Jump-Start: A New Generation of Mobility Companies – and Venture Capital

Jul 15, 2019

They belong to the giants of the mobility industry: Mercedes, Audi, BMW, Renault-Nissan, Toyota – and this list is not even complete. Probably everyone can easily enumerate four or five other companies. After all, mobility is not just limited to the car.

In addition, a new generation of mobility companies is already on the starting blocks. The Liliums (flying taxis), Teslas (electric cars), e.Gos (low-cost electric vehicles), Ubers (ridehailing) or ViaVans (ridesharing) of this world are now often representative of the emerging new mobility services. And they all have one thing in common: Venture capital is crucial for their businesses. It is practically their jump-start to succeed in the highly competitive mobility market.

 

Record Sums are Invested into European Startups

Over €2.6 billion were invested in European transport startups in 2017 alone, according to the State of European Tech. A report on the European tech ecosystem by Europe's largest venture capitalist Atomico. And each year, the sums invested are growing. The mobility industry is currently booming for startups. In 2017 for example, Lilium alone received €90 million for the development of autonomous flying taxis. Sums like these showcase the value that young companies are now enjoying – and they illustrate the importance of these startups for the development of advanced technology and means of transportation.

However, all this does not mean an alleged generational conflict; the startups on the one hand – big automotive companies on the other. Of course, companies like Uber and ViaVan compete with established players in the industry. However, startups are also the big opportunity for VW, Daimler and Co in the race for digital mobility. For this reason too, automobile companies are increasingly investing directly in startups.

 

Mobility in the Digital Age

After all, digital transformation is changing the car as we know it. Many cars are already rolling computers, equipped with digital assistance and infotainment systems and a large number of sensors. Classical success factors of the industry – well-engineered engines, design, the feeling while driving – are becoming less important as digitization extends the requirement profile of vehicles by one more variable: Software (and thus networked hardware). This development will continue rapidly as technology advances. Keywords are artificial intelligence or autonomous driving.

It is precisely here that the digital companies of the world, which are currently pushing into the mobility market with all their might, have advantages over classic automobile companies. Engineering meets software development. And while Google or Alibaba are developing their own mobility services and services, the startups of the mobility world are a welcome partner for automotive companies to build their know-how for software development.

 

Mobility Companies are Becoming Venture Capitalists

Every automotive company now has its own startup network via innovation hubs, incubators, accelerators or venture capital arms – also to gain access to interesting new technologies.

Daimler is a leader in this field in particular: According to the consultancy firm Berylls, Daimler acquired 14 companies in 2017 – especially from the digital sector – and invested over €650 million in CASE technologies (Connectivity, Autonomous, Electric, Shared & Services). The direction is clear: The companies want to expand their software know-how and build new competencies.

Targets of Mobility Companies; Source: Berylls, M&A Automobil 2017, page 13

On Medium, Oswin Krüger Ruiz from the Lufthansa Innovation Hub describes the work of large companies as venture capitalists. According to him, the goal of mobility players – know-how and experience for their own company – manifests itself in the phases in which they invest in startups. In fact, corporations often participate in later rounds of financing; when the startups have already established their business to a certain extent in the market. According to Krüger Ruiz, these are signals that corporations want to reduce their investment risks as much as possible.

Figure: When corporates are investing in startups; Source: Lufthansa Innovation Hub on Medium

When corporates are investing in startups; Source: Lufthansa Innovation Hub Analysis, Pitchbook | Lufthansa Innovation Hub on Medium

Krüger Ruiz argues that traditional venture capitalists usually minimise their risk by investing in multiple startups. With a two- or three-digit return on successful investments, the losses from less successful financings are to be covered accordingly. According to Krüger Ruiz, corporate investors, however, are less concerned with financial success, but focus on the strategic fit for their own company.

In a way, it all comes full circle: In addition to a disruptive idea, venture capital is often an integral part of the recipe for success of a new generation of companies in the mobility market. At the same time these young companies are an investment, maybe even a guarantee for the future – No matter whether for the classic VC or the venture capital arm of a corporation.

 

Corporates Meet Startups: The NMW Lab


Collaboration between startups and companies has also been a key theme at the New Mobility World for several years. During the NMW Lab, promising companies can pitch, share and connect with their ideas, visions and products to VCs and company representatives. Once again, the NMW Lab is part of the New Mobility World this year. The applications for the industry-owned startup challenge and for the open startup challenge are now open. Further information can be found here.

The winners of last year's NMW Lab18: Blickfeld