has $40 million in total funding, including investment from leading VCs and former vice-chairman of GM Steve Girsky. The company’s ability to land funding and customers, including Daimler, the only one of its nine automaker clients it can reveal publicly right now, is down to the growing appetite for driving data, according to otonomo CEO and co-founder Ben Volkow.
“There are more and more connected cars out there, and those connected cars are sending a lot of data in the background all the time to big databases the car manufacturers have built,” Volkow explained. “They send the data between every minute to every three or four minutes depending on the model, and also when you start the car, when you park the car or when you have an event.”
All this data is valuable to car makers, for their own use in developing new vehicles, services and technologies. But it’s also an additional cost load to bear.
“It costs a lot of money for the OEs; putting the modem in the car is like $100, then you have to pay AT&T about $5 per month to get the data out, then it’s about $1 to store the data,” Volkow said. “So we started talking to the car companies and they’re telling us ‘Connectivity, it’s a thing – show us the money.’ That’s what we do: We want to move from the age of data mobilization, to the age of data monetization.”
Otonomo’s platform is a cloud solution, with nothing additional required in the car, that connects on one side to the databases of the car manufacturers, and on the other to different services and applications that want this data. This group of customers including insurance companies, smart cities, workshops, dealerships, developers, and even hedge funds – “everybody wants car data,” as Volkow puts it.
Basically, the startup is helping car companies build new business from the data, and that’s become a very lucrative proposition. It helps that selling data is around 100 percent margin, Volkow notes, while selling actual cars is a single digit margin game.
Some examples of how services can use car data to supplement their own businesses include insurance companies sending out tow trucks. If they can instead identify a problem in advance and send a message to the driver, they’ll save the cost of that truck dispatch. Likewise, you can identify issues in the road early for maintenance by analyzing driving data in the aggregate, avoiding more costly infrastructure repairs.
But how does otonomo handle privacy? Volkow says there are a lot of regulations around use of this data coming, and otonomo is proactive about working with them. He says his company makes sure in advance that the automakers are in compliance with local regulations, and that they also factor in the rules set out by car makers, the rules set out by app makers and service providers, and the permissions agreed to by drivers and tell the OEMs what they can safely do.
Regulation and increased restrictions around use of data might be otonomo’s biggest prospective roadblock, but even with tighter controls it seems likely automotive data will remain a boom industry for the foreseeable future, on both sides of the marketplace. Key, longtime industry leaders like Delphi recognize this opportunity and its growing worth, which is why its participation in this round is a strong endorsement of otonomo’s model.