Nokia Growth Partners shifted its interest in the smart car into high gear this summer when it announced its first deal from its $200 million Connected Car Fund.
The firm co-led an $8 million investment in connected car service Zubie, with auto supplier Magna International. The startup, located near Charleston, South Carolina, sells a dongle that connects into a car’s data port and tracks car data, such as engine performance and braking and speeding habits. Parents can have the information fed to them, enabling them to track their teenage drivers.
Nokia Partner Paul Asel said that the investment combines big data and analytics, and he expects more such deals when it comes to automotive technology.
“The average driver spends about 50 minutes a day in a car,” said Asel, who noted that cars develop as much as 1 gigabyte of data per second when running. “We’re looking for developments to better utilize and analyze that time behind the wheel.”
Asel said he is scouting for opportunities in hardware and sensors, as well as technologies linked to smart travel, ride sharing and smart parking.
Nokia Growth Partners, which remains a corporate venture arm despite the parent selling its cell phone business to Microsoft in September 2013, expects to invest in 15 to 20 connected car companies over the next 10 years with deals size ranging from $5 million to $10 million, according to Asel.
“We’re taking the expertise we’ve developed in mobile and applying it into smart transportation,” he said.
Asel said that the firm, which has five offices worldwide, is particularly interested in finding connected car-related investments in China, where half of the world’s luxury cars are sold.
“It’s a large and sophisticated market,” he said, noting that Chinese drivers will want all the bells and whistles that come with the connected car.
Nokia Growth Partners joins a number of corporate funds targeting the connected car, including Intel Corp, which set up the $100 million Intel Capital Connected Car Fund in 2012.
In addition, Apple is developing its smart car platform, called CarPlay service, which will offer apps that have been optimized for the car. Apple already has partnerships in place with several automakers to include the tech in their new vehicles. Meanwhile, Google has rolled out Android Auto, a car-focused version of its Android operating system.
“The car is rapidly evolving into a computing platform, which is of course core to Intel’s strength,” said Elliot Garbus, general manager of Intel’s Transportation Solutions Group.
Portfolio companies include ZMP, a startup located in Tokyo that is developing an autonomous driving platform; Tobii, a Swedish company that is using eye tracking to develop advanced driver assist applications; and UIEvolution, a Kirkland, Washington-based, startup that has come up with auto-related software to safely connect vehicles to other software services.
Marc Weiser, founder and managing director of early-stage investor RPM Ventures in Ann Arbor, Michigan, said automakers in Detroit and overseas are still trying to figure out the future landscape of the connected car.
He said General Motors has announced that it will unveil a platform for the connected car in 2016, while Ford and Toyota, among others, are trying to figure out a strategy.
“Over the next five to 10 years new car buyers will be more concerned about connected features than traditional features, such as styling and performance,” he said. “Today’s Millennials are more concerned about the technology in today’s automobile than in size, color or price. And they demand features they enjoy in their smart phones and other mobile devices beyond streaming music through the car’s dashboard.”
Car makers are rushing to meet this demand with new interactive in-dash navigation systems, which include real-time traffic information and automated calls to emergency services in case of an accident.
Market research firm Machina estimates that all of the hardware and software required for the connected car industry will be worth $422 billion in 2022.
Until recently, new companies had an impossible time breaking into the automotive supply market traditionally dominated by original equipment manufacturers, Weiser added.
“But over the past two years, startups are finding ways around the monopoly, and that’s good news for new companies who want to get into the industry,” he said.
He said one of his portfolio companies, Automatic, “is sitting at the center of the Internet storm.”
Like Zubie, San Francisco-based Automatic has developed a dongle that plugs into a car’s data port and connects wirelessly to a smart phone to help motorists save gas and perform such functions as keeping track of where the car is parked in a crowded lot.
Other investors reportedly include Andreessen Horowitz, Foundation Capital, Founders Fund, Anthemis Group, SV Angel and individual investors, including Bob Zipp, co-founder of seed fund Americus Capital.
Weiser said that the number of U.S. cars on the road, currently about 260 million, won’t change over the next 10 years. But as new cars replace old, the number of connected vehicles will jump to 90 percent of all vehicles.
Some experts say that the technology developed for the connected car will lead directly to the autonomous car.
Yet NGP’s Asel said the advent of a fully autonomous car is decades away, at minimum.
“We’re still very much in the first-inning beginnings of the connected car,” he said. “Investments in those technologies will help us prepare for that fully connected, driverless car of the future.”
Tom York is a San Diego-based contributor. He can be reached at email@example.com.