Autonomous vehicles are set to transform the transportation industry. But this VC is betting there are better ways to make money off them than backing self-driving car companies.
- Autotech Ventures cofounder Quin Garcia is a big believer in next-generation car technologies, such as electric and autonomous vehicles.
- But his venture fund has intentionally avoided backing startups that are developing electric or self-driving cars for the masses.
- Such companies require massive investment and are many years away from delivering returns, he said.
- But Autotech is finding ways to place bets in those areas and in other areas where the transportation sector is being transformed by technology, such as in a startup working on self-driving mining vehicles and another that's built an online marketplace for auto repairs.
- Click here for more BI Prime stories.
Quin Garcia is a self-described "car guy."
He's also a big believer that autonomous and electric vehicles will revolutionize the transportation industry and the broader society.
But if you scrutinize the portfolio of Autotech Ventures, the transportation-focused venture capital firm that Garcia cofounded, you won't find any investments in companies developing or building cars for the masses - autonomous, electric, or otherwise. That's intentional, Garcia told Business Insider in a recent interview.
"Our job is to make money, and if we don't, we're out of business. So that's the ultimate lens through which we look when making investment decisions," Garcia said. "And when you are a financially motivated investor, you also have to think about [the] time horizon" for a payoff, he added.
As transformational as electric and self-driving cars will eventually be, companies building them require huge investments, Garcia said. Tesla aside, it could be many years - maybe even decades - before investors in those kinds of companies see much of a return.
"As much as I want EVs here yesterday and for everyone to have one ... it's going to take time," he said.
Autonomous vehicle startups face "a day of reckoning"
Likewise, he continued, fully autonomous vehicles that can drive anywhere and everywhere are likely more than 10 years out.
"We're just too early to be investing in something that's more than 10 years away, so we stayed away," Garcia said.
Indeed, in the autonomous area, he thinks a shakeout is coming among the numerous startups that are working on self-driving cars. The technological and regulatory obstacles to the rollout of such vehicles remain huge, even after years of investment, he said. And, he said some companies are likely going to run low on cash in the next year or so - long before there's a widespread market for autonomous vehicles.
"We think that there's a day of reckoning coming for a lot of these ... autonomous startups," he said.
But Garcia thinks there are still ways to benefit in the much nearer term, from both the development of autonomous vehicle technology and the still nascent, but growing, market for electric cars. Autotech has placed bets in both areas, even if it's not investing in mainstream car companies, per se.
In the electric car area, the firm has backed Volta, a startup that has rolled out a network of more than 1,000 charging stations around the country. Unlike other such companies, Volta doesn't charge consumers to juice up their cars. Instead, it makes its money on advertising. Its charging stations are designed to look like kiosks or digital billboards that carry ads, and it tries to place them in prominent areas, such as near the front of retail stores. As such, the company isn't dependent on the number of people who have electric cars, but on the much larger number of people who can see its ads.
"In Volta's case, they're selling eyeballs instead of electrons," he said.
Mines will adopt self-driving vehicles much faster than consumers
Similarly, in the autonomous area, the company is backing SafeAI, which is developing self-driving technologies for mining and construction vehicles, and Verdant Robotics, which is working on similar technologies for farm vehicles. Such vehicles generally won't be operated on public roads and instead will typically be operated on privately owned land, Garcia said. So, they won't have to worry about the complexities of navigating city streets or highways and the challenges of contending with human drivers, complicated street signs, or sometimes unpredictable pedestrians or bicyclists.
Because of that, such vehicles will likely face much less government regulation - and a significant market for them could develop much sooner than for fully self-driving cars for consumers.
"The time to market and the time to revenue is much shorter," Garcia said.
And Garcia sees plenty of opportunities in the transportation sector outside of electric vehicles and self-driving car technologies. Three other big trends are shaping the transportation industry writ large, he said - the connecting of vehicles to the internet, vehicle sharing, and the adoption of enterprise software by transportation-related companies. Autotech was a backer of Lyft - Garcia and John Zimmer, the app-based taxi company's cofounder, were fraternity brothers in college. But many of its investments have been less high-profile.
The firm focuses on finding and betting on early-stage companies in the transportation sector, often investing in the seed or Series A round. Autotech's limited partners include some of the major auto industry suppliers, including Murata Manufacturing and Denso. Garcia and his team also have other, long-standing connections in the transportation industry. Autotech's forte is helping connect those contacts to the transportation-related startups it backs, he said.
Among the other firms in which it has invested outside of the autonomous and electric vehicle areas is Fixico, a European startup that's created a marketplace for car repair and body shop services. Instead of having to go from body shop to body shop to get quotes for a minor repair, customers can submit a picture and description through Fixico's website and request quotes for fixing it.
"Is that going to have as an enormous an impact on our society as autonomous? Nope," Garcia said. "But there's still a huge pain there and the opportunity is more near-term to solve that pain.
"It's not going take 10 years to solve the challenge of getting gouged by a mechanic."
Got a tip about venture capital or startups? Contact this reporter via email at twolverton@businessinsider.com, message him on Twitter @troywolv, or send him a secure message through Signal at 415.515.5594. You can also contact Business Insider securely via SecureDrop.
- Read more about venture capital and startups:
- A VC invests in dozens of companies each year and helps them raise their next round of funding. Here's his top advice for creating a winning pitch deck.
- As billions of dollars flooded in to Silicon Valley, some startups and founders got left behind. Here's why this VC thinks there's still good money to be made investing in them.
- 2 months after Israeli startup Stoke was founded, it raised $4.5 million. Here's the pitch deck it used.
- Emergence Capital backed Salesforce before its IPO. Here's why one of the VC firm's partners thinks the $141 billion software giant is vulnerable to a next-generation enterprise software startup.