The Cruise investor weighs on valuations in the auto tech space and areas of opportunity for the road ahead.
Auto tech financing continues to sustain its momentum as 2016 draws to a close, marking a banner year with founders and investors alike diving headfirst into the space. GM’s acquisition of Cruise Automation back in March brought mainstream attention to the burgeoning field, and the blockbuster exit served as a major catalyst for the activity to follow.
Varun Jain at Qualcomm Ventures led his firm’s investment in Cruise, in addition to QCV’s other auto tech and logistics bets such as Navdy and Flirtey. We caught up with Varun to get his take on the state of auto tech and the opportunities he sees ahead as we move into the new year.
On the auto tech and mobility landscape
This has been a very interesting year for auto tech and we’ve seen hundreds of millions being invested in this market, particularly since the acquisitions of Cruise Automation (GM) and Otto (Uber). While valuations are quite steep, I’m really excited about the fact that there are lots of very talented founders who are now interested in this market. That said, I’m also seeing a flurry of struggling companies that have opportunistically shoehorned themselves into this market to cash in on the growing investor appetite.
On challenges incumbents face
I believe the first wave of autonomous cars will be in the form of ‘car-as-a-service’ and that’s fundamentally a new business model for existing automakers. Moreover, many automakers and Tier-1s will have to significantly bolster their software capabilities to solve non-trivial problems in areas such as localization, perception and ride-sharing.
On areas Qualcomm Ventures is bullish about
We are investing in two types of opportunities: one is aftermarket next-gen devices and cloud services that democratize access to premium advanced safety, connectivity or fuel-saving features in existing vehicles with minimal installation and maintenance effort. Such devices can passively collect vehicle, road and driver data, which can be used, by insurance companies and car dealers for acquiring/retaining customers, by fleet owners for monitoring drivers and by developers for building applications for existing cars without building their own hardware. Navdy, which is one our portfolio companies, is a good example of such an aftermarket device.
The other is companies in the autonomy space that are either building fully autonomous vehicles (for instance, cars, trucks, shuttles, delivery bots) or focusing on a particular part of the autonomy stack (say perception or localization) and productizing it as a service that can be used by automakers. We are also scouting for companies that are developing alternate autonomy architectures, which can scale much faster. Lastly, we are spending a lot of time thinking about long-term differentiators for autonomous vehicles and investing in technologies that can help in improving the in-cabin experience so that passengers can be more productive. In the autonomous category we have invested in companies such as Cruise Automation (acquired by GM) and Flirtey (drone-delivery service).
On opportunities beyond the US
While we continue to invest across the world, I think the path to Level-5 autonomy may be longer in emerging markets because of the complex driving behaviors, levels of resources, and uncertainty around regulation. In these developing countries, I think aftermarket connected car devices such as Navdy or Pearl Automation could have a greater impact in the near term given the universal nature of pain points that they are addressing.
Varun (@jvarun83) is an early-stage investor at Qualcomm Ventures and is based in San Francisco.
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