GM Ventures Aims to Ensure Parent’s Future By Investing in the Best Automotive Startups: Q&A With President Jon Lauckner
In early July, General Motors announced the creation of its own venture capital arm, General Motors Ventures. The $100 million fund was set up, GM said, to identify and help develop and bring to market innovative automotive technologies. To date, the fund has made just two investments, but more are on the way (read on).
To run the fund, the automaker tapped GM insider Jon Lauckner. The new president of GM Ventures is not a veteran venture capitalist at all—but he does know the automotive world, including GM’s strategic needs around technology. Lauckner joined GM in 1979 and has risen to hold a suite of leadership positions that include VP of Global Program Management and VP of General Motors Global Product Planning. According to his bio, Laucknerba also serves as a member of GM’s Senior Leadership Group and had a hand in developing the Chevrolet Volt electric vehicle.
Now that Lauckner is almost six months into his new role, I reached out to him to check on the motives behind the fund, how it is going so far, and what Lauckner sees as keys to—and milestones for—future success.
Our brief e-mail conversation follows:
Xconomy: What motivated or inspired the formation of GM Ventures? What needs are you trying to meet?
Jon Lauckner: Establishing GM Ventures as a new subsidiary is a new way of doing business at GM to accelerate the introduction of innovative technology to support our core automotive business. So, our mission is to support GM’s vision to design, build, and sell the world’s best vehicles by investing in automotive-related startups to ensure that GM vehicles have the best technology available.
X: What is your investment philosophy–types of ventures you want to fund, the time horizon you are looking at, industries, how you syndicate deals, and so on?
JL: We are interested in technologies in the areas of automotive cleantech, “infotainment,” advanced materials and other automotive-related technologies that can be introduced in our future vehicles in a 3-5-year time horizon. As a strategic investor, our investment philosophy is to either lead or co-invest with other venture capital firms, but always as a minority investor. The value we can add comes not only from the funding we provide to start-ups, but also with the understanding that we want to be a customer of technology being developed by the start-up company. The concept of not only being an investor, but also a customer, is a unique source of value that GM Ventures offers for start-up companies that we invest in.
X: Tell us about what you have funded so far, and why.
JL: We’ve closed two investments since we were formed about four months ago, and I expect a couple of others to close in the near future. Our investments to date have been have been:
Bright Automotive—GM Ventures invested $5 million. Bright is developing a light-weight, plug-in hybrid commercial van. In addition to our investment, we expect that we will finalize a commercial agreement in which Bright will use a GM powertrain and other components in their vehicle.
Sakti3—GM Ventures invested $3.2 million. Our investment in Sakti3 gives us access to an innovative battery technology that has the potential to be a mainstream solution for electrically driven cars and trucks of the future.
X: Are you limited to the fund size you currently have, the way a traditional venture fund would be, or can you tap corporate coffers for more funds if necessary?
JL: The first year of funding for GM Ventures was set at $100 million with the understanding that we will assess the funding for future years based on our experience in the first year. Since we have only one limited partner (GM LLC), we don’t need to create a fund structure, which gives us some flexibility to set our annual funding based on actual experience.
X: The history of corporate venture capital is not exactly storied. Corporate venture arms are usually short-lived, changing with corporate management or hard times—and because they aren’t part of the core focus of the company that spawns them. How do you plan on avoiding the traditional pitfalls?
JL: First of all, we structured GM Ventures to address many of the “lessons learned” of other venture capital firms. Specifically, I personally talk to a number of independent and corporate venture capital firms to review our investment philosophy, governance, and linkage to other key organizations within GM. One cornerstone that was defined for GM Ventures was that the primary purpose of the fund is to support our core automotive business, not an activity focused on investing strictly for financial return. Now, that doesn’t diminish the expectation that GM Ventures will be self-sustaining in the longer term, but it provides a clear framework in terms of our focus on automotive-related technologies and the value-add benefit for GM.
X: If all goes well, what will you have done in one year, five years, or longer?
JL: A simple measure of our success will be that investments that GM Ventures makes today winds-up in the GM vehicles of tomorrow. While that won’t be something that happens after one year, it certainly is something that I expect we will be able to demonstrate within 5 years. And, if [we] do this consistently, it should give GM a competitive advantage in the longer-term, drive more GM vehicles sales, and give us a reputation as the automaker that offers cars, crossovers, and trucks with the best technology.