i3 - September/October 2019 - 27

BMW were the earliest to perceive the
importance of software in cars and open
Silicon Valley R&D offices, says Liz Kerton,
executive director of the Autotech Council,
an auto industry association that introduces
automakers and their tier 1 and tier 2 suppliers to startups worldwide looking for
investors. Today, there are 36 carmakers
with offices in Silicon Valley and "a lot of
industries that were separate are now overlapping," especially as automakers morph
into mobility companies, Kerton says. The result, in the
Autotech Council, is a group of member companies that
function collaboratively as a team to support and buy
innovation as a whole.
For automakers, "the idea is embedded that 'we are not
going to own a technology. The best we can do is be first to
market. And if we can get a six-month advantage by being
faster, that's how we are going to be the innovative brand.'"
By 2029, Kerton surmises, transportation as a service
could encompass anything from a car, scooter, helicopter,
drone or an EVTOL (electric vertical takeoff and landing)
vehicle like that envisioned by Uber Elevate and shown in
prototype by Bell Nexus at CES 2019.
"The companies who have already made the commitment of working with startups, are the cutting edge of the
automotive industry, which are the change makers,"
Kerton says. "I don't think we've hit the follower stage yet."

IT'S NOT ALL ABOUT SELF-INTEREST

According to data compiled by Crunchbase in 2018 and
reported by Crunchbase News, the venture capital investment tracking firm's publication - the top 20 global automakers collectively participated in more than 50 startup
fundings last year (the most since 2012), and were the leading or sole investors in about one-third of those. Mostly the
money went to tech companies for self-driving and electric
cars, and ride hailing services. But developers of solid-state
batteries, 3D metal printing and computer vision technologies were also in the mix, Crunchbase News reported.
Investments ranged from $65 million put into Desktop
Metal (a 3D metal printing company) by Ford, to $1 billion
invested by Toyota in the ride-hailing firm Grab. In fact,
Toyota was the largest investor in ride-hailing companies,
Crunchbase News said, with an additional $500 million
placed into Uber and a joint investment of $300 million
with Softbank in Getaround. In May 2018, GM spent $1.1
billion acquiring Cruise, but this was not included in
Crunchbase News' compilation.
More recently, in July, Volkswagen invested $2.6 billion
in Argo AI, a self-driving car technology platform, joining
Ford as an equal partner in the company. This investment
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i3_0919_FEATURE_AutomakerStartups.indd 27

included $1 billion in funding and the contribution of VW's
Autonomous Intelligent Driving company, which has 200
employees and was valued at $1.6 billion. The deal also stipulates that VW will buy $500 million worth of Argo AI shares
from Ford over the next three years, diluting Ford's prior commitment of $1 billion to Argo AI. (Ford retains its commitment
to put $600 million into Argo AI in the same period.) Together,
VW and Ford are now majority stakeholders in the startup.
At the same time, Ford announced it will be the first automaker to use VW's dedicated electric vehicle architecture called
MEB, for high-volume production of a zero-emission vehicle
in Europe beginning 2023.
Quin Garcia, managing director of Autotech Ventures, based
in Menlo Park, CA, says, "Most automakers globally are trying
to reposition themselves as a company that's more than just
manufacturing cars."
Some are gravitating toward smart city and mobility services technologies (Ford), others toward industrial or elderly
assistant robotics (Honda and Toyota) and still others toward
trucking (Tesla), he points out.
"Pretty much every major automaker has done or is doing
joint projects with startups. Most major automakers have
made strategic investments into externally managed VC funds
and most automakers have made some direct investments into
startups or acquired such startups," Garcia says.
"This enormous wave" of automaker investments began
about 2009, but it was about seven years ago when technology
giants and very well-funded startups such as Lyft, Uber and
eSurance entered the fray, Garcia recalls. And that spurred
automakers to invest because they perceived a threat.
"Another reason is that automakers recognize that they
have difficulty attracting and retaining certain types of technology talent," especially the type needed to develop software
and business model innovations, he says. "So essentially what
they're doing is relying on startup companies for external
research and development."
Autotech Ventures was founded in 2014, assembled its first
fund in 2015, and now manages more than $200 million, which
it invests in transportation-related startups, in cooperation with
large transportation corporations, including automakers. Its
investments span 21 startup companies, and they compose "the
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i3 - September/October 2019

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