A note from James Nettleton, a Principal at Downing.
Prior to joining the Downing Ventures team in summer 2019, I spent three years investing in transport and mobility companies at Jaguar Land Rover’s VC fund – InMotion Ventures, a fund I helped set up in 2016.
A major focus for my role at Downing is to lead investments in the transport and mobility sector, building on Downing’s existing investments in companies such as Flock (drone insurance), Vivacity Labs (traffic analytics) and AVID Technology (electric vehicle powertrains).
Transport and mobility are transforming rapidly and one of the biggest potential changes out there is the end of the car as we know it.
Ending a century-long love affair with the car?
The 20th century was the century of the car, one in which personally owned vehicles enabled huge economic growth and shaped the design of our cities and our working lives. But the 21st century will see the primacy of the car challenged in a big way, with significant value created for entrepreneurs and investors.
A few years ago, the Apple analyst Horace Dediu coined the phrase ‘The Unbundling of the Car’. He saw a trend in the transport industry that he’d previously seen driven by the internet and mobile computing. iTunes, and then Spotify, unbundled music – enabling users to listen to any song, any time, on demand, rather than buying ‘bundles’ of tracks as CD albums. Netflix then unbundled network television – challenging everything from the screen we watch content on, to how we pay for it and how it’s produced. The car, Dediu suggests, is next.
Unbundling the car – one use case at a time
In the US, c.50% of all car trips are less than five miles in length and almost half of those are less than two miles. About 10% of trips are under one mile, or roughly a 20-minute walk. That creates a huge opportunity for disruption, as companies create cheaper, cleaner, and more convenient ways to make these short trips.
Highlights of investment themes which look most interesting include:
- B2B2C, or the ‘connective tissue’ layer. In other words these are the platforms that connect between travellers and their destinations. The dawn of e-commerce brought about similar platforms in delivery and logistics, with most online retailers now wholly or partly subsidising shipping, often fulfilling delivery by automatically connecting to one of many tech-enabled logistics partners. We see the same happening in personal transportation. Bricks and mortar retailers are showing willingness to subsidise the journeys of their best customers to promote loyalty, just as hospitals are starting to pay for ride hailing credits to prevent missed appointments. But to facilitate this at scale, a new middle layer will need to be created, making it almost inevitable that B2B2C platforms will emerge.
Players: Splyt, Validated (acquired by Moovel), Miles
- Optimising public transport through city scale simulation. For all the talk of new entrants to the transport market, the real hero of urban transport is the mass transit system. In London, 45% of the capital’s 27 million daily trips are taken on trains and buses. At peak times (commuting hours) that percentage is much higher. As cities grow in population, they need more infrastructure – that is inescapable. But there is a huge opportunity both to do more with the infrastructure we have and to better direct our infrastructure spend. Analysis that was expensive or time intensive in the past can now be done almost instantaneously, as companies harness the vast datasets produced by transport operators to optimise the system.
Players: Optibus, Swiftly, Immense Simulations
- Subscription access to cars (and other vehicles) coming of age. Car subscriptions offer flexible all-inclusive contracts that give the user access to a fully insured and maintained car for a single monthly payment. Subscription approaches to other, lower value vehicles such as e-bikes, scooters and mopeds are also becoming more common. The less we rely on our cars for our daily transportation, the less prepared we are to commit to the upfront payments and long-term financial products car ownership usually requires. Underpinned by a more general trend towards subscribing for consumer goods (phones, laptops, entertainment etc), flexible car subscriptions will be on the rise.
Players: Evezy, Drover, Cluno, Fair.com, Driver 1, Vanmoof
- Enabling the mass adoption of electric vehicles. There are few trends in mobility that are as widely agreed upon as the shift to EVs. That said, one big challenge remains – namely, getting our energy infrastructure ready for mass adoption. People we know and trust at energy suppliers, charging networks, OEMs, local councils and the grid all say this is one of the biggest challenges faced by EV adoption. We are actively searching for the companies building the software and systems that will enable us to serve the growing demand for EV charging.