Download - Connected Car Investment Thesis
The Emergence of the Connected Car
Where are the investment Opportunities?
2
Connected Car of Today and Tomorrow
Investment Thesis
© Copyright 2015 James Harris. All Rights Reserved
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Posturing in the MarketThought Leader Consensus
James A. BuczkowskiDirector, Electrical and Electronics Systems “The focus on innovation, at least for Ford,
starts with the consumer, and people want to stay connected when they get into their car. Plain and simple.”
Source: Industry Interviews, Market Research
Acknowledgement from Tier I Autos
Tier I autos are moving to introduce connected car features and
functionalities in new vehicle lines
Thought leaders acknowledge the emergence of the trend, and are bullish
in market growth projections
Connected car investment deals are climbing; organizations are moving to set up funds that exclusively focus on
the space
The connected car is universally acknowledged to be part of our future
© Copyright 2015 James Harris. All Rights Reserved
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“A vehicle using mechatronics, telematics and artificial intelligence technologies to interact with the
environment to provide greater safety, comfort, entertainment and, importantly, a ‘connected-life’
experience” – Cognizant 20-20
• In-dash, infotainment system with embedded applications that offer features like:
˗ System and automobile diagnostics
˗ Navigation
˗ Smart device connectivity
˗ Roadside assistance (e.g. OnStar)
˗ Voice command/hands free control
˗ Contextual help/assistance
• Today, connectivity is generally limited to users and devices inside of the car
Key Features of Today’s Connected Car
Source: Market Research
© Copyright 2015 James Harris. All Rights Reserved
How do we define the connected car today?
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The evolution of the Connected Car
“Today” : ~2013 - 2015
Near-Term : ~2015 - 2020
… Longer-Term : ~2020 and on
…
We are here
Smart device integration & Infotainment applications
Internet/WLAN access; Partial Autonomous Vehicles; Partial
Vehicle-to-Vehicle (V2V) & Vehicle-to-Infrastructure (V2I)
connectivity
Ubiquitous V2V & V2I connectivity; Fully
Autonomous Vehicles
Source: Industry interviews, market research
• System and automobile diagnostics
• Navigation
• Smart device connectivity
• Roadside assistance (e.g. OnStar)
• Voice command/hands free control
• Etc.
• WLAN hotspot
• Vehicle condition and service reminders
• Optimized fuel consumption
• Fatigue detection
• V2V & V2I
˗ Collision protection
˗ Heavy traffic or parking auto-pilot
˗ Other
• Ubiquitous V2V & V2I communications
˗ Cooperative intersection safety˗ Cooperative adaptive cruise
control˗ Dynamic mobility applications˗ Etc.
• Driverless vehicleSam
ple
Featu
re
Set
Connected Smart Automated
© Copyright 2015 James Harris. All Rights Reserved
How will the connected car evolve tomorrow and beyond?
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…“Today” : ~2013 - 2015
Hard
ware
Soft
ware
Infotainment / In-Dash Display Bluetooth Module(s) OBD-II Module Smart Devices
Infotainment OS Smartdevice iOS, Android
…
Infotainment OS Smartdevice iOS, Android
Infotainment / In-Dash Display Bluetooth Module(s) OBD-II Module Smart Devices In-vehicle LTE antennae DSRC vehicle and roadside
infrastructure (for V2V & V2I)
Smart device integration & Infotainment applications
Internet/WLAN access; Partial Autonomous Vehicles; Partial
Vehicle-to-Vehicle (V2V) & Vehicle-to-Infrastructure (V2I)
connectivity
Near-Term : ~2015 - 2020
Longer-Term : ~2020 and on
The evolution of the Connected Car
Source: Industry interviews, market research
© Copyright 2015 James Harris. All Rights Reserved
Core technologies that enable this evolution exist today
Retrofit 4G LTE connectivity solutions are available
OEMs like General Motors are starting to build this hardware into new vehicle lines
The US Dept. of Transportation:˗ Is currently developing
plans to rollout Dedicated Short Range Communication (DSRC) roadside infrastructure
˗ Announced plans to mandate OEMs to build V2V technology into new vehicle lines
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• By 2020, Business Insider Intelligence estimates that:
˗ There will be 220 million connected cars on the road
˗ 75% of cars shipped globally will be built with the necessary hardware to connect to the Internet
˗ Connected car hardware and software will bring $150Bn+
˗ Sales of connected cares will equal $2.3T+
˗ Driver assistance, safety and entertainment will be the dominant categories
Insights
Source: Business Insider
© Copyright 2015 James Harris. All Rights Reserved
Growth projections are bullish
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Road Safety
Interactive apps need to manifest themselves in a non-distracting way; eyes on the road, hands on the wheel is crucial
Natural language and contextual speech enablement is essential, but will be difficult to develop given a vehicle’s noisy environment
Cyber Security & Privacy
End-to-end security architecture that spans from the chip level of the CPU, to the vehicle network, to the vehicle gateway, and up to the cloud is required
Different standards for encrypted communication between WANs & LANs need to be defined
Regulatory Environment & Infrastructure
(V2V/V2I)
Interoperability, safety and security standards for V2V and V2I communication need to be defined and rolled out
For V2I, roadside infrastructure needs to be equipped with the necessary DSRC communications technology, which will take years!
OEM Readiness Speed to market is much slower in the automotive world relative to rapidly
evolving expectations of consumers for connected functionality and technology
Source: Industry interviews, market research
© Copyright 2015 James Harris. All Rights Reserved
But challenges around safety, security and OEM readiness exist
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Connected Car of Today and Tomorrow
Investment Thesis
The Trouble with a Pure Consumer Play
The Enterprise Bias: A snapshot of the Funding & Exit Landscape
Recommended Focus Areas
© Copyright 2015 James Harris. All Rights Reserved
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5636
23
29
2135 Strongly Agree
Somewhat Agree
Disagree
100 100
Statement: I am willing to pay for connected services in my car in a subscription-based model
Statement: I would pay an extra USD100 for a new car if it offered connected car features
Mckinsey Connected Car Consumer Survey
(% of new car buyers)
Source: Mckinsey
© Copyright 2015 James Harris. All Rights Reserved
Consumer willingness to pay (WTP) for in-vehicle connected services seems low
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Highlights
Open collaboration in a traditionally closed industry will
take time
High uncertainty around standardized OS
Limited basis for which to assess the viability and
potential of in-vehicle consumer apps
Source: Market research
© Copyright 2015 James Harris. All Rights Reserved
Standardization of infotainment OS across vehicle lines is highly uncertain
To foster an open ecosystem, automakers will be forced to cooperate and converge to a single (or very few) infotainment OS
Disparate OS make it difficult for automotives to tailor the connected car experience to suit customers swiftly changing needs and preferences
Developers will not build across multiple platforms!
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• App marketplaces for other form factors (e.g. tablets, smart TVs) are host to apps that were designed for the smartphone, and are merely optimized for the new medium
• The same thing will happen for the connected car app ecosystem. Examples are already unfolding:
Insights
Smart TVs
Tablets
Smartphones
Tablets & Smart TVsAn extension of the mobile app marketplace
… …
Source: Market research, Industry interviews
© Copyright 2015 James Harris. All Rights Reserved
Will OS standardization bring about lucrative investment opportunity on the consumer side? … Probably not
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Connected Car of Today and Tomorrow
Investment Thesis
The Trouble with a Pure Consumer Play
The Enterprise Bias: A snapshot of the Funding & Exit Landscape
Recommended Focus Areas
© Copyright 2015 James Harris. All Rights Reserved
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2009 2010 2011 2012 20130
5
10
15
20
25
30
Num
ber
of
Deals
Connected Car Financing Deal Trend
(2009 – 2013)
• Intel Capital launches $100MM connected car fund in 2012
• Nokia launches $100MM connected car fund in 2014
• Alibaba, SAIC Motor partner in 2015 to invest $160MM in connected cars
• Etc.
Key Activities
Source: CB Insights, Market research
© Copyright 2015 James Harris. All Rights Reserved
Despite challenges and uncertainties, the connected car funding landscape looks promising
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• Based on recent investments in the connected car space, it can be inferred that:
˗ Majority of funding has been aimed at startups positioned to sell to, or develop technology on behalf of the enterprise
˗ Competition for consumer mobile and off-the-shelf aftermarket solutions has, and will continue to intensify
Insights*Enterprise* *Consumer*
Primary Paying Customer
Source: Market research
© Copyright 2015 James Harris. All Rights Reserved
So, what can we learn from recent investments in the space?
Most are to those organizations that target the enterprise as the customer
Non-
Exhaustive
Zubie's market focus includes fleet-managment and Usage-Based-Insurance (UBI)
Navdy is considering an enterprise license play
Source: Market research
Company Service Offering Exit
Vision-based advanced driver assistance systems (ADAS)
2014 IPO$5.3Bn Market Cap
Real time fuel pricing and parking data to auto manufacturers, PND manufacturers and mobile operators
2015 AcquisitionBy Oil Price Information
Service (OPIS)
Roadside assistance, connected vehicle services, and claims management services 2013 Acquisition
By Sirius XM Radio, Inc.
End-to-end automotive software management solution provider
2015 AcquisitionBy Harman International
$170MM
Embedded system firmware dev and integration; data ingestion processing and analytics; firmware / software updates
2015 AcquisitionBy Harman International
$780MM
Offers world-leading eye tracking technology to automakers that look to innovative technology for human-machine interaction
2015 IPO$244MM Market Cap
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Target Audience
OEMsSupplier
sInsurers Telcos
© Copyright 2015 James Harris. All Rights Reserved
The biggest exits in the space are for co.’s that target and sell to the enterpriseNon-
Exhaustive
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Services, Content,
AppsSoftware System
IntegrationHardware Infrastructur
e
Highlights Services Streaming
Content Mobile Apps
App Store OS/Platform
Software Car/User
Interface
Components Car design and
manuf. Mobile Devices
DB/Cloud Mobile network Mobility Infra
OEMs
e.g. Audi, BMW, Ford, GM, Mercedes-Benz, Toyota, VW
• Extending activities from core hardware business into provisioning and management of software OS
Automotive Suppliers
e.g. Bosch, Continental, Delphi, Magna, Denso
• Providing OEMs with an easy way to manage software / firmware …
• … and deploy, manage, scale connected car services from the cloud
Telecom Players
e.g. Telefonica, Vodafone, AT&T, Verizon
• Moving to partner with OEMs to equip connected cars with pre-installed SIM cards and other DSRC infrastructure
Automotive Insurers
e.g. AllState, Progressive, Statefarm
• Moving to offer telematics and usage based coverage options
Connected car:
En
terp
rise P
layers
Historical core business New activities
Source: Mckinsey
© Copyright 2015 James Harris. All Rights Reserved
So, what are the more reliable and predictable ‘paying customers’ doing?
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Services, Content,
AppsSoftware System
IntegrationHardware Infrastructur
e
Services Streaming
Content Mobile Apps
App Store OS/Platform
Software Car/User
Interface
Components Car design and
manuf. Mobile Devices
DB/Cloud Mobile network Mobility Infra
OEMs
e.g. Audi, BMW, Ford, GM, Mercedes-Benz, Toyota, VW
Automotive Suppliers
e.g. Bosch, Continental, Delphi, Magna, Denso
Telecom Players
e.g. Telefonica, Vodafone, AT&T, Verizon
Automotive Insurers
e.g. AllState, Progressive, Statefarm
Connected car:
En
terp
rise P
layers
Historical core business New activities
Does the service(s) and/or technology that the startup organization is
bringing to market cater to these ‘new
activities’?
© Copyright 2015 James Harris. All Rights Reserved
New activities represent ‘white space.’ Promising companies are playing here
The first question I will ask when I see
a connected car ‘deal’ -
Source: Mckinsey
Airbiquity sells connected car cloud platform for OEMs to manage services
Redbend Software empowers tier 1 suppliers to remotely deploy / manage software
Zubi partners with Progressive to provide low cost, usage based insurance packages
AT&T partners with GM to implement 4G LTE antenna for wifi connectivity and V2V
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Connected Car of Today and Tomorrow
Investment Thesis
The Trouble with a Pure Consumer Play
The Enterprise Bias: A snapshot of the Funding & Exit Landscape
Recommended Focus Areas
© Copyright 2015 James Harris. All Rights Reserved
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Automotive Software &
Service Mgmt.
Navigation Enhancement &
Remote Assistance
Usage Based Insurance
V2V & V2I
Exam
ple
sEn
terp
rise
S
erv
ice
Are
as
OBD; driver performance data
V2V & V2I communications
technologies
Crowdsourced parking and traffic data; contextual help;
vehicle diagnostics
Remote OS and connected car service mgmt., deployment,
update, security, cloud connectivity
Enterprise Service Areas1
Crowded and Oversubscribed Poised for GrowthNear Term Longer Term
1) Does not include enterprise telematics
© Copyright 2015 James Harris. All Rights Reserved
Of major enterprise service areas, UBI and V2V / V2I are the areas to watch
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Insurers are moving … … and consumers are [becoming more] ready
5% Discount 10% Discount
15% Discount
27%
52%
23%
50%
62%
30%
62% 63%
2010
2013
2014
% of consumers interested in enrolling in UBI at x% discount rate
Source: LexisNexis, Towers Watson, Market Research
80% of consumers with smartphones are
comfortable with the idea of UBI apps to monitor their driving
© Copyright 2015 James Harris. All Rights Reserved
The Usage Based Insurance (UBI) space is poised for significant growth
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On March 13, 2015, the US Department of Transportation (USDOT) announced its
proposal for requiring vehicle to vehicle (V2V) communication capabilities in all
future cars
Governmental Developments … … and Pilot Programs underway
Plans to equip 9000 vehicles in Ann Arbor with V2V and V2I comms. technology
USDOT funded $28MM of $31MM required for the study
Virtual traffic light technology launched in 2010
Proprietary technology has proven to increase traffic flows in urban areas by 60% during rush hours
© Copyright 2015 James Harris. All Rights Reserved
Mainstream V2V & V2I technologies are part of a more distant future, but still represent a massive opportunity
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Company Category Description Raise Investors
UBI
OBD-II dongle that integrates with smartphone
Partnered with Progressive to provide usage and performance based insurance
$18MM• Magna International• Nokia Growth• Castrol Innoventures
UBI
Uses smartphone sensors to track performance data for on-demand fleets
Partnered with Uber and Lyft to provide insurance to drivers (unconfirmed)
$1.5MM Seed + undisclosed extension
• First Round Capital• BMW I Ventures• Fontinalis Partners
UBI The only variably-priced, pay-per-mile car
insurance provider in the United States $14MM in 2 rounds• SV Angel• First Round Capital• NEA
UBI
Uses near field communication technology inside of a smartphone to transmit driving data twice a year to insurance providers; currently piloting with 3 of 10 top US insurance companies
Undisclosed
• N/A
V2V & V2I
Networking platforms are designed to overcome urban dead zones, switch automatically to cost-effective wifi, and expand the vehicle's communication range through the self-organized vehicular mesh
$4.9MM Series A
• True Ventures• Union Square
Ventures
V2V & V2I
Replaces traditional traffic lights with virtual ones to reduce commute seams and lower traffic congestion
None / Resarch Phase• Carnegie Mellon
Companies to track
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The connected car is universally acknowledged to be part of our future; growth projections are bullish
But significant challenges around safety, security and OEM readiness exist
A pure consumer play is tough to justify:
˗ Consumer willingness to pay for in-vehicle connected services seems low
˗ High uncertainty around how the infotainment OS standardization issue will unfold
Of all enterprise-focused service areas, Usage Based Insurance (UBI) and Vehicle-to-Vehicle / Vehicle-to-Infrastructure technologies represent the most opportunity for investment
© Copyright 2015 James Harris. All Rights Reserved
Summary
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Appendix
© Copyright 2015 James Harris. All Rights Reserved
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Company Description Raise Investors
Telematics, compliance and navigation software provider $95MM across 4 rounds
• Kleiner Perkins• Fontinalis Partners• GM Ventures
Cloud platform enables end-to-end connected car services on a global scale via cloud and mobile <> infotainment OS integration
$35.4MM across 4+ rounds
• Ignitition• Kirnaf Ltd.• Acorn Venures• Shell Inernet Ventures
OBDII plugin that integrates with smartphones to enable location tracking, driver-scoring, location-based alerts, private location-sharing, health monitoring and upcoming maintenance costs
$18MM across 3 rounds
• Magna International• Nokia Growth• Castrol Innoventures
Parking mgmt. system offers cities control / oversight of all spaces $50MM across 5 rounds
• Qualcomm Ventures• True Ventures• Fontinalis Partners• Rockport Capital
Brings a crowdsourced solution to parking, providing parking availability info for any area, at any time $1MM across 2 rounds
• OurCrowd• SparkLabs Global Ventures• Tumml
INRIX offers real-time traffic information solutions that help develop traffic data and traffic speed for freeways, highways and arterials
$143.1MM across 8 rounds
• Bain Capital Ventures• Kleiner Perkins• August Capital• Venrock
© Copyright 2015 James Harris. All Rights Reserved
Funding Landscape
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Company Description Raise Investors
Highway autopilot that controls steering, throttle, braking and stays in lane Unknown
• Y-Combinator
World leading open platform for cars that makes it easy for developers to create consumer and enterprise connected car apps
$10.3MM across 2 rounds
• 500 Startups
• Relay Ventures
• Deutsche Telekom Capital
Uses near field communication technology inside of a smartphone to transmit driving data twice a year to insurance providers; currently piloting with 3 of 10 top US insurance companies
Undisclosed
• N/A
Uses smartphone sensors to track performance data for on-demand fleets
Partnered with Uber and Lyft to provide insurance to drivers (unconfirmed)
$1.5MM Seed + undisclosed extension
• First Round Capital• BMW I Ventures• Fontinalis Partners
Cloud platform enables end-to-end connected car services on a global scale via cloud and mobile <> infotainment OS integration
$16.3MM across 3 rounds
• Greylock
• Sunstone
• Intel Capital
Veniam builds city-scale networks of connected vehicles that expand wireless coverage and bring terabytes of physical data to the cloud
$4.9MM Series A • Union Square Ventures
• Cane Investments
© Copyright 2015 James Harris. All Rights Reserved
Funding Landscape
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Company Description Raise Investors
The only variably-priced, pay-per-mile car insurance provider in the United States $14MM in 2 rounds
• SV Angel• First Round Capital• NEA
Specializes in robotics and autonomous driving sensor technologies Undisclosed
• Intel Capital
© Copyright 2015 James Harris. All Rights Reserved
Funding Landscape
29
Company Service Offering Exit
Vision-based advanced driver assistance systems (ADAS) Forward collision warning, lane departure warning, pedestrian
detection, traffic sign recognition,
2014 IPO
$5.3Bn Market Cap
Real time fuel pricing and parking data to auto manufacturers, PND manufacturers and mobile operators
2015 Acquisition
By Oil Price Information Service
(OPIS)
Roadside assistance, connected vehicle services, and claims management market
Provide vehicle manufacturers and insurance carriers w/ roadside assistance plans, connected vehicle services, and claims management solutions
2013 Acquisition
By Sirius XM Radio, Inc.
End-to-end automotive software management solution provider; allows OEMs to centrally manage infotainment software, applications and firmware over the air
2015 Acquisition
By Harman International
$170MM
Embedded system firmware dev and integration; data ingestion processing and analytics; over the air firmware and software updates and telematics
2015 Acquisition
By Harman International
$780MM
Offers world-leading eye tracking technology to automakers that look to innovative technology for human-machine interaction
2015 IPO
$244MM Market Cap
Target Audience
OEMsSupplier
sInsurers Telcos
© Copyright 2015 James Harris. All Rights Reserved
Exit Landscape
30
Source: RPM Ventures
© Copyright 2015 James Harris. All Rights Reserved
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Source: RPM Ventures
© Copyright 2015 James Harris. All Rights Reserved