(MENAFN- Robotics & automation News)
The ultimate investing machine: Interview with Kasper Sage of BMW i Ventures
Kasper Sage , managing partner at BMW i Ventures , gives us some insight into the investment strategy of the venture capital arm of the German automotive giant. By Abdul Montaqim
One of the things we have found most surprising in the past six or seven years since we started publishing RoboticsAndAutomationNews is the amount of investment that has gone into the robotics and automation sector – not just from the pockets of people who start their own companies, but also from what could be regarded as outside sectors, specifically pure investment vehicles.
And that investment keeps growing, with 2024 shaping up to be another blockbuster year. According to Crunchbase , the total amount of investment into robotics, automation, and computer vision startups has exceeded $4.2 billion – in seed funding and growth-stage financing – so far this year.
Some might say the sector is just“fashionable” at the moment, but it doesn't look like a fad. Apart from dips caused by things such as global pandemics and wars, this looks like a trend that will last for a long time, and continue to grow for the foreseeable future. The main reason for this is that an increasing number of governments and large organisations – whether in the private or public sector – are recognising how critical the sector is to the one thing all of them, or at least most of them, want and strive for: growth.
Whether, as a government, you are hoping to grow your economy, or a private company that is looking to increase your profits, robotics and automation is an important – possibly the most important – key to unlock increases in productivity.
And increasing productivity is arguably the most fundamental requirement for growth – whether you're talking about a nation's economy or a small private company.
But while a simple formula for growth may be described thus: replace many workers with fewer robots; how do you achieve growth as an investor who has to take a large number of educated guesses as to which of the many diverse markets will grow and which ones will converge in the future? That's a bit more tricky.
So, RoboticsAndAutomationNews decided to speak to a man who pulls the strings at a venture capital firm that has more than $800 million to do business with: Fund 1, $500 million in assets under management, and Fund 2 – a further $300 million – being utilised now.
The Sage of investment
Kasper Sage is the managing partner at BMW i Ventures. But before I get carried away with questions about the globally admired German automaker, Sage explains that, while BMW is the body connected to, and the originator of, the venture capital arm, Sage himself does not speak for BMW itself. But I can't help thinking that BMW is the engine inside the i Ventures investment vehicle. Anyway, it is an intriguing one that I am still ruminating over.
“BMW i Ventures has been around for about 13 years, total. I joined when it became an independent fund,” says Sage.“All the money comes from BMW but in the investment decision-making process, we are independent.
“We were set up as a typical venture capital firm, with a foundation of three partners. So, it's me, Marcus Behrendt, the other managing partner in Europe, and partner Baris Guzel.
“We have done a little over 80 investments. We usually invest in the early- to mid-stage of a business – Series A, Series B is where we're focused most.”
BMW i Ventures was founded by BMW in 2011. The German automotive giant expanded the operation in 2016, appointed Sage, poured in another $500 million into the fund, and relocated it to Silicon Valley, in the US, where Sage and Guzel are now based.
BMW also widened the scope of investment and gave it greater independence. The automaker said at the time that investments in start-ups“have proven extremely promising, both from a strategic and an economic perspective, and create sustainable value for the BMW Group”.
That was before. This is now. While i Ventures may have started out with a conservative policy, only really investing in automotive sectors, a new path – or many new paths – are being created by Sage and his colleagues.
“We invest in things that basically have the potential to influence the automotive sector industry in every country,” explains Sage.“It's a pretty broad definition. Anything from manufacturing and supply chains, to things that can potentially go into the vehicle, or after-sales and financial services.”
Strategies, philosophies and themes
Many investment companies and the individuals that work in them have strategies and philosophies – or“themes”, as they are often called. Not being an expert in these things myself, one thing that occurs to me about BMW i Ventures is that its parent company's most pressing concern over the next few years and decades is the twin challenges of, one the one hand, the global trend towards electric engines instead of petrol-driven combustion engines, and on the other hand, the threat of Chinese producers of electric cars.
Governments in Europe and North America have been trying to grapple with the difficulty of competing with China, which not only has rare earth minerals in abundance – the raw materials needed for electronics and specifically for electric vehicles, it also now has the manufacturing and engineering capability to eclipse Western rival automakers.
That's before we consider the labour cost advantage as well as other facts such as: China is now the world's largest automotive market; and it is the biggest buyer of industrial robots, which are absolutely essential for the mass manufacturing of cars – approximately half of all industrial robotic arms are bought by the global automotive industry.
Chinese electric vehicles are, predictably, approximately 20 per cent cheaper than their European and American competitors. So how does the West compete with all that?
“I don't want to get into the geopolitics of it,” says Sage.
Possibly one of the most key investments that Sage and his colleagues have made is in a company called Mangrove Lithium . Lithium is, of course, absolutely critical to batteries. You might be thinking that China is probably the largest producer of lithium as well, but actually, the world's largest producer of lithium is Australia (86,000 metric tons), followed by Chile (44,000) and then China (33,000).
The United States does not reveal how much lithium it mines, but the country is included in the top 10 producers in the world by Investing News .
Mangrove Lithium is basically a lithium refiner. It has developed its own technology for refining lithium from many kinds of materials – from clay to rocks and brine. It also says it can“refine lithium hydroxide from recycled batteries in fewer steps than incumbent technologies, with no waste by-products and at a higher purity”.
If the current upward trend of the electric vehicle industry continues, and Mangrove can establish a place within it, there is a good chance that the startup will become the 12th unicorn – billion-dollar company – in the portfolio of BMW i Ventures.
“When we invested in Mangrove, we thought this is a new way of doing lithium refining,” says Sage.“Basically it makes the process more efficient and greener. That's a process or technology innovation.
“We only invest in technologies. We don't invest in extraction projects themselves. So, something Lilac Solutions , a company that has developed direct lithium extraction process innovation, so the idea or goal is that it gets adopted by many, many companies – not just one facility or one specific resource, it would be more like enabling the industry to make things greener and more sustainable.”
While Sage has made it clear that he does not speak for BMW, the automaker is understandably keen to secure its supply of lithium for the gradual shift towards electrification of vehicles. The company signed a €285 million contract with Livent in 2021 for the supply of lithium. It agreed a similar deal with an Australian company before that. Most recently, Albemarle said it had reached“one of its largest ever” deals to supply lithium from next year – to BMW.
It's a logical strategy, and one that may enable BMW to emerge from the transition phase with its reputation as a premier car brand and its market share intact.
However, no matter how clever BMW or its venture capital arm is, there remains the threat of Chinese-made electric cars flooding western markets, something which has been exercising the minds of politicians for some time.
The European Union, for example, has imposed tariffs of up to 38 per cent on electric cars from China because it says they are anti-competitive, having been produced with heavy subsidies from the Chinese Communist Party government.
“I don't want to comment on the geopolitics of it,” says Sage.“But (on the point about selling Lilac's and Mangrove's technology to China) the US and North America, in general, has restrictions on who can acquire critical technology companies.”
Is robotics and automation important to you?
Sometimes we at RoboticsAndAutomationNews overvalue our contribution to the industry. We enjoy imagining that we are a hugely influential website which is often a catalyst for innovation in certain companies and sectors. So, for example, we heavily covered the early days of what could be called the autonomous mobile robot proliferation, if not revolution.
After Amazon bought Kiva Systems and took its AMR off the market, new companies emerged that produced similar small mobile robotic platforms that moved things around warehouses and facilities. We covered these developments fairly comprehensively. The AMR market grew faster than any other robotics market in industrial history and our readers were intensely interested in what was happening from day to day.
And the next thing we know, BMW has produced an AMR of its own. Replete with BMW styling and aesthetics, it was arguably the best-looking AMR on the market at that time. We're not saying it was our fanatical coverage of the market that prompted BMW to get in on the fun, but you never really know where ideas come from or where they end up, nor the neurons and synapses they connect along the way.
I asked Sage what he knew of the development of BMW's AMR.
“That's BMW territory, so I can't comment on that. If you want more background on it, the company is called IdealWorks , and it is a spin-out from BMW, so it was originally developed in-house by BMW, and then spun out into a company.”
IdealWorks last year made an investment of its own, becoming the majority shareholder in engineering and artificial intelligence company Agile Robots , although it's not entirely clear who is the more powerful company, given that Agile Robots has more than 1,200 employees worldwide and IdealWorks was just starting out and was yet to take a significant share of the AMR market. In fact, I'm not sure if it sold any AMRs to anyone else at all.
I asked Sage about it because I wondered if IdealWorks was part of the i Ventures portfolio, given that it's a BMW spin-out and would fit in with the venture capital arm's“smart production” investment theme. Sage says it is not, but goes on to highlight some of the recent investments in that space.
“So we invested in Formant, for example, which is a software platform for robotics. It enables a variety of robotics use cases at any scale. It is an operating system for robotics, providing everything from data analytics, to backend infrastructure. We led the last financing, so we took a significant share.
“Maybe I should explain some of the thesis. We really see the industry as being at an inflection point.
“Originally, a couple of years back, the robotics solutions and deployments – and I'm now talking about things like welding robots, which have been in the industry a long time – were, from a technology perspective, different because they were very precisely programmed to do the same thing indefinitely basically.
“So it's a very different overall technology system because they are in a static environment, and very repetitive. That system has been in the industry for many, many years.
“But what is new is the mobile and autonomous systems that can react to changing environments. They have, really only recently, reached an inflection point where they are scaling to the masses. And that's why we are very excited about the space.
“That's why we invested in Formant because we see that many enterprises are adopting this solution for a variety of use cases. This goes from surveillance, maintenance and more mundane things like cleaning, where the solutions are now robust enough and the business cases work out, and customers are scaling these things in a big fashion.
“Another one we invested in is Fox Robotics , which produces automated forklifts, among other things. Their technology is based around really automating the loading dock, which is an important and critical part of the supply chain, or everything in logistics. They recently signed an agreement with Walmart, which is quite a substantial contract.
“To summarise what Fox does, they autonomously load and unload trucks.”
The success with Fox Robotics follows a pattern which, Sage explains, goes from one or two installations to sudden massive scaling up, as in the contract with Walmart, which is still the world's largest grocery and variety of other goods retail chain. While that may be debatable, what's very clear is that Walmart has been dealing with the challenge of online retailers – mainly Amazon – and needs to streamline its operation in every way possible.
“What is important in these instances is that the startup company has business cases that make sense and that it is solving a business need,” Sage says.“And one of the things that has become quite clear because of Covid is that, for a lot of logistics companies, the labour shortage is a real problem.”
Another company BMW i Ventures has invested in is Kodiak , the developer of autonomous trucks which we regularly feature on our website.“We invested in them not from an angle that their autonomy stack could eventually make it to the vehicle – that was never the thesis.
“It was really about the logistics angle of it. There are not many people who want to do that job anymore because it involves sometimes travelling for two weeks, and there are massive benefits from an economic standpoint if you make this autonomous.”
Who will win the robot race?
As well as Kodiak, BMW i Ventures has also invested in other autonomous vehicle technology developers, including May Mobility, the provider of autonomous“shuttles” – known as minibuses in some countries. But the difference is that May Mobility carries passengers, not freight.
Some, including us, would argue that the growth of autonomous transport for human passengers will be limited by the fact that it will probably be seen as too risky by regulators, despite automakers' insistence that autonomous systems will reduce accidents on the roads, effectively implying that humans are inferior drivers, which may well be true but the regulators are siding with humans, possibly because when an autonomous vehicle has an accident, it's very tricky to find someone to blame. And the average person or politician or even programmer probably would not be able to find the rogue line of code that is at fault for autonomous systems malfunctioning and causing injury or death.
With that in mind, I suggest to Sage that the market for autonomous trucks intended for logistics applications is likely to expand rapidly once the technology is proven, but for passenger-carrying autonomous vehicles, there is likely to be very tentative growth, if at all – the vehicles may well be limited to relatively small spaces, say, at an airport or the grounds of an industrial facility, or a specific, controlled and short route within one single local authority's road network.
“I don't think it's an either/or question,” says Sage.“I think both will happen. It's a matter of timing. I think we will see more heavy proliferation of autonomous systems in the business or industrial contexts first.”
By“contexts”, I think he means geographical spaces.
“First of all, the problem set is different. Usually, these are on private roads, so you own the land. You have the ability to structure these systems, so you can create separate lanes, you can create a certain rule set for humans so they don't interfere there, and you can also install additional sensors to enhance the level of security.
“That would be difficult to scale in cities or in other public spaces because of the cost.
“In transportation, if you're talking about an Uber-like service, you have certain economics that will come into play. If you're talking about moving of goods and creating efficiencies with that, you might have a very different angle to that. So the value that an autonomous system creates might be much higher.”
Human truck drivers generally drive no more than 12 hours at a time in the US. If a journey is longer, which is very often the case in the US, then more than one driver is needed to complete the journey in the shortest time possible. Obviously, an autonomous system can drive itself indefinitely. Its only limitations would be running out of fuel and running out of road.
“There is real economic impact of an autonomous trucking system and network,” says Sage.“From a themes perspective, it's really about making sure that you create a resilient supply chain – that's what most businesses want.”
Show me the most amount of money
I asked Sage to tell me which sector he thinks will make the most amount of money for BMW i Ventures. Part of me thought he would say“the space sector” because, to my mind, it's only a matter of time before robots are sent to nearby asteroids, the moon or other celestial bodies to bring back gold or some equally – or even more – valuable metal or mineral. And if i Ventures has a long-term vision, surely it will be massively rewarded within the next decade or two.
While BMW i Ventures has indeed invested in a space technology company, called Skylo Technologies , it's in the relatively conventional sector of satellite communications – probably to provide network coverage to the increasing number of vehicles that are going to be on the roads in future.
“This is not an investment of BMW i Ventures, just to be clear,” says Sage.“But you've probably seen that BMW has announced that it is working with Figure AI – the humanoid robotics company.
“I can't speak to that because it's a BMW initiative. But I think it's a generalisable theme, along with generative artificial intelligence.”
Generative AI, for those of us are already bewildered and a bit worried by the pace of progress in artificial intelligence, is, basically, systems that learn by themselves what is required of them to do whatever task they are programmed to do, whether it is software that lives inside a stationary computer or a system that integrates mobile hardware and software, like a robot or autonomous car.
The worry is always of course that such machines will learn too much and start taking over and diminishing the role of humans in society. Is Sage worried that such a dystopian future could become reality?
“It is actually quite interesting when you combine physical applications, like robotic systems, with generative AI capabilities. We've seen this at companies like Formant, for example. You can start to use that to do provisioning and basic configuration of systems.
“Basically, what you would have done in the past, say you have a new robot, you would have had to first of all say what it is, configure the API connections, make sure you get data off of all of the devices, and then tell it what to do.
“With generative AI, you can basically auto-configure the whole thing. So it goes from hours and hours of manual integration to... you press the button, the thing understands what it is, it understands what its purpose is, it can harness all the data that has been collected on similar applications before, so it has a lot of knowledge, and can auto-configure all the connections. So, with that, a lot of robotics systems will become more cost-effective.
“In the past, one big impediment of robotics was system integration. You'd need a system integrator that puts it into an existing environment and make sure that it all works. And for large-scale deployments, that's probably still true, especially for static systems, but for mobile systems, it's different.
“With generative AI, you can make a lot of these use-cases viable, so I think it's quite an exciting time because we will see a lot more of those that utilise the technology.”
Yes, still worried
Many people have long been of the view that science fiction writers are way ahead of all of us in predicting the future. So, what Sage is implying, in my opinion, is that humanoid robots could conceivably use generative AI to learn to use a welding gun or load and unload a truck or do whatever else is needed in any facility, and humans will all be out of work and scared of what the robots will do next.
Aren't you at least a little bit worried about that? I ask Sage.
“The thing that I think people get scared about, although I don't share that fear or that concern, is that it looks like some of these systems have their own consciousness and may take their own decisions. I don't think that's the right way of looking at it.
“I think it's similar to the evolution of the internet. I think generative AI will become part of many, many applications. It is about shaping these things into useful, meaningful, impactful things.
“I don't think today we are in a situation where we as humans will be extinct because tomorrow these robots will decide that we are no longer necessary.
“These are complex technology systems. If you only look at Hollywood movies you could have fears. The reality is these systems have security layers in them, non-overridable functions (for safety).”
While Sage did try his best to reassure me, I've seen too many sci-fi films to stop worrying.
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