Connected Car: The Convergence of Mobile, Auto, and the Internet of Things

Press releases and conferences come and go in the tech world and many pass by without notice. For years if it was linked to the auto industry, Silicon Valley really didn’t notice. However, in the last few months, the rules have changed, and it’s because of one idea: The Connected Car. The reason is simple, it has the potential to be the biggest Internet of Things category of them all.

A bit of self-promotion here, but there was a press release this week by one of our portfolio companies, Automatic, about how they are helping new and older Ford vehicles become connected cars that can take advantage of Internet of Things devices and the most recent advances on the iPhone. Like many of the recent announcements around Connected Car, the Valley did notice.

More interesting then press releases, there have been three conferences in the Midwest since June, that brought more than just the standard industry names like Ford, GM, Toyota, Allstate, State Farm, etc… For those paying attention the conference halls filled with startups, venture capitalists, and visitors from across Silicon Valley. At the Telematics Detroit Conference, Intelligent Transportation Systems World Congress, and Insurance Telematics Conference, the phrase Connected Car was repeated 100 times a minute.

For years, Telematics has been a niche sector dominated by mega Midwest manufactures, foreign import players, and major telcos.  Suddenly, the Internet of Things, big data, and the changing demands of a connected consumer are all colliding together within the Automotive Industry. RPM Ventures has put together our own industry map to share how we see these forces converging together.

As a VC who splits his time on both sides of the continental divide (Michigan and Silicon Valley), it has been natural for my firm, RPM Ventures, to look at and invest in startups related to the Automotive Industry. The Telematics Detroit Conference and RPM Ventures were both started fourteen years ago. At that time, we thought Telematics should be left to the major automotive players and not startups.  Over time the growth in technologies has allowed these industries to drift towards one another forcing our perspectives to change particularly as mobile and auto have converged to create opportunities for startups. We made our first investment in the sector in 2005, and for the last four years have been aggressively pursuing connected car as we believe it is the foundation that will completely reshape the entire automotive world.

From our standpoint, success requires not only an understanding of how to build a hyper growth valley style startup, but also deep insight into the auto industry and the myriad manufacturing and service businesses that touch it. We’ve made thesis driven investments in companies like Automatic and Xtime, which has won Telematics awards for making the connection between the auto manufacturer and driver more meaningful throughout the ownership lifecycle. We also have investments in companies like Navdy, and Getaround. Others are beginning to take notice of these industry shifts and are pushing their own efforts to transform the sector.  Nokia and Intel have both launched $100M venture funds focused just on the connected car.  Apple and Google have launched versions of their OS targeted directly at the vehicle, and the industry is flowing with hot startups creating new land to build upon.

Why now though?  Today, the industry may spend $40B on marketing cars globally, but as millennials now see mobile devices as their source of freedom instead of cars, connected features differentiate cars more than rumbling horsepower or the long-term stability of a warranty.  As design cycles for cars take years, few big auto companies are yet able to market connected car features.  To fill the gap, startups are rising up to meet consumer demand. Further, the Insurance industry realizes leveraging data directly from the vehicle can help them bring better pricing and risk adjustment to drivers versus using externally generated and extrapolated event data like a speeding ticket. Municipalities recognize they can improve safety and decrease traffic jams on their roads by combining real-time data from the vehicle with growing amounts of external road information.

As VCs, we’re constantly looking into the future, so people ask us, “Will autonomous cars be everywhere?”  What is that if not a connected car?  It’s a car, with artificial intelligence, aware of its surroundings through connections to data hubs (Internet) and other cars (vehicle-to-vehicle or peer-to-peer), all controllable from a touch screen.  Sound familiar?

RPM Ventures has put in considerable effort over the last several years to make sure we know the majority of startups across the space, and spend time with all the major auto manufactures and wireless carriers in order to learn from them.  Our Connected Car map will be the first in a series of perspectives RPM Ventures has developed on the convergence of the automotive and startup industries. We see the sector as providing incredible opportunity for both the traditional automotive companies and their newer startup brethren. More importantly, as these players push each other and find innovative ways to work together, drivers will be the real winners.

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