Who are the Top Corporate VCs in auto-tech?

The 20 corporations listed below (boxes 1 and 2) are using venture capital to try to ensure they are on the right side of the forces of creative destruction unleashed in today’s automotive industry. There’s a lot at stake. The costs of missing out on a revolution in transportation will be very high. The prize for the winners will be dominance of a trillion dollar industry.

It’s no surprise to see Ford, Castrol, Magna and Volvo on this list.  They are incumbents with a track record in innovation they need to protect and sustain. But the presence of companies more renowned for their internet and digital expertise such as Intel, Qualcomm, Comcast and Verizon, confirms that transportation is a huge new territory ripe for connectivity, whose future will be determined as much by software innovation as hardware.

Allianz might seem an ‘unusual suspect’, but transport connectivity creates new challenges and opportunities for the insurance industry and Allianz is not the only insurance company actively venturing. 

Asia to the fore

If we narrow our search and look at the lead corporate VCs over only the last two years (see box 3 below), we see more Asian internet and software giants entering the fray. Tencent takes top spot (by number of deals), with Softbank and Alibaba, Didi Chuxing and Baidu not far behind. It’s in Asia, China and India in particular, with relatively under-served markets for transportation (both consumer and industrial) that are likely to go straight to shared, connected and autonomous or semi-autonomous vehicles. These markets are less encumbered by what will soon be seen as the ‘legacy’ model of owner-based, unconnected, driver-dependent transportation. 

Lidar is a type of sensor that helps the autonomous or semi-autonomous vehicle see the outer world (and hopefully not bump into things). In August, Ford and Baidu jointly invested $150m in Velodyne, a US-based producer of Lidar 3D mapping technology. Velodyne has specialised in developing Lidar sensor technology for self-driving cars and 3D mapping since the mid-2000s.

A week later Samsung, Delphi Automotive and Sensata Technologies’ announced a joint $90m investment in Volodyne competitor Quanergy, which is also US-based. 

Audi said its 2015 investment in TTTech, an Austrian company specialising in real time safety control technology, was prompted by TTTech’s ability to help them make the move to autonomous and semi-autonomous driving. Audi’s co-investors were GE and Infineon. 

Hype territory?

There’s lots of excitement about autonomous and connected vehicles and increased venturing. Are we therefore approaching hype territory? Probably yes. Research firm Gartner has warned that autonomous vehicles generally were just past the “peak of inflated expectations” and about to slip into the “trough of disillusionment” before reaching mainstream adoption in about a decade. Very few corporate VCs are telling their parent companies they have to hold their investments for a decade. So disappointment may be just round the corner for some, if not most, of today’s investors. But this, of course, is just the nature of venture capital.  Some investments go massive. Some do ok. Others die.

Right now, what’s buoying venture appetite are some good exits (see box 5 below) in which some corporate VCs have already enjoyed returns. There’s nothing like a few headline-grabbing exits to get the venture juices flowing. 

But more fundamentally, there is growing recognition that the war to dominate the future of the transportation sector (or just stay in it) is going to be long, hard and very expensive. Ford is preparing its shareholders for the long haul, warning that profits will fall as the company increases its investments in new technologies.  In remarks to investors reported by the FT, Ford’s CEO, Mark Fields, preached what will have sounded like a new automotive religion to many of his shareholders. “We are really rethinking our business models … for years we have very much thought about the ‘thing’ and how much of the ‘thing’ we sold. Now we are thinking more about usage … and so miles travelled becomes an important metric,” as important as the number of cars sold.

On December 1st 2016, the world’s leading corporate VCs will gather in London for ‘Venturing and the future of mobility and automotive technology’ – www.gcvautomotive.com Then in January at the Global Corporate Venturing and Innovation Summit in California, transportation will be high on the agenda, in both the main programme and break-out sessions. To get involved, please contact me on tom.whitehouse@london-eif.com