Auto technology startups predict bright road ahead
Proximity to Detroit and Silicon Valley provides plenty of scope for Canadians
Technology trends research firm CB Insights recently reported that startup financing for automotive-technology companies surpassed $1 billion worldwide in 2016, and that only the United States enjoyed a greater share than Canada.
While this may seem like a big accomplishment for this country’s burgeoning automotive-technology startups, it’s one that comes with a few asterisks.
On the one hand, Canadian startups — such as LeddarTech in Quebec City, which develops high-end laser scanners and obstacle detectors for autonomous vehicles, or KeyFree in Toronto, which is replacing car keys with smartphones to support car-sharing services — have recently out-fundraised companies in countries with longstanding automotive traditions, including Japan and Germany, while inching ahead of those with renowned startup ecosystems, such as France and Israel.
But when you consider the fact that 68 per cent of all auto-tech startup financing between 2012 and 2016 went to companies based in the United States, Canada’s second-place share of seven per cent seems a little less exciting.
“Canada did have a solid showing in terms of deals going to Canadabased startups,” said CB Insights’ automotive-trends analyst Kerry Wu. “However, it’s important to remember that this measure is just tracking financings going to private companies, and the balance of Canadian auto-tech startups are still relatively young.”
Wu said countries with wellestablished automotive industries, such as Germany, Japan and South Korea, “have large incumbents who are now plowing billions into internal research and development and have advanced their programs significantly,” as opposed to Canada’s more startup-based system.
Canada’s startups, however, do have some advantages in the world of automotive-technology development, including its relative proximity to both Detroit automakers and Silicon Valley venture capitalists.
“U.S. investors were involved in over a third of all 2016 seed-stage deals to Canadian VC-backed companies, and their participation increases for startups with greater capital needs at expansion and later stages,” said Wu, adding that instead of being an independent leader, Canada’s automotive-technology startups are “playing a (smaller) part in a bigger picture.”
Vancouver-based connected-car technology startup Moj.io, for example, closed a $15 million series A investment round in 2016, and is backed by e-commerce giant Amazon, German telecommunications provider Deutsche Telekom, and Toronto-based VC firm Relay Ventures, among others. Over the past year the company has ballooned from having fewer than 20 employees to employing 44, divided among its Vancouver, Palo Alto and Prague offices, and it expects to come close to doubling that number over the next 12 months.
Moj.io provides a cloud-based connected-car platform to utilize the onboard diagnostics port that exists in approximately 530 million vehicles in North America and Europe alone. The platform allows telecom companies to provide connected-car services to customers, even if they didn’t sign up for those capabilities when they purchased their vehicles.
“When a customer signs up, for example, to the T-Mobile Sync Up Drive service, they get high-speed Wi-Fi in the car, they get safety and security knowing where the car is, if its safe to drive, if anybody has bumped, towed or stolen their car, and in the future they’ll get insurance discounts,” explained the company’s chief executive, Kenny Hawk.
Hawk said that it’s not just U.S. funds that are bolstering the country’s auto-tech startups. The successes they’ve enjoyed recently may also be built on the legacies of technology companies past.
“You’ve got BlackBerry, Nortel, a lot of research was done in the wireless sector in Canada, both in the West and the East,” he said. “Think about the size of those companies — all those people didn’t just disappear, they’re still around and have experience.”
Another advantage Canada’s automotive-tech startups enjoy is the availability of government programs that support research and innovation for early-stage companies. As chief executive of the first company to receive funding through the BC Tech Fund — which dedicated $100 million in venture capital funds to invest in emerging-technology companies throughout the province — Hawk praises the provincial and federal governments for taking proactive steps in transitioning the country away from the old automotive economy.
“It would be very easy to just focus on the natural resources, but we’ve seen the sort of swings that industry can have. It’s boom or bust. Technology is the future,” he said. “They’re making investments in the future, and I think it will accelerate under Justin Trudeau.”
While Canadian CEOs in the automotive-tech industry praise the federal government’s shift toward new technology, some still feel that more should be done in order to stay competitive with the U.S.
“I think what’s lacking is just more stimulation from the government to really inject money into this space, even more than they ’re already doing,” said Karim Ali, co-founder of Algocian, a Toronto-based AI company developing camera-sensor technology for autonomous vehicles.
“I think they’re already doing a great job, but they need to do a better job. If you look at what the U.S. government does for startups, they have billions of dollars every year that go to innovation grants that any company can apply for and many companies rely on.”
Unlike other cloud-connected sensors and cameras that rely on Internet connectivity, Algocian is developing AI software that lives inside the camera, and can identify obstacles such as cars and pedestrians in any weather condition, with no additional hardware.
Founded less than two years ago and currently housed in Ryerson University’s Digital Media Zone, the three-person operation raised a “small” undisclosed round this year combining government grants, angel investment and private capital from Detroit-based VC firm, Fontinalis.