VC Company Autotech Skips Semiconductors, Backs Tesla-fying Dealerships

Smart cities are an intelligent play, electric and autonomous vehicles will prevail, brick and mortar dealership won’t but the Tesla model will, the effects of Covid will outlive the pandemic and semiconductors are like toilet paper. Those are just some of the beliefs of Alexi Andreev, managing director of Autotech Ventures, a Menlo Park, Calif.-based venture capital company.

Andreev’s short answer for what kinds of companies Autotech backs is “their products should have wheels and cannot fly.” The complete answer, however is much more specific.

“We invest in early stage companies in ground transportation. The way we define our investments is end to end life cycle of a vehicle. We invest on how people choose vehicles, how they purchase vehicles, how they finance vehicles, insure vehicles, fleets…how vehicles are used to move cargoes and passengers. How vehicles are built…and we invest in repair and disposal,” Andreev told Forbes.com in a recent interview.

 Autotech typically makes an initial investment of $1 million to $8 million as a lead or follow-on investor. To date it has more than $270 million under management. Four of Autotech’s start up portfolio companies have achieved at least $1 billion valuations. Those companies include: Lyft

LYFT
, Indie Semiconductor, Volta and Outdoorsy.

Autotech’s investment in recreational vehicle rental company Outdoorsy represents its strong belief in one of those big changes in society and behaviors brought on by the Covid pandemic, Andreev said, citing what he termed the “Airbnb of RVs.”

“Last year there was a massive shift in demos. RV’s was 55 years and up for post retirees— take your RV and travel America,” Andreev explained. “Then 20-30 year olds were rediscovering national parks. They go and hike and pick up physical activities when the gym is closed. When they can’t travel to Mexico suddenly they’re back to RVs. We Don’t see any slow down.”

Andreev believes the changes brought on by Covid will stay with business and society for at least the next five years. Those changes include the convenience of making purchases online and having them delivered, rather than making trips to brick and mortar stores.

“So the IT challenges, the logistics challenges, last mile delivery, fulfillment infrastructure has to adopt and adopt in a massive way,” said Andreev. “If you ask where we’d be placing bets in the next 18 months, we are just doubling down on this particular transformation…we are playing in this domain.”

That philosophy also extends to Autotech’s belief the move to a more digital business model for auto dealers will only accelerate as customers have warmed to the ability to avoid hours in a showroom negotiating pricing and working out financing.

“We placed a number of bets essentially Tesla

TSLA
-fying dealerships,” said Andreev. “So we invested in multichannel retail solutions allowing normal dealerships, traditional dealerships to compete with Tesla on customer experience.”

Perhaps the biggest Covid-triggered change driving Autotech’s investment interests is a move away from public transportation out of health concerns to personally-owned modes of transportation that includes everything from automobiles to electric scooters.

“So we’re investing pretty aggressively in kind of next gen car car ownership models and personal mobility solution. From the craze which is going on in used cars and Carvana going through the roof and Vroom going through the roof it’s clear people going to buy the vehicles. They don’t want to carpool anymore. They want to be isolated from anyone who can carry the virus,” said Andreev.

Autotech recently invested in Turkish micro mobility startup Marti which developed and operated the top mobility app in that country. In July, it was announced Autotech led other investors in a $16 million Series A funding round for Chicago-based micro mobility tech company Veo.

As for electric vehicles, Andreev believes they’re “here to stay,” elaborating, “if you look at projections of EV penetration I think we’re beating them every year and we will be beating them as an industry for years to come.”

He’s just as bullish on autonomous vehicles—not so much for general use on public roads due to technical and governmental challenges, but for special uses. For that reason Autotech has invested in two off-road autonomous vehicle technology companies.

One of those companies is Milpitas, Calif.-based SafeAI which retrofits mining and construction equipment with autonomous technology.

“It’s a much more forgiving driving environment, low speed, no traffic lights, no one crossing the streets, no bicyclists, and there’s a very, very clear ROI,” said Andreev.

The other company is Verdant Robotics based in Hayward, Calif. Which produces autonomous robots for agriculture.

In light of the U.S. Senate’s passage of Pres. Joseph Biden’s $1 trillion infrastructure bill, Andreev notes Autotech’s financial backing of companies involved in smart city technologies.

“If you want to play the trend, if you want to play what is up and coming, clearly smart cities and predictive traffic and reducing congestion through intelligence and machine learning and enforcing laws and supporting people driving in the carpool lane and bus lanes,” said Andreev. “I think all the automation is coming and we’re a big players in this particular domain. So we’re placing bets for next generation smart city AI (artificial intelligence) in response to federal money and response to shortage of funds, frankly.”

So what’s this about semiconductors being toilet paper? It’s Andreev’s metaphor for the hoarding of the bathroom necessity when the Covid pandemic first hit. “We’re buying toilet paper, the industry is buying semiconductor chips,” said Andreev.

He believes as semiconductor production ramps up, the crisis will abate by the second quarter of next year. But don’t expect to see companies producing them in Autotech’s portfolio.

Instead of investing in chips we try to invest in software and new algorithms which do not require that much computational power,” explained Andreev. “You can run them on much, much weaker and previous generation silicon which is not in short supply. There is plenty of old silicon. There’s a shortage of cutting edge, new silicon.”

Autotech’s investment criteria is based on what Andreev terms a triangle: the quality of a company’s team, competitive advantages and dynamics of the market.

How’s that working out so far? Andreev keeps it simple. “Results have been pretty impressive.”