Reilly Brennan loves cars. Born in Michigan, he enjoyed working for an automotive magazine as a student at the University of Michigan before joining General Motors as a trackside communications manager. He spent several years as an editor and general manager at an automotive publisher called NextScreen. He then becomes the program director for AOL's automotive real estate.
His next role would be on the West Coast as the executive director of an automotive research program at Stanford, where Brennan continues to be a visiting professor (his handful of courses combine transportation and design thinking). No wonder that at some point a seed stage fund also made a lot of sense and so Trucks Venture Capital was born, which has since made dozens of bets on a debut of $ 20 million and is soon to launch a larger fund.
Late last week, we spoke with Brennan about two of the fastest rising valuations we've seen in the automotive sector recently: that of electric vehicle maker Rivian, which last week launched a huge new round with a post-money valuation of nearly $ 30 billion and Cruise Automation, which also opened a huge new round last week and is also valued at $ 30 billion. (Along with a few other interesting bets, Trucks managed to write an early check to Cruise before it was acquired by GM in 2016, which retains a controlling interest in the company.)
We wondered if even a car enthusiast might think things were bubbly.
You can listen to the full interview here. The following excerpts have been edited slightly for length and clarity.
TC: Who are your investors in Trucks VC? Are they individuals? Are there any automakers trying to take a look at new technology?
RB: We have some former auto executives in the tech world, a handful of family offices, and definitely some big strategic companies. Unfortunately, I cannot give you their names as I have signed documents preventing me from doing so. But one of the cool things about our little Rolodex from (limited partners) is that when our founders come in and want to do something in transportation, it's an easy dog's door into many of these entities, whether they're people or companies. One of the things I love (the mix is) that there is probably no part of a vehicle, whether it's a car, truck, bicycle, or airplane, that one of our investors couldn't help with.
TC: Are you looking for the first money on your deals?
RB: One of the interesting things I learned about the first fund was that we were just trying to participate. We were just happy to be at the party. So we were participating in rounds led by other people and our checks (from Fund I) ranged from $ 100,000 to a few thousand dollars.
The new fund was designed to take advantage of leadership laps (because) the founders asked us to lead laps halfway through our first fund, and frankly the fund wasn't big enough to do that. Our new fund is really designed to give us starting laps, and that's exactly what we're doing. We lead or co-lead and sit on the board. We typically own around 10% to 12% of a company on Seed.
TC: One of Truck's earliest audits went to Cruise, the self-driving auto company that GM acquired for an amount that was reported to be more than $ 1 billion, as well as nearly $ 500 million. . .
RB: The Cruise investment that my (co-partners) Jeff and Kate made. I can't tell you exactly what the purchase price was, but it was pretty good. That being said, if you read about Cruise's review now at General Motors or that of another (self-driving) company we invested in, Nutonomy, which was acquired by (automotive supplier) Delphi (for $ 450 million in 2017 ) and is now essentially a company called Motional, they are pretty high up.
I think a lot about these early exits because they validated the space, but I also think a lot of the early investors are likely to want more ownership. I'm not saying they shouldn't have sold. But you look at the Cruise and Motional rating today – if you put those two units together – that's more than the rating of General Motors or maybe the Ford Motor Company.
TC: But is Cruise's rating too high at the moment? You still have a very long lead time to make money.
RB: I agree with you that the public market feels a little bubbly when it comes to electric vehicles and some of those ideas related to technology and auto. However, I think many of these companies are considering the option of automating things beyond robo-taxis. Last year in particular, there was a good insight into how the logistics and delivery part of automation is likely to be shorter-term than robo-taxis and therefore more valuable.
TC: How much has the ratings been boosted by Tesla, whose rating now dwarfs all of the major automakers?
RB: One of the things the market seems to want is the simple story, and belief in Tesla is now heavily centered on (thinking that) this is exactly the way transportation is organized. It will be a zero-emission vehicle that is highly connected and possibly tied to a consumer in new ways.
You see the same thing with a lot of these EV-only companies, whether it's (automaker) Fisker doing a SPAC or the way (automaker) Neo is received in China. There is this purity of their message.
You can successfully argue that a lot of other companies have more engineering or a bigger dealer network or more IP for a particular idea, but when it comes to the public market, it's really about painting the picture in that particular way that's on the future oriented. And right now, the public markets really don't like this composite liberal arts approach to vehicle manufacturing. They really just want one thing that is very fitting for the future and that they think is better electric vehicles.
TC: That seems to be the case with Detroit automaker Rivian. What do you think of this nearly $ 30 billion company that hasn't sold a truck or SUV? You are not one of the investors. Does the evaluation make sense for you?
RB: From a tech point of view, Rivian is probably one of the companies I most respect out of this new generation of manufacturers.
Ten years ago when they started there were a lot of new supercar entrepreneurs trying to start something new, but they were always small ideas. Maybe you could get 100 people to buy one. But they didn't really match what consumers were buying, who are increasingly utilities and trucks. So Rivian's approach to the segment he is aiming for is really smart and has fantastic technique. So I'm pretty optimistic about Rivian.
There will likely be two major events for Rivian in a year. For one, they will ship the first batch of (investor-built electric vans) to Amazon, along with (other orders) to some of the early customers. I wouldn't be surprised if they are public sometime next year.
They didn't tell me that. just my personal speculation here.
TC: When you say it goes public, do you mean a traditional IPO or maybe a huge SPAC? Would you advise
I bet Rivian will likely do a traditional IPO, that's my guess. But they could also do a SPAC at some point. (Either way) I think the public markets will really care about Rivian. I just think there are really good things out there.
TC: Were you able to test his cars? Have you seen the technology up close? What makes you so confident that what Rivian builds is superior?
RB: I think the point of view you have on the segments is really interesting. In the US, they are pursuing two rapidly growing segments of business, namely utilities and trucks, in which there is, by the way, a lot of leeway. and there is no one who specifically aspires to these segments.
The Rivian tech I'm talking about is really about the adjustments they made and a lot of the things they did for years before they got these vehicles ready. They have many amazing talents from great manufacturers. You made an unusual, but really smart, investment in a vehicle assembly facility that you bought relatively cheap years ago and owned by Mitsubishi. And they put all of these components together long before anyone really knew what was really smart.
Obviously there is still a big risk. What I am saying is not investment advice. I just think there are a lot of interesting things out there that are superior to a lot of other EV companies that don't have a lot of substance in to be honest.
TC: My colleague Kirsten reported in December that Rivian is building a network of charging stations along the highways and also in places such as hiking trails to cater to customers. Does that make sense to you? How many different types of charging stations will we have in the world?
(In terms of the location of the stations) it is definitely a nice addition to the story that they are trying to tell, although I don't think you will see a Rivian charger at the entrance to each national park. You likely have access to other charging systems. One of the things we see in the US is that you have some of these dedicated networks like Tesla and then you have a lot of agnostics (stations) that you can plug in and charge in many other places, and Rivian probably will exploit. An open question would be whether Rivian is building its own (larger) dedicated network that offers a lot of coverage, and I don't know about that yet.
The other component of Rivian that really fascinates is what they do for service and maintenance. I saw an open job Rivian had in remote diagnostics a few months ago and one of the gist of the job posting was that this job was really designed so that people didn't have to return to the dealer. (The question arises :): Could you make experiences digital, like at (on-demand doctor visits) where you could possibly speak to someone live, you could have (Rivian) evaluate the vehicle, or maybe you could through a vehicle to lead? Situation where you can fix something that would prevent many trips to the dealer?
When you factor in the traditional dealer and OEM relationship, the way cars are designed is that they have to keep returning to the dealer. Rivian's view of this is really different, and that's one of the other reasons it should be looked at.