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Connected Car of Today and Tomorrow
Investment Thesis
© Copyright 2015 James Harris. All Rights Reserved
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
“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
“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
“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
• 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
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
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
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. 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
• 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
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
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
• 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. 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
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
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
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
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
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
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
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
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
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
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
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
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