Auto Tech Startup Funding Surviving Financial Downturns

Since federal regulators shut down Silicon Valley Bank (SVB) last month, business leaders report a ripple of fear running through the startup world, including companies offering innovative new services to automotive dealerships.

But the uproar quieted after First Citizen’s Bank of North Carolina announced it was acquiring SVB.

Such acquisitions signal recent financial downturns won’t greatly impact startup funding in the automotive technology world, Quin Garcia, managing director of Autotech Ventures, tells Wards.

“SVB is a great institution, but it is not the only show in the town,” he says.                                                                                                        

Autotech Ventures, based in Menlo Park, CA, in the heart of Silicon Valley, is an early-stage venture capital firm with more than $400 million under management. It provides a bridge between large businesses in the transportation sector and startup companies with technology those businesses can use.

Companies it has funded include Drover, a U.K.-based car subscription service acquired by Cazoo; and Digital Motors, an Irvine, CA-based digital retail and financing platform acquired by TrueCar.

Garcia says he has noticed little direct impact on venture capital funding in the auto tech sector because of the SVB failure.

 “We are open for business,” he says of Autotech Ventures. “It has had no impact on our desire to deploy capital.”

Dealership groups are among the large businesses with which Autotech Ventures works. It provides them with market intelligence and introduces them to startups with retail automotive-related technology. Sometimes the dealership groups invest in or acquire the startups.

Over the past decade, dealerships have increasingly embraced external innovation, says Garcia. Franchised automotive groups were slowly digitizing their processes, which were accelerated due to COVID. That boosted interest in companies with the enabling technology.

Garcia sees a match between dealers and startups.

 “A lot of the (dealership) ethos is well-aligned with startup tech entrepreneurs,” he says. “There is a willingness to take risks and invest now for a future opportunity.”

Given the rise of online shopping and the movement to a business model in which franchised dealerships are only “agents” delivering vehicles sold by automakers, there has been much speculation about the future of the dealership model.

Garcia says he has encountered a “spectrum of mindsets” among dealers as to the future of the retail auto world, but the “consensus view is, the fixed ops and aftersales service will be increasingly important in the future.”

Autotech Ventures has invested in startups in those spaces including Bumper, a U.K.-based startup offering buy-now-pay-later auto repair service in dealerships. Bumper helps “dealers offer a consumer the ability to spread their (repair) payment for zero interest to the consumer,” says Garcia. The consumer is able to afford a repair he or she otherwise might not have been able to, and “it is a win to the dealers (because) they are able to sell more service and products,” he says.

Autotech Ventures was also an early investor in ride-sharing startup Lyft, Garcia says, and “We have been asking ourselves, what comes after Lyft?”

Many drivers work for multiple gig-economy companies, such as Lyft and DoorDash.

“These drivers are multi-tenanting,” says Garcia. “They are living on different platforms at work.”

And their cars need repairs. So, Autotech Ventures has invested in Gridwise, a platform that allows dealers to provide service offers to gig-economy drivers.

It will “allow dealers to access a large share of gig-economy drivers at once,” says Garcia.