Will Venture Capital Drive the Future of Mobility?
6:47PM Jun 9, +0000
Speakers:
Keywords:
cities
companies
scooters
mobility
space
rachel
clara
opportunity
micro
transportation
startup
eevee
bit
quinn
fleet
invest
sharing
specs
evie
question
Starting in a few minutes, we have a breakout session sponsored by the California MOBILITY Center. And they're going to talk about how to bring your technology to the marketplace. If you'd like to watch this session, click the breakout session button on the left hand side of your screen. Here on the mainstage. At least virtually, we are going to be talking about investment investors and the complexity of that job. We have three great panelists that I'd like to introduce Clara Brenner with urban Innovation Fund, Quinn Garcia, with auto tech ventures and Rachel Holt with construct capital. I'm going to be your moderator, and I'm very excited. But you probably have some questions, and we want you to ask them. So if you would like to ask some questions, please click the q&a button on the right hand side of your screen.
All right, well, welcome Clara Quinn and Rachel, thanks so much for joining me today at TechCrunch. And we're back here in virtual land. It's been a weird, weird year in general. And I'm guessing that the venture world was as topsy turvy as the rest of the economy. So I want to first turn to Clara, on your VC firm, urban Innovation Fund. It provides seed capital, but also regulatory support to founder shaping the future of cities. And so I want you to look back into the beginning of the pandemic, and what were those conversations like with your founders? Were you getting a lot of inbound and concern? Were you spending most of your time sort of advising them to? It's gonna be okay, like, what were those conversations like? Well,
it really varies depending on who the customer is, I think generally, companies servicing the public transit space were severely impacted. But we were also even really early on during the pandemic, seeing a spring usage in bicycles scooters and a broader interest in and maybe you could say, a consensus around slow streets and bike lanes. And so we've just seen a lot of companies emerge. Even early on in the pandemic, I think there's a general recognition that there's a lot of opportunity in this space, absolutely. Supported by I think, a recognition that the Biden administration is very much in favor of innovation within this space, especially around electrification, you know, their their goal of zero emission, federal fleet, I think, has gotten a lot of companies. ears perked up. And so we generally have just seen a lot of interest even in the highly regulated, like, spectrum side of the transportation space.
So is the driver than sort of on the political end that's driving deal cadence and interest? Or is it kind of a recovery from the pandemic? That's that that snapback economy that we keep hearing about? That's happening?
It's probably a little bit of both. I mean, we have companies in our portfolio like electrify, which service, both private fleets as well as government fleets, you know, school district leads, they essentially offer software for these entities to help transition to an all electric vehicle fleet. And there's, I think, on the one hand, you know, a little bit of deal fever, for sure. But there is there's a lot of customer demand right now.
Rachel, I'm wondering if you're getting seeing the deal fever as well, you one of your investments is with charter labs. So it's EV software? And are you seeing a lot of activity around that specific area? Or is it just across the board? Tons of inbound that's happening now?
Well, I mean, the entire venture space is, is moving very quickly. So certainly, we're seeing a lot of activity, particularly within, you know, within the Evie charging space, as Carl mentioned. But you know, that is that is what we're actually seeing across just a ton of sectors right now. I mean, there's some really great startups that are that are being started, there was enough dislocation in transportation, and you know, some other areas, I think that happened through COVID, that it's just the time when, you know, whether it's buyers or cities or others are just evaluating, you know, what their, you know, the new the new world order should look like. And I think that just creates a lot of opportunity.
You talk about dislocation on what do you mean by that specifically, are you talking about sort of like this digital nomads style, and that's sort of creating these new opportunities for startups.
You know, I don't think that that that is necessarily that in particular, I just think when you have a shock to the system, like COVID, right, it creates Just an opportunity for everyone, whether it's inside companies, whether it's, you know, whether it's founders, or whether it's cities and governments and other entities to take a step back and say, Okay, what do we want the next five years to look like? And I think, of course, there's, you know, there's also an element of just pull forward of digital digitization that happened through so many spaces, you know, over the last 15 months. And I think what you're seeing is great founders who are taking a look at, you know, the spaces around them and saying, How can I change them? How can I make them better? And that's what we'd love to see on the venture side.
Quinn, turning to you, I just want want to know, if you wanted to weigh in on what Rachel just said, and then kind of tweaking that a bit. Do you see this sort of new energy that's happening around post COVID as something that's going to stay and linger for a while? Or is this sort of a bit of a blip, where we're going to return to, you know, 2019, or early 2020 sort of deal flow? And in the types of startups you're saying,
when you say, when you say new energy? Do you mean, do you mean startup formation? Or do you mean, transportation energy?
I mean, I like actual deals, although if you want to weigh in on transportation, energy as well, maybe that's a trend we can get into. But no, I'm talking about deal flow and interest on you know, it, Rachel touched on it a bit. But there does seem to be this new energy that's happening in terms of startup ideas that have sprung up around a variety of different areas. Clara touched on a little bit politically, there's this interest in EBS, you do a lot on digitization, and also on sharing on so outdoors, he has one of yours. So I'm wondering if you expect, first of all, what are you seeing in terms of deal flow? And then if you expect that to continue or slow, and kind of maybe revert back to early 2020?
Yeah, yeah. So in when we had kind of peak COVID fear, you know, across the Scott spring of 2020, everyone kind of went down Periscope, and and kind of batten down the hatches and looking for capital to kind of endure nuclear winter for some months. And the deal flow, I'd say, new startup formation during that period, dropped dramatically. And so a lot of existing companies kind of came back to the well, and we're looking for, for capital to endure the the hard time. And then a few months passed, and then we hit we hit, let's say, Summer of 2020. And everyone kind of, you know, put the periscope back up and and realize that actually, we're going to be okay. And in new companies started to get formed, kind of natively, remote companies started to get formed. So we started to see the rate of startup formation around that time increased dramatically. And then of course, existing companies were kind of coming back back to the Well, I would say, during 2020. There was pretty if I had to say what were the most hype spaces in ground transportation in 2020. used cars were very hot, they continue to be hot. And then also, we saw a lot of last mile delivery, right, everyone's everyone's stuck at home. And so goods delivery to two houses. So that was really kind of peak hype during during 2020 this year. So new administration comes in. And suddenly you see a lot of hype around electric vehicles. So he V's i think is probably maybe there's a few other spaces, but Evie is probably one of the most hype spaces that we are seeing this year. And thus a lot of startup formation in that space and a lot of a lot of funding going into that space.
When you talk about IE V's there's a lot of categories, right. One of our early stage founders who's going to be spotlighted today, you know, her company is looking at repairing Evie chargers. Then there's you know, Rachel's constant capital is invested in, in sort of the Evie software side. Where do you see the opportunities within the Evie space specifically? I mean, what about you know, is micro mobility still something that is that is hot, or is that kind of tired at this point?
Yeah, so within within the Eevee space, there's a couple different categories that you can speak to. So one, you can say you can see actual propulsion equipment, so motors, batteries, inverters and like stuff that goes into into vehicles. My take is that there's probably a little bit less opportunity there for for startups because there's a lot of really strong incumbents in kind of propulsion components. Another another category would be actual kind of Eevee OEMs. Right, so that you've had, you know, rivian and viraday future and all these different kind of Eevee Car and Truck OEMs and even even Mike mobility, folks, you know, what is it nine bought and segway and, and the like that's, that's another category very capital intensive, but also very large kind of opportunity at the end of the, the rainbow. Another would be infrastructure. So we've we've invested into voltage charging, which is an electric, let's say ad funded, so it gives away charging for free, and then sells ads and installs these stations in front of shopping malls and, and grocery stores and the likes. So that's kind of an Eevee charging network or an ad company that's masquerading as as an Eevee charging company. That's another another space and then in the actual kind of Evie fleet. So you mentioned you mentioned micro mobility, which is pretty much 100%. Electric at this point, right? There's no, there's no gas powered scooters, and bikes and such running around anymore. And so great penetration of electric, that's wonderful success for society, we kind of steered clear of micro mobility for some years, because we had a few kind of structural concerns about that space. But now, we finally been able to resolve some of those concerns. We've just made our first investment into a micro mobility sharing fleet operator. And which is which, what is the company that you? Yeah, so what I can't mention the company's name yet, because we just we just invested However, what I can say I know I'm sorry, that's very unsatisfied, all friends here. What I can say is we were so we were previously hesitant to get into the micro mobility space, because we saw low barriers to entry, meaning all you know, in order to start up a micro mobility startup, all you had to do was buy a bunch of scooters and write an app and then throw the scooters on the sidewalk, right? You're in business, right? So there was a punch of cash being pumped into that space, very low differentiation between the companies operating in that space, meaning the main form of differentiation was actually capital formation. So an ability to fundraise, right? And lime and bird were two big, you know, companies, at least in the US that were able to fundraise quite quite well. But then you got a bunch of other companies. Let's call, you know, ankle biters, if you will, that were that were also kind of nipping at the heels. And in those large players weren't able to kind of stamp out the smaller companies. And so we kind of want to stay on the sidelines. We also felt that a lot of the acquirers in the space, weren't willing to kind of pay up. But it's we're looking for exclusivity or some form of defensibility. And I think we've we finally found it in this company, and I hope to be able to spill the beans in a number of weeks from now.
Okay, well, I'll be following up with you. I know that Rachel has an opinion on this, because you've worked in this space. But I do want to ask Claire because I think that maybe you haven't made any direct investments in micro mobility companies. Or maybe you're on the cusp of doing that. So is this still an area that you see has promise in the Evie space or in actually just the transportation space? Yeah, you
know, I think micro mobility, there is a lot of opportunity. I don't know if I agree with Quinn, that I'm not sure there is that much differentiation, just like he was saying, there's like there's bird. And then there's this huge, long tail of largely undifferentiated operators. I think the economics are just so challenging, you know, from a profitability perspective, but at the same time, these operators are delivering so much value. And so from our perspective, when we look at micromobility, we're not necessarily as interested in the like hardware operations and maintenance side. But we we definitely see there's opportunity for software to service those companies, those private campuses, those municipalities that are running their their own fleets, we're actually closing on a deal later today in a software provider that that essentially serves as a as a wraparound offering. So let's say you want to launch a micro mobility service in your town or on your your office campus. Whenever you decide to go back to the office, this company would essentially help you acquire the scooters, stand up an app, maintain communications with your customers and the actual fleet itself. So we think there's a lot of really cool opportunity. I'm really curious to see what this company is that couldn't invest in because we just haven't seen any differentiation from four factor all the way to sort of customer experience in the space which is I think one of the one of the big challenges.
It will we'll have to you know, there isn't We all kind of share right now, if you want to learn together, we have, you know, 15 minutes left. But um, so you do want to pull that thread a little bit around micromobility. And Rachel, I want to pull you into this, which is the whole question about unit economics and that push and pull or that tension between providing this access, which Clara kind of got into, which is this opportunity to provide access and this sort of public good that can happen. But then just the kind of terrible unit economics and we've seen at least some filings now with bird that give insight into just like the extreme burn on. So do you see this as like, Where are are there still opportunities in micro mobility? Um, and if you could weigh in just on the unit economics issue, too?
Yeah, definitely. Well, I think, first of all, there, there needs to be opportunity here, right, the concept that you know, a ton and a half or you know more of steel, is the best way to move around the city for one person largely is just, fundamentally, we've got to figure out something better, right. And if you look at how people move around our city, and you looked at, you know, you went to the 1950s, and you looked at today, there wouldn't be that much. That's that different, right. And I think we're now starting, you know, at least till 2010. And now I think we're starting to see over the last decade, and I think we're gonna see even more over the next decade, just, you know, people cities, not being willing to say, you know, the way we got around in 1950, shouldn't be the way we get around today. And I think Europe, in many ways is, is leaps and bounds ahead of the US, when it comes to micro mobility, they have to be, they just don't have the room, and the space that most US cities have. And so, you know, I think if you kind of want to look two years in the future, you just need to look at Europe, because they've always been two years in the future, when it comes to micro mobility. You know, I do think, I do think when it comes to the economics, there's no question, particularly, you know, for scooter companies that have, you know, I think that's you're kind of referring to scooter companies in particular, that we're using largely off the shelf hardware, these, you know, these scooters were not designed for sharing, right, and one of the things when, you know, when I was at Uber and and, and was, you know, helping to run the jump businesses, it's very clear that building and developing a product, whether it's a bike or scooter or other from scratch, that it is designed for sharing is just so critical to actually getting the economics to work right to making sure they don't end up in a river, right, because they are seen as semi disposable. And I think the challenge is, you know, with the, in these companies that are, of course, as all companies need to be, you know, focused on making sure that the business is sustainable. Sometimes those corners are cut in my mind in the wrong places, or actually having, you know, custom hardware, I think it's one of the things that jumped did an amazing job of right, they had really good hardware product. And I think, you know, with with some more time, you what you would have actually seen was that would have delivered a far more sustainable, ultimate product. You know, I think you're seeing bird lime, others, again, the European players, I think, are in a little bit of a better spot here, invest more in in custom hardware invest more in a product, again, that is really designed with the use case of being used by 810 12 people on a given day, rather than one person, right? I'll give you one tiny example of that, you know, the seat on a bike, right? When you're buying a bike that's just for personal use, you set it and the seat never goes up and down, right? You just have it in that one spot when it's being shared by eight or 10 people in a day. What's the first thing that wears out the seat, right? Because it goes up and down and up and down and up and down all day. So even just simple things like that need to just be re architected redesigned, with kind of the new use case in mind. And then one one final thing you asked about, you know, you asked about kind of the city's roles in all that and, you know, I think it's a very interesting tension that's going on, and I think has been going on frankly, since Uber, right, which is there is a desire for cities to sort of, you know, control the way that these you know, these products interact with with their streets, right and their sidewalks as they should, right our cities can't be like a cluttered junk yard of of, you know, half mangled scooters, no question, but sometimes in in trying to fix those problems. what it's meant is, it's just far more challenging to run these businesses? And so, you know, if if I was running a city, right, and I wanted to incentivize a behavior, which I think micro mobility is something that should be incentivize, I sure wouldn't tax it first, right. And I think what you're seeing is, those kind of behaviors happen, being the person that was trying to get Uber into a lot of these cities, then try to get, you know, jump into a lot of new cities, it, it was made harder, often with the micro mobility, and that feels like it should have, you know, it should have changed over over that, you know, seven, eight year difference between when we were first trying to get to brand and then first and then trying to get that jump, you know, along with the other micro mobility players. And
I mean, push back there and say, I disagree. I think the challenge, like the reason why biking in Holland is so delightful is because municipalities invest in protected bike lanes, like the reason why train service in Japan is so fantastic is because, you know, communities allocate tremendous resources to, you know, building and maintaining high speed rail. Solving the transportation problem in this country absolutely requires innovation on from the private sector, whether it's bikes, or scooters, electric vehicles, but like the money has to come from somewhere in order to maintain the public infrastructure where all of these services can run and coexist. And so, you know, until we, you know, City of San Francisco City of New York, state of California, whatever, you know, make a concerted effort, whether it's on a statewide or in a large scale, that we have to start somewhere. And that usually comes from taxing these, these very large and highly capitalized private enterprises. That or we as citizens have to start coughing up more money like it's got, it's got to come from somewhere.
But But Clara, wouldn't you? Wouldn't you tax individual car owners if you wanted to disincentivize car ownership and incentivize micromobility sharing? Right? I think the reality is that there are nuances
and gradations here, right. It's not like tax or no tax, like there. There's a spectrum of opportunity here. And absolutely, I think, you know, in the case of cars, we have too many cars, and certain taxes could be implemented to diminish car use, but we have plenty of taxes on cars already. And people still drive them all the time.
I think whether it's taxes, whether it's data sharing, whether it's the owners permit processing is having run that business. But those businesses, I can tell you they aren't in, they aren't. They aren't running away, that the city processes aren't running away that says, hey, I'm, I'm an entrepreneur, I want to start something, let me make it as easy as possible to create the next new thing. And I think for all of us, we want that we want entrepreneurs that are super excited about jumping in and getting to start that. And I think, you know, I think there is more that can be done. I think cities are in a tough spot. I spent a lot of spent a lot of time talking to city regulators and and folks that are sort of in that private public partnership. But I think it's an you know, the public sector has an important role to play. And I think, but but I think if micromobility as an example is a priority over the next decade, I think there are some things that really need to change, and I think protected bike lanes would be a great start.
Yeah, the next new thing isn't what cities want, period, they want a good solid thing that works for most people. And I think that's where the tension lies.
Okay, um, we could obviously have like a 45 minute discussion about this very specific area. So I'm glad that you both weighed in. Quinn, do you have any thoughts on that? Before we move to we have a ton of questions that have come in? Do you want to take a stand on what what Rachel and Clara were just saying?
Well, so as the as the son of a politician, I've, I've tried to remain blissfully ignorant of of many political matters. However, one thing I would say is, it varies by city. I think a lot of the cities got burned during rideshare. So we were investors and Lyft. And a lot of cities felt a bit burned by that rideshare kind of came in, and they weren't able to kind of control the impact of rideshare on their urban core. And so cities kind of learned their lesson a little bit. And they came out many of them who felt the most burned by rideshare came out with a bit more, let's say draconian measures to control the proliferation of scooter sharing. But that wasn't the case. For all cities, there are certain cities that are a little bit more laissez faire in certain cities that are a little bit more, let's say controlling. So that's that's my take
on it. Well, we have a few questions, and you wouldn't be surprised to know that I had these questions, but we also have audience questions about specs. And so one question is thoughts on specs. What's driving the early stage companies to spax versus traditional VC. Is it a lack of access to venture capital? And is it a healthy trend? On? I think any of you can can go for it. But Quinn, maybe you have something to say about that. First.
Sure. So Spats, I've used facts as a tool to achieve an objective for a company and our portfolio. So I wouldn't say that they're good or bad. They just they just are they're just they're a financial instrument. In many ways, they they look and smell kind of like an SPV. A special purpose vehicle although although there's there's some differences. Our portfolio has benefited from SPAC mania. We have with three portfolio companies there that are stacking have announced their specs in the semiconductor volta charging and kazoo. I think that the strong public public equities markets and kind of ease of liquidity events vs. backs have driven up valuations of startups. Although early stage startups are a little bit buffered, from the public markets, and so they're less impacted than late stage startups are by Vice backs. spax offer kind of a lower effort to to go public than than a traditional IPO. primarily due to the fact that traditional IPOs have more onerous compliance requirements with securities laws, I could see spax continuing to be used over the coming years, though it's possible regulators might clamp down on them a bit as they clamped down on traditional IPOs when they saw kind of irrational exuberance, and some folks getting getting hurt by traditional IPOs many years ago. So you all may remember there was this, you know, Sarbanes Oxley was made, which made it a lot tougher to to go public. And now folks are kind of taking a little bit the easier route via via fax
data want to do that? Yeah, please do. I looked this up this morning, because I knew this question was coming. This is just from the Financial Times, I think in April, so it's a little bit dated, but it said, Of the nine car tech groups that had listed by us back so far in 2020. Collectively, between them all, they expected revenues this year of 139 million. But by 2024, they projected a combined revenues of 26 billion, which I think can either be interpreted that, you know, the spec space, at least as a relates to transportation is a lot of smoke mirrors bullshit. On the other hand, I think, you know, there's something to be said for the fact that there's a lot of potential growth in this space. These companies, as we've all talked about, need a lot of money to scale and specs, I think can represent a really fantastic way to secure that capital. I imagine it's probably a little bit of both. But I think just as Quinn was saying, for us, you know, as early stage investors, it doesn't impact the way we do business necessarily. But I think it's really interesting. There's a lot of a lot of hope for potential in this space.
So Rachel, if you have like a 10 second answer, I do have one more question. I want to very quickly squeeze in. So do you want to weigh in on the specs?
Yeah, I think the only thing I would say is having been at a company that was private for a while and then gone goes, You know what a public. There's a lot involved in being a public company. And I think, you know, I hope there isn't a backlash because these companies aren't ready to be public.
Got it. Alright, one word answer. What are the most overlooked opportunities that you as an investor are interested in within the transportation space? So Rachel put you in the hot seat first.
All right, um, oh, look, I don't I one word answer. Quinn, and then go back to Rachel. You got your first digitization. Okay, Clara. Car Rental. Okay, Rachel, back to you. Public transit. Okay, nice.
All right. Well, thank you so much for all three of you being such great sports and having a really great conversation. Thank you. Thank you.