connected car investment thesis

31
The Emergence of the Connected Car Where are the investment Opportunities?

Upload: james-harris

Post on 14-Aug-2015

229 views

Category:

Technology


1 download

TRANSCRIPT

Page 1: Connected Car Investment Thesis

The Emergence of the Connected Car

Where are the investment Opportunities?

Page 2: Connected Car Investment Thesis

2

Connected Car of Today and Tomorrow

Investment Thesis

© Copyright 2015 James Harris. All Rights Reserved

Page 3: Connected Car Investment Thesis

3

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

Page 4: Connected Car Investment Thesis

4

“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?

Page 5: Connected Car Investment Thesis

5

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?

Page 6: Connected Car Investment Thesis

6

…“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

Page 7: Connected Car Investment Thesis

7

• 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

Page 8: Connected Car Investment Thesis

8

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

Page 9: Connected Car Investment Thesis

9

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

Page 10: Connected Car Investment Thesis

10

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

Page 11: Connected Car Investment Thesis

11

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!

Page 12: Connected Car Investment Thesis

12

• 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

Page 13: Connected Car Investment Thesis

13

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

Page 14: Connected Car Investment Thesis

14

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

Page 15: Connected Car Investment Thesis

15

• 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

Page 16: Connected Car Investment Thesis

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

16

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

Page 17: Connected Car Investment Thesis

17

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?

Page 18: Connected Car Investment Thesis

18

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

Page 19: Connected Car Investment Thesis

19

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

Page 20: Connected Car Investment Thesis

20

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

Page 21: Connected Car Investment Thesis

21

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

Page 22: Connected Car Investment Thesis

22

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

Page 23: Connected Car Investment Thesis

23

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

Page 24: Connected Car Investment Thesis

24

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

Page 25: Connected Car Investment Thesis

25

Appendix

© Copyright 2015 James Harris. All Rights Reserved

Page 26: Connected Car Investment Thesis

26

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

Page 27: Connected Car Investment Thesis

27

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

Page 28: Connected Car Investment Thesis

28

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

Page 29: Connected Car Investment Thesis

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

Page 30: Connected Car Investment Thesis

30

Source: RPM Ventures

© Copyright 2015 James Harris. All Rights Reserved

Page 31: Connected Car Investment Thesis

31

Source: RPM Ventures

© Copyright 2015 James Harris. All Rights Reserved