An Inside Look at Silicon Valley’s Mobility Ecosystem
November 2017

Silicon Valley (SV) is at the forefront of the deep transformation mobility is experiencing, which will massively impact the automotive industry. Over the last few years, SV has become a hyperactive melting pot of startups, large tech companies, industry incumbents, academia, incubators and venture capitalists (VCs) that together imagine, develop, test, finance and scale new tech or business models for tomorrow’s mobility. Located at the heart of SV, Tesla and Google (Waymo) have certainly been the initial master-disruptors of the mobility space, respectively with vehicle electrification and autonomous driving. It is one thing to read about SV, its various players and new initiatives, it is a very different — and truly exciting — thing to experience it as I do everyday, living in Palo Alto. In this article I analyze SV’s mobility ecosystem, its structure and modus operandi.

 

Prior to moving to SV, I spent over 25 years in the mobility space (automotive and rail) between Europe and the US Mid West. I decided to move to SV because of the concentration of mobility-related initiatives taking place here, which is truly unique. I have come to realize the significant difference between what you read from afar and what you learn speaking with locals, listening to startups pitches and attending conferences, etc. which allows you to hone in on the information that really matters.

 

What constitutes Silicon Valley’s mobility ecosystem?

SV has long been known for its world class universities, its dynamic set of investors, the presence of major tech companies and its fertile startup environment. Google’s effort in autonomous driving (started in 2009) and Tesla’s industry-rattling Model S (2012) definitely accelerated the development of a local mobility-related ecosystem which relies on several groups of stakeholders.

 

Major tech companies have boosted their investment in mobility, following Google’s lead with Waymo. Intel spent $15bn to acquire Mobileye earlier this year. Nvidia is investing large amounts in autonomous driving and startups. Apple is in a start-and-stop mode but will not stay away from this deep transformation. Uber — and increasingly Lyft — are also busy developing autonomous driving solutions of airborne mobility alternatives. China’s Baidu and Tencent have also established a presence in SV, leverage local talents (Baidu plans on recruiting 200 engineers in SV and investing $1.5bn in startups globaly) to fuel their development.

 

The local universities are excellent and have a strong presence in Mobility as well. Stanford’s Center for Automotive Research and Berkeley’s Institute for Transportation Studies actively fuel innovation, train talents and spin off startups sometimes partnering both professor and student. These universities attract smart people from around the globe who come to study here, and many stay. This creates a very multicultural, multiethnic and truly cosmopolitan population which contributes to increasing creativity. 

New startups emerge pretty much daily. Most are eliminated as they progress through the growth stages, from developing a concept with founders’ funds, to Seed round, Series A, B … to acquisition or IPO for the happy few. Employees move easily from one startup to another as the State of California forbids non-compete clauses in employment contracts. Serial entrepreneurs will found several startups, whether previous ones have failed or succeeded, as failure is an integral part of the local culture. Moreover, speed is an essential value as startups strive everyday to gain traction in the market and make the most of their often limited funds. But they face difficulties when dealing with potential corporate partners which operate with a significantly longer time horizon. One more thing: some European startups open an office in SV or even move their HQ here — I know several startups who have done this. The reason is simple, VCs in SV reportedly invest on a basis of higher valuations than in Europe.

 

Startups are supported by accelerators which provide various resources to accelerate their development. Services range from help to prepare pitches (3 minutes to convince), mentoring, introduction to potential investors, connections with corporates (proofs of concept, investment, scaling opportunities), back office assistance (e.g. legal, financial) to investing their own money. Incubators filter through the many candidates to select the ones they will accelerate. I mentor mobility startups at two SV accelerators / incubators (Plug and Play and FrenchTechHub), which allows me to give back, but also see first hand some very exciting new solutions.

 

Over 10 global incumbent OEMs and many more automotive suppliers have offices in the SF Bay Area, mainly within a 10 mile radius of Palo Alto where Tesla has its HQ. Local teams may have as little as one person, 50-60 (BMW and Renault-Nissan), 200 (Ford and Daimler) and up to 300 (Bosch). Whereas some of these outposts have been here for a while (1998 for BMW), about half of the existing ones opened in the last 5 years. Most major players from Europe, Detroit, Japan and China have a presence in SV, and more are coming — Faurecia just announced theirs. The scope may include an innovation lab that performs Proofs of Concepts or test new business models with local startups, a R&D center that is integral to companies’ R&D network or a scouting office that identifies relevant technologies and startups for partnership or investment purposes.

 

Several new OEMs are trying to replicate Tesla’s adventure and have established development centers in California, mainly in SV. They include Lucid (300 people in SV), Nio (Tencent recently led a $1bn fundraising round), Faraday Future (based in LA), SF Motors, FMC or Chanje. These new players are for the most part first interested in the Chinese market, yet they tap the local ecosystem to advance their interest in order to realize their objectives.

 

Finally, investors are essential enablers of this ecosystem, and their spending in mobility is booming, in particular in autonomous driving startups. According to McKinsey, $31bn were in invested globally by VCs, tech companies and auto players ($2bn only) in 2016, the largest chunk of which in SV. There are hundreds of funds here. Yet, only a handful of them specialize in mobility. Some of these have over $100m to invest, including Autotech Ventures, with $120m, or another VC that is currently raising even more capital from mobility players. The money comes from corporations, wealthy individuals, family offices or sovereign wealth funds. Corporate Venture funds also have a strong presence in SV, with the objective to enhance enterprise value; they invest in startups that will help their corporate owners deploy their strategy. Among those are BMW’s iVentures, Airbus Ventures or Total Energy Ventures. Alternatively, corporations directly invest; for example, GM spent $1bn to acquire Cruise Automation last year and recently Google led a $1bn investment round in Lyft.

 

The SV ecosystem works closely together

SV is home to a dynamic combination of academics, research, real life evaluation of all sorts, development, partnerships and investment. Incumbent players come to SV to be at the forefront of technological and business model innovation. They work with incubators and VCs to screen and select startups with the intent to partner with and possibly invest in them, and try to adapt to SV’s fast pace — startups are often shocked by how slow corporates move. Universities train talents, spin off startups and collaborate with corporates on research projects. Startups benefit from SV’s large pool of talents, VCs’ deep pockets and a business and cultural environment that favors risk taking. 

 

Opportunities to navigate this ecosystem are plentiful, ranging from conferences, meet-ups, startup pitches, various networking events to one-to-one meetings with startup founders. Connecting with locals also allows me to separate hype from reality and decipher what is really happening, which partnerships succeed, which technologies work, which startups gain strong traction. Overall, this local ecosystem is multifaceted and moves very fast; it requires a local presence with a broad network to understand it and make the most of it. It is the price to pay in order to surf on the deep transformation wave.

 

Based in Palo Alto, I focus on the four mobility megatrends, ie electrified, autonomous, connected and shared mobility. I assist incumbents players in making the most of what is going on in SV   through the scouting of startups and tech, representation and assistance in corporate development. I also advise and mentor startups including product-market fit, go-to-market strategy, partnerships and business development.

 

Being in contact with both the SV crowd and incumbents back at their HQs, I have come to realize that a reality check is often necessary. At times there is a disconnect regarding the vision of future mobility (particularly its timing) whether you listen to people based in SV and those back at incumbents’ HQs. In fact, the reality lies somewhere in-between. But at the end of the day, Silicon Valley is definitely shaking the mobility space and shaping its future. Being passionate about mobility, I am really excited to be in SV and take an active part in the profound transformation of the 125-year old automotive industry.

Marc Amblard

Also published on LinkedIn (https://goo.gl/zoskCz)

© 2020 by Orsay Consulting