The days when your vehicle was a simple conveyance for getting from point A to point B are drawing to a close. Instead, cars are becoming an extension of your smartphone, serving up real-time traffic reports, Twitter feeds, and even coupons for that restaurant you just drove past.
Cars are truly going mobile.
Auto companies and mobile startups are shifting into high gear as Internet technologies merge with the car. By 2014, cars will be in the top three fastest-growing segments for connected devices and streaming content, says research firm Gartner. Perhaps more intriguing to venture investors, 90% of new cars will be connected by 2020, creating a $600 billion market, according to a recent report by Machina Research.
Wanting to take the lead is Intel Capital, which recently announced the creation of a $100 million fund to invest in startups that target the connected car. Though the fund has not yet made an investment, it is exploring a number of opportunities. Intel is particularly interested in wireless technology that creates a better, safer experience by enabling vehicles to communicate with each other. For instance, the car ahead of you might sense an icy patch of road, and then send a signal to your car to slow down.
“We’re looking at newer, more advanced in-vehicle and driver assist technology, everything from lane departure warnings to traffic sign recognition to blind spot detection,” says Bryan Wolf, managing director at Intel Capital.
“Car manufacturers are going to have to adopt a mobile OS construct. If automakers want to keep pace with consumer consumptive patterns, they will have to give in. Why shouldn’t we have an embedded pad in our car that is as current from a software standpoint as other mobile devices like iPads or smartphones?”
Managing General Partner
One interesting driver assist startup that is certainly on Intel’s radar is Autotalks, an Israeli company backed by Gemini Israel Funds, Magma Venture Partners and Mitsui Global Funds. Autotalks, which makes silicon for vehicle-to-vehicle communications, is designing a chip for cars that would wirelessly transmit electronic messages, such as the car’s position and direction, to other vehicles on the road. If the vehicle senses danger, it could then send a warning message to the driver to avoid potential accidents.
“The car is an area that is undergoing amazing transformation,” says Yahal Zilka of Magma Venture Partners, which led the first investment in Autotalks. “We are just at the beginning.”
Intel is also interested in a variety of apps that could enhance the driver experience, such as speech recognition, text-to-speech, gesture recognition, eye-tracking, and even heads-up displays. Connected car proponents could envision a scenario where you hear a new song on the radio on your way home from work, speak a few commands to check out the band on the Internet, and then speak a few more to download the song to your smartphone.
“Those technologies are finding their way into the car and we want to look at them from an investment perspective,” says Wolf.
Despite the fact that the connected car is undoubtedly a fascinating sector that impacts almost every consumer, there have not been a lot of venture-type deals in the space. That’s one of the reasons Intel launched the fund.
“From an investment perspective, we saw this as an opportunity to provide leadership in the investment community,” Wolf says. “There is some level of deal activity being done, but this is the only truly dedicated funds targeting this space. We saw it necessary to provide a catalyst.”
A big reason why there have been so few venture deals in the space is because it is very hard for new tech companies to gain acceptance with car manufacturers.
“The carmakers need to be very systematic and thorough in the vetting of technologies because there is so much at stake in terms of quality, safety, and reflecting well on the brand,” says Brian Ascher, general partner at Venrock and an early investor in Inrix, a provider of traffic information and driving-related apps that last year raised $37 million in growth capital from Kleiner Perkins Caufield & Byers and August Capital. “The last thing any of them want is a recall.”
For that very reason, Ascher believes the opportunities for de novo startups in the digital car market will be few and far between. But for those that are able to overcome the hurdles, the opportunity will be very meaningful.
“The bad news is that it takes a real long time to sell into the automakers,” he says. “But the good news is that it takes a real long time, and Inrix has arrived.
”The Inrix technology, with provides insights into the fastest routes, travel journey times and other daily commuter services, is integrated directly into the onboard systems of several car manufacturers, including Ford and Mercedes-Benz. Inrix also has its own mobile app and powers several other stand-alone traffic apps, such as Mapquest, which drivers can bring into the car on their own via a smartphone. However, Ascher believes being integrated directly into the carmaker’s onboard navigation offers a better, safer experience, as well as a distinct competitive advantage.
Slow Car Development
However, consumers are more apt to bring technology into the car on their own via their personal devices, rather than use the car itself as the platform. After all, the average consumer/driver is far more tech savvy today than ever before. Plus, the five-year technology and development cycle for automobiles can’t keep pace with the five-week development cycle for Web services and mobile apps.
“There is a real problem with the connected car fitting into the automakers’ design cycle,” says Forrest North, a former Tesla engineer and founder of Xatori, an angel-funded startup focused on the intersection of electric vehicles, mobile apps and the smart grid. “Right now if you buy a brand new car, you are using telematics that feel like they are a decade old. An iPad 2 is going to feel old as soon as you pick up iPad 3. So how can a car company stay on top of technology? They used to be at the forefront and now they are way behind.”
Automakers, of course, realize the problem. But, for safety and brand reasons, they have been reluctant to open up their systems to third-party applications. North believes consumers are hungry for digital tools in the car and are frustrated with what the car makers have to offer, such as clunky navigation systems that are not nearly as easy or intuitive to use as the GPS apps on their smartphones. As a result, consumers will continue to bring more and more technology into the car independent of automakers, he believes.
“The bad news is that it takes a real long time to sell into the automakers.”
That’s one of the reasons Xatori created a new app called GreenCharge that synchs with the Chevy Volt and Nissan Leaf, and feeds data directly to the driver’s iPhone or iPad. Users can monitor their battery charge no matter where they are, and they can chart their driving patterns, charging costs and environmental contribution in graphical form. Xatori’s first app, PlugShare enables users to find the closest electric car charging station, as well as add the location of any public charging stations, including their own garage.
Another new app that drivers can bring into the car is iOnRoad, which can turn any smartphone into a personal driving assistant. Users mount their phones to a special dock on the dashboard or windshield. The app uses the native camera in the phone and real-time image recognition to detect other vehicles on the road and monitor their lane position. If you get too close to the car in front of you, or if another car drifts in your lane, the app sounds a warning so you can react before there is serious trouble.
Automakers are surely sensing the danger that technologies like these can pose to their hold on the car. John Malloy, managing general partner at BlueRun Ventures, says car manufactures have been more responsive to Silicon Valley in the last 18 months than he has ever seen in his career. But he still doesn’t think they are not going far enough.
“Car manufacturers are going to have to adopt a mobile OS construct,” says Malloy, who is an early investor in a traffic and navigation app called Waze, which recently raised $30 million in Series C funding, led by Kleiner Perkins. “If automakers want to keep pace with consumer consumptive patterns, they will have to give in. Why shouldn’t we have an embedded pad in our car that is as current from a software standpoint as other mobile devices like iPads or smartphones?”
That would certainly help Waze get into even more hands. The app is already a favorite of 12 million drivers who use it not just to get real-time traffic reports, but also to share what they are seeing on the road with the Waze community, such as new accidents or speed traps. As for monetizing the Waze app, Malloy envisions a business model where drivers are served up ads and coupons for shops and services that are on their route. Of course, this means interacting with the app while driving, which could be dangerous. That’s why Waze has developed a new voice interface that allows users to operate it hands free.
But that brings up another sticky issue with the connected car technology. U.S. Secretary of Transportation Ray LaHood has railed against infotainment devices in cars, calling them a major contributor to distracted driving. If U.S. regulators decide to pursue aggressive laws against distracted driving, such actions could slam the brakes on the connected cars before it ever takes the road.
But no one really thinks such a harsh scenario is in the cards. Consumers want their cars to be connected, and they are going to get it, says Intel’s Wolf.
“People are spending more time in their vehicles and they expect those vehicles to have access to the same kind of information and services that they get at home or on their smartphones,” he says. “There is a big opportunity in satisfying that demand.”
Tom Stein is a Palo Alto, Calif.-based contributor. He can be reached at firstname.lastname@example.org.