The firm, which now has over $4 billion in assets under management, invests across all stagesRead more...
The Israeli firm has invested in companies such as Phantom Auto, Cognata and Revel Transit
While technology is touching every aspect of our lives these days, seemingly few spaces have seen as much evolution in such a short amount of time as the automotive industry. Everything from services like Uber and Lyft, which have totally upended not only the taxi space but also the whole idea of car ownership, to the promise of autonomous vehicles, have turned the space completely upside down. Then there's the sheer size of the space, with autonomous vehicles alone expected to be a $54 billion industry this year, and $556.67 billion by 2026. Suffice to say, there's a huge opportunity here for investors.
Enter Maniv Mobility, an Israeli venture firm dedicated solely to investing in transportation and automotive technologies. On Tuesday, Maniv revealed that it closed its second venture fund with $100 million in commitments.
Investors in Maniv’s newest fund include twelve corporates from the automotive and transportation industry such as car-makers and suppliers such as Alliance Ventures, which is the strategic venture capital arm of Renault-Nissan-Mitsubishi, Aptiv, BMW i Ventures, Hyundai Motor Group, Lear Corp, LG Electronics, Shell Ventures and Valeo. Other investors include Deutsche Bahn Digital Ventures, which is the venture arm of the German rail and logistics operator Deutsche Bahn, and Israeli car importer Carasso Motors, in addition to numerous individuals, family offices and institutional investors.
"The most important thing to understand is that we're called Maniv Mobility, not Maniv Capital or Maniv Ventures, and that’s not an accident. We didn’t set out to start a venture fund and then say, ‘Maybe we’ll focus on mobility.’ Instead, we were focused on mobility and we were trying to figure out how to contribute to the ecosystem and it turned out that doing it in a venture structure was what made the most sense for our ability to contribute in that way," Michael Granoff, Managing Partner at Maniv, told me in an interview.
Maniv's sector specific focus allows the firm to offer its limited partners something that other generalist funds, which might also invest in the mobility space, simply cannot, said Olaf Sakkers, General Partner at Maniv.
"Our entire network and all our relationships are in this sector, all our time spent thinking is about the sector, all the problems we see on the board level at the companies we work with are within the sector. All our investors are coming from this sector, so all the resources that we have, and all the knowledge that we have, is very focused on this sector which makes us much more effective in supporting the companies that we’re investing in and also making investment decisions about the companies we’re investing in," he said.
"We’re able to show our investors insights about the sector. We’re focused just on mobility, and that’s the space they care about, so if they’re investing in a generalist fund, that fund isn’t giving them the information of knowledge that they need, or the access to the right set of companies, whereas everything that we do is aligned with what they care about and need to do. So, we’ve been able to specialize and offer a distinct offering that meets what the industry needs right now as it faces this time of disruption. That’s something important about our structure on the business development and deal flow side."
It's also a space that's growing quickly; Maniv raised its first $44 million fund around two and a half years ago, and in just that time, there has been a big upswing in activity in this space, according to Granoff.
"The most interesting thing that happened after we began to really get active in investing and going to the global conferences and expanding our network across the automotive industry, the mobility industry and the technology industry more broadly, is the strategic interest in what we were doing became very high. And when we opened up to raise the second fund last year, there was a bit of a flood of strategic interest that led us to bring in some of the names that invested in the company," he said, noting that a big part of the firm's strategy going forward will involve a broader geographic focus.
"Now we’re working very hard on the second fund, we’re a staff of seven, we see deal flow of about 50 to 70 deals a month, and these days I’d say a little less than half of that s coming from Israel and the other more than half coming globally. While we have picked a single sector to focus on, we think that are able to very well evaluate companies in any real geography in the sector, and that’s why I think of the things that will characterize our second fund is a broadened geographical distribution that we’re already seeing in the early stages," said Granoff.
Maniv's investing strategy
The firm's sweet spot, said Sakkers, revolves more around the dollar amount invested than the stage of investing, which he noted can change depending on what geographical location the investment is being made in. With the new fund, Maniv plans to make between 20 and 25 total investments, with initial checks of around $1.5 to $2.5 million, and total investments of $4 to $5 million over the life of the company.
"In Israel or the U.S. we often look for a team and an idea, sometimes they're still establishing product market fit, but some companies we’re looking at, especially in Europe, the businesses are more mature, which actually makes it little bit easier for us, and yet we’re still able to bring significant value," he said.
"What we’re doing is very focused on one particular area, which means, like most VCs are geographically constrained but vertical agnostic, we’ve got the inverse structure, where we’re vertical constrained and we actually think the unique advantages around that focus but we’re quite agnostic in terms of geography. We just closed a European investment, so on that geographic level from this fund it’s going to be a pretty broad spread, but our quality of deal flow has grown tremendously across the globe and we’ll continue to invest where we see the best opportunity."
When looking to invest in a company, one of the key things that Maniv looks for is the team.
"Obviously team is very important because things change and companies need to pivot sometimes and adapt to things, and good teams are better at that. Good teams are better at hiring good people and understanding strategies for being successful," said Sakkers.
"Another thing we look for is a certain sense of humility because we try to collaborate closely with these founders and having that quality is very helpful, especially in an industry that can sometime be challenging or involve regulations that move slowly."
For Granoff, the most important thing is actually being able to work with these founders over the long haul, and developing a working relationship with them.
"If I am chafing away from wanting to work with them, that is going to be a terrible for the prognosis of the company. We have to have people who we feel good about, who we’re comfortable working with. Having that filter means that you could miss out on a world changing opportunity; it’s not obvious that that should be a filter, and maybe it’s my age, but life’s too short to work with people who don’t share some foundational worldview," he told me.
Of course, traction and product market fit are factors that the firm looks for as well, even if the team ultimately is the most important thing.
"We like to see traction that indicates that there is product market fit, that there is rapid growth and interest from consumers, etc, that validates the product. Again, we’re early stage investors, so it’s not a metrics game, it’s not cookie cutter at all, it’s much more about quality of teams having a strong sense of this is the right market that we understand ourselves and then whether this is the right strategy to tackle that market," said Sakkers.
The formation of Maniv
Despite being only a few years old, Maniv actually grew out of a long journey for Granoff that began in the years immediately following 9/11 in New York City, where he became interested in the issue of national security and its relationship to energy policy. That led him to start an organization in Washington DC to figure out how to use American policy to "reduce the monopoly that oil has on transportation," as he pit it.
In 2006, that organization he founded was able to get a bill through Congress, signed by President Bush, which increased fuel economy standards for cars and trucks sold in the U.S. Another part of the bill involved electric vehicle incentives.
"As I began look at this issue, not just from policy perspective, but also from a business and pragmatic perspective, and thinking about how you would actually do this in the real world, I came to the conclusion that the only scalable way to reduce oil’s monopoly on transportation was electric. I hired a PhD student from MIT to teach me about batteries for a week and I can’t say that I absorbed most of that lesson but the key takeaway for me was batteries were very definitely on a declining cost curve and that it would reach a certain point at which electric would be the only logical way forward for transportation," said Granoff.
"Granted, at that time, in 2006 or 2007, it was before the shale revolution took place and therefore I really thought that this was going to happen pretty dramatically, and in a disruptive way, in the early part of this decade. But, nonetheless, the logic still prevails."
That interest in electric vehicles led Granoff to meet with "two outstanding entrepreneurs who were both looking at the same problem," Shai Agassi and Elon Musk.
"I came away from those meetings with a pretty firm conviction about which one had the better chance to succeed, and spent the next several years with Agassi, working on something called Better Place. We raised about $1 billion and built a lot of infrastructure in Denmark and Israel, mostly around switching batteries in electric cars. Renault set up a whole factory production line to built cars with switchable batteries. It was, for a couple of years, a bit of an international celebrity as a startup but more so than Tesla even, if you go the years 2009 or 2010," Granoff explained.
After the company went bankrupt in 2013, thanks to what Granoff calls "a series of monumental execution blunders," he continued to work in the space, "to resolve this issue in my ind about electric and whether I was wrong about that and what the demise of Better Place meant for the future of electric."
"As I started thinking about those issues, I started to understand that the intersection of technology and transportation was actually much broader than just about the drive chain, much broader than just electrification, but really every car now was coming with a modem and was connected to the cloud and all sorts of data was flying around. Then you had the advent of the third party apps and the ability for new business models, such as ride hailing and then, later on, micromobility to take hold. Then, of course, there’s the autonomous piece of it and the attention that Google began to get at that time and the beginning of the flood of money into autonomous transportation. So, I was reinvigorated a little bit about transportation in a broader sense than I had been when I was just focused narrowly on electrification."
After moving to Israel, and connecting with founders in the space, Granoff began making angel investments, before being joined by Sakkers in 2014, which is what eventually led to their first fund.
"I realized, first of all, that the opportunity was bigger than my ability to capitalize on it just as a modest angel investor. The other thing I realized was that I had friends who did things like run hedge funds, where information about innovation was essential to their success. They began to ask if I could manage some of their money alongside my own to give them an understanding of what was going on. One thing led to another and we ended up raising our first fund which we closed about two and a half years ago with $44 million," he said.
From the first fund, Maniv made a total of 24 investments, 18 of which were in Israeli companies.
Early on, Maniv broke its investments down into four categories: data connectivity, business model innovation, autonomy and vehicle architecture. So far, the firm has invested in 27 companies including Arbe Robotics, Bipi, Hailo Technologies, Intuition Robotics, Nauto, Oryx Vision, Otonomo, and Upstream Security.
One of thise investments, Revel Transit, is a New York-based electric moped sharing company that just launched 1,000 mopeds in Brooklyn and Queens.
"It’s very exciting because they’re solving a real problem; we get text messages from our friends living in Brooklyn who say, ‘Revel is everywhere.’ So, it’s amazing. It’s changed what it means to live in Brooklyn and you see the impact of mobility on people’s lives," said Sakkers.
Another investment, Phantom Auto, is a company that allows people to take a demo drive in a vehicle that i remotely operated from a computer.
"We met the founder very early on and developed a strong relationship there and he’s got a lot of energy and focus. He had this vision. We were involved in the shaping of the company; I helped connect some of the core team members that became a part of the company, and I actually came up with the name Phantom Auto. So, we were quite involved in a lot key aspects of that company and it’s been very successful," Sakkers explained.
The firm has also invested in Cognata, a company that offers simulations for various kinds of autonomous development.
"It’s a fascinating tool for improving safety for autonomous vehicles and accelerating their development. When we started seeing autonomous development, it was immediately obvious that simulation would be a core part of it. Trying to explain the idea took time, and over time we’ve been involved in seeing this company transform into what it is, and having really meaningful traction and validation."
One of the younger companies in Maniv's portfolio is Autofleet, which offers ways for fleets of vehicles to offer supply into ride hailing networks.
"They take vehicles that a car rental company has at the airport and that need to be moved into the city or vice versa, so depending on where the demand might be, and those are cars are being moved by a fleet of drivers but the car is empty for their whole trip and they’re losing money to move those vehicles. At the same time, often when these vehicles need to be moved around, there’s often a lot of demand on ride hailing networks for trips from the airport into the city or from the city to the airport," Sakkers explained.
"So, one of their use cases, is creating a way for that driver who is moving that vehicle to pick up somebody from the airport, take them somewhere close to where the car needs to be dropped off, and they’re basically paying back, or even making money, on that ride given that they would otherwise have been losing money. It’s a team that’s been flexible and creative and built something interesting things."
The future of mobility
The mobility space is an exciting one but, as Sakkers admits, "There’s been a lot of hype in the industry and there’s a lot of excitement about some of the possibilities, and now we’re in the phase of disillusionment."
"It’s also a very complicated industry, there’s so many different pieces, there’s so much depth to the complexity of engineering a vehicle."
So, what does the future of mobility actually look like? As he sees it, will be getting away from the car as an all purpose vehicle and one that is more specialized.
"Cars, right now, are not that well specialized to the uses that they’re performing. They’re generalists; they’re like decathletes that compete in all the disciplines and they’d be much more effective if they competed in only one or two disciplines. They’re popular because they’re this bundle that allows you to complete all these different types of trips, like taking your kids to school, going away on the weekend, driving to work, moving apartments, all these different things are possible to do in a car," he said.
"When you’ve got a world with Uber you’re thinking about this trip or that trip and if you take an Uber you can take a train or you could walk or you could take a Revel or other forms of micromobility. So, you have all these different options and so you’re going to choose the vehicle or the method that’s going to be optimized for that particular trip. So, that’s one big change that’s happening and it’s been playing out for a few years kind of under people’s noses; I don’t think people think when they’re taking an Uber that this is going to be a natural consequence, but it’s an inevitable consequence of the time."
Meanwhile cars are becoming more and more digitized, there is the rise in electric vehicles, there are going to be changes to the inside of the vehicle in terms of its architecture and structure, along with advanced driving assistants and forward collision warnings. To say things are changing quickly would be an understatement and it's going to necessitate a lot of solutions.
"Part of what we’re doing as a fund is having a whole lot of nuanced views about this world. There’s so many aspects to it, which is why I think it really helps to be specialized because it’s such a complicated set of problems. You can’t just quickly come up with solutions to all of them, or even quickly explain how we think they’re going to evolve, and, over time, we have to update our views and models for how the world is going to develop and change," said Sakkers.
"There’s a big basic equation here, which is that cars are used four or five percent of the time right now, and that they’re very generalist and owned and that model is shifting. New technologies are coming in, people are looking at digitization and smartphones are enabling new business models. So, all this stuff, these are inefficiencies that are going to be worked out. All of this stuff is going to play out, driven by these large macro forces around inefficiencies and opportunities to create new value, which is why we think this is such a big market and there’s such a large opportunity around it."
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