I founded Automotive Ventures for two reasons: to create a transparent research ecosystem designed to surface and share information on trends affecting the automotive and mobility industries; and to help entrepreneurs succeed. The convergence of the two led us to launch the first of our two venture capital funds back in 2020.
We’re in the very early innings of building out this Automotive Ventures brand and are just beginning to realize the network effects of being the go-to source of industry information and insights into how the future will play out.
Through the support that Automotive Ventures provides to entrepreneurs, we often get early and exclusive access to the most sought-after deals.
Like other networks, Automotive Ventures will become more valuable to users as more participants join. We’re already tracking the vast majority of global early-stage automotive and mobility deals and are regularly presented with unique and attractive deals in which our investors are able to participate.
As we continue to grow, the network effects of the Automotive Ventures brand will prove to be a powerful driver of growth and value creation; a virtuous cycle where the more users there are in the network, the more valuable it becomes, which in turn attracts more users.
The Luxury of Having a Long-Term Time Horizon
Big technology company CEOs have recently been sounding the alarm. “This next year or two, the economy is going to test the long-term resolve of a lot of companies,” Amazon’s Andy Jassy noted in late November. “Our operational focus over the next few years is going to be on efficiency and discipline and rigor,” declared Mark Zuckerberg of Meta Platforms, “and just operating in a much tighter environment.” At Google, Sundar Pichai pledged to slow hiring and “focus on a clear set of business and product priorities.”
Recent big tech layoffs are a necessary reset after an extraordinary run of growth. The SaaS Capital Index indicates that publicly-traded B2B-focused SaaS companies are trading at 7.2x their Annual Revenue Run-Rate (ARR), well down from their high of 16.9x back in late 2021.
The era of easy money that fueled Silicon Valley’s longest and largest boom seems to be over. Silicon Valley’s boom-and-bust history illustrates why macro conditions matter - stagflation hammered the industry in the 1970s, low interest rates boosted it in the 1990s and the quantitative easing of the 2010s powered its longest and biggest boom so far.
One of the advantages of overseeing 10-year venture funds is that we aren’t beholden to the short-term vagaries of market fluctuations and valuation. In fact, we expect the average hold time of our investments to be approximately 7 years, so the companies we invest in today will have the luxury of being able to sell into stronger markets well into the future.
Warren Buffett cites the concept of "Mr. Market" in his investment philosophy, a fictional character used to represent the stock market, who is described as being highly emotional and prone to erratic behavior.
Buffett's advice is to approach investing with a long-term mindset, rather than being swayed by short-term fluctuations driven by market sentiment. By focusing on underlying business fundamentals and buying quality companies at attractive prices, investors avoid being swept up by Mr. Market's emotional swings and instead build successful long-term investment portfolios. We at Automotive Ventures subscribe to this philosophy
Albert Einstein noted that “Compound interest is the eighth wonder of the world.” We believe that disciplined investing with a long-term horizon will build our investors’ wealth over the long term, but this will require patience, discipline, and a focus on high-quality investments with strong long-term growth potential.
Why we’re doubling down on Mobility
We believe that investments into the early-stage mobility space will deliver outsized returns to our investors as we fund the next wave of innovation in transportation technology.
The mobility industry is accelerating, driven by advances in technology and changing consumer behavior. From ride-sharing and electric scooters to autonomous vehicles and drone deliveries, there are multiple opportunities to invest in companies that are shaping the future of how we transport both humans and cargo.
In parallel, as concerns about the environment and climate change increase, there is a growing demand for more sustainable modes of transportation. Investing in companies that are developing electric or hybrid vehicles, or that are involved in public transportation infrastructure projects, can be a way to support these efforts while also profiting from them.
Investing in mobility provides exposure to a growing and dynamic industry segment that is shaping the future of transportation.
Where are we investing?
Below, I outline some of the important investment thesis areas of our two funds, along with specific examples of companies we’ve invested in.
Our First Fund: The Mobility Fund
We launched our Mobility Fund back in late 2020, and have made 17 investments so far. The Mobility Fund is a global, Seed-stage fund that invests in startups that are positioned to benefit from the trends shaping the mobility landscape. Our average initial check size is $150k, and we will make a total of 25 investments out of the fund.
Mobility Fund Thesis Area: Autonomy, Robotics & AI
One of six thesis areas for our Mobility Fund, we believe that automation is on the cusp of fueling dramatic changes to how we transport people and cargo.
Computational systems and software that evolve with data can solve intractable problems, automate knowledge work, and accelerate technology integration. The potential for end-users is clear: a constellation of AI-driven intelligent devices that pervade people's lives, changing the way that they spend, work, and play. The adoption of artificial intelligence should transform every sector, impact every business, and catalyze innovation over the next decade.
AI is expected to increase the productivity of knowledge workers more than 4x by 2030.
Our investment in Axion Ray is exciting for a number of reasons. Manufacturers face a dizzying array of potential problems around the products they produce, and it’s challenging to track down issues. This is critical information, often tracked manually today by human auditors in spreadsheets. In some cases, failing to understand when there is a faulty part could result in costly recalls, and in the most extreme cases, deaths and lawsuits. Axion Ray is an early-stage startup using machine learning to track these issues in unstructured data to build a picture of potential problems before they get out of hand.
Mobility Fund Thesis Area: Decarbonization & New Energy Sources
The outlook for decarbonization and new energy sources is accelerating, as governments, businesses, and individuals increasingly recognize the need to transition to cleaner, more sustainable sources of energy. The global shift towards renewable energy sources such as solar, wind, and hydropower is being driven by factors such as technological advancements, falling costs, and increased public awareness of the risks associated with climate change.
Advancements in energy storage technology, such as batteries and hydrogen fuel cells, are expected to further accelerate the adoption of renewable energy sources.
Our investment in Recurrent positions them to grow to become the industry standard used EV history report. Recurrent was founded in 2020 with the goal to provide more transparency and confidence in pre-owned electric cars. Through its comprehensive battery reports for EV owners, buyers and sellers, it aims to accelerate the overall adoption of electric vehicles.
The Recurrent Battery Report is designed to answer common questions from used EV shoppers. Each report includes a Range Score, which compares a vehicle’s current max range to the original range for that make, model, and battery pack configuration. For example, a Range Score of 94 means that the vehicle is expected to get 94% of its original range.
Mobility Fund Thesis Area: Evolution of Business Processes
The trend towards evolving business processes is driven by the need to find ways to improve efficiency, reduce costs, increase agility, and enhance customer experiences. Companies recognize the importance of continually improving their processes to remain competitive and adapt to changing market conditions.
In parallel, businesses are placing greater emphasis on understanding customer needs and preferences in order to design processes that deliver exceptional customer experiences. This involves breaking down silos between departments and using data analytics to gain insights into customer behavior and preferences.
Additionally, there is a growing trend towards process standardization and simplification, where businesses seek to reduce complexity and create more efficient processes that can be easily replicated across different business units or geographies. This can help businesses to reduce costs, improve consistency, and improve scalability.
Our investment in Wrapmate is squarely in this area. Wrapmate is an all-in-one digital platform for business owners and consumers to get their vehicle wraps & graphics projects designed, produced, and installed in any city across the U.S. Utilizing Wrapmate's advanced technologies, customers can visualize, purchase, and even finance their vehicle graphics in the simplest way possible. Additionally, Wrapmate supports a nationwide network of over 1,300 vetted graphic professionals known as Wrapmate Pros, providing them with local customer projects and solutions to grow their businesses.
Our Second Fund: The Dealer Fund
We launched our DealerFund in mid-2022, and have made 3 investments so far. The DealerFund is a vertically-focused fund, raising money from automotive dealerships and investing into solutions that benefit dealers. Our average initial check size is in the $350k - $500k range. We are still actively fundraising and will close the fund at the end of April.
We strongly believe that as both new and used vehicle inventories return to more normalized levels, dealers will enter a new phase of profit margin compression, exacerbated by challenges in Fixed Operations: EVs having longer service intervals and more of the historical warranty and recall work being replaced by Over-the-Air (OTA) updates.
We are on the hunt to find and invest in companies that help dealers defend against profit margin compression. A big area of interest for us is Robotic Process Automation (RPA), where repetitive tasks are replaced with automatic scripts that reduce or eliminate human labor. Automation can be used to automate repetitive tasks, freeing up employees to focus on more strategic work that adds value to the business.
A great example of this is our investment in WarrCloud, a company that reduces warranty processing costs and improves gross profit by transforming automotive warranty processing for auto dealerships. WarrCloud provides proprietary machine learning-enabled software that assists franchise automotive dealerships and OEMs by streamlining and automating the otherwise complex and costly process of warranty claims administration between the parties. Dealer clients report on average cost savings in excess of 50%.
We will continue to be on the lookout for solutions that help dealers dramatically eliminate costs from their operations.
Today, auto dealerships generate more than half of their profit from their Fixed Operations: the combination of service and parts. Despite its importance, this area of the business hasn’t experienced nearly the amount of innovation that marketing and sales has benefited from over the past 15 years.
We’ve been exploring how best to enable dealerships to participate in ADAS calibration since we launched the first fund. As vehicles become more complex, it’s will become increasingly important that the external sensors (Lidar, cameras, windshields, etc.) are calibrated at regular intervals, and especially after accidents.
We’ve been on the lookout for clever technology that will help dealerships participate at scale, and we came across Kinetic Automation, that has both a unique approach and a brilliant founding team. The company automates the process of ADAS calibration and allows dealers to participate in attractive economics while greatly increasing their throughput.
We will continue to search for companies that help dealers drive more revenue and profit from their fixed operations.
The evolution from Internal Combustion (ICE) to Electric Vehicles (EV) is well underway, with many consultants forecasting that half of passenger vehicle sales in the U.S. will be plug-in electric by 2030. But, a lot has to happen between now and then to prepare for an electrified future, including investments in battery technologies, EV incentive optimization, EV charging infrastructure, and “second life” and “end of life” solutions for the batteries themselves.
Out of the DealerFund, we have made an investment in Go Eve, a company that is destined to challenge the way that automakers and dealerships think about their EV charging infrastructure requirements.
Go Eve’s DockChain product is a patent-pending technology for charging electric vehicles at scale. DockChain is a 'chargepoint multiplier'. The innovation allows multiple parking spaces to be electrified from one base power source with a daisy chain of inexpensive and simple charging points. Combined with a standard high-power DC Charger, the Go Eve technology significantly reduces the cost involved with charging large numbers of EVs. Plus you can charge any car at high power in any parking space without moving vehicles around.
We will continue to be on the lookout for innovative early-stage companies that are positioned to help auto dealers navigate the coming wave of electrification.
Our Newest Option: The Investment Club
As we make investments out of our two core funds, we’re often able to negotiate additional capacity that we can then expose to our investors (LPs).
Our Investment Club was created to increase accessibility to early-stage AutoTech and Mobility investments, by taking some of this excess capacity and offering these exclusive deals to a broader group that wouldn’t otherwise have access. We enable our Investment Club members to participate even with very small check sizes.
It’s important to note that our Mobility and DealerFund LPs are always prioritized for these deals.
Two of our recent Investment Club deals were strongly oversubscribed. Sign up for free, and you’ll see exciting opportunities to invest each month.
Automotive Ventures aims to deliver long-term capital appreciation by investing in early-stage automotive and mobility technology companies that are best positioned to benefit from the industry’s biggest trends.
As always, we remain committed to seeking out and investing into innovative companies with strong potential for growth and profitability.
We believe every investor should have a strategic allocation to innovation, not only to access potential exponential growth opportunities typically absent from other asset classes, but also to hedge against the increasing risk that industry incumbents will be disrupted.
As a team, we remain focused on identifying the most promising opportunities, supporting our portfolio companies in their efforts to scale and succeed, and generating strong returns for our investors. We believe that our strategy of investing in early-stage technologies will continue to pay dividends in the years to come.
Thank you for your ongoing support, and we look forward to working closely together with you to create the future of this industry.
It’s been three years since I left the corporate world and three years since we began publishing this Intel Report.
You’ve likely noticed that we’re putting a lot more effort into the weekly report (delivered early Mondays via email) in an effort to spread out the content more evenly over the course of the month and ensure you’re receiving it in a more timely manner.
We’re also making great progress with both of our venture funds; we’ve already made three investments out of the new DealerFund.
The DealerFund is closing on April 30th. If you are interested in learning more about the early-stage startups in our fund or becoming an investor, please let me know.
Finally, we’re building momentum with the new Investment Club, and have brought four deals to our members. You can join the Club for free.
As always, please send me a note if there’s anything I’ve missed or that comes to mind while reviewing this month’s content.