The venture capital firm, based in Palo Alto, California, has raised about $75 million to bankroll early-stage technologies enabling autonomous driving, improved cybersecurity in cars, entertainment systems and other automotive next big things.
Auto-parts makers and component suppliers, including Denso Corp., Mahle GmbH. and Murata Manufacturing Co. Ltd., were among the investors in the firm, founded last year. As limited partners, they’ll get a share of AutoTech Ventures’ returns.
“We aren’t in it for financial return — it’s all strategic,” said Tony Cannestra, director of corporate venture at Japan-based automotive components company Denso. He said the number of tech startups in transportation has more than doubled since he began investing in such companies almost five years ago, making it harder to hone in on the potential winners.
That fear of missing out on the next hot company is the primary factor driving corporate investing to what the National Venture Capital Association said was a 15-year-high in 2015. While the sentiment has washed over many sectors, it’s particularly acute in the world of transportation. “High tech has long been in the auto industry, but the role has primarily been as a supplier,” said Egil Juliussen, director of research at IHS Automotive. “Now, they will be direct competitors.”
Juliussen, who has been studying car technology for the past decade, said the number and diversity of people working in the sector has exploded in recent years. The number of cars with connectivity in use worldwide hit 81 million last year and is expected to reach 345 million by 2022, according IHS Automotive.
General Motors Co. and Fontanilis Capital, the fund founded by Ford Motor Co. Chair Bill Ford, and some others have been investing in transportation startups for at least seven years, backing companies including Lyft Inc., Wheelz Inc. and Zendrive. Uber Technologies Inc., Tesla and Lyft have formed during this time and existing tech titans Google and Apple have expanded their reach with the goal of creating autonomous, electric transportation on demand.
For AutoTech Ventures, the goal is to find startups roaming the range of transportation development. “There needs to be a smart handoff between the human and the machine,” said Quin Garcia, who co-founded the fund. “When a driver is getting sleepy or suddenly has a pulse that starts racing, that trade-off should be smooth.”
Alexei Andreev, another founder, said the firm has a pipeline of roughly 1,100 startups they are examining now. AutoTech has made just one investment so far, putting $4 million into Lyft in December when the ride sharing service raised $1 billion from Alibaba Group Holding Ltd., GM and others, and struck a partnership with the U.S. carmaker to develop a network of self-driving cars.