LAS VEGAS – Investments in automotive mobility startups have been gaining traction recently, but venture capitalists still do not put a priority on investing in this sector.
One way that startups could improve the investment process is by forming partnerships before pitching venture capitalists.
This was the unanimous advice to startups from both OEMs and VC firms during the Consumer Telematics Show here last week.
“We have a lot of people calling us, but what they don’t always grasp is that we have a very long development life cycle,” said Rick Whittemore, connected vehicle portfolio manager at Audi of America. “My suggestion is to partner with someone that works with us already. Find a Tier 1 or 2 supplier, that already has all the ins and outs, and find a better way to come to us.”
Investors, as opposed to startups, have time on their side to “watch trends play out, to see you play out, to see if you can provide what they want without taking unnecessary risk,” said Chris Thomas, founder of Fontinalis Partners. Therefore, startups need to make sure they are not wasting time aligning their products with the wrong investor, Thomas said.
“Automotive companies are not like any other space: scaling is extremely hard, and it takes years for any new product to develop,” he said. “So when we see a company already partner with incumbents, it lets us start off from a much better position, rather than looking at a startup and saying ‘this company is just too small, or it doesn’t fit my interests.’”
Venture capital investment in mobility-related startups has been on the rise recently. According to McKinsey & Co., the total funding in mobility reached $21 billion last year, up from $5 billion in 2015.
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