A transportation investor overseeing a $200 million portfolio reveals the biggest opportunities coming to the industry
- Autotech Ventures was an early Lyft investor, and the firm has already doubled its money on the stake.
- Alexei Andreev, a managing partner at the Menlo Park firm, explained his strategy for investing in seemingly disparate parts of the transportation industry.
- He expects every element of transportation as we know it - from buying vehicles, to how we use, park, service, and eventually sell them - is ripe for disruption.
But beyond the Wall Street hubbub, hundreds if not thousands of smaller startups are trying to tackle many of the same problems. After all, so much of a commute is connected. The car that drove you to work either has to park or go give more rides.That's the thesis behind Autotech Ventures' portfolio. The Menlo Park, California-based venture capital firm just closed its second fund, and is managing about $200 million with investments in everything from ride-hailing, to parking apps, artificial intelligence, and insurance.
Alexei Andreev, a managing director of the firm, says there's more connecting those seemingly disparate investments than one might think.
"We believe the entire transportation stack - starting from how people choose vehicles, how they purchase vehicles, how they finance the purchase, how they insure the vehicles, how they put vehicles in fleets, how they manage those fleets, how vehicles are built, how vehicles are used to move cargo and passengers along the road, repair, service, and eventually how vehicles are disposed of - is undergoing a rapid transformation."
Not only are technological innovations like data-connectivity, sensors, and artificial intelligence set to make commutes "smarter" and potentially faster, the entire way people think about cars has begun to change.
"You have clear demographic changes, with people living in densely populated areas where personal car ownership doesn't make sense," Andreev continued.
He's far from the first investor to notice that society may be past "peak car." Analysts at Nomura Instinet expect global auto demand to sink 3% in 2019. The industry is cyclical, yes, but with oil at five-month low prices and a glut of used cars building up, "the peak in auto sales is clear," Bank of America said recently.Then there's Uber and Lyft's massive IPOs this year. Each company cited a wane in personal vehicle ownership in their offering prospectuses, helping boost the massive addressable markets each company touted to investors.
Choosing Lyft over Uber
Lyft vs Uber was a fight running through the mind of many investors in recent years. Despite the massive disparities in size, Autotech eventually chose Lyft. Andreev said that was partly due to Lyft's singular focus on ride-hailing as opposed to Uber's far-flung bets on flying cars, food delivery, and more. There was a more personal element at stake.
"First, we definitely knew Lyft better through John Zimmer, we had barbecues many times together and felt really good about it," Andreev said. "He graduated from the hospitality department at Cornell so he's very focused on customer experience. At the end of the day, you have to make sure your customers are happy and keep them coming back to you after having a positive experience."
Zimmer even lived with one of Autotech's other LP's when he moved to San Francisco from the East Coast, so the personal connection cannot be overstated.
So far, Lyft has been a good investment for Autotech. The firm's stake is now worth about $2.34 billion following the company's IPO, a nearly 150% return on the initial $1 billion stake, according to PitchBook data. Depending on what Andreev decides to do with the shares after the 180-day lockup period, it could be the firm's first true exit from an investment, with a hefty profit to boot.
Lyft fits into a larger theme beyond ride-hailing, too
Consensus among many investors, researchers, and executives is that the societal transition to self-driving cars will be a slow one. Even slower, perhaps, than some initial estimates of a fully autonomous future.Vehicle ownership, is also sure to be sticky in parts of the country where it's virtually impossible to live without a personal vehicle. For many businesses, too, they're a necessity of the trade.
"My wife, for example, uses our vehicle as an extended purse," Andreev said. "You need to carry your strollers, diaper bags, soccer balls, et cetera. I just cannot envision if you're going through this period of your life how you can get rid of your personal vehicle. Maybe some families will downsize from two to one, but these corner cases do exist."
Given that most cars sit idle for the majority of any given week or day, Autotech is investing in other ventures that can increase utilization, too.
Andreev noted that people are moving into online everything, like buying vehicles and booking hotels and such. Referring to his firm's participation in the parking app SpotHero's $31 million funding round in 2017, he said "it became clear to us that we wanted to invest in the company which can be the booking.com of parking."
"If you live in Silicon Valley and have to go to San Francisco," he said, "Over time you're saving 30% or 40% on parking while also removing your headache. It's a real painkiller by increasing that efficiency."
By the same token, Autotech has invested in a handful of startups aiming to increase utilization of assets. There's Outdoorsy, an online marketplace for recreational vehicles; Volta, a free electric-vehicle charging network supported by advertising revenues; Rollick, a platform for motorcycle sales; and more than a dozen more in the firm's current portfolio.
"My personal philosophy is if you have enough moats, you can build a lot of sustainable value," Andreev said. "I'm very sensitive to defensibility for particular opportunities that can come through either technology or a unique idea, algorithm, or other competitive advantage."