Data-Driven Insights on Mobility and Deep Tech Trends

Four key takeaways:

1: The climate tech boom boosts electric vehicle (EV) investment while autonomy progress lags.

Three years ago, autonomous driving was all the rage, but the technology has developed slowly, especially in the consumer space. On the other hand, EVs have seen significant advances. Between 2018 and 2021, the number of US EV venture capital (VC) deals increased 80%. This boom has been in large part fueled by climate tech investing. As limited partners (LPs) set environmental, social, and governance (ESG) goals, VCs recognize the maturity of the sector and governments set ambitious climate targets, the amount of money flowing to climate tech funds increased 3x between 2019 and 2021. While autonomy is still one of SVB’s four pillars of innovation that will help shape the future of mobility — in addition to shared, multimodal and electric — progress has been slower.

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Source: PitchBook and SVB analysis. Notes: For funds with a stated focus in cleantech, agtech or electric vehicles/hybrids.

2: Mobility companies are burning through cash as runways shorten.

In the frenzied environment of 2020 and 2021, VC-backed mobility companies raised nearly $80 billion from VCs globally, pushing cash balances higher. After the worst-case scenario of the COVID-19 pandemic didn’t come to fruition, companies put that money to work and net burn increased. But as the funding environment dried up in 2022, cash balances began to fall while net burn continued to climb. While tech sectors such as enterprise software have made cost-cutting moves including headline-grabbing layoffs, mobility companies have mostly stayed the course. This has pushed the cash runway down for mobility companies — the median US VC-backed mobility company now has less than 12 months of cash runway. That is a far cry from the 24 months of cash runway that most VCs are recommending.

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Source: SVB proprietary data and SVB analysis. Notes: Data smoothed using trailing 2 quarters of financial data.

3: De-SPAC’ed mobility companies sputter, but many are well-positioned for the future.

As with the rest of the Special Purpose Acquisition Company (SPAC) market, mobility de-SPACs boomed in 2021. But the SPAC asset class has been plagued with poor performance — the median 2021 mobility de-SPAC has seen its price drop 79% since de-SPAC (as of Sept. 15, 2022). De-SPACs have become a particularly useful funding option for mobility companies. Compared to software-only companies, building new cars and planes takes a lot of time and capital to execute. That capital isn’t always easy to raise in private markets given that some mobility companies have longer investment time horizons, tougher unit economics and higher capital requirements that some VCs shy away from. But de-SPACs provided some mobility companies with 4-5 years of cash runway (assuming current net burn rates). That means those companies now have both the time and capital to execute their vision. However, those with 18-24 months of cash runway are certainly in a tougher position.

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Source: PitchBook and SVB analysis. Data for VC and PE-backed or formerly VC and PE-backed transportation companies on major US exchanges.

4: Deep tech companies turn to hardware-as-a-service.

As machines become more integrated with software, deep tech companies are adopting a business model that leverages the best of both worlds. More companies are adopting the hardware-as-a-service (HaaS) business model. Instead of selling their solutions outright, HaaS companies sell their products as a subscription model. This recurring business model means shorter sales cycles, higher profitability in the long term and leverage over the data they collect. The downside is that it increases capital needs for a hardware company, given the company is paid back over one to three years for its product, instead of immediate payback. Over the past five years, we’ve seen an increase in demand for SVB debt facilities to help HaaS companies meet their capital needs. We’ve also seen the average loan size increase, indicating that these companies are growing and require more capital to cover the payback period for the asset.

For a more detailed look at HaaS, check out the State of Hardware-as-Service report that dives into the metrics that matter for HaaS companies.

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Source: SVB State of HaaS Report. Notes: HaaS includes hardware companies with an as-a-service business model. Traditional hardware companies do one-time sales only.

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The views expressed in this report are solely those of the author and do not necessarily reflect the views of SVB Financial Group, Silicon Valley Bank, or any of its affiliates.