Venture360
Nov 14, 2019 · 40 min read

GM Ventures and the corporate strategy of venture investing.

General Motors is one of the largest companies in the world, and over 10 years ago they created a venture arm to find and fund innovation to enhance their strategic vision.

We discuss this vision with Kai Daniels, and autonomous vehicles, of course.

Rachael Qualls: Welcome back everyone to Venture360’s podcast about all things venture capital. My name is Rachael Qualls. I’m Venture360’s co-founder and CEO and your host. I’m really excited to introduce our next guest today because she comes from the corporate venture world. In fact, she manages a fund for one of the largest companies in the world, General Motors. So everyone please meet Kai Daniels, investment analyst with GM Ventures.

Kai Daniels: Hola. Hi Rachael. How are you?

Rachael Qualls: It’s going great. We always record on Friday, so it’s the end of the week and everybody’s kind of through it. First, let’s start off by learning all about you and how did you get into this crazy world of venture capital?

Kai Daniels: Yeah, it’s a, it’s an interesting story. I actually come from a very strong entrepreneurial family. My, my grandfather, he owned his own grocery stores. My mother, she, she built her own successful real estate business. And it’s just always been around me, entrepreneurship and I even kind of pursued those endeavors in my degree at Florida state. So when I came out, we had a small startup actually in mobile fitness called sofitU. And we applied to accelerators all over the country and we ended up getting into the DTX accelerator in TechTown Detroit.

Kai Daniels: And so we, we made the move simultaneously. We were graduating from undergrad, we had our small startup that we had built in the entrepreneurship program at Florida state. We had had some venture capital dollars to kind of take our vision and dream to Detroit. And we did. And I was also simultaneously accepting a role as an IT project manager for General Motors.

Kai Daniels: And so, it was just all kind of happening at once. And then after that I realized, you know, General Motors actually had a venture capital fund and that was really intriguing to me. I had done about a year and a half in GM IT and I was like, wow, you know, I really feel like that would be a place for me. And I just sent my resume, cold sent my resume to the managing director and interviewed and the rest is history.

Kai Daniels: And now I’ve been a part of the fund for almost about almost three years now. And it’s been such a great experience because the investments that we’re making now are going to dictate the next hundred years of transportation. And that’s just been so interesting, kind of being on both sides of the table. One as an entrepreneur and trying to raise funds and trying to build a business. And also now kind of on the investor side of the table and being connected to a large corporation, like General Motors is driving a lot of strategic value for the company. So it’s just, it’s just a different lens looking at the whole ecosystem. And so that’s kind of how I got started.

Rachael Qualls: Well, I’m so excited to learn more about that lens. So I think it’s, it’s such a huge value add. Anytime an investor’s come from the other side of the table, like you have of raising funding and then building companies because it’s such a unique thing to really experience.

Kai Daniels: Yeah.

Rachael Qualls: And then to be able to parlay that into something like a strategic vision fund, like for General Motors, that’s just pretty cool Kai. So let’s talk about that. So one of the largest companies in the world decides they need a venture fund, but why? Like what is it for General Motors strategically that they would be investing in, you know, earlier stage private companies?

Kai Daniels: Yeah. So for, for GM Ventures, our fund is actually 10 years old now and General Motors a decade ago had the vision to say, look, you know, there’s new innovation that we’re trying to drive into the enterprise. And it was, it was identified that venture capital and being able to be early adopters of these technologies would be advantageous to the company. And now 10 years later, a little over $320 million deployed and almost 20 successful exits. We, we have, we have a lot to show in the sense of being a corporate venture capital fund. Our goal is more so to drive strategic benefit into the vehicle directly or supply chain for General Motors and to have investments that we’ve made go into production in the vehicle and also getting some healthy and successful returns off of these investments. I mean that is how we’re defining winning and we want that winning to roll into how we attack the marketplace as a company. So it’s very, very exciting.

Rachael Qualls: So I would think, you know, if a new company came up with an innovation specifically that could be used by GM, it would be an almost daunting task of who do I talk to and how does that work to become, you know, to get into some sort of pilot program with GM. So how do you guys find these companies and how do they find you? Like do they go through the venture arm in order to become kind of one of those pilot testing companies and you know, how are you guys finding each other, I guess is what I’m getting at?

Kai Daniels: It’s a couple of different ways that we find each other, right? So we work very closely with a General Motors subject matter experts. And being experts in their field they have networking contacts and visibility into some of these early technologies that may be a ready for investment and a push. And that’s a, that’s always a great way to receive those companies because you could be a, you know, a great startup and have awesome technology, great management team. But for us, if there’s no connection to GM proper and there’s no real champion for what you’re doing, we’re, we’re probably going to pass, right? Because we’re trying to drive that value into General Motors. And if General Motors isn’t, isn’t ready, then we’re probably not ready either.

Kai Daniels: But another way that we pipeline is also through, you know, our syndicates and our, our investment partners, the investment managers here have robust networks of, of just really great investors that have, that are picking awesome deals. And then we come around and bring that technology or that deal in front of our experts here at General Motors. And if there’s an interest and we’re moving forward to engage at a deeper level.

Kai Daniels: And so for startup companies that are thinking about, you know, engaging with big corporates like General Motors, it’s actually maybe not as scary as one would think. You know, we, we do the, the typical in saying, “Hey, let’s see your pitch, let’s, let’s hear what you have to offer.” And if it’s interesting, we share that with our subject matter experts, our leaders in whatever part of the enterprise we’re trying to innovate in and we build from there.

Kai Daniels: And all of our deals are attached with a commercial agreement or a technical licensing agreement that helps us drive that innovation further into GM. So it’s not just saying, “Hey, here’s a check, here’s an intro to the, to the design team or to the manufacturing team. Good luck.” Not so much. It’s, “Hey, this is the design team, this is the engineering team, this is what we’re trying to do. We’re making an investment in supporting as you know, as strong syndicate partners, or investment partners should. And then also driving that company deeper into GM. So we can, we can really build something product ready, we can really build something to take to the marketplace and win together.”

Rachael Qualls: That’s so cool. I think that probably a lot of entrepreneurs think the opposite when it comes to working with the larger corporate VC.

Kai Daniels: Yeah.

Rachael Qualls: But you guys have taken a very partnership approach to it, it sounds like.

Kai Daniels: Yes. And you know, the other aspect of it is General Motors has some very smart and intelligent people working here. And we’re, we’re able to identify, look, you know, these are the technical roadmaps, these are our experts and they’re not necessarily trying to take, we’re trying to work together and partner at that point. And I think that’s the misconception. It’s like you, you have a commercial agreement or you have a technical licensing agreement with a corporation like GM and you may have assumptions, but we’re negotiating these things together with our, our counsel and start up attorney’s counsel. And it helps us get to a place where we’re creating deals that are a win-win.

Rachael Qualls: Yeah. And so you guys wouldn’t necessarily be looking at funding these companies to acquire them. I mean you’re looking at funding them to grow alongside them as you know, a customer and a partner. Right?

Kai Daniels: Exactly. Yeah. We’re, and that’s kind of a misconception in corporate venture capital sometimes is that when you have these venture funds they’re investing in, they’re automatically investing so that the mothership can acquire you. And in a lot of cases that’s true. But, but not all corporate venture capital is created equal and that, that’s not really our goal. Our goal is to drive that strategic value into General Motors throughout the entire enterprise. And we have had that happen in portfolio once where we invested and became, and General Motors became an acquirer. But it’s not typical for our process. And it’s not a bad thing when it happens either. It’s just not our main focus.

Rachael Qualls: Yeah. I just think that’s such a cool perspective of, you know, saying that you’re a value added customer first, right?

Kai Daniels: Yeah.

Rachael Qualls: Because that’s how the company really drives that value is by having, you know, a customer first and then a partner.

Kai Daniels: Yes. And that’s how, that’s how we become really strong partners because we’re saying, “Hey, let’s, let’s do this together. Let’s bring this new technology to the marketplace together in a way that’s real.” And you know, the, we generate, our success is interdependent on each other. Right? As a startup, you’re saying, “Hey, we’re bringing this advanced technology to you and you guys are General Motors, one of the largest automotive makers in the world, and we’re ready to partner.” And we’re saying, “Yeah, we’re ready to partner to, let’s get this into development. Let’s get this into deployment so that our success is tied to one another.”

Kai Daniels: And, that is a, that’s a beautiful thing to see when you, you see a, startup that that’s solely an investment. And then maybe two to three years later their, their technology is in production, in a vehicle and interacting with customers, and things like that. It’s like, wow, you know, these startups really can make it through our process and we can deliver a competitive advantage in the marketplace by working together. And so that, that’s kind of how we see it.

Rachael Qualls: Love it. And what stage do you guys typically invest in?

Kai Daniels: We typically invest in Series A, Series B companies. We won’t invest less than a million dollars per se. And we typically don’t invest over $10 million in a round. We can if it’s very special. But we typically do not. And, and we’ve invested in and outside of Series A and Series B too. I mean we’ve made investments all over the world. Like I said, we’ve deployed over $320 million worth of capital to, to drive this strategic innovation. And so for us, Series A, Series B companies, are a sweet spot for us, because they’re still early enough for us to make an impact as we join on as investors and try to be strong customers to, to these startups. And also, you know, just just us being able to share and impart kind of the ins and outs of working with large automotive companies, or OEMs like ourselves. And then that helps guide them through the process as well. So Series A, Series B is as typically a sweet spot for us.

Rachael Qualls: And so when you talk a lot about the strategic, you know, vision, mission and the things that we keep saying, how does it work internally? Does a product team come up with something and say, “Hey is, you know, is there anything that exists in the market that you know can solve a certain problem?” Does the market determine like, “Hey there’s this new product solution, does it fit within kind of an innovation team?” I guess who’s driving that and how does it work internally?

Kai Daniels: Yeah, I mean for one of the unique aspects of our fund is the president of our fund. John Lockner is also the Chief Technology Officer of General Motors. And that gives us a unique insight into our technical objectives. And that drives kind of how we are sourcing in the market. You know, having the ability to have the Chief Technology as the company or the Chief Technology Officer of the company, you know, say, “Hey, let’s look at a blockchain this year. Let’s look closer in advanced manufacturing and additive materials. And this is exactly what we’re looking for in the battery tech evaluations.” You know, these are, these are kind of helping us guide how we’re reaching out into the marketplace and reaching back to our partners sourcing deal flow. And also since he’s the Chief Technology Officer of the company, our subject matter experts are well socialized to our group and how we do business. So it’s, it’s been, it’s been interesting and great having, having John as president because that’s helped drive a deeper understanding of General Motors’ technical needs.

Rachael Qualls: Oh yeah, I bet. Wow. So can you give us an example of maybe an investment you guys have made and how? And kind of the start to finish process of that. So internally you identified maybe the need or there was this strategic vision and then you source the deal here and the reason you invest in it, kind of a real life story, if you will, of how all this works.

Kai Daniels: I think maybe a good example of that is an investment we made a few years ago into a company called Ushr. And Ushr basically, their dynamic mapping technology was paramount in our Cadillac CT6 execution of Super Cruise. And so it is keeping you in the lane while you’re, you’re kind of in a Super Cruise, half, semi-autonomous state I should say. And that is, that was really interesting to see because we originally made an investment that spun out into Ushr and we took Ushr into development with the team and had them slated for a product line. And the Cadillac CT6 one of our, you know, luxury high end vehicles was where we were able to deploy that technology into Super Cruise. And now customers are enjoying driving at a semi-autonomous state with, with Super Cruise empowered in help with Ushr. And so just to see that type of innovation and work with the team to get them there, that has been, that’s what we would consider a win. That is a definite win.

Kai Daniels: It’s a, it’s another example that comes to mind too in an investment we made around dynamic fuel management. And we were able to, even though that startup was at an earlier stage, they didn’t quite have a product ready, dynamic fuel management system just to deploy into the, to these ICE engines. We actually worked together in a joint development project built on the technology together and were able to were able to implement that into our 2019 Silverados.

Kai Daniels: And so that is like the dream for us to find startups that we can work together with to bring something unique to the marketplace first. And to really make a statement to the marketplace that General Motors is at the cutting edge of innovation. And that’s what these venture dollars are bringing us, right? They’re bringing us this cutting edge of new technology that we can facilitate and support a startup. You know, partnering with us in a way that, you know, builds, builds both the startup and General Motors. So that, that’s, that’s a win for us. That’s a win, win deal we’re trying to create. And when we talk about General Motors proper and us winning in the marketplace, that’s the value that our fund is bringing.

Rachael Qualls: Absolutely. I don’t think most people realize, you know, the innovation that we rely on day to day and the innovation that we use every day was once someone’s little baby idea.

Kai Daniels: Yeah, yeah.

Rachael Qualls: And the thing that I, you know, keeps coming me back because, or keeps me coming back as a, an investor over and over again is, well I’m part deal junkie, but I’m part just so fascinated with how innovation gets to market. And you guys being a conduit for that, taking someone’s idea and now you have all these people driving these incredible cars, semi-autonomously.

Kai Daniels: Yeah.

Rachael Qualls: That started off as a little startup and you guys were the facilitator and catalyst of that. It’s kind of the perfect marriage of, you know, established, mature, big companies like GM serving as that commercialization innovation hub for your newer kind of startup and baby companies. It’s just cool to see that I don’t think people outside of, you know, the world you and I live in everyday probably think about, so.

Kai Daniels: Yeah. I think sometimes when we think about driving innovation, it almost is like a, you think you’re pushing the boulder up the hill in a sense, this is a difficult thing. But really when you have partnership and when you have real people ready to make real decisions, it becomes easier than one would think. Right? And on our side we have real experts and you know, we’re a real fund making real decisions. And on a startup side they’re real entrepreneurs ready to make a real impact usually in technology or society as a whole. And with, with both sides being in agreement and an understanding about where we’re going, we’ve been able to achieve great things.

Kai Daniels: And there’s still a lot, a lot coming down the pipeline and a lot of greatness for us to still achieve. And so that’s what makes it exciting is that, you know, it’s not a pain, it’s not as painful of a process when you have everybody on the same page. And that’s why we’re, we’re trying to approach these startups in the marketplace with, with win-win negotiations that they’re, they’re getting a benefit out of it. And General Motors proper is too.

Rachael Qualls: Yeah, exactly. What about like are there any other stories you can tell us or any lessons you’ve learned kind of on the front lines of being a venture capitalist? Because this is, you know, a peer to peer podcast for the most part. So any lessons you’ve learned that you can share with the rest of us of do’s and don’ts and anything like that?

Kai Daniels: Yeah, I, I think the, for me still being relatively new to the venture capital community and having the opportunity to be an analyst here with the fund. You know, it’s been amazing to see, even in my role how much of a connector I, I have the ability to be and how engaged I, I get to be in, in pretty much all aspects of the business.

Kai Daniels: And so I think one of the things that I learned was, you know, it doesn’t necessarily matter your role or title or even, you know, on the startup side as CEO or CFO. It’s really more about recognizing people as people and recognizing that all of us as individuals, we’re trying to come to the table to, to create something special and great. And, that’s always been, especially for myself now, where I’m trying to, I myself is, “Hey, I’m getting on these calls and I’m talking with these CEOs and I’m like, this is, this is where we’re coming from, this is, this is what we’re trying to achieve.” And I want to hear and learn more about what they’re trying to achieve so that we can find early alignment. You know?

Kai Daniels: That’s really what I’ve learned makes the process work best is that early alignment on how we’re, how we’re going to do things. And yeah, you work through and you negotiate and there’s sometimes there’s a pull and tug, but when you break it all down to the brass tacks of we’re real people trying to do something real, it just, it makes the work more satisfying. It makes these innovations that are going to really dictate or kind of guide the next hundred years in transportation. You can kind of soak it up then, right. Versus feeling like you’re, you’re, you’re pushing a boulder up a hill or you know that you’re, you’re, you’re almost catching your nerves talking to certain people. It’s like, Oh, you know, just have a conversation and be ready to move the ball forward in a real way.

Kai Daniels: And that positions you for, for whatever situation or conversation or innovation, whatever it may be that you’re trying to drive. You can do that. If you’re, you’re kind of anchored down in your shoes and you know who you are and what you’re doing and what you’re bringing to the table.

Rachael Qualls: That’s exactly right. I mean, that’s my experience too. You know, the best deals that we did were also the easiest.

Kai Daniels: Yeah.

Rachael Qualls: When you’re in alignment and everything’s working deals, you know, negotiations don’t have to be hard.

Kai Daniels: No.

Rachael Qualls: Deals don’t have to be hard to get done. The right ones are honestly typically the easiest.

Kai Daniels: Yeah.

Rachael Qualls: It all works out.

Kai Daniels: Yeah, yeah.

Rachael Qualls: And you know, if you’re fighting on either side of that table, chances are that you know, some of the best deals you do, too are the ones that you don’t do, or some of the best deals are the ones you don’t do, I should say so. That is all- [crosstalk 00:21:38]

Kai Daniels: You know, marriage is right. You know, you want to at least put your your best foot forward.

Rachael Qualls: Right.

Kai Daniels: And sometimes things go bumpy, sometimes you know, cash flow isn’t what we thought or we need a bridge or whatever it may be. And you want that early understanding of each other and that early trust so that when bumpy times hit, that doesn’t end our goal. That doesn’t mean the mission is over. We just, we tighten up ship and we course correct and we support each other and we move forward.

Kai Daniels: And that’s, that’s what also excites me about being here at this particular fund with GMV, because I’ve watched us support startup companies through difficult times in order to get to amazing places. And I think that’s also important in being a committed investor and, and being at a high level committed investor because you’re not ever, if something doesn’t go right or you know, we need to really sit down and discuss and course correct. We don’t scare, you know, we’re not, we’re not going to, we’re not going to shake in our boots and turn tail. We’re going to turn, we’re going to lean in and focus on what we have to adjust to be successful. And that that’s, that’s been a rewarding part of it too when you talk about these deals being marriages and you know, having that early understanding because you know, we can’t predict the future, but we can at least know that we’re going to come out on the other side of it together.

Rachael Qualls: Well you guys just sound fabulous and like, you know, the perfect investors, but do you ever, I have to know, do you ever compete for deals? Like, do you ever find a really,

Kai Daniels: Well yeah, I mean this is,

Rachael Qualls: Really?

Kai Daniels: This is a competitive venture capital market. We’re seeing valuations kind of increase and you know, C deals are almost looking like Series A deals now. And yeah, it’s a competitive environment. We’ve been, had the opportunity to, you know, invest with the Kleiner Perkins of the world and have strong strategic and syndicate partners that, that we’ve, have a couple of different co-investments with. And that makes it, and that’s a kind of an edge too, in the sense that we kind of have our ear to the ground on certain deals earlier and we can kind of call on our network to support us.

Kai Daniels: And so that, that’s another reason why with the fund being 10 years old it’s a, it’s a good time because we’ve had a decade to grow these relationships and establish ourselves in the marketplace as a strong strategic partner and strategic investor. And we’re standing on our values and our reputations in the marketplace and continuing to push ourself as a fund to innovate and be on the cutting edge and engage more and in a different ways and that, that’s how you stay fresh, right? That’s how you stay competitive and that’s what we’re trying to do.

Rachael Qualls: Well, I think that’s one of the most fun things, at least for me, about being on the venture capital side, is that there’s always something new and fresh.

Kai Daniels: Yeah.

Rachael Qualls: And after you’ve seen, you know, every version of one thing, someone comes along and blows your mind with something you never thought of. Right. Which is a good segue.

Kai Daniels: Yeah. You’ve never learned it all.

Rachael Qualls: Exactly. Which is a good segue to my ending question because you’ve been so fabulous to share your time with us today. What is something, and this can be for you personally, it can be for you know, GM strategic mission or both, but what is something on the innovation horizon that just gets you really, really excited? Like, you know, again, it could be anything but coming down the pipeline for society, of one big innovation thing that we’re on the cusp of that just gets you really excited?

Kai Daniels: You know, I, I’m definitely a millennial who’s ready for autonomous driving. And I’m, I’m just super excited to see how our relationship with the car is about to transform and change because our focus will not necessarily be on the road and driving. It’ll really be about transportation and getting to where we’re going. And you know, I think there’s always going to be a need for, for driving in a sense because it’s such an excellent pastime and people love to drive and I’m interested to see how that transforms as well.

Kai Daniels: But the innovations that are going to roll out into the vehicle without that element of driving is what excites me too. I could see these vehicles really being the center of life and how we get around and how we interact with the world around us. And that’s what’s exciting to see come down the pipeline. That’s what’s exciting to be a part of GM Ventures because we’re making investments in these areas and it’s, it’s exciting about being alive today. I mean it’s, it’s so much change happening and that’s the only thing that’s consistent is change and you know, to be a part of the next hundred years of transportation is the type of change I want to, I want to enjoy and be a part of. So that’s, that’s what I’m excited about.

Rachael Qualls: Oh, me too. I think it’s the coolest. I was just telling my children the other day about, we were talking, you know, about how cars are kind of an outward representation and people pick the cars that they like and kind of represent them. And I was telling them that that won’t matter longterm.

Kai Daniels: Yeah.

Rachael Qualls: Because now we’re moving to cars are just going to get you to the next place and you’re going to hop in whichever car picks you up and takes you.

Kai Daniels: Yeah. And then I think about it too, and I’m like, well maybe maybe with the future in additive manufacturing and how we see these, these vehicles or pods, maybe they’re all customizable and maybe you have a Hello Kitty one and I have a Pokemon or something like that. I don’t know. But that’s what makes the future exciting. You know, maybe, maybe it’s not all plain Jane. Maybe it’s a lot of customization coming down the pipeline. So, it’s just exciting.

Rachael Qualls: I know. Well it’ll just completely change how we think about transportation as an individual thing. I think going forward, you know, I get in my car and I drive to my place and I, you know.

Kai Daniels: Yeah.

Rachael Qualls: Because it’s somewhere in between mass transit and individualized transits where it’s going.

Kai Daniels: Yeah.

Rachael Qualls: And I think we can kind of hopefully all feel that.

Kai Daniels: Yeah.

Rachael Qualls: Especially after, if you’re listening to this podcast and knowing that, you know, big, big companies like GM are making innovation strides towards the autonomous vehicle. Like it’s just a cool time, like you said, to be alive.

Kai Daniels: It is, it really is.

Rachael Qualls: All right Kai. Well, again, we’re so thankful that you joined us on the podcast today and hopefully we’ll get to chat again in the future when you know, GM rolls out the first fully autonomous vehicles for, you know, the masses.

Kai Daniels: Yeah, we’re excited about that.

Rachael Qualls: Cool. All right. Well, you enjoy and,

Kai Daniels: Awesome. Thank you Rachael.

Rachael Qualls: Thank you.

Kai Daniels: This was great and we really appreciate it.

Rachael Qualls: All right, thanks, Kai.

Speaker 1: Welcome to the podcast about all things venture capital, brought to you by Venture360, and the industry’s most complete back office software solution. Venture360 works with progressive fund managers, investment group leaders, companies and individuals all over the world to provide a full funding life cycle management system. Now let’s dive in to all things venture capital with your host Rachael Qualls.

Rachael Qualls: Welcome back everyone to Venture360’s podcast about all things venture capital. My name is Rachael Qualls. I’m Venture360’s co-founder and CEO and your host. I’m really excited to introduce our next guest today because she comes from the corporate venture world. In fact, she manages a fund for one of the largest companies in the world, General Motors. So everyone please meet Kai Daniels, investment analyst with GM Ventures.

Kai Daniels: Hola. Hi Rachael. How are you?

Rachael Qualls: It’s going great. We always record on Friday, so it’s the end of the week and everybody’s kind of through it. First, let’s start off by learning all about you and how did you get into this crazy world of venture capital?

Kai Daniels: Yeah, it’s a, it’s an interesting story. I actually come from a very strong entrepreneurial family. My, my grandfather, he owned his own grocery stores. My mother, she, she built her own successful real estate business. And it’s just always been around me, entrepreneurship and I even kind of pursued those endeavors in my degree at Florida state. So when I came out, we had a small startup actually in mobile fitness called sofitU. And we applied to accelerators all over the country and we ended up getting into the DTX accelerator in TechTown Detroit.

Kai Daniels: And so we, we made the move simultaneously. We were graduating from undergrad, we had our small startup that we had built in the entrepreneurship program at Florida state. We had had some venture capital dollars to kind of take our vision and dream to Detroit. And we did. And I was also simultaneously accepting a role as an IT project manager for General Motors.

Kai Daniels: And so, it was just all kind of happening at once. And then after that I realized, you know, General Motors actually had a venture capital fund and that was really intriguing to me. I had done about a year and a half in GM IT and I was like, wow, you know, I really feel like that would be a place for me. And I just sent my resume, cold sent my resume to the managing director and interviewed and the rest is history.

Kai Daniels: And now I’ve been a part of the fund for almost about almost three years now. And it’s been such a great experience because the investments that we’re making now are going to dictate the next hundred years of transportation. And that’s just been so interesting, kind of being on both sides of the table. One as an entrepreneur and trying to raise funds and trying to build a business. And also now kind of on the investor side of the table and being connected to a large corporation, like General Motors is driving a lot of strategic value for the company. So it’s just, it’s just a different lens looking at the whole ecosystem. And so that’s kind of how I got started.

Rachael Qualls: Well, I’m so excited to learn more about that lens. So I think it’s, it’s such a huge value add. Anytime an investor’s come from the other side of the table, like you have of raising funding and then building companies because it’s such a unique thing to really experience.

Kai Daniels: Yeah.

Rachael Qualls: And then to be able to parlay that into something like a strategic vision fund, like for General Motors, that’s just pretty cool Kai. So let’s talk about that. So one of the largest companies in the world decides they need a venture fund, but why? Like what is it for General Motors strategically that they would be investing in, you know, earlier stage private companies?

Kai Daniels: Yeah. So for, for GM Ventures, our fund is actually 10 years old now and General Motors a decade ago had the vision to say, look, you know, there’s new innovation that we’re trying to drive into the enterprise. And it was, it was identified that venture capital and being able to be early adopters of these technologies would be advantageous to the company. And now 10 years later, a little over $320 million deployed and almost 20 successful exits. We, we have, we have a lot to show in the sense of being a corporate venture capital fund. Our goal is more so to drive strategic benefit into the vehicle directly or supply chain for General Motors and to have investments that we’ve made go into production in the vehicle and also getting some healthy and successful returns off of these investments. I mean that is how we’re defining winning and we want that winning to roll into how we attack the marketplace as a company. So it’s very, very exciting.

Rachael Qualls: So I would think, you know, if a new company came up with an innovation specifically that could be used by GM, it would be an almost daunting task of who do I talk to and how does that work to become, you know, to get into some sort of pilot program with GM. So how do you guys find these companies and how do they find you? Like do they go through the venture arm in order to become kind of one of those pilot testing companies and you know, how are you guys finding each other, I guess is what I’m getting at?

Kai Daniels: It’s a couple of different ways that we find each other, right? So we work very closely with a General Motors subject matter experts. And being experts in their field they have networking contacts and visibility into some of these early technologies that may be a ready for investment and a push. And that’s a, that’s always a great way to receive those companies because you could be a, you know, a great startup and have awesome technology, great management team. But for us, if there’s no connection to GM proper and there’s no real champion for what you’re doing, we’re, we’re probably going to pass, right? Because we’re trying to drive that value into General Motors. And if General Motors isn’t, isn’t ready, then we’re probably not ready either.

Kai Daniels: But another way that we pipeline is also through, you know, our syndicates and our, our investment partners, the investment managers here have robust networks of, of just really great investors that have, that are picking awesome deals. And then we come around and bring that technology or that deal in front of our experts here at General Motors. And if there’s an interest and we’re moving forward to engage at a deeper level.

Kai Daniels: And so for startup companies that are thinking about, you know, engaging with big corporates like General Motors, it’s actually maybe not as scary as one would think. You know, we, we do the, the typical in saying, “Hey, let’s see your pitch, let’s, let’s hear what you have to offer.” And if it’s interesting, we share that with our subject matter experts, our leaders in whatever part of the enterprise we’re trying to innovate in and we build from there.

Kai Daniels: And all of our deals are attached with a commercial agreement or a technical licensing agreement that helps us drive that innovation further into GM. So it’s not just saying, “Hey, here’s a check, here’s an intro to the, to the design team or to the manufacturing team. Good luck.” Not so much. It’s, “Hey, this is the design team, this is the engineering team, this is what we’re trying to do. We’re making an investment in supporting as you know, as strong syndicate partners, or investment partners should. And then also driving that company deeper into GM. So we can, we can really build something product ready, we can really build something to take to the marketplace and win together.”

Rachael Qualls: That’s so cool. I think that probably a lot of entrepreneurs think the opposite when it comes to working with the larger corporate VC.

Kai Daniels: Yeah.

Rachael Qualls: But you guys have taken a very partnership approach to it, it sounds like.

Kai Daniels: Yes. And you know, the other aspect of it is General Motors has some very smart and intelligent people working here. And we’re, we’re able to identify, look, you know, these are the technical roadmaps, these are our experts and they’re not necessarily trying to take, we’re trying to work together and partner at that point. And I think that’s the misconception. It’s like you, you have a commercial agreement or you have a technical licensing agreement with a corporation like GM and you may have assumptions, but we’re negotiating these things together with our, our counsel and start up attorney’s counsel. And it helps us get to a place where we’re creating deals that are a win-win.

Rachael Qualls: Yeah. And so you guys wouldn’t necessarily be looking at funding these companies to acquire them. I mean you’re looking at funding them to grow alongside them as you know, a customer and a partner. Right?

Kai Daniels: Exactly. Yeah. We’re, and that’s kind of a misconception in corporate venture capital sometimes is that when you have these venture funds they’re investing in, they’re automatically investing so that the mothership can acquire you. And in a lot of cases that’s true. But, but not all corporate venture capital is created equal and that, that’s not really our goal. Our goal is to drive that strategic value into General Motors throughout the entire enterprise. And we have had that happen in portfolio once where we invested and became, and General Motors became an acquirer. But it’s not typical for our process. And it’s not a bad thing when it happens either. It’s just not our main focus.

Rachael Qualls: Yeah. I just think that’s such a cool perspective of, you know, saying that you’re a value added customer first, right?

Kai Daniels: Yeah.

Rachael Qualls: Because that’s how the company really drives that value is by having, you know, a customer first and then a partner.

Kai Daniels: Yes. And that’s how, that’s how we become really strong partners because we’re saying, “Hey, let’s, let’s do this together. Let’s bring this new technology to the marketplace together in a way that’s real.” And you know, the, we generate, our success is interdependent on each other. Right? As a startup, you’re saying, “Hey, we’re bringing this advanced technology to you and you guys are General Motors, one of the largest automotive makers in the world, and we’re ready to partner.” And we’re saying, “Yeah, we’re ready to partner to, let’s get this into development. Let’s get this into deployment so that our success is tied to one another.”

Kai Daniels: And, that is a, that’s a beautiful thing to see when you, you see a, startup that that’s solely an investment. And then maybe two to three years later their, their technology is in production, in a vehicle and interacting with customers, and things like that. It’s like, wow, you know, these startups really can make it through our process and we can deliver a competitive advantage in the marketplace by working together. And so that, that’s kind of how we see it.

Rachael Qualls: Love it. And what stage do you guys typically invest in?

Kai Daniels: We typically invest in Series A, Series B companies. We won’t invest less than a million dollars per se. And we typically don’t invest over $10 million in a round. We can if it’s very special. But we typically do not. And, and we’ve invested in and outside of Series A and Series B too. I mean we’ve made investments all over the world. Like I said, we’ve deployed over $320 million worth of capital to, to drive this strategic innovation. And so for us, Series A, Series B companies, are a sweet spot for us, because they’re still early enough for us to make an impact as we join on as investors and try to be strong customers to, to these startups. And also, you know, just just us being able to share and impart kind of the ins and outs of working with large automotive companies, or OEMs like ourselves. And then that helps guide them through the process as well. So Series A, Series B is as typically a sweet spot for us.

Rachael Qualls: And so when you talk a lot about the strategic, you know, vision, mission and the things that we keep saying, how does it work internally? Does a product team come up with something and say, “Hey is, you know, is there anything that exists in the market that you know can solve a certain problem?” Does the market determine like, “Hey there’s this new product solution, does it fit within kind of an innovation team?” I guess who’s driving that and how does it work internally?

Kai Daniels: Yeah, I mean for one of the unique aspects of our fund is the president of our fund. John Lockner is also the Chief Technology Officer of General Motors. And that gives us a unique insight into our technical objectives. And that drives kind of how we are sourcing in the market. You know, having the ability to have the Chief Technology as the company or the Chief Technology Officer of the company, you know, say, “Hey, let’s look at a blockchain this year. Let’s look closer in advanced manufacturing and additive materials. And this is exactly what we’re looking for in the battery tech evaluations.” You know, these are, these are kind of helping us guide how we’re reaching out into the marketplace and reaching back to our partners sourcing deal flow. And also since he’s the Chief Technology Officer of the company, our subject matter experts are well socialized to our group and how we do business. So it’s, it’s been, it’s been interesting and great having, having John as president because that’s helped drive a deeper understanding of General Motors’ technical needs.

Rachael Qualls: Oh yeah, I bet. Wow. So can you give us an example of maybe an investment you guys have made and how? And kind of the start to finish process of that. So internally you identified maybe the need or there was this strategic vision and then you source the deal here and the reason you invest in it, kind of a real life story, if you will, of how all this works.

Kai Daniels: I think maybe a good example of that is an investment we made a few years ago into a company called Ushr. And Ushr basically, their dynamic mapping technology was paramount in our Cadillac CT6 execution of Super Cruise. And so it is keeping you in the lane while you’re, you’re kind of in a Super Cruise, half, semi-autonomous state I should say. And that is, that was really interesting to see because we originally made an investment that spun out into Ushr and we took Ushr into development with the team and had them slated for a product line. And the Cadillac CT6 one of our, you know, luxury high end vehicles was where we were able to deploy that technology into Super Cruise. And now customers are enjoying driving at a semi-autonomous state with, with Super Cruise empowered in help with Ushr. And so just to see that type of innovation and work with the team to get them there, that has been, that’s what we would consider a win. That is a definite win.

Kai Daniels: It’s a, it’s another example that comes to mind too in an investment we made around dynamic fuel management. And we were able to, even though that startup was at an earlier stage, they didn’t quite have a product ready, dynamic fuel management system just to deploy into the, to these ICE engines. We actually worked together in a joint development project built on the technology together and were able to were able to implement that into our 2019 Silverados.

Kai Daniels: And so that is like the dream for us to find startups that we can work together with to bring something unique to the marketplace first. And to really make a statement to the marketplace that General Motors is at the cutting edge of innovation. And that’s what these venture dollars are bringing us, right? They’re bringing us this cutting edge of new technology that we can facilitate and support a startup. You know, partnering with us in a way that, you know, builds, builds both the startup and General Motors. So that, that’s, that’s a win for us. That’s a win, win deal we’re trying to create. And when we talk about General Motors proper and us winning in the marketplace, that’s the value that our fund is bringing.

Rachael Qualls: Absolutely. I don’t think most people realize, you know, the innovation that we rely on day to day and the innovation that we use every day was once someone’s little baby idea.

Kai Daniels: Yeah, yeah.

Rachael Qualls: And the thing that I, you know, keeps coming me back because, or keeps me coming back as a, an investor over and over again is, well I’m part deal junkie, but I’m part just so fascinated with how innovation gets to market. And you guys being a conduit for that, taking someone’s idea and now you have all these people driving these incredible cars, semi-autonomously.

Kai Daniels: Yeah.

Rachael Qualls: That started off as a little startup and you guys were the facilitator and catalyst of that. It’s kind of the perfect marriage of, you know, established, mature, big companies like GM serving as that commercialization innovation hub for your newer kind of startup and baby companies. It’s just cool to see that I don’t think people outside of, you know, the world you and I live in everyday probably think about, so.

Kai Daniels: Yeah. I think sometimes when we think about driving innovation, it almost is like a, you think you’re pushing the boulder up the hill in a sense, this is a difficult thing. But really when you have partnership and when you have real people ready to make real decisions, it becomes easier than one would think. Right? And on our side we have real experts and you know, we’re a real fund making real decisions. And on a startup side they’re real entrepreneurs ready to make a real impact usually in technology or society as a whole. And with, with both sides being in agreement and an understanding about where we’re going, we’ve been able to achieve great things.

Kai Daniels: And there’s still a lot, a lot coming down the pipeline and a lot of greatness for us to still achieve. And so that’s what makes it exciting is that, you know, it’s not a pain, it’s not as painful of a process when you have everybody on the same page. And that’s why we’re, we’re trying to approach these startups in the marketplace with, with win-win negotiations that they’re, they’re getting a benefit out of it. And General Motors proper is too.

Rachael Qualls: Yeah, exactly. What about like are there any other stories you can tell us or any lessons you’ve learned kind of on the front lines of being a venture capitalist? Because this is, you know, a peer to peer podcast for the most part. So any lessons you’ve learned that you can share with the rest of us of do’s and don’ts and anything like that?

Kai Daniels: Yeah, I, I think the, for me still being relatively new to the venture capital community and having the opportunity to be an analyst here with the fund. You know, it’s been amazing to see, even in my role how much of a connector I, I have the ability to be and how engaged I, I get to be in, in pretty much all aspects of the business.

Kai Daniels: And so I think one of the things that I learned was, you know, it doesn’t necessarily matter your role or title or even, you know, on the startup side as CEO or CFO. It’s really more about recognizing people as people and recognizing that all of us as individuals, we’re trying to come to the table to, to create something special and great. And, that’s always been, especially for myself now, where I’m trying to, I myself is, “Hey, I’m getting on these calls and I’m talking with these CEOs and I’m like, this is, this is where we’re coming from, this is, this is what we’re trying to achieve.” And I want to hear and learn more about what they’re trying to achieve so that we can find early alignment. You know?

Kai Daniels: That’s really what I’ve learned makes the process work best is that early alignment on how we’re, how we’re going to do things. And yeah, you work through and you negotiate and there’s sometimes there’s a pull and tug, but when you break it all down to the brass tacks of we’re real people trying to do something real, it just, it makes the work more satisfying. It makes these innovations that are going to really dictate or kind of guide the next hundred years in transportation. You can kind of soak it up then, right. Versus feeling like you’re, you’re, you’re pushing a boulder up a hill or you know that you’re, you’re, you’re almost catching your nerves talking to certain people. It’s like, Oh, you know, just have a conversation and be ready to move the ball forward in a real way.

Kai Daniels: And that positions you for, for whatever situation or conversation or innovation, whatever it may be that you’re trying to drive. You can do that. If you’re, you’re kind of anchored down in your shoes and you know who you are and what you’re doing and what you’re bringing to the table.

Rachael Qualls: That’s exactly right. I mean, that’s my experience too. You know, the best deals that we did were also the easiest.

Kai Daniels: Yeah.

Rachael Qualls: When you’re in alignment and everything’s working deals, you know, negotiations don’t have to be hard.

Kai Daniels: No.

Rachael Qualls: Deals don’t have to be hard to get done. The right ones are honestly typically the easiest.

Kai Daniels: Yeah.

Rachael Qualls: It all works out.

Kai Daniels: Yeah, yeah.

Rachael Qualls: And you know, if you’re fighting on either side of that table, chances are that you know, some of the best deals you do, too are the ones that you don’t do, or some of the best deals are the ones you don’t do, I should say so. That is all- [crosstalk 00:21:38]

Kai Daniels: You know, marriage is right. You know, you want to at least put your your best foot forward.

Rachael Qualls: Right.

Kai Daniels: And sometimes things go bumpy, sometimes you know, cash flow isn’t what we thought or we need a bridge or whatever it may be. And you want that early understanding of each other and that early trust so that when bumpy times hit, that doesn’t end our goal. That doesn’t mean the mission is over. We just, we tighten up ship and we course correct and we support each other and we move forward.

Kai Daniels: And that’s, that’s what also excites me about being here at this particular fund with GMV, because I’ve watched us support startup companies through difficult times in order to get to amazing places. And I think that’s also important in being a committed investor and, and being at a high level committed investor because you’re not ever, if something doesn’t go right or you know, we need to really sit down and discuss and course correct. We don’t scare, you know, we’re not, we’re not going to, we’re not going to shake in our boots and turn tail. We’re going to turn, we’re going to lean in and focus on what we have to adjust to be successful. And that that’s, that’s been a rewarding part of it too when you talk about these deals being marriages and you know, having that early understanding because you know, we can’t predict the future, but we can at least know that we’re going to come out on the other side of it together.

Rachael Qualls: Well you guys just sound fabulous and like, you know, the perfect investors, but do you ever, I have to know, do you ever compete for deals? Like, do you ever find a really,

Kai Daniels: Well yeah, I mean this is,

Rachael Qualls: Really?

Kai Daniels: This is a competitive venture capital market. We’re seeing valuations kind of increase and you know, C deals are almost looking like Series A deals now. And yeah, it’s a competitive environment. We’ve been, had the opportunity to, you know, invest with the Kleiner Perkins of the world and have strong strategic and syndicate partners that, that we’ve, have a couple of different co-investments with. And that makes it, and that’s a kind of an edge too, in the sense that we kind of have our ear to the ground on certain deals earlier and we can kind of call on our network to support us.

Kai Daniels: And so that, that’s another reason why with the fund being 10 years old it’s a, it’s a good time because we’ve had a decade to grow these relationships and establish ourselves in the marketplace as a strong strategic partner and strategic investor. And we’re standing on our values and our reputations in the marketplace and continuing to push ourself as a fund to innovate and be on the cutting edge and engage more and in a different ways and that, that’s how you stay fresh, right? That’s how you stay competitive and that’s what we’re trying to do.

Rachael Qualls: Well, I think that’s one of the most fun things, at least for me, about being on the venture capital side, is that there’s always something new and fresh.

Kai Daniels: Yeah.

Rachael Qualls: And after you’ve seen, you know, every version of one thing, someone comes along and blows your mind with something you never thought of. Right. Which is a good segue.

Kai Daniels: Yeah. You’ve never learned it all.

Rachael Qualls: Exactly. Which is a good segue to my ending question because you’ve been so fabulous to share your time with us today. What is something, and this can be for you personally, it can be for you know, GM strategic mission or both, but what is something on the innovation horizon that just gets you really, really excited? Like, you know, again, it could be anything but coming down the pipeline for society, of one big innovation thing that we’re on the cusp of that just gets you really excited?

Kai Daniels: You know, I, I’m definitely a millennial who’s ready for autonomous driving. And I’m, I’m just super excited to see how our relationship with the car is about to transform and change because our focus will not necessarily be on the road and driving. It’ll really be about transportation and getting to where we’re going. And you know, I think there’s always going to be a need for, for driving in a sense because it’s such an excellent pastime and people love to drive and I’m interested to see how that transforms as well.

Kai Daniels: But the innovations that are going to roll out into the vehicle without that element of driving is what excites me too. I could see these vehicles really being the center of life and how we get around and how we interact with the world around us. And that’s what’s exciting to see come down the pipeline. That’s what’s exciting to be a part of GM Ventures because we’re making investments in these areas and it’s, it’s exciting about being alive today. I mean it’s, it’s so much change happening and that’s the only thing that’s consistent is change and you know, to be a part of the next hundred years of transportation is the type of change I want to, I want to enjoy and be a part of. So that’s, that’s what I’m excited about.

Rachael Qualls: Oh, me too. I think it’s the coolest. I was just telling my children the other day about, we were talking, you know, about how cars are kind of an outward representation and people pick the cars that they like and kind of represent them. And I was telling them that that won’t matter longterm.

Kai Daniels: Yeah.

Rachael Qualls: Because now we’re moving to cars are just going to get you to the next place and you’re going to hop in whichever car picks you up and takes you.

Kai Daniels: Yeah. And then I think about it too, and I’m like, well maybe maybe with the future in additive manufacturing and how we see these, these vehicles or pods, maybe they’re all customizable and maybe you have a Hello Kitty one and I have a Pokemon or something like that. I don’t know. But that’s what makes the future exciting. You know, maybe, maybe it’s not all plain Jane. Maybe it’s a lot of customization coming down the pipeline. So, it’s just exciting.

Rachael Qualls: I know. Well it’ll just completely change how we think about transportation as an individual thing. I think going forward, you know, I get in my car and I drive to my place and I, you know.

Kai Daniels: Yeah.

Rachael Qualls: Because it’s somewhere in between mass transit and individualized transits where it’s going.

Kai Daniels: Yeah.

Rachael Qualls: And I think we can kind of hopefully all feel that.

Kai Daniels: Yeah.

Rachael Qualls: Especially after, if you’re listening to this podcast and knowing that, you know, big, big companies like GM are making innovation strides towards the autonomous vehicle. Like it’s just a cool time, like you said, to be alive.

Kai Daniels: It is, it really is.

Rachael Qualls: All right Kai. Well, again, we’re so thankful that you joined us on the podcast today and hopefully we’ll get to chat again in the future when you know, GM rolls out the first fully autonomous vehicles for, you know, the masses.

Kai Daniels: Yeah, we’re excited about that.

Rachael Qualls: Cool. All right. Well, you enjoy and,

Kai Daniels: Awesome. Thank you Rachael.

Rachael Qualls: Thank you.

Kai Daniels: This was great and we really appreciate it.

Rachael Qualls: All right, thanks, Kai.

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