Last November, five years after starting a corporate venture capital group, carmaker BMW announced that it was quintupling its financial commitment, and expanding its field of interest. BMW said it will invest up to 500 million Euros over the next decade, across a broad swath of the tech landscape, from 3D printing to on-demand transportation to smart logistics. BMW also moved its US office from New York to Silicon Valley, and accelerated the decision-making process for making new investments. “You have lots of competitors for the best startups,” explains Ulrich Quay, Managing Director of BMW i Ventures. “You can’t wait for two or three months to get into those deals.”
We spoke to Quay earlier this month about the thinking behind all of the changes.
• Expanded scope. “When we were in New York, we had a very limited investment mandate — only mobility services. We’re now able to invest in anything that’s automotive/transportation-related. Mobility services is one out of eight sectors we’re looking at right now. We can invest in the hot topics – autonomous driving, artificial intelligence, stuff like that.” (See the list below.)
“All of the changes in the automotive world are being triggered by software becoming increasingly important. Most automakers have a hardware history, and limited software expertise. They will all put a stronger focus on software – that means hiring internally – but also figuring out how it affects your business models… BMW wants to be on the front lines of all these new developments.”
• Faster decisions for new investments. “Before, we had to seek corporate approval of everything we did. …We are now a proper venture unit with complete autonomy that can execute [on a new deal] in one or two weeks. We only need to agree within our group.”
• Staffing. The team is now about 10 people, with two in Europe and one in New York. Since moving from Manhattan to Silicon Valley, BMW iVentures has been hiring new team members with venture capital and hedge fund experience. The office, in Mountain View, Calif., is co-located with a BMW technology group.
• Reporting structure. “We previously reported to the head of mobility services. Now we report directly to the board – a steering committee that consists of three board members and the head of strategy. Before, we had a good relationship.” But the new arrangement gives the venture unit ties to more parts of the company, with more of a long-term focus. “Now, it’s overseen by the CFO, two board members most connected to venture investments, plus the head of strategy. It’s a very good setup. They don’t want to approve individual deals, but they see what our strategy is. We talk to them on a regular basis, and [we have] two to three formal meetings each year.”
• Plugging in to the Valley. “So far, we don’t have a deal flow problem. [In the past], it was more a problem of coping with the deal flow, since we [had] only three people in the U.S. Now that we have more people, we can focus on spreading the word. We’re doing door-to-door marketing on Sand Hill Road and other places [where venture capital firms are located], talking to them individually, and [trying to connect with all of] the VCs who are most interested in automotive. We just revised our web site, and we are increasing our presence on social. We’re also hoping to do meetups in our office. We did them in New York, and they helped us become more known [among entrepreneurs there.]”
• Advice for others doing corporate VC. “Getting a long-term commitment by establishing a [dedicated venture capital] fund,” as opposed to doing investments on a deal-by-deal basis, “sends a good message. Startups often ask about that,” because it is a signifier that a fund will likely still be around when they need continued support, or another infusion of capital. “It helps to have high-profile sponsors that you interact with on a regular basis. It’s easier to get engagement from other business units if you report to the board…there is accountability.'”
• Building the portfolio. BMW’s investments so far have included Turo, a peer-to-peer car-sharing company that allows individuals to rent out their vehicles on an hourly basis; Zendrive, which seeks to use smartphones to encourage safer driving; ChargePoint, which is building a charging network for electric vehicles; and Embark, a public transit information app that was acquired by Apple in 2013.