Garrett Van Wagoner, Van Wagoner Ventures Addresses Smart Grid PotentialPosted:
By: Garrett Van Wagoner, Managing Partner, Van Wagoner Ventures
VW Ventures Fund II's mission is to be the leading financier of "New Economy" mobility connected technology solutions supporting impact through an interdependent, cleaner more efficient sustainable transportation grid. This ecosystem is about to embark on fundamental changes over the next 5 years that outpace the last 50 years and will revolutionize how we travel, transport goods and live our daily lives. The result will be a cleaner, sustainable transportation ecosystem. The following trends and subsectors lead to a compelling business thesisthat leading financiers of interconnected mobility solutions can capture significant alpha within a $15 trillion global market.
A VIRTUOUS CYCLE
Electrification, decentralization and digitalization act in a virtuous cycle, enabling, amplifying and reinforcing developments beyond their individual contribution. Their integrated deployment could generate more than $2.4 trillion of value globally for society and industry by 2025 by increasing the efficiency of the ecosystem, optimizing capital allocation and creating new services for customers.
Significant innovation of IoT capabilities for "grid edge" technologies are being deployed into transit assets: In 2016, Mercedes-Benz released the semi-autonomous Future Bus which employs radars and cameras to guide direction. Intelligent, connected buses and shuttles are gradually becoming more common, paving the way for autonomous public transitby 2030. Olli, the self-driving vehicle powered by Watson, is exploring possibilities to provide personalized shuttle services. And KONE, an elevator and escalator manufacturer, is investing in IoT technology that communicates real-time occupancy between buildings and transportation systems to help improve inner city mobility.
Government incentives for mobility-as-a-service: Big data and analytics tools have begun to improve the flow of information between pedestrians and providers of public transit, reducing congestion and waiting times. The US Federal Transit Administration recently launched a "Mobility on Demand" initiative to encourage cities and states to incorporate mobility-as-a- service into public transit systems in order to reduce congestion, which currently costs the country approximately $160B per year.
Major trucking and logistics companies don't have the resources to develop software solutions in-house creating opportunity for innovative companies offering software and telematics solutions addressing things like fleet management (i.e. vehicle monitoring) and operations (i.e. driver safety features). The global automotive telematics market is anticipated to produce 73 million units by 2020, growing at a CAGR of close to 34%.
There are also opportunities for companies creating hardware units to store, monitor, and redirect energy flows in trucking, mass transit, and aviation. Examples include, but are not limited to, innovations in auxiliary power units (APUs), flywheels, solar-based hybrid solutions, drones, and IoT sensors. The global market for energy efficient technologies was $227B in 2017, and is expected to grow to $360B in 2026.
Where there is growth, fragmentation, and complexity, there is opportunity:
Fragmented industries: Logistics and transportation are still very fragmented industries, with little central infrastructure and many disparate players. Disruptive companies and their investors have an opportunity to build software platforms and telematics solutions that can collect data to help connect industry players.
Growth in e-retail purchases: Global e-retail sales added up to $1.9T in 2016 and projections show a growth of up to $4T by 2020. The value of merchandise ordered annually via same day delivery will exceed $4b by the end of this year. Trucking and logistics companies will be looking for ways to effectively handle the enormous growth of shipped goods, including new solutions for inefficiencies in last mile delivery and new ways to speed up the delivery process.
Government regulations: From regulations on lower GHG emissions to safety regulations and compliance, government regulations are driving companies to look for technologies that make their operations more environmentally friendly and safer. Disruptors can fill that gap.
LACK OF VENTURE CAPITAL FOCUS
The due diligence and ongoing research and significant experience in recognizing new disruptive technologies fundamentally changing traditional vertical markets has led few venture capital firms to sharpen their focus on the ROI potential of a mobility connected transportation grid. By developing relationships with industry consultants, fleet managers, public officials and thought leaders, Van Wagoner Ventures used this domain expertise to reach the following conclusions:
The $16 trillion transportation vertical is being disrupted by "New Economy" start-ups utilizing software technology to design and integrate standard components creating fundamentally new solutions for global transportation market. The OEM's and their Tier1 partners were likely to follow rather than lead allowing significant market presence to develop for the "New Economy" leaders in each of these traditional verticals. Lack of competition for deal flow stems from VCs lack of focus on this vertical, being deemed too painful given past experience, too capital intensive or not enough disruptive technology for today's VC models.
Significant alpha will be generated in this vertical and Van Wagoner Ventures can capture it.
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Source: Van Wagoner Ventures
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