Munich The BMW Group is increasing its pace in the search for innovative start-ups. The venture capital division BMW i Ventures is to give the car company even more access to key technologies with a new fund launched last year.
In addition to electromobility and digitization, BMW i Ventures intends to increasingly get involved in start-ups for sustainability and the circular economy, said the two managing partners Kasper Sage and Marcus Behrendt the Handelsblatt. BMW has been investing in start-ups since 2011. In 2016, the Munich-based company moved from New York to Silicon Valley with its VC offshoot BMW i Venture and launched its first fund with 500 million euros.
The detection and search function of the unit is becoming more and more important for BMW, but the fund managers decide autonomously about their investments. “Our job is to register the early signals and to recognize where the market is going,” says Sage, describing the function of the division.
One can also “turn left when the company turns right” – that is, rely on technologies that the BMW Group is not currently pursuing any further. Should BMW rely entirely on central computer architectures, then BMW i Ventures should also invest in edge computing.
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This is the only way to identify disruption at an early stage, says Sage. This is an important corrective for the car company, which is sometimes very hierarchically organized. Because unlike in the past, the rivals are no longer just Mercedes and Audi. After the Tesla shock, BMW has to be careful not to be surprised by the next new competitor from the technology industry.
Solid power as an “ideal” investment
The example of Solid Power shows how valuable the unit can be for CEO Oliver Zipse. The start-up from Louisville, Colorado has long been one of those largely unknown companies working on the development of solid-state batteries. The technology is considered to be a possible successor to today’s lithium-ion batteries, the cells are potentially more powerful, cheaper and recyclable – but technically not yet fully developed.
Some researchers in Munich found the approach exciting; a team from BMW i Ventures traveled to Colorado. Sage calls the early investment in the single-digit million range “ideal typical”. “First the specialist department in Munich dealt with the company, then we got involved in financing as i Ventures.”
In the meantime, the parent company has taken over the direction itself: In May 2021, BMW and Ford announced that they would jointly invest 130 million dollars in Solid Power, with production scheduled to begin at the beginning of this year. BMW hopes to be able to use the technology in the “new class” electric cars from 2025 and thus be one step ahead of the competition.
In addition to Solid Power, BMW i Ventures has already participated in many other start-ups such as Boston Metal, which wants to manufacture liquid iron and thus climate-friendly steel, on behalf of the white and blue car manufacturer.
One of the most successful participations so far is, for example, a commitment to Chargepoint. The US charging specialist started with a little effort in the spring with a billion valuation on the stock exchange. In addition, BMW i Ventures invested early in Xometry, a marketplace for production services that is now listed on the stock exchange.
The company, which also has BMW as a customer, bought the German start-up Shift two years ago and now has 4,000 production sites in the network. Another investment by BMW i Ventures is Turntide. The US company manufactures intelligent engine systems. But there are also real flops: In 2017, BMW i Ventures invested a double-digit million amount in “Europe’s first digital car repair shop” Caroobi – the Berlin company went bankrupt two years later.
For BMW i Ventures, home remains exciting. “We can see that more is happening in Germany and Europe than before and therefore want to expand our commitment,” says Sage. There are now more serial founders and business angels in this country who are passing on their experiences.
In addition, investments are increasingly being made in the deep-tech sector. “The overall ecosystem is getting a new level of maturity.” The BMW i Ventures teams have already been expanded. “We will see more deals in Europe.”
Learning curves in the Valley
BMW founded its start-up unit ten years ago. Initially, the division acted as a classic venture capital offshoot. The approval of the headquarters had to be obtained for deals. “That led to delays and could at times slow the process down a lot,” says Sage. The speed of innovation is high in disruptive times.
BMW just wasn’t fast enough in the beginning. Therefore, one now acts as an independent venture capital fund and can decide independently. “We concluded our fastest deal in ten days – that would hardly have been possible before.”
This is also due to the move from New York to California that began in 2016. BMW i Ventures has its headquarters where the center of the start-up world is still: in Silicon Valley. The 15-person team usually makes one to low double-digit million investments in minority interests in the earlier phase.
Often the unit leads the financing rounds. So far, investments have been made in around 60 companies – exclusively with money from BMW. Only three of them were based in Germany. There are already 16 exits.
Siemens, SAP, Daimler: The search for new ideas
When it comes to start-up investments, the large corporations have different strategies. Next47 from Siemens sees itself as a normal venture capital provider who also invests far away from Siemens’ core businesses. Next47’s list of holdings ranges from 15Five, a platform for employee feedback, to data warehouse specialist Yellowbrick. Acquisitions that are intended to advance the operational business are made directly by the divisions, sometimes advised by Next47.
The SAP offshoot Sapphire is even one of the largest investors in start-ups worldwide. The independent venture capital specialist has already invested in well over 100 young companies. The engagements ranged from LinkedIn to Fitbit to data analysis specialists like Sumologic and fintechs like Transferwise.
The corporate start-up units compete with countless venture capital investors around the world. “Money alone is no longer what brings you into the deal,” says Marcus Behrendt, also a Managing Partner at BMW i Ventures.
There is a lot of capital available worldwide. With good companies, the contract is awarded to the one that brings an additional benefit. That is big at BMW i Ventures: “We can open doors.” Many start-ups are interested in the sales and purchasing channels and in the production and development expertise of the car manufacturer.
The industry has changed. “In the past, the suppliers developed technologies that were then available to all car manufacturers.” Today, access to key technologies that others could not use is a competitive advantage. “The rules of the game in the technology industry spill over into the auto industry – because there is more and more IT in the car.”
Therefore, all major car manufacturers are looking for attractive investments. Daimler, for example, set up the Techinvest venture division. One is constantly on the lookout for innovative companies and technologies, it is said in Stuttgart – “It does not matter whether the start-up is still in an early phase or whether it is already an established technology company”.
The company holdings in the Daimler portfolio include, for example, the Blacklane driving service, also Chargepoint, the software specialist Fleetmaster, Flixbus, the materials specialist Storedot, Torc Robotics and Volocopter.
Daimler also founded the Start-up Autobahn initiative, which aims to bring young companies and large corporations together and thus facilitate cooperation. Among other things, Volkswagen has launched a start-up incubator program in its glass factory in Dresden. In Munich, the car manufacturer has set up a “Start-up Collaboration Space” in its Data: Lab.
In addition, VW and its daughters are actively involved in young companies. For example, Porsche Ventures recently bought the Chinese company iMaker, which it claims to be a leading provider of virtual influencers in China. The auto industry will also need this in the future.
More: “Investors’ appetite for new companies is unbroken”.