Venture Capital Investing Art, Not Science

TRAVERSE CITY, MI – To invest or not to invest, that is the question.

Whether it be the venture capital arm of an established automaker or supplier, such as Renault and Bosch, or a venture capitalist such as Tech Stars or Trucks, the rationale for whether to invest in a startup varies.

Startups take notice: There is no shortage of companies for VCs to choose from. According to AngelList, there are 7,305 automotive startups in the U.S. alone.

“We focus on risk,” says Reilly Brennan, founding general partner at Trucks Venture Capital in Silicon Valley. “The (startups) with the fastest outcomes take risk off the table.”

Robert Bosch, which operates Robert Bosch Venture Capital, takes a different approach, says Maximiliane Straub (pictured below, left), chief financial officer and executive vice president-Finance, Controlling and Administration.

“As a public company, first and foremost is strategic fit,” Straub says of the Germany-based supplier, which does not trade publicly but operates with obligations to a leading charitable foundation.

“And then, can we add value to that business?” Straub says during a panel discussion on funding future mobility at the Center for Automotive Research’s Management Briefing Seminars here. “And we will look at risk. We may not always buy a company, we may take a minority stake; we have to spread out our investment.”

Ted Serbinski, managing director and founder-Mobility Program at the Detroit-based Tech Stars mobility-startup accelerator, says the entrepreneur’s big idea takes a back seat.

“Tech Stars invests backwards,” Serbinski says. “The idea is the least important. The most important is the team.

“We invest so early, there is no revenue,” he adds. “There is nothing to measure. It’s the team behind them.”

Investors, take notice: Silicon Valley’s days as the mecca for successful startups may have run their course. Serbinski says of the 44 startups to receive Tech Stars backing, only one hails from Silicon Valley. And, he notes, Tech Stars makes investments from a headquarters in Detroit.

“Innovation is global,” he says.

Brennan puts mobility startups in two buckets: unstructured, where their innovation operates without boundaries, and fixed-route technologies. As such, he thinks investment opportunity for an unstructured entity such as Waymo has passed.

But the time might be right for a company such as Bar Flag Robotics, which is focused on self-driving agricultural vehicles.

“In that you have some interesting characteristics, such as private roads, low speeds and usually one single customer,” Brennan says. “That represents a huge bulk of our portfolio.”

Christian Noske, managing director-Direct Investment for Alliance Ventures, the venture capital arm of Renault-Nissan-Mitsubishi, is a first- and second-round startup investor, so it prefers companies already seeded.

“For us it was very important to find the right stage, where we have the right impact for both sides,” Noske says of the 8-month-old fund. Its first investment was Ionic Materials, a battery developer. “We want to work at eye level, so we need a partner that can do that from a product and resources point of view.”

Alliance Ventures typically seeks a board seat or advisory role.

Straub advises big companies looking to invest in startups to be patient and keep it intimate.

“We don’t go to accelerators to buy startups,” she says. “We leave ourselves very open to see what relationships can happen. And we learned they need a single sign-on at Bosch, one person,” she says. “We, the corporation, can kill a startup with hundreds of people asking questions.”

And one more thing, she adds: It’s always yes or no, never maybe.