Ford's CEO explains why he loves Silicon Valley

Ford, the 113-year-old automaker, may be headquartered in the suburbs of Detroit, but CEO Mark Fields has his eyes set on Silicon Valley.

The company built a research and innovation center in Palo Alto in 2015 and went on to acquire two tech startups the following year.

It's now working with some 40 startups on joint research projects at the center, in addition to companies it works with through tech incubators and accelerators like Techstars.

"To me it was really important to be part of the ecosystem there - for our people to be rubbing elbows with somebody in line at the Starbucks and striking up a conversation and saying, 'Hey, I'm working on this,' and 'I'm working on that,'" Fields told Business Insider.

Ford's innovation center currently employs about 150 people, but Fields plans to double that number by the end of the year.

Fields, who started traveling to Silicon Valley about three years ago, described why it's important for him to do that.

"One is to learn. Two is to create relationships. And three is to send the message to our team out there that you're not an outpost - you are a part of our network," he said.

Auto 2.0

Ford in September bought the San Francisco-based shuttle van startup Chariot for $65 million. That company was founded in 2014 and emerged from the startup incubator Y Combinator.

"We said to ourselves, 'You know, we could build this [on] our own, but it's going to take time - let's just buy them,'" Fields said.

That followed Ford's August 2016 purchase of the Israeli startup SAIPS for its artificial intelligence and computer vision capabilities. It also invested in a California startup called Civil Maps, which focuses on 3D mapping.

"You'll see more of those going forward," Fields said of startup acquisitions. "You're not going to see, 'Let's go buy Cisco, or let's go buy these huge mega-mergers - we've been down that path with car companies before.'"

And Wall Street is paying attention.

Deutsche Bank's cohead of internet investment banking, Riaz Ladhabhoy, recently said he is spending more and more time with his firm's auto banker as large-cap companies in that industry look to acquire internet startups.

"There's no question that auto tech is incredibly important," Ladhabhoy said. "It's accelerating at a faster pace than a lot of research analysts thought it would."

And the Goldman Sachs technology, media, and telecom bankers Tammy Kiely and Kyle Jessen described in an internal Q&A the importance of the auto industry at last month's CES tradeshow, an annual consumer electronics and technology event.

"A number of companies at CES have developed technologies to enable autonomous driving, and that idea has moved one step closer to reality," said Kiely. "Companies across sectors, from original equipment manufacturers and the direct suppliers to them, to software and semiconductors firms, are introducing products demonstrating how autonomous driving can actually be implemented."

"This year, we can start to see some of the actual puzzle pieces coming together that will be the building blocks for the autonomous mobility future," said Jessen.

That firm has a dedicated "Auto 2.0" investment banking team, headed by Michael Ronen.

All of this is why Fields thinks the Palo Alto center is so important.

"People know that Ford's there, so these small companies can have access to us, versus, 'Oh, how would I ever get in touch with big old Ford Motor Company in Dearborn, Michigan?'" he said. "So it's worked really well."