Reilly Brennan possesses a deep-seated enthusiasm for automobiles and trucks. The Michigan native willingly performed foundational tasks for an automotive publication while studying at the University of Michigan, subsequently securing a position as a trackside communications manager with General Motors. He then spent several years as an editor and general manager with an automotive publishing company named NextScreen, before transitioning into the role of programming director for AOL’s automotive divisions.

His career progressed to the West Coast, where he became executive director of an automotive research program at Stanford University, a position he currently maintains as a lecturer. It was not long before the concept of a seed-stage fund began to appeal to him, ultimately leading to the creation of Trucks Venture Capital, which has since invested in numerous companies from an initial $20 million fund and is currently preparing to launch a larger fund.

Last week, we spoke with Brennan regarding the rapidly increasing valuations of two companies within the automotive industry: the electric vehicle manufacturer Rivian, which recently completed a substantial funding round at a post-money valuation of almost $30 billion, and Cruise, which also secured a significant investment at a $30 billion valuation. (Trucks Venture Capital had previously made an early investment in Cruise, prior to its acquisition by GM in 2016, where GM continues to hold a majority stake.)

We inquired whether even a dedicated automotive enthusiast might perceive current valuations as inflated. The complete discussion is available here. The following excerpts have been slightly edited for conciseness and clarity.

TC: Could you describe the investor base of Trucks VC? Are they primarily individuals, or are any automotive manufacturers seeking insight into emerging technologies involved?

RB: Our investor network includes former executives from the automotive sector now working in the technology world, a number of family offices, and certainly several large strategic corporations. Unfortunately, I am unable to disclose their identities due to confidentiality agreements. However, a significant benefit of our network of [limited partners] is that our portfolio companies – when they require assistance with transportation-related initiatives – have streamlined access to these individuals and organizations. I appreciate the breadth of our investor mix; there is likely no component of a vehicle, be it a car, truck, bicycle, or airplane, that one of our investors couldn’t provide support with.

TC: Does Trucks VC typically aim to be the first investor in a deal?

RB: A key lesson learned during our first fund was that we initially focused on participating in rounds led by others, simply being pleased to be involved. Our initial investments [from Fund I] ranged from $100,000 to a few thousand dollars.

The new fund is structured to enable us to lead investment rounds, as founders frequently requested our leadership during the first fund’s lifecycle, but the fund size limited our capacity. This new fund is specifically designed to allow us to lead seed rounds and actively participate on company boards, typically holding a 10% to 12% equity stake.

TC: Trucks Venture Capital made an early investment in Cruise, the self-driving car company acquired by GM for a reported amount varying between $1 billion and $500 million…

RB: The Cruise investment was initially made by my fellow general partners, Jeff and Kate. While I cannot confirm the precise acquisition price, it was a favorable outcome. Furthermore, considering the current valuation of Cruise within General Motors, or that of another company we invested in, Nutonomy, which was acquired by [automotive supplier] Delphi [for $450 million in 2017] and now operates as Motional, these valuations are substantial.

I often reflect on those early exits as they validated the industry, but I also believe many early investors might have preferred a larger ownership position. I am not suggesting they made the wrong decision, but the current valuations of Cruise and Motional collectively exceed those of General Motors or Ford Motor Company.

TC: Do you believe Cruise’s valuation is currently justified, given its long timeline to profitability?

RB: I concur that the public market appears somewhat overvalued when it comes to electric vehicles and related technologies. However, I believe many companies are exploring automation opportunities beyond simply robo-taxis. Last year, in particular, highlighted the potential of automation in logistics and delivery, which appears to be a more immediate and valuable application than robo-taxis.

TC: To what extent have valuations been influenced by Tesla, whose market capitalization now surpasses all major car manufacturers?

RB: The market seems to favor a straightforward narrative, and the belief in Tesla is now strongly associated with the idea that transportation is evolving in a specific direction: toward zero-emission vehicles that are highly connected and offer a new consumer experience.

This trend is evident with many pure-play EV companies, whether it’s [carmaker] Fisker pursuing a SPAC or the reception of [carmaker] Neo in China. There’s a clarity and consistency in their messaging.

One could argue that other companies possess greater engineering expertise, broader dealer networks, or more intellectual property, but in the public market, it’s about presenting a unified vision of the future. Currently, public markets are less receptive to a multifaceted approach to vehicle manufacturing and prioritize a clear alignment with the future, which they perceive as electric vehicles.

TC: This observation seems particularly relevant to Rivian. What is your assessment of this company, valued at nearly $30 billion despite not yet having sold a truck or SUV? You are not an investor in Rivian. Does its valuation appear reasonable?

RB: From an engineering standpoint, Rivian is arguably one of the most impressive new manufacturers.

A decade ago, numerous new supercar entrepreneurs emerged, but their ideas were often limited in scope, appealing to a small customer base. However, Rivian’s focus on utility vehicles and trucks, segments with growing demand and higher margins, is a strategic and intelligent approach, supported by exceptional engineering. Therefore, I am optimistic about Rivian’s prospects.

Within the next year, two significant events are likely to occur for Rivian. First, they will begin delivering the initial batch of [electric delivery vans being built for] Amazon, along with fulfilling orders from early customers. It is also plausible that they will become a publicly traded company within the next year. [This is my own assessment, and has not been communicated to me by Rivian].

TC: If Rivian were to go public, would you anticipate a traditional IPO or a SPAC merger? What is your prediction?

I believe Rivian will likely pursue a traditional IPO, but a SPAC merger remains a possibility. Regardless, I anticipate significant public interest in Rivian. I believe the company possesses substantial potential.

TC: Have you had the opportunity to test-drive Rivian’s vehicles or examine their technology firsthand? What specifically leads you to believe their engineering is superior?

RB: I believe Rivian’s strategic focus on the utility and truck segments is particularly insightful. In the U.S., these are two rapidly expanding segments with substantial profit margins, and there is currently no dedicated competitor specifically targeting these markets.

The engineering prowess of Rivian stems from the talent they have recruited and the proactive investments they made years in advance of vehicle production. They have attracted exceptional engineers from established manufacturers and strategically acquired a vehicle assembly facility from Mitsubishi at a reasonable cost, assembling these components well before their competitors.

It is important to note that there are still significant risks involved. My comments should not be construed as investment advice. However, I believe Rivian offers a compelling proposition that surpasses many other EV companies in terms of substance.

TC: Your colleague Kirsten reported in December that Rivian is developing a network of charging stations along interstate highways and near recreational areas like hiking trails to cater to its target customers. Does this strategy seem logical to you? Furthermore, how many different types of charging networks do you foresee in the future?

The development of a charging network is a valuable addition to Rivian’s overall narrative, although it is unlikely they will establish charging stations at every national park entrance. They will likely leverage existing charging networks. Currently, the U.S. market features dedicated networks like Tesla’s, as well as numerous agnostic [stations] that accommodate various vehicle types, and Rivian will likely utilize both. The question remains whether Rivian will build a comprehensive, dedicated network with extensive coverage, but I do not have an answer to that at this time.

Another compelling aspect of Rivian is their approach to service and maintenance. I recently reviewed a job posting for a remote diagnostics position, which emphasized the goal of minimizing the need for customers to visit dealerships. This raises the possibility of designing digital experiences, similar to telehealth, where customers could receive live support, vehicle assessments, and guidance on resolving minor issues remotely.

Traditional automotive design often necessitates frequent dealership visits. Rivian’s perspective on this is markedly different, making it a company worth watching.