What is the strategic role of GM Ventures within GM?
GM Ventures was launched in July 2010 as a key component of GM’s corporate strategy to be a leader in technology and innovation. We identify and invest equity in startups that are developing automotive-related technology and business models to accelerate the introduction of innovations that will strengthen GM’s automotive business. So, venture investing gives us another method to gain access to advanced technology that fills a gap or complements our internal technical capabilities.
To what extent is GM Ventures integrated with other divisions of GM and what type of synergies does it generate within the broader organisation?
My role at GM is chief technology officer, vice-president of research and development and president of GM Ventures, with a reporting relationship to global product development which includes product and manufacturing engineering, design, purchasing and propulsion systems. This organisational alignment provides a clear indication that we believe venture investing needs to be tightly integrated into our overall technical and business strategy to drive the most impact. A byproduct of this setup is that GM Ventures has direct access to GM’s entire technical community and a detailed understanding of their technical priorities.
What is GM Ventures’ investment strategy?
Since launching GM Ventures six years ago, our primary focus has been on five key technology sectors:
• Automotive cleantech – technologies related to the greening and electrification of the vehicle.
• Infotainment – voice recognition, cloud services, connectivity.
• Advanced materials that create mass efficiency or have cost or performance benefits.
• Other automotive-related technologies, especially sensors, processors and memory.
• Value-chain or business model opportunities, such as car and ride-sharing.
It will be critical to have technical leadership in these five areas during the next five to 10 years.
What have been the most recent trends you have seen in those areas?
Over the past five years, there has been an explosion in the number of startups and venture funding for all types of ride sharing, car sharing and delivery services. That area is now saturated and probably headed for a shakeout of the companies that will survive. More recently, there has been a rapid increase in the number of startups focused on artificial intelligence, advanced sensing – radar, lidar, others – and anything autonomous. There are also a fair number of startups working on virtual and augmented reality that have automotive applications. On the funding side, the number of automotive manufacturers and suppliers that have announced venture organisations has increased very significantly in the past couple of years as well.
What is the ideal investment for GM Ventures? How important is the financial versus the technological potential of a prospective portfolio company?
An ideal investment is a relatively early-stage startup. The startup already has a proof of concept that we assess as “promising” but needs a fair amount of technical support and funding to commercialise the technology for automotive. The startup is also looking for a lead customer in automotive that will do joint development with them to integrate their technology into a larger vehicle system and launch it. We have done quite a few investments in startups with this profile. Generally, we value the technical impact that a startup’s technology can have on our products or business to a greater degree than financial forecasts or metrics, especially when we factor in our financial impact as a customer. But we are not indifferent to financial considerations and have walked away from deals because terms of an investment were out of line or the potential for an exit over a reasonable period of time was unsatisfactory.
What is your focus in terms of stage of development of companies and what size stake do you normally seek?
We are stage-agnostic and have probably done as many A round investments as the number of later rounds combined. The sweet spot is a startup that has already raised an A round and is looking for new investors for a B round to supplement its investor group. We always stay below 20% of the fully-diluted equity of the company and generally aim to have equity of between 10% and 20%, although we are sometimes a bit less than 10%. We do not do seed investments though. We will lead rounds – about 20 so far – or sign on to another investor’s term sheet or participate in a syndicate of investors.
What is the geographical focus and orientation of GM Ventures’ investments?
We are not zip-code investors, so geography is not an overwhelming consideration compared with the strength of a startup’s technology and its management team. Our current portfolio is 25 companies and they are located across the US, Europe, Israel and Asia. For competitive reasons, we do not disclose our investments when they close. As a result, you will not find them in databases that report on venture investments until many months later when we decide it makes sense.
To what extent does GM Ventures scout for potential acquisitions for its corporate parent?
We actively scout for startups, particularly in the US and Israel, that are developing remarkable technologies. We do not get into an investment with the idea that we will acquire a startup, though we do not rule it out either. In fact, before GM acquired Cruise Automation in early 2016, we were looking at it as a potential venture investment. However, as we got into details of what Cruise was developing, we decided it made more sense to acquire it outright.
What is your take on the three megatrends in the sector – connected car, autonomous car and electric car?
Each of these areas is going to be critical for an automotive company because they are foundational elements for cars of the future. The combination of these three megatrends, plus “shared”, opens up all sorts of new possibilities to dramatically change the automotive business as we know it today. So we are very active in these areas. In fact, the combination of investments by both corporate and financial investors seeking access to the latest technologies in these areas has driven valuations for all rounds up very significantly. It feels a lot like cleantech did between 2009 and 2012.
What other innovation developments do you expect to see in the transport sector?
The automotive industry is facing an unprecedented period of disruption, much of it in non-traditional technical areas. The explosion of new technology and business models – ride-sharing, for example – is likely to lead to a split of automotive industry into haves and have-nots.
The haves will be automotive manufacturers and suppliers that choose to make the large investments now in the megatrend and other technical areas in order to be among the leaders in capability. The have-nots will be companies that are unable to make or avoid making those investments and fall behind, impacting their ability to compete in the medium and longer term. In that context, GM Ventures provides access to a wider range of technologies than GM can pursue by itself, financially or technically, and is an asset to assure that GM is among of group of haves going forward.
