Most of the major advancements in cleaner transportation technologies have come from mechanical engineering processes like electric motors, energy grids and hydrogen fuel cells.
But the next wave of green innovation will be driven by connecting trucks to the cloud, not by hardware per se.
This trend is playing itself out on the road and in the investment community, where these days the lion’s share of VC funding is going to tech-enabled startups with an emphasis on mobile connectivity.
More investment, more VC deals in transportation
Venture capital investment in the U.S. has been steadily increasing, from about $23 billion in 2010 to nearly $50 billion in 2014.
At the same time, the amount of VC money going to transportation startups has exploded, from $726 million in 2010 to $4 billion in 2014.
In the first 5 months of 2015, there was more investment in transportation startups than in 2010-2013 combined!
Massive investment in Uber — the most well-funded startup ever — represents a significant portion of this increase in transporation investment.
But even when you look at the total number of VC deals in transportation, there has been significant growth over the last 5 years.
This number of transportation deals is growing significantly faster than the total number of VC deals in the US:
From electrification to mobile software
By the end of the 2000s, most of the investment dollars in transportation were going to startups focused on vehicle electrification.
But the verdict is still out on some of these startups, many of which have yet to develop self-sustaining business models or solutions that are cost-effective and reliable enough to implement into a supply chain.
Of course, the notable exception among electrification startups is Tesla, which has created a market for high-end electric vehicles as well as commercial and home battery systems, which Wal-Mart is already testing.
“The reason Tesla made it big is not because it has a great electric car,” says Jonas Landström, investment director at Volvo Group Venture Capital.*** “It’s that they have a highly connected car, and they’ve disrupted the distribution model by selling directly to consumers instead of having dealers.”
Software has become an important element of most modern vehicles, whose on-board computer systems regulate safety procedures, energy usage and on-road performance.
But connecting cars to the cloud promises even greater advantages, such as road hazard warnings, traffic and weather reports, and over-the-air software updates.
*** Special thanks to Jonas Landström for providing the charts cited in this post. For more insight into the transportation startup world, check out the Volvo Group Venture Capital blog.