GM Ventures Growing Up—A Quick Look at How it Operates and How Deals Work

5/24/11Follow @bbuderi

General Motors launched its first venture capital fund—GM Ventures—last summer. We covered the news, and in December, still early in the $100 million fund’s life, I did a Q&A with GM Ventures president Jon Lauckner. At the time, the fund had invested in just two startups—battery maker Sakti3 and Bright Automotive, which offers a new approach to hybrid electric vehicles. GM Ventures was really just getting going—and Laucker was limited in what he could tell a reporter.

Now, things have changed somewhat—and the fund is definitely heating up. It has closed four deals—with Powermat (wireless charging technology) and Envia Systems (materials for increasing the storage capacity of lithium ion batteries) joining the initial two. Four more have been approved and should be announced relatively soon. Another pair of GM investments that predate the founding of GM Ventures, Coskata and Mascoma (both biofuels companies), were also transferred over to Lauckner’s charge. All told, GM has put about $30 million into those six companies, with investments typically running between $3 million and $7 million per deal. And Lauckner says a half dozen or so more deals are in the works.

Meanwhile, the GM Ventures head and his colleagues seem to have settled into a groove. They are swamped in deal flow—more than 350 prospective deals have already crossed Lauckner’s desk—and finding that being associated with GM gives the firm some real leverage that not even the best traditional venture funds can match. This includes the ability to help startups evaluate their technology on highly sophisticated equipment in one of GM’s vast R&D operations, and to offer a mega customer in General Motors if things pan out.

I recently sat down with Lauckner in GM Ventures’ headquarters in Detroit’s Renaissance Center. I’ve long been fascinated by corporate venture arms—most of which quickly fade away due to such factors as shifting priorities within the parent company and the difficulty of adapting to changing conditions in the fast-paced startup world. The presence of a corporate investor like GM might even discourage orders from rival automakers looking at a portfolio company’s products or technology, for instance.

In short, it’s early days for GM Ventures. But Lauckner believes he and his team have some special things going for them that give the fund great power and, presumably, longevity. Some are quite different from what traditional venture firms bring to the table—and, if he’s right, provide an added dimension to the innovation ecosystem that should help get new technology to market, faster.

Lauckner and I spoke about the mandate for GM Ventures and how it evolved, what the firm looks for in startups, and how deals actually work. Here are highlights from our conversation.

Why GM Ventures? Why Now?

“After we came through bankruptcy, the order was this is a new General Motors and we need … Next Page »

Bob is Xconomy's founder and editor in chief. You can e-mail him at bbuderi@xconomy.com, call him at 617.500.5926. Follow @bbuderi

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