[Un]bundling Mobility — Introducing Toyota AI Ventures Fund II
“In business, there’s only two ways I know of to make money: bundling and unbundling.” — Jim Barksdale
Since July 2017, Toyota AI Ventures has supported early-stage startups in their quest for the right product bundle to fit their target markets. Today, we’re announcing our next fund, Toyota AI Ventures Fund II — an additional $100M that will power innovative, disruptive, early-stage companies that are challenging established mobility markets.
The creative destruction of bundling/unbundling/rebundling happens constantly across markets. In 1999, the music industry suffered the first cracks in its bundled business model. Back in those halcyon days, CDs (compact discs for you younger readers) usually held about 15 songs and cost about $15. The trouble was that we, the music-buying public, typically wanted only three songs of the 15 on the CD. So, we were wasting 80% of our money on each CD, effectively paying $5 a song! We voted with our wallets as soon as per-song downloading became viable (and not illegal).
The CD was first unbundled into individual songs by Apple iTunes in 2003 for $0.99 per song, a significant value over the $5 a song ransom we were paying. Then, in 2005, with the maturation of Internet streaming technology, Pandora and Last.fm further unbundled music with personalized, ad-supported Internet radio. By 2007, Spotify took a step in the other direction and rebundled streaming music. For $10 a month, we could listen to unlimited music, get personalized playlists, or create our own — a huge value, indeed.
Similarly, the history of computing has seen its share of bundling and unbundling shifts — unbundled computing devices like the abacus, calculating tables, and slide rules; bundled mainframe services; unbundled “fat client” personal computers; and, most recently, rebundled cloud services. Each wave adds or subtracts services to provide value for the customer at a fair price, growing profits and building brand loyalty for the business.
Mobility is not immune from its own [un]bundling creative destruction, though the dynamics differ from those governing music and computing. More than 100 years ago, before the automobile, land transportation was unbundled. We traveled by a mix of foot, horse, and train. The automobile bundled these trips into a personally-owned package that was safe, liberating, convenient, and fun.
However, driven by urban congestion and underutilization, the traditional automotive mobility bundle has been unwinding over the last decade, with few signs of slowing. Industry disruptions led by startups in autonomy technology, sensors, ride-hailing, micromobility, and even robots are changing the way we move through our world. Startups are petri dishes, experimenting with different product bundles that are reinventing the mobility landscape.
Toyota AI Ventures Fund II
Since our founding, the Toyota AI Ventures portfolio has grown to include 19 startups. These startups share our vision of a world where technology creates a strong, even emotional, connection between humans and machines. Toyota’s been doing that for more than 80 years.
In furtherance of this mission, Fund II is a continuation of our original vision — to partner with founders that share our passion for amplifying the human experience through innovations in autonomous mobility, robotics, AI, data and cloud. We’ve learned that we can only make great investments if we attract and invest in great entrepreneurs and their teams. In today’s emerging mobility economy, capital is plentiful and the best startups have many investors courting them.
To earn the trust of the best startups and co-investors, our fund is financially aligned with their success. Our deeply held belief is that if a startup is financially strong, it will be a capable, reliable strategic business partner with Toyota. Corporate investors often miss this critical element by putting their own strategic interests ahead of the startup’s financial success. Actually, the opposite is true — financial return is a prerequisite for strategic return.
With Fund II, we will continue our practice of treating founders as customers and encouraging their companies’ unfettered growth. When asked, we’ll help recruit talent, advise on technology, and connect them to Toyota’s global network. We’ll continue our search for the most talented, highest integrity entrepreneurs who strike that delicate balance between confidence and humility.
In his October 2017 Message from the Toyota President, Mr. Akio Toyoda said:
“As we aim for the mobility society of the future, we are headed into unknown territory, seeking to ascend as-yet unconquered peaks. To climb these uncharted mountains, new technologies and the sherpas who know the paths will be indispensable.”
Although Mr. Toyoda wasn’t specifically referencing startups, I believe that startups can be a kind of sherpa that guide Toyota’s journey of discovery toward new mobility capabilities and market opportunities. Startups are built to run fast, fail fast, pivot fast, and do anything to survive. Toyota can learn a great deal from how startups approach speed and risk to develop disruptive businesses that are redefining mobility.
More than just additional capital, Toyota AI Ventures’ Fund II is a recommitment to the entrepreneurs creating the businesses that are fueling the emerging mobility ecosystem. We’re not sure where the [un]bundling lines will be drawn, but we do know that startups will be the ones drawing them. They always have.