Toyota doubles funding for mobility startups

Future-minded transportation start-ups keep attracting capital, even as U.S. auto sales slide. Case in point: Toyota Motor Corp. last week doubled its commitment to invest in advanced technologies.

Startups developing autonomous and connected vehicles raised more than $3 billion in the first four months of 2019, according to research and consulting firm CB Insights. If that pace continues, the industry will eclipse last year's record high of about $8 billion, CB Insights said.

Toyota AI Ventures, a subsidiary of the Toyota Research Institute, said it will dedicate another $100 million to invest in early-stage startups focused on artificial intelligence, automation or robotics. The company initially committed $100 million in July 2017.

"We are just seeing a tremendous amount of opportunity, especially as the mobility landscape evolves," said Jim Adler, managing director of Toyota AI Ventures. "We wanted to make sure we had the dry powder to find more great startups."

So far, Toyota AI Ventures has crafted a diverse investment portfolio with its initial funding. Its 19 investments include early-stage startups such as self-driving shuttle provider May Mobility, electric vertical-takeoff-and-landing company Joby Aviation and cognitive AI company Intuition Robotics.

Adler's investment philosophy is unchanged for the new funding. One thing that has changed, however, is the emergence of micromobility options such as e-bikes and scooters. Those are not included in CB Insights' numbers, but Adler anticipates giving them a long look.

"We're seeing more in micromobility as business models evolve and bifurcate, and we're seeing hardware-as-a-service," he said. "There's a separating out of hardware components and costs into a service, and that's really interesting to us. Pay by the trip or pay by the unit of consumption. I'm excited to see how this might evolve."

A potential example: Scooter company Bird announced a pilot program last week that offers scooter subscriptions for $24.99 a month in select locations.

Though Adler didn't refer to Bird's program, he said, "Subscriptions can mean loyalty, so if there's really low friction on a business model and the service is amazing, we'll look for those opportunities as well. That brand value can create a moat around the business."

Others are showing interest in micromobility companies. Last week, Toyota-affiliated supplier Denso led a $20 million Series A funding round for e-bike company Bond Mobility Inc. Last November, Ford bought electric scooter company Spin for $100 million.

From high-tech companies to mobility companies, Adler said he's looking for more than novel technology. He wants to see fleshed-out business plans that are grounded in reality.

Adler said he and his team vetted more than 1,500 companies to find the 19 initial investments.

Broadly, the pace of investment in automotive technology has remained high, with the dollar amounts rising.

While the number of deals in mobility startups slipped last year to 203 from 212 in 2017, according to CB Insights, the amount of money invested soared to $8 billion from about $4.5 billion a year earlier.