There is a nice line from a corporate venturing head at a vehicle maker that cars often have more lines of software than an airliner, “which just goes to show how inefficientthe industry is”.
And to develop its innovation capacity, companies in the transport and logistics sector have been embracing business models and services as well as looking at technologies applied outside their area – and going to Silicon Valley in California to see how software is developed there.
While car maker BMW has been present in the valley for a decade through its Technology Office USA, it has been followed by peers, including in the past two years by Ford, truck maker Volvo, and Hyundai opening its regional corporate venturing unit under John Suh.
Suh moved from being technology and investment manager at General Motors to managing director of Hyundai Ventures in April 2011, according to his LinkedIn profile, working with colleagues in South Korea, such as Sung Woo Shin (see Outlook survey for Suh’s views on the year ahead).
But other vehicle makers have been developing their valley strategy.
Toshinori Arita, the former head of Japan-based car maker Honda’s corporate venturing unit, re-emerged at printer company Ricoh’s new business development centre.
Arita had spent nearly a decade as head of strategic venturing at Honda’s Silicon Valley officeand the move came as the car maker shifted from equity investments towards setting up an incubator.
Nick (Naoki) Sugimoto, is manager of Honda’s Silicon Valley Lab after six years working with Arita on strategic venturing, while Dani Essindi Behrendt looks after innovation and strategic alliances.
Volvo is Global Corporate Venturing’s most influential unit from a parent in the transport and logistics industry (see table) has also opened in the San Francsico bay area.
This is part of a rebadging of its corporate venturing unit and evolution of its strategy to a more global franchise looking at the challenges incumbents in the sec-tor are facing (see profile).
Jonas Landström, who moved to the bay area in California in October for Volvo, said in his blog : “The transportation sector is more than ever converging with other industries such as power electronics, telecom, software, and the trends of connectivity, electrificationand servicification are both huge threats and opportunities for Volvo.”
Similar issues have been affecting logistics (see IDC’s predictions in the box below), leading to Deutsche Post DHL’s inaugural Innovation Day in March.
Speakers there debated the upsides and challenges of smart materials, self-driving vehicles, and 3D printers, and discussed the recent scenario study, Delivering Tomorrow – Logistics in 2050, about how customers’ demands are changing, from the need to save time, to the desire to play a role in shaping the kinds of products they seek.
The same preoccupation with the future is true for other transport and logistics companies, leading to a host of new launches.
Fundraising
Global Corporate Venturing has tracked at least seven unit or fund launches over the past two years, including BMW formalising its i Ventures fund investing out of New York to complement its technology office in California, and rental company Enterprise taking a 15% stake in China-based peer EHi as part of a global affiliation scheme.
The agreed acquisition of car rental service Zipcar by peer Avis will result in the removal of one corporate venturing unit, as the target had been a backer of start-ups, such as Wheelz, which also has venture capital firm Fontinalis Partners as an investor.
Ford opened up its technology scouting and research laboratory in Silicon Valley in March but its chairman, Bill Ford, had effectively outsourcing the company’s entrepreneurial eyes and ears to Fontinalis.
While Fontinalis is unaffiliatd to Ford, it was set up at least in part using Bill Ford’s money. Bill Ford told news provider Hour Detroit: “I started to be aware that there was so much new technology coming into the transportation space, whether it was engine technology, like electric vehicles, and all the different pieces that spun off that, or entertainment technology, like Sync and My Ford Touch and all the apps that go into that, or whether it was technology to solve urban congestion issues.
“Almost invariably the answer was ‘no’ [for Ford itself], because even though the technology might be interesting, it was way too early-stage for something Ford would be thinking about … I went to my board and told them I am very interested in investing in this space [through Fontinalis] and if I do it right, I can be early eyes and ears for the company as well.”
Fontinalis, which describes itself as “a strategic investor in transportation technology companies”, has also invested in Zagster, a company that provides bicycle-sharing and rentals; Everyday Solutions, which makes GPS systems to improve the efficiency of school bus transportation and merged with Synovia; QuickPay, a mobile payments company capable of interacting with legacy transportation infrastructure; Wheelz, a mobile and web-enabled peer-to-peer car sharing company; Parkmobile, a provider of mobile parking payment systems; SQLstream, which allows customers to analyse real-time data on trafficpat-terns; and Streetline, which uses sensors to track parking spaces in cities and won technology provider IBM’s Smart-Camp award.
Other corporate venturing units have raised dedicated funds, often with external investors joining what have become effectively multicorporate investment vehicles, particularly in France.
Train operator SNCF spun out its corporate venturing unit, Ecomobilité Ventures, as part of a €30m fund launched in collaboration with phone operator France Telecom/Orange and advertising agency Publicis, although car maker PSA Peugeot Citroën dropped out at the last moment.
This followed the success of Xange Private Equity, founded and backed by France’s main mail delivery company, La Poste, since 2004. XAnge raised its second fund at €60m in a first close in January last year, with a 40% commitment by La Poste and its banking subsidiary.
Other limited partners in XAnge Capital 2 fund included technology provider Alten, logistics group Neopost and accountancy firm Deloitte Finance as the remit for the second vehicle was broadened beyond logistics and into digital media more widely reflectingthe changes affecting the sector from non-traditional markets.
Hervé Schricke, a member of the Global Corporate Venturing Powerlist 100 and chairman of XAnge, which moved up to second place in the sector’s most influential ranking, said: “I was a bit reluctant about corporate venturing when I joined [in 2003]. I thought corporate venturing was a trick. Yet you raise funds and have the expertise of the groups and the people who are with it. These people are very skilled and knowledgeable and you need their expertise. We bring a lot of value-add, which is different when you are just a financial investor.
“Yet it is better to have the mix of two worlds, where the manager is also motivated by the financial performance of the fund. This allows you to be both independent and con-nected to the corporates.”
Deals
XAnge and Ecomobilité have been some of the most corporate venturing investors in the transport and logistics sector over the past year.
Ecomobilite said it had invested €5m ($7m) in total in three companies – Move About, ez-Wheel and Zilok Auto.
XAnge said it had struck four deals in the final four months of the year alone, including Sculpteo, a France-based pro-vider of 3D printing services, Pactas, a Germany-based electronic Invoicing services provider, and Tag Commander, a France-based provider of digital marketing services.
Many of XAnge’s deals were with unconventional syndicates, including business angels, reflecting the paucity of venture capital firms (VCs) able to invest in early-stage or complicated or unusual sectors.
Last month, Robin Radar, an avian (bird-detecting) radar company for airports and wind parks, raised an undisclosed amount from Inkef Capital, a venture firm set up by two pension funds, and Mainport Innovation Fund, which has backing from Netherlands-based Schiphol Airport and local airline KLM.
At the time of the deal, Jos Nijhuis, chief executive of Schiphol Airport, said: “With this technology Robin meets the growing need for more accurate and real-time information about movements of large birds in the vicinity of the airport. In January, we begin a one-year trial to gain experience with Robin and its effectiveness.”
US-based logistics company UPS has also been exploring areas beyond traditional VCs’ range, including portfolio company United Villages, which acts as a distributor in Africa.
But for the biggest rounds, China and the US were most active, with electric car maker Fisker raising more than $100m.
Management consultancy Accenture in its 2011 report, The United States and China: the Race to Disruptive Transport Technologies, said: “Significant investment is going into electrification in both markets, as exemplifiedby the fact that every major automaker has planned or plans to launch an EV [electric vehicle] or PHEV [plug-in hybrid electric vehicle] model.”
But the disruption is beyond car ownership to models of car-sharing and renting.
Germany-based Daimler has made corporate venturing investments in all these fields,including a minority interest in Tiramizoo, a local delivery logistics service start-up, MyTaxi through its short-term car rental provider Car2Go, which currently has 150,000 registered customers, ride-sharing service Carpooling and US-based electric car company Tesla through Aabar Investments.
In China, US-listed auto loan company Enterprise took a 15% stake in car rental provider EHi after it had raised about $165m from a consortium including investment bank Goldman Sachs.
EHi has been competing against Legend Capital-backed China Auto Rental, which is reported to be the country’s largest car rental network in terms of revenue and raised $200m from private equity firm Warburg Pincus in July.
The $200m bet was on the rising middle class and challenges of car ownership in a country of more than a billion people.
With stock markets rising in China and the US last year, there is better hope for some flotations,although groups are looking at other exit routes, such as spin-offs of incubated companies.
DHL and its joint-venture partner, CargoGuard, spun off Agheera after it had developed the DHL Secure Box.
On the other side of the world, NZ Post hired adviser Grant Samuel to find investors for its Localist daily deals start-up, which led to some adverse reader reaction to the news story when it was published.
There have been relatively few exits from corporate venturing units in the sector.
Volvo sold Jensen to Bourns and Vaperma and lost Effpower to a bankruptcy last year.
Garbage disposal company Waste Management (WM) saw portfolio company Enerkem abandon its flotation in March, Genomatica drop its initial public offering (IPO) in August and Fulcrum BioEnergy do the same in November.
Another WM portfolio company, Agilyx, replaced its chief executive and chief financial officer in August after earlier being talked about as a candidate for a listing – leading to reaction from investment forums, such as “Agilyx IPO? Don’t make me laugh.”
WM made an exit of sorts by selling S4 Energy Solutions to joint venture partner InEnTec in order to take a minority stake in InEnTec.
People
In February last year, another portfolio company, Terrabon, a US-based bioenergy company, appointed Carl Rush to its board to replace Tim Cesarek, who left its investor, WM.
Cesarek left after nearly three years as managing director of organic growth at WM to join another of the company’s portfolio enterprises, waste-to-fuels provider Enerkem, as senior vice-president of business development in North America. WM owns 11% of Enerkem.
Separately, WM has promoted Bill Caesar as president of WM Recycling and the Organic Growth Group. He joined WM in 2010 as chief strategy officer after being a principal in the Atlanta office of management consultant McKinsey & Company.
Box: IDC’s supply chain predictions for 2013
l Resiliency becomes a priority for end users looking to master ‘massive multidimensionality’.
l On the supply side of the supply chain, recognising the inherent cost of long lead-times, manufacturers con-tinue to look at global networks through the lens of both regional and country-level sourcing.
l On the demand side of the supply chain, recognising the need for better service levels and mass customisation, manufacturers look again to postponement tech-niques and data analytics to drive more effective cus-tomer insights and smarter fulfilment
l End user it organisations will have to support a more productive supply chain ecosystem.
l Service excellence becomes a strategic priority.
l Supply chains will optimise omnichannel customer service and cost by enabling trustworthy, efficientand effective supply chains.
l End users will focus efforts to improve collaboration both upstream with suppliers and downstream with cus-tomers to compete better in a faster world.
l Supply chains will invest in technologies that enable visibility, visualisation and virtualisation.
l The modern supply chain gets smarter through integration, optimisation and embedded analytics.
l The big data era dawns for supply chain organisations.
For interpretations see Kevin O’Meara’s blog at 10X Logistics.