Following the roller coaster ride that was GM’s bankruptcy and subsequent IPO, the auto maker — for the first time in its history — launched a venture capital arm, GM Ventures, last summer. But given GM’s long history and inexperience with investing and the startup world, there are a whole lot of directions — some good, some bad — GM could go with its experiment. But at the Cleantech Investor Summit in Palm Springs, Calif. on Wednesday, GM Ventures President John Lauckner highlighted just how GM Ventures could help entrepreneurs and startups, and also what GM Ventures is looking for in terms of its investments.
To get an initial clue into what GM Ventures might be attracted to, just look at the companies it has backed: electric vehicle maker Bright Automotive, battery startup Sakti3, and wireless charging firm Powermat. Yeah, all over the map. But Lauckner explained how the investments fit in its five key sectors to focus on: automotive cleantech (electric and low-carbon cars), infotainment, smart materials (light weight, phase change, forming tech), other automotive tech (like advanced sensors), and alternatives to traditional business models (like car sharing). The mission statement of GM Ventures is basically a spinoff of the mission statement of GM: Help GM build the best vehicles.
Rather than compete with venture capitalists, Lauckner said GM Ventures would actually be more eager to invest in startups that already had some sort of venture interest. “Venture capitalists have a lot of valuable experience that we can learn from, including knowing when to cut things and move on, working with management, and doing due diligence,” said Lauckner.
In terms of startups, Lauckner said GM Ventures is commonly investing as a customer, so the startup wouldn’t only get equity but often, a commercial relationship, which could be crucial for an early stage company. In addition, Lauckner said if GM starts working on the technology with a company at an early stage, GM can likely help the startup “shave the lead time off of the product development process,” by months or more.
Other benefits (beyond the obvious equity) would include GM being able to raise the profile of the company. We can “de-risk the equity structure of the company. We can take a lot of risk out of that from the beginning.” As a bonus, automotive testing and R&D is also an expensive undertaking and GM can help startups use its facilities and expensive tools.
On the flip side, what does GM get in return? Lauckner said it’s not common for GM to demand exclusive deals, but GM wants “a head start,” or basically a 12-month to 18-month exclusive lead time, before the startup starts selling the tech to other auto competitors. “We’ve done that for a couple [startups] and it works pretty well.”
GM has also taken the unusual step of licensing cathode technology from Argonne National Labs, and Lauckner said “the national labs do some tremendous work. It’s intellectual property at this moment, so it has it be turned into a product, but it’s extremely promising.”
Will GM Ventures be able to invest $100 million into helping GM produce the best cars in the world? Well, it certainly won’t hurt.
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