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Connected Car Investment Thesis

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Investment thesis on the connected car space

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Connected Car Investment Thesis

  1. 1. The Emergence of the Connected Car Where are the investment Opportunities?
  2. 2. 2 Connected Car of Today and Tomorrow Investment Thesis © Copyright 2015 James Harris. All Rights Reserved
  3. 3. Posturing in the MarketThought Leader Consensus 3 James A. Buczkowski Director, 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
  4. 4. 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?
  5. 5. 5 “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 vehicle SampleFeatureSet Connected Smart Automated © Copyright 2015 James Harris. All Rights Reserved How will the connected car evolve tomorrow and beyond?
  6. 6. … 6 “Today” : ~2013 - 2015 HardwareSoftware  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 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
  7. 7. 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
  8. 8. 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
  9. 9. 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
  10. 10. 10 56 36 23 29 21 35 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
  11. 11. Highlights 11 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!
  12. 12. 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 TVs An 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
  13. 13. 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
  14. 14. 14 0 5 10 15 20 25 30 2009 2010 2011 2012 2013 NumberofDeals 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
  15. 15. 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 Zubie's market focus includes fleet-managment and Usage-Based- Insurance (UBI) Navdy is considering an enterprise license play
  16. 16. 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 Acquisition By 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 Acquisition By Harman International $170MM  Embedded system firmware dev and integration; data ingestion processing and analytics; firmware / software updates 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 16 Target Audience OEMs Suppliers Insurers Telcos           © Copyright 2015 James Harris. All Rights Reserved The biggest exits in the space are for co.’s that target and sell to the enterprise
  17. 17. 17 Services, Content, Apps Software System Integration Hardware Infrastructure 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: EnterprisePlayers 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?
  18. 18. 18 Services, Content, Apps Software System Integration Hardware Infrastructure  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: EnterprisePlayers 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
  19. 19. 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
  20. 20. 20 Automotive Software & Service Mgmt. Navigation Enhancement & Remote Assistance Usage Based Insurance V2V & V2I Examples Enterprise ServiceAreas 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 Growth Near 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
  21. 21. 21 Insurers are moving … … and consumers are [becoming more] ready 27% 52% 23% 50% 62% 30% 62% 63% 5% Discount 10% Discount 15% Discount 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
  22. 22. 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
  23. 23. 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
  24. 24. 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
  25. 25. 25 Appendix © Copyright 2015 James Harris. All Rights Reserved
  26. 26. 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
  27. 27. 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
  28. 28. 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
  29. 29. 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 OEMs Suppliers Insurers Telcos           © Copyright 2015 James Harris. All Rights Reserved Exit Landscape
  30. 30. 30 Source: RPM Ventures © Copyright 2015 James Harris. All Rights Reserved
  31. 31. 31 Source: RPM Ventures © Copyright 2015 James Harris. All Rights Reserved

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