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Investing in mobility start-ups

Smart Mobility today – what’s changed and what hasn’t

A casual observer might think that COVID-19, which has brought much of the world to a halt, ​will have dampened the prospects of start-ups focusing on mobility solutions. Although this ​may well be the case in the short-term, demand for cheaper, more convenient, more contextualized transport solutions will be as strong as ever when countries fully emerge from lockdown measures and users return to their previous daily routines. Since the realities of the pandemic were realised in March, the automotive industry has been forced to innovate quickly around the development of new hygiene features. Without a global health emergency, examples of innovation such as sanitizing and neutralizing cabins (as shown by Ford) and preventing harmful virus particles from entering the vehicle (as demonstrated by Geely) would not have been seen in vehicles. The health/hygiene aspects of smart mobility were rarely thought about pre-pandemic, if at all. Now the cleanliness of a mobility service has the potential to make or break a consumer’s decision to use it. This is an example of how quickly new consumer demands can arise and the speed at which the industry must meet them. Importantly however, the core goal of most mobility start-ups has not changed, despite the upheaval over the last 4 months. This article will show what the current market landscape looks like, as well as giving insights on how to evaluate the individual companies that make it up.

It takes a village to deliver Smart Mobility

For many years, the potential to digitalise transportation has been a key focus of the world’s tech giants e.g. Waymo, Uber, Baidu, Tesla but there is still room for new start-ups to co-exist and make a difference. In fact, there are over 800 start-ups across 70 niches in the mobility sector – most with little to fear from being ‘Google-d’. They all have a role to play in delivering a more convenient, safe and productive mobility experience.

5 things to consider when evaluating mobility start-ups

SBD has extensive previous experience in managing technical due diligence with a focus on mobility start-ups. Here are five key things to look for:

1. Assessing what a start-up does (and doesn’t do) There is no shortage of start-ups that aspire to be end-to-end mobility providers. However, all start-ups are anchored in a comfort zone – their USP – and inevitably rely on a combination of suppliers and strategic partners to deliver the remaining gap between that comfort zone and what their customers need. The grander the ambitions in managing an end-to-end mobility solution, the more important it is to understand any areas of over-reliance on partners and suppliers. These dependencies could affect their operational viability (what happens if a key supplier goes bust?), their scalability (will their suppliers help or hinder them when expanding?) and ultimately their valuation (what EBITDA multiple applies to a Tier-1 vs a Tier-2?). This is where technical analysis of IP is critical, as it can help investors determine whether the USP ultimately belongs to the start-up or their strategic partners. 2. Hunting out the in-house experts As an investor, the first people you’ll meet during an exploration phase are the salesmen – the executives and the marketeers. While visionary leadership is crucial to the success of a start-up, it needs to be built on a strong foundation of expertise. One of the first places we investigate when we kick-off a due diligence project is the organisational chart and their recruitment roadmap. It becomes immediately clear whether a start-up can deliver what they’ve promised to their clients. Meeting with their engineers, data scientists, AI software developers and technicians (ideally in isolation from the executive team) gives a much more balanced view of a start-up’s capabilities – these people tend to be more pragmatic and aware of the limitations of what they’ve already delivered as a company. An ideal start-up is one where visionary leaders are surrounded by positive pragmatists. Effective questioning of technical teams during a due diligence exercise is invaluable to identifying whether the right technical culture and capabilities exists. 3. Evaluating the right KPIs to measure start-ups by While 1.35 million people already die on our roads each year globally, any incremental casualties caused by new mobility technologies or services risk creating a huge regulatory and public opinion backlash. There is consequently additional pressure for mobility start-ups to demonstrate that every reasonable measure has been taken to protect consumers. Getting it wrong in the past has led to traditional car makers becoming embroiled in legal battles, the cost of which would cripple a start-up. In addition to evaluating the financial performance of a start-up, it is therefore vital to undertake a detailed assessment of the product performance metrics and test procedures. More mature start-ups in the mobility sector will be quick to transparently share them – less mature ones will likely scramble to produce credible data. The expectation isn’t to get everything right from day one. Instead, mobility start-ups need to be able to demonstrate that they are measuring the right KPIs (e.g. interventions per x miles driven) and are achieving a consistent improvement in performance over time.

4. Identifying small decisions that lead to big problems Having to re-develop elements of a platform as new requirements emerge is generally accepted as a necessary part of a start-up’s growth. However, start-ups can quickly lose their agility and scalability if they’ve made poor technical decisions at an early stage. Making the wrong choices can burden a start-up with costly technological legacy before they have even won their first customer.

Poor technological decisions may be reversible, but can often be a symptom of other larger issues within an organisation that are harder to fix. Analysing their decision-making process is as important as understanding how they plan on addressing any weaknesses. 5. Mapping short-term and long-term competitors In a rapidly-evolving market like mobility, it can be hard to distinguish clearly between customers, competitors and partners. For example, while many start-ups are targeting traditional auto makers as either customers or partners, those same auto makers often have their own internal strategies and roadmaps that could place them in direct competition within a few years (or conversely make them candidates for future rounds of investment). Similarly, mobility start-ups may build up strong niches within certain segments (e.g. ultra-localised automated delivery of goods), only to find that established players in peripheral segments (e.g. high-speed autonomous vehicles) find it easy to enter their space because of the robustness and downward-scalability of their technology stack.

Mobility start-ups need to identify threats from across, above and below their line of sight. Challenging their perceived current USP is an important first step, but any technical due diligence also needs to include a forward-looking Porter’s Analysis to assess indirect or incoming threats.

How we help investors make better decisions

At SBD we provide research and consultancy services to our clients in the auto & mobility sector so that they can make informed decisions that eventually shape the future of how people travel. We do this by balancing vision with pragmatism. Our experts aren’t generalists - we recruit them from leading auto and mobility companies where they gained valuable hands-on experience developing cutting-edge solutions. The insights we deliver throughout all our projects are data-driven, independent and actionable. Investing in the mobility space is getting harder, despite (or perhaps because of) the proliferation of potential start-ups and the growing initiatives from tech disruptors like Google and Amazon. Because of this, we have built up a thorough and data-driven approach to managing technical due diligence projects:

  • We have an existing library of hundreds of pre-defined criteria ready to apply to any mobility start-up

  • Our experts adopt an ‘Ask, Observe, Test’ approach to all due diligence projects, helping to provide a holistic assessment of a start-ups capabilities

  • We undertake hundreds of mobility projects each year, which means we have expansive visibility of what ‘best-in-class’ really looks like


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