The Pandemic's Impact on the Transportation Sector

The COVID-19 pandemic profoundly disrupted the transportation industry. It not only exposed existing vulnerabilities but also revealed previously unforeseen possibilities for growth and innovation.

A significant surge in electric bike sales occurred as reliance on public transportation decreased dramatically. Both the general public and investors started to appreciate the practical applications of autonomous sidewalk delivery robots, which were previously considered simply as curiosities.

Shifting Priorities and Investment Trends

The increased demand for on-demand delivery services spurred major retailers, such as Walmart, to allocate more resources to fulfilling consumer requirements. This trend was also a key factor in Uber’s strategic decision to streamline its operations by divesting from numerous business units and acquiring Postmates.

Consequently, the ongoing transformation within the sector is far from complete. Building upon a survey conducted in May 2020 regarding the specific impact of COVID-19, TechCrunch consulted with 10 investors to assess the current state of mobility.

These investors shared insights into the most promising trends and the criteria they are using to evaluate potential investments. Opportunities are being identified in areas such as software, particularly within mobility-as-a-service and fleet management solutions.

Continued demand for delivery services, the ongoing transition to electrification and advancements in battery technology, and the utilization of SPACs (Special Purpose Acquisition Companies) by startups in 2020 are also considered significant factors.

Furthermore, positive momentum is even being observed for eVTOLs (electric vertical takeoff and landing) technology.

Expert Perspectives

The following individuals contributed their expertise to this analysis:

• Clara Brenner, co-founder and managing partner, Urban Innovation Fund
• Shawn Carolan, partner, Menlo Ventures
• Dave Clark, partner, Expa
• Abhijit Ganguly, senior manager, Goodyear Ventures
• Rachel Holt, co-founder and general partner, Construct Capital
• David Lawee, founder and general partner, CapitalG
• Sasha Ostojic, operating partner, Playground Global
• Sebastian Peck, managing director, InMotion Ventures
• Natalia Quintero and Rachel Haot, Transit Innovation Partnership/Transit Tech Lab

Clara Brenner, co-founder and managing partner at Urban Innovation Fund

The COVID-19 pandemic caused significant disruption across nearly all areas of the transportation sector. Demand for e-bikes surged, while shared scooter services initially faced challenges, though some have since seen a recovery. Ride-hailing and public transit experienced substantial declines in ridership as individuals opted for personal vehicles and alternative modes of transport. Simultaneously, delivery services saw a dramatic increase in demand, and the autonomous vehicle industry underwent a period of consolidation.

Looking ahead to 2021, which sectors are poised for recovery, and where might new, unexpected investment opportunities emerge?

The pandemic highlighted the fragility, financial instability, and inherent inequities within U.S. transit systems. We are particularly drawn to tools that empower cities to receive compensation when private companies profit from public infrastructure. Furthermore, solutions that promote more equitable access to mobility options are of great interest. For example, companies such as Ride Report, which assist cities in managing the diverse range of public and private transit activities occurring within their boundaries, are quite promising.

What opportunities remain for new startups, considering the autonomous vehicle industry is now maturing, marked by unprecedented consolidation, substantial funding rounds reaching billions of dollars, and the initial stages of limited commercial operations?

Despite the progress made, autonomous vehicles still face considerable hurdles, leaving ample space for new startups to contribute to this evolving field. Currently, we are focusing on new companies developing software solutions to streamline regulation and address parking challenges.

With established automakers shifting their focus towards electric vehicles and new EV manufacturers preparing for production, what overlooked areas are you keen to invest in?

We are showing significant interest in the developing field of fleet management – a focus reflected in recent investments like Electriphi, which provides software to aid fleets in transitioning to electric vehicles, and Kyte, which leverages underutilized fleets to offer a streamlined car rental experience. The efficiencies inherent in the fleet model for transportation are substantial, and we anticipate its growing importance in the years to come.

What fundraising strategies are likely to prove successful for transportation startups in the future? Do you foresee continued strong early-stage funding in this sector? Do you view SPACs as a viable long-term path to liquidity for a significant number of startups within this industry?

Transportation is essential for nearly everyone and currently presents numerous challenges, suggesting it will remain a popular topic and attract investor attention for the foreseeable future. However, the substantial size and cost of capital rounds for transportation companies can often result in significant dilution for early-stage investors. This doesn’t appear to be deterring investors currently, though.

At the Urban Innovation Fund, we are dedicating considerable effort to identifying software tools that enhance the efficiency of larger hardware systems. Regarding long-term liquidity, SPACs offer a potential avenue for many companies. However, consolidation and mergers appear to be the most probable outcome for the majority of companies in the transportation space, where strategic alliances and integrations provide crucial competitive advantages.

What actions would you like to see from the Biden administration to foster innovation within the transportation sector?

I would like to see investment in urban public transit systems – systems that, when properly implemented, can be remarkably effective. This action may not directly accelerate “innovation,” but it will undoubtedly accelerate progress. A common misconception within the venture capital community is that innovation always equates to progress.

Shawn Carolan, Partner, Menlo Ventures

The COVID-19 pandemic significantly altered nearly all facets of the transportation sector. Demand for e-bikes surged, while shared scooter services initially faced challenges, though some have since seen a recovery. Ride-hailing and public transit experienced substantial declines in ridership as individuals opted for personal vehicles and alternative modes of transport. Simultaneously, delivery services witnessed a dramatic increase in demand, and the autonomous vehicle industry underwent a period of consolidation. What areas of transportation are poised for recovery in 2021, and where are the emerging investment prospects?

A widespread recovery across nearly all transportation segments is anticipated in 2021, driven by a strong public desire for a return to normalcy, decreasing infection rates, improved mask usage, and increasing vaccination rates. The slowest recovery is expected in commute-to-work scenarios, as the “new normal” for many will involve a 50%-100% reduction in monthly office visits.

A Shift Towards Personal Mobility

The psychological effects of the pandemic will likely endure, leading individuals to prioritize personal space. This trend will accelerate the adoption of personal e-mobility solutions, encompassing both direct purchases and subscription models for scooters and e-bikes, such as Unagi, a company in which we have invested.

Asset-sharing services that minimize close contact between riders, like GetAround, Turo, Lime, and Bird, will also gain traction. Similarly, single-ridership options from Uber and Lyft will be favored over shared rides.

The E-commerce Supply Chain Transformation

E-commerce demand has experienced a substantial and lasting increase. Many shippers, trucking companies, manufacturers, and distributors remain disconnected, inefficient, and reliant on outdated paper-based and manual processes. The entire supply chain is ripe for improvements in efficiency and transparency, mirroring the model of Amazon. This will be fueled by automation at the factory and warehouse levels, robotics, and advanced fulfillment and logistics software, as exemplified by our investments in Alloy, Fox Robotics, and ShipBob.

The Growth of Local Delivery Services

Services like Instacart, DoorDash, and UberEats have popularized local delivery. This trend is expected to continue, with major companies focusing on streamlining fulfillment processes to avoid allowing delivery fleets to capture all the benefits. Companies such as AnyCart, which integrate ordering for groceries and recipes, can partner with large grocery chains to deliver a superior user experience and more competitive pricing.

Opportunities in the Maturing Autonomous Vehicle Industry

Despite the ongoing consolidation, substantial funding rounds, and the emergence of limited commercial operations, opportunities will always exist to enhance transportation in terms of speed, cost, and efficiency for any given distance. Key areas of advancement include:

Leveraging Electric Propulsion

Electric propulsion, both on land and in the air, offers a significantly lower cost per mile due to reduced operating expenses related to motors and recharging, compared to traditional fuel combustion. Investment opportunities exist primarily in companies developing improved batteries, motors, and quieter propellers.

Improving Asset Utilization

More efficient vehicle routing through advanced software, increased capacity utilization via optimized marketplaces, and reduced downtime through better scheduling and optimization algorithms can all contribute to lower prices.

Advancing Autonomy

While fully human-level autonomy remains several years away, significant opportunities exist for autonomy in controlled environments – such as vehicles operating on repetitive routes with minimal obstacles – and in aerial applications.

Overlooked Investment Areas

Beyond the car, numerous transportation options, including electric scooters, bikes, and eVTOLs, will continue to grow in popularity for both practical use and recreational purposes.

Fundraising Models for Future Transportation Startups

The transportation sector will consistently present opportunities due to its substantial share of consumer spending. While Silicon Valley largely overlooked transportation until the late 2000s, this has changed dramatically, particularly with the rise of Tesla.

However, the sector is often capital intensive. Demonstrating strong unit economics at a small scale before expansion will become increasingly crucial, as evidenced by the challenges faced in the shared scooter market, which highlighted that rapid growth alone does not guarantee success.

We would welcome greater availability of debt financing for electric vehicle companies. Given their lower operating costs and the current low-interest rate environment, substantial pools of clean transportation debt capital could accelerate adoption by enabling consumers to acquire vehicles through affordable monthly fees. For instance, Unagi’s all-access subscription provides a personal scooter for $30-$40 per month, offering a compelling return on investment given usage patterns and reliability.

SPACs can be a viable option for companies with high research and development costs and a long timeline to reach traditional IPO milestones (e.g., exceeding $100 million in annual revenue). However, some of these ventures may fail, leaving retail investors with losses when stock prices decline. This could represent a large-scale version of the “failed launch” phenomenon, with significant repercussions.

Corporate venture capital, particularly from industrial and automotive companies, is becoming more aggressive as the industry recognizes the need to adapt.

Policy Recommendations for the Biden Administration

We advocate for proactive policies to accelerate the adoption of clean technologies. Beyond the environmental benefits of reducing carbon emissions, such policies make sound economic sense. Examples include tax credits for investments in environmentally friendly transportation options – electric scooters, bikes, cars, boats, etc. – as well as incentives for installing solar power for homes and utility plants, and utilizing EVs for materials handling.

The U.S. should strive to become a leading testing ground for AVs by establishing a more favorable regulatory environment compared to competitors like Europe and China, both on the ground and in the air.

Securing a dominant position in the extraction and manufacturing of lithium-ion batteries is crucial, as this material is the “white oil” of our generation.

Aggressive funding of research and development initiatives at universities and commercial labs is essential to drive innovation and improve the cost-effectiveness of batteries, motors, propellers, the power grid, and other fundamental components.

Dave Clark, Partner, Expa

The COVID-19 pandemic significantly impacted the transportation industry across nearly all sectors. Demand for e-bikes surged, while shared scooter services initially faced challenges, though some have since recovered. Ride-hailing and public transit experienced substantial declines in ridership as consumers opted for personal vehicles and alternative transportation methods. Simultaneously, delivery services saw a dramatic increase in demand, and the autonomous vehicle industry underwent a period of consolidation.

Looking ahead to 2021, the question arises: which sectors will rebound, and where will new investment opportunities emerge?

I anticipate a recovery within the ride-sharing sector.

The food delivery landscape now benefits from a more robust infrastructure, poised for continued growth. This shift has driven supply online and encouraged existing businesses to enhance their products and packaging. Delivery times are consistently decreasing. An increasing number of cloud kitchens and the exploration of dark stores in major cities are designed to meet the heightened consumer expectations during this period of e-commerce expansion. However, significant progress is still needed, particularly in grocery delivery, as the online shopping experience differs considerably from traditional in-store shopping.

Alcohol delivery represents another substantial opportunity; monitoring companies like GoPuff and their international counterparts is advisable.

Several sectors are demonstrating resilience even amidst ongoing market volatility and disruption. These include esports, edtech, biotech and telemedicine, enterprise SaaS fueled by accelerated digital transformation, e-commerce and grocery services, and investment platforms.

Autonomous Vehicle Industry Opportunities

What remaining opportunities exist for new startups, considering the autonomous vehicle industry's maturation, characterized by unprecedented consolidation, substantial funding rounds, and the emergence of limited-scale commercial operations?

It would be premature to overestimate the advantages of established companies. As technology becomes more readily available, new competitors will enter the market, particularly those focusing on designs better suited for autonomous and shared systems.

Consider these specific examples:

Electric vehicles (EVs) are nearing price parity with gasoline-powered cars, alongside advancements in carbon-neutral and negative-emission technologies, energy storage, microgrids, and battery technology.

We are on the cusp of seeing drone infrastructure and service business models scale as consumer adoption increases and industry regulations become clearer.

As autonomous vehicle technology becomes more commonplace, opportunities will arise in the software layers that optimize routes and manage resources throughout supply chains.

Overlooked Investment Areas

Now that traditional automakers are transitioning their portfolios to electric vehicles and new EV manufacturers are preparing for production, what overlooked areas present attractive investment opportunities?

eVTOL (electric vertical takeoff and landing) vehicles are a key area. Roads are limited to a single dimension, and congestion is worsening. Expanding transportation into the skies is essential.

Fundraising and Liquidity

What fundraising model will define success for future transportation startups? Will early-stage funding in this sector remain strong indefinitely? Do SPACs offer a viable long-term path to liquidity for a significant number of startups?

Currently, 139 SPACs (special purpose acquisition companies) are actively seeking targets, with 29 new SPACs emerging in January alone. This level of activity is unsustainable. The increased competition will likely lead to unfavorable deals driven by desperation.

Solving transportation challenges is a monumental undertaking. A successful company in this space has the potential for limitless growth. Given these conditions, I believe early-stage funding rounds for exceptional teams will remain competitive.

Biden Administration Priorities

What actions would you like to see from the Biden administration to accelerate innovation in the transportation sector?

Regulatory acceptance and support for both autonomous and eVTOL technologies are crucial.

The development of autonomous vehicles is driven by the need to reduce the significant number of fatalities caused by car accidents each year. Human drivers are prone to errors. Slowing down innovation in this sector through excessive regulation will perpetuate an unacceptable level of annual accidents. Autonomous systems have the potential to dramatically decrease the number of deaths. The focus should be on saving lives, rather than fixating on the occasional errors during autonomous testing and development.

Abhijit Ganguly, Senior Manager at Goodyear Ventures

The COVID-19 pandemic caused significant disruption across nearly all segments of the transportation sector. Demand for e-bikes experienced a surge, while initially, shared scooter services faced challenges, though some recovery was observed. Ride-hailing and public transportation saw substantial declines in ridership as individuals opted for personal vehicles and alternative modes of transport. Simultaneously, delivery services witnessed a dramatic increase in demand, and the autonomous vehicle industry underwent a period of consolidation.

Looking ahead to 2021, which sectors are poised for recovery, and where might new, unexpected investment opportunities emerge?

At Goodyear Ventures, we are closely monitoring long-term growth patterns within the transportation landscape. Prior to the pandemic, trends toward digitalization were already gaining momentum in our industry. We anticipate that the pandemic will serve to accelerate these existing trends.

This acceleration is evident in the growth of companies within our portfolio, such as Starship, which is experiencing rapid expansion in the contactless delivery market.

What opportunities remain for emerging startups, considering the autonomous vehicle industry is now maturing, marked by unprecedented consolidation, substantial funding rounds reaching billions of dollars, and the initial stages of limited-scale commercial operations?

Despite the recent consolidation, we continue to identify several opportunities within the autonomous vehicle space. The advancements achieved by TuSimple, a company in which Goodyear Ventures has invested, serve as evidence of these possibilities. Focusing on high-value applications where drivers can be removed from specific, defined routes presents areas where startups can provide significant value.

While these applications may present challenges in terms of scalability, they also offer a more direct route to establishing a sustainable business model. Startups capable of effectively navigating this balance are well-positioned for success.

With established automakers shifting their focus towards electric vehicles and new EV manufacturers preparing for production, what often-overlooked areas are attracting your investment interest?

The ongoing shift towards electrification creates opportunities for original equipment manufacturers (OEMs), Tier 1 suppliers, and companies in the aftermarket. We continue to see potential in EV fleet management solutions, aftermarket services designed to improve vehicle uptime and reduce operational costs, and the development of supporting infrastructure – both software and hardware – to facilitate seamless deployment.

Envoy, a Goodyear Ventures portfolio company, is actively capitalizing on these opportunities through its shared mobility EV platform.

What fundraising strategies are most likely to lead to success for transportation startups in the future? Do you foresee continued strong demand for early-stage funding in this sector? Do you view Special Purpose Acquisition Companies (SPACs) as a viable long-term path to liquidity for a significant number of startups in this industry?

We maintain the belief that each startup possesses unique characteristics, and its financing path should ultimately be determined by its specific needs. Our primary objective is to identify startups that are poised to revolutionize mobility. Financing preferences will inevitably fluctuate, but our investment strategy centers on supporting companies that generate value and capitalize on robust underlying trends, regardless of the financing models they employ.

What specific actions would you like to see from the Biden administration to foster innovation within the transportation sector?

The administration’s initial steps to promote the adoption of EVs within government fleets are encouraging. However, the fundamental trends driving autonomous and electric vehicle development are rooted in the need to advance societal productivity. For instance, autonomous vehicles address the critical issue of driver shortages and accommodate surges in demand for expedited shipping. Policy can certainly support these trends, but they are largely market-driven and inevitable.

Rachel Holt, Co-founder and General Partner, Construct Capital

The COVID-19 pandemic caused significant disruption across nearly all areas of the transportation industry. Identifying which sectors will experience the quickest recovery in 2021, and uncovering novel investment prospects, is crucial.

Individual travel is anticipated to rebound most rapidly. Furthermore, micromobility solutions are projected to see a strong recovery during the coming summer months. A fundamental reassessment of “public transportation” will be a central focus.

Numerous innovative concepts within various bus service models are currently gaining considerable traction.

Autonomous Vehicle Industry and Startup Opportunities

Given the autonomous vehicle industry’s maturation, marked by increased consolidation, substantial funding rounds reaching billions of dollars, and the initial stages of limited commercial deployments, what opportunities remain for new startups?

The electric vehicle (EV) sector is poised for significant growth and activity. Additionally, a number of compelling startups are emerging that specialize in considerably more precise location tracking technologies.

Overlooked Investment Areas

With established automotive manufacturers transitioning their product lines to electric vehicles and new EV companies preparing for production, what areas are currently undervalued and represent attractive investment opportunities?

We recently invested in a company developing the software infrastructure that enables EV hardware manufacturers to establish connectivity. The software component within the EV ecosystem is expected to be a particularly dynamic and promising area for investment.

Fundraising and Liquidity for Transportation Startups

What constitutes a successful fundraising strategy for transportation startups moving forward? Is the current high level of early-stage funding in this sector expected to continue indefinitely? Do Special Purpose Acquisition Companies (SPACs) represent a viable long-term path to liquidity for a substantial number of startups in this industry?

Events like the COVID-19 pandemic provide a natural catalyst for re-evaluating existing paradigms. A considerable number of areas within the transportation landscape have yet to experience substantial innovation.

Biden Administration and Transportation Innovation

What specific actions would you like to see from the Biden administration to foster accelerated innovation within the transportation sector?

Continued investment in reimagining the utilization of our cities and roadways is essential.

David Lawee, Founder and General Partner, CapitalG

The COVID-19 pandemic caused significant disruption across nearly all areas of the transportation landscape. Demand for electric bicycles experienced a surge, while shared scooter services initially faced difficulties, though some have since seen a recovery. Ridership numbers decreased in ride-hailing and drastically fell in public transportation as individuals opted for personal vehicles and alternative methods. Simultaneously, delivery services saw a substantial increase in demand, and the autonomous vehicle industry underwent a period of consolidation.

Looking ahead to 2021, which sectors are poised for recovery, and where might new, unexpected investment opportunities emerge?

The industry’s trajectory will continue towards a model of transportation as a service. The advantages and disadvantages of individual car ownership are constantly being reevaluated, leading an increasing number of people to forgo owning a vehicle. While the pandemic briefly paused this trend, the underlying shift remains irreversible.

Ride-sharing platforms such as Uber and Lyft, having established superior user experiences and strong competitive advantages, alongside car-sharing services like Turo and Getaround, are expected to continue their growth, with substantial increases in usage anticipated following the pandemic’s conclusion.

This evolving landscape is contributing to a more favorable environment for the adoption of autonomous technologies. Although widespread individual ownership of fully self-driving cars, priced around $100,000, may be limited, a significant number of people will likely be interested in utilizing such vehicles through rental services for short durations.

Opportunities in a Maturing Autonomous Vehicle Industry

Given the autonomous vehicle industry’s current state of maturation – characterized by unprecedented consolidation, substantial funding rounds reaching billions of dollars, and the initial stages of limited commercial operations – what opportunities remain for new startups?

A considerable scope for innovation still exists within the realm of autonomy. Many of the underlying technologies, including lidar and other sensor systems, are still in relatively early stages of development. Furthermore, core challenges related to data processing require ongoing attention.

Despite continued and intensified investment from major technology companies, the potential for competition will actually expand as resources like ride data become commercially available.

We can anticipate the deployment of fully self-driving vehicles on highways and major roadways in the near future. The necessary technology is already available. However, achieving complete autonomy – enabling a self-driving car to navigate virtually any location – will likely require a considerably longer timeframe, potentially up to a decade.

Investment Focus Beyond Electric Vehicles

With established automakers shifting their product lines towards electric vehicles and new EV manufacturers preparing for production, what overlooked areas are attracting your investment interest?

My current focus is on autonomous deep tech – the intricate, foundational technologies that will ultimately realize the full potential of autonomous systems. Having been involved with autonomous technologies for over ten years, initially overseeing some of Google’s early self-driving projects, I firmly believe that the sector remains in its nascent stages.

At CapitalG, we operate as highly engaged, long-term strategic investors. Alphabet’s patient approach as a limited partner allows us to dedicate our time and resources to technologies with the greatest potential for transformative impact, regardless of the time required.

I am eager to connect with the forward-thinking technologists who will drive the next wave of innovation in autonomy.

Fundraising and Liquidity for Transportation Startups

What fundraising strategies are most likely to lead to success for transportation startups in the future? Do you foresee continued strong interest in early-stage funding within this sector? Do you view Special Purpose Acquisition Companies (SPACs) as a viable long-term path to liquidity for a significant number of startups in this industry?

Highly skilled technical teams are consistently in high demand and short supply. Startups operating in the autonomous space will continue to attract attention from venture capitalists, large technology corporations, and established automotive manufacturers.

A limited number of companies will achieve full integration, offering autonomous ride-sharing as a service. However, a greater number of companies will likely pursue success through strategic partnerships across both the technology and service layers.

Accelerating Innovation Through Government Policy

What actions would you like to see from the Biden administration to accelerate innovation within the transportation sector?

The U.S. transportation technology sector is currently experiencing a period of remarkable innovation. As regulations are developed, it’s crucial to recognize the inherent complexities and potential risks associated with the process. I hope that future regulations will be grounded in thorough, fact-based risk assessments that preserve the ability of transportation technology companies to maintain their current impressive rate of innovation.

Sasha Ostojic, Playground Global Operating Partner

The COVID-19 pandemic caused significant disruption across nearly all areas of the transportation sector. Demand for e-bikes experienced a surge, while shared scooter services initially faced challenges, though some recovery followed. Ride-hailing and public transportation saw substantial declines in ridership as individuals opted for personal vehicles and alternative modes of transport. Simultaneously, delivery services witnessed a dramatic increase in demand, and the autonomous vehicle industry underwent a period of consolidation.

A complete return to 2019 levels isn’t anticipated, but improvements are expected in 2021 across various sectors, including ride-sharing, both business and leisure air travel, and public transit. New opportunities are emerging within the logistics transportation space. The peak demand experienced by FedEx, UPS, and USPS in December highlighted the need for innovation in legacy transportation logistics, creating space for new companies leveraging technology to meet consumer expectations for rapid package delivery.

Opportunities for New Autonomous Vehicle Startups

Given the current state of the autonomous vehicle industry, characterized by substantial consolidation, large funding rounds, and the initiation of limited commercial operations, what opportunities remain for new startups?

The pursuit of fully autonomous driving is proving to be a remarkably expensive undertaking, accessible primarily to those with the capacity – and willingness – to invest billions in research and development. For companies unable to secure funding of at least $100 million, acquisition by a larger entity, often referred to as “acqui-hiring,” represents the most likely outcome.

This consolidation also results in a diminishing pool of potential customers for autonomous technology startups. A promising area for development lies in data ingestion and management. The vast amounts of data generated by autonomous R&D fleets are mirrored by a similar trend emerging with both commercial fleets and, increasingly, consumer vehicles. Automotive manufacturers currently lack the infrastructure and expertise required for a sophisticated and efficient data backend.

Overlooked Investment Areas in the EV Transition

With established automakers shifting their focus to electric vehicles and new EV manufacturers preparing for production, what overlooked areas present attractive investment opportunities?

A significant opportunity appears to exist in the realm of consumer automotive applications. Given the prevalence of apps for managing smart homes – controlling cameras, speakers, and sensors – it is logical that vehicles should integrate into this ecosystem. Initially, these applications will likely be specific to each manufacturer, such as the Tesla app or the GM app. However, an evolution towards open APIs is anticipated, allowing users to connect any vehicle to a centralized “garage” system, similar to adding a device to a platform like Google Home.

Fundraising and Liquidity for Transportation Startups

What fundraising strategies are most likely to lead to success for future transportation startups? Is the current level of early-stage funding in this sector sustainable? Do Special Purpose Acquisition Companies (SPACs) offer a viable long-term path to liquidity for a significant number of startups?

The period of intense early-stage funding for transportation startups has already passed. The $1 billion GM paid for approximately 40 Cruise engineers in 2016 represents a peak in investor enthusiasm that is unlikely to be repeated. Archer Aviation’s public offering via a SPAC likely marks the high point of excitement surrounding air taxi services.

Currently, there is an overabundance of SPACs competing for a limited number of high-quality companies. It is reasonable to expect investors to recognize the lack of value in acquiring stock in companies valued at zero billion dollars with no projected revenue for the next three to five years. These high-tech SPAC investments increasingly resemble biotech investments, often ending up as penny stocks reliant on press releases for survival. However, a rational investor over the past year would likely have ranked poorly.

Biden Administration and Transportation Innovation

What actions would you like to see from the Biden administration to foster innovation within the transportation sector?

Greater emphasis on public-private partnerships and the opening of city and municipal APIs to facilitate the integration of transportation services with existing city infrastructure would be beneficial. Cities are actively seeking to reclaim their streets and are motivated to explore new revenue streams and participate in the growth of innovative transportation business models.

Positive developments are already visible in the Los Angeles Department of Transportation’s deployment of a platform for managing Uber/Lyft services at LAX and scooters in Santa Monica. The federal government can accelerate this progress by establishing standards that enable the replication of these models nationwide.

Sebastian Peck, Managing Director, InMotion Ventures

The onset of COVID-19 caused widespread disruption across nearly all facets of the transportation landscape. Demand for e-bikes experienced a significant surge, while shared scooter services initially faced challenges, though some have since shown signs of recovery. Simultaneously, ridership in ride-hailing services declined and public transit usage plummeted as individuals gravitated towards personal vehicles and alternative transportation methods.

Conversely, the demand for delivery services rose dramatically, and the autonomous vehicle industry underwent a period of consolidation. Looking ahead to 2021, which sectors are anticipated to recover, and where might new, unexpected investment opportunities emerge?

A resurgence is expected in both ride-hailing and micromobility, with the latter possessing substantial untapped growth potential. The consolidation trend within the autonomous vehicle industry is likely to persist.

Companies lacking established relationships with original equipment manufacturers (OEMs) will encounter considerable obstacles. However, the defining narrative for 2021 centers on the decarbonization of transport, closely linked to the evolution of the digital supply chain.

Increased investment activity is anticipated in areas such as battery chemistry, technologies for smart and rapid charging, hydrogen fuel, and green supply chains.

Opportunities for New Startups

Given the maturing autonomous vehicle industry, characterized by unprecedented consolidation, substantial funding rounds, and the emergence of limited-scale commercial operations, what opportunities remain for new startups?

Innovative technologies that demonstrably expedite the decarbonization of transport will attract significant investor interest. This sector is heavily reliant on research and development, presenting complexities for investors, but the potential returns are substantial.

We also identify considerable opportunities in areas like battery recycling and the development of sustainable materials – for example, those used in vehicle interiors – where the expansive market size allows for the growth of high-potential companies driving innovation.

Furthermore, significant potential exists in connected car insurance, alongside other business models enabled by connected car data, and related services such as vehicle maintenance and repair.

Overlooked Investment Areas

With established automakers shifting their focus towards electric vehicles and new EV manufacturers preparing for production, what overlooked areas present attractive investment prospects?

The full potential of connected vehicle data may not yet be fully recognized, partly due to current access limitations for developers. We anticipate more OEMs releasing application programming interfaces (APIs) in 2021, fostering a dynamic environment of innovation that will benefit both consumers and commercial fleet operators.

Fundraising and Liquidity

What fundraising strategies will define success for future transportation startups? Is the current high level of early-stage funding in this sector expected to continue indefinitely? Do SPACs represent a viable long-term path to liquidity for a significant number of startups?

Currently, there are no indications of waning momentum surrounding SPACs, and we expect them to remain a crucial avenue for liquidity for the foreseeable future. We foresee a greater concentration of early-stage capital within a smaller number of transactions, a trend observed in 2020 and projected to continue.

This implies increased competition for select deals, while first-time founders may find securing capital remains challenging.

Biden Administration Priorities

What actions would you like to see from the Biden administration to accelerate innovation within the transportation sector?

A national commitment to decarbonizing transport, coupled with the open sharing of data and the dismantling of data silos to facilitate the growth of Mobility as a Service, would be highly beneficial to the U.S.

Natalia Quintero and Rachel Haot, Transit Innovation Partnership

The transportation industry experienced widespread disruption due to COVID-19. Identifying which sectors will lead the recovery in 2021, and uncovering emerging investment possibilities, is crucial.

The effects of the pandemic will persist throughout 2021. Significant potential exists for the integration of AI and digitization within public transportation systems, encompassing subway cars, buses, and shuttle services.

This advancement will be fueled by infrastructure investments and revenue generated from congestion pricing. Furthermore, micromobility companies will likely see continued growth, particularly as cities shift away from centralized business districts towards more distributed commercial areas.

Biden Administration's Role in Transportation Innovation

What specific actions would accelerate innovation within the transportation sector under the Biden administration?

Funding for public transit and approval of significant urban infrastructure projects, such as New York City’s congestion pricing plan, would be highly beneficial. This initiative serves as a national precedent for other cities to follow.

Congestion pricing mechanisms will generate funds for public transit enhancements. This presents a substantial opportunity for digitizing transit infrastructure and applying autonomous vehicle (AV) technologies – including computer vision, AI, and lidar – to transit operations.

The Internet of Things and connected infrastructure also represent a major area for development. Additionally, incentivizing and funding electric vehicles, EV charging infrastructure, and clean energy sources are vital steps.