Automakers Pump Record Sums Into Startups

The car of the future will probably drive itself, but it shows no signs of funding itself.

Instead, automotive startups are guzzling growing volumes of capital in the race to build the next generation of connected vehicles. And established automakers are funding their efforts.

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In this latest Crunchbase News data dive, we take a look at carmakers’ recent investments in the startup ecosystem. The dataset spans the 20 largest global automakers, tallying up their total investments, laying out largest deals, and spotlighting startup M&A.

The broad finding is that Big Auto venture activity is trending up in 2018. Currently, car manufacturers are on track to deliver the seventh consecutive year of rising deal counts. Automakers are also leading a lot of mega-sized rounds, including at least four valued at over $100 million, with one hitting the $1 billion mark.

Below, we lay out the numbers and trends in more detail.

Automakers Do More Venture Deals

Judging by round counts, automakers are getting behind the wheel of more startups than ever.

So far this year, big car companies participated in just over 50 known venture and seed financings globally.1 That’s more than the total for all of 2017, and it’s the highest number since we began tracking.

In the chart below, we look at the growth in funding activity from 2012 through today. Funding activity started to pick up in 2016, and it continues to rise.

It’s not a secret what’s driving the investment surge, given the massive shifts the auto industry faces from emerging technologies and business models, including the rise of autonomous vehicles, electric cars, and ride-hailing services. Just like last year, those areas attracted the largest amounts of automaker funding.

Carmakers are also investing in developers of technologies that play a role in designing the car of the future. That includes solid-state batteries, 3D metal printing, and computer vision, among other areas.

Biggest Carmaker-Led Rounds

To get an idea of how much capital automakers are putting to work, we zeroed in on rounds in which they were a lead or sole investor.

For 2018, automakers were the lead or sole backer in about a third of the rounds in which they participated. Included in that third are some of the largest transport-related fundings this year, listed below:

Looking at the chart above, it’s pretty clear automakers are putting a lot of money into ride-hailing apps, like many late-stage investors. It’s not a new phenomenon for these corporate investors, but it’s notable that the scale of funding continues to grow.

Another standout on this front is Toyota, which was particularly active this year in leading big investments in ride-hailing companies. The automaker led a $1 billion investment into Grab, put $500 million into Uber, and joined SoftBank in a $300 million round for Getaround.

While there are concerns that ride-hailing will reduce consumer demand for personal vehicles, it’s clear automakers want to be part of this fast-growing space. For now, it’s too early to tell just how the rise of ride-sharing will impact auto design and sales, though there are plenty of theories.

Automakers Bought These Startups

Car companies aren’t just investing in startups. In many cases, they’re buying them outright.

Automakers have acquired at least seven venture and seed-funded companies so far this year, according to Crunchbase data. Below, we take a look at what they’re snapping up.

For the most part, automakers are buying early stage companies at undisclosed prices. So far this year, they’ve steered clear of acquiring unicorns, opting instead for partial stakes.2 Notably, the startup acquisitions we’ve seen so far this year are more focused on business-model innovations affecting the auto industry, rather than deep tech in areas like computer vision, manufacturing, or batteries.

Driving Forward

In a follow-up installment, we’ll look at which automakers are most and least active in the startup ecosystem. For now, looking at the data across all major automakers, it’s clear their role in venture and growth dealmaking is growing.

But how much higher can it go? If transportation unicorn valuations continue to ascend, and established automakers fail to do the same, the space could fast become unaffordable.

Recent private market valuations of Uber, for instance, are higher than the public market caps of General Motors or Ford. That makes the investment a pricey proposition for automakers. However, it also demonstrates the risk of being left out.

Illustration: Li-Anne Dias