The world can be divided into two neat groups: people who think finance is cool and people who think finance is an instrument of Satan. Of late, the instrument-of-Satan crowd has had plenty of ammunition. However, even finance-haters are often willing to give venture capitalists a break, because VC drives the innovation economy. And that's why General Motors started a VC fund.
A 100-year-old, just-out-of-bankruptcy, newly-IPO'd old-line manufacturing company acting like a VC? Yep, and with a $100 million war chest to spend on startups that will both serve GM's vision of its future and define the cutting edge of the 21st-century auto industry.
But it's also about branding
Prior to its 2009 bankruptcy, GM didn't have the greatest reputation for much of anything besides being huge, old, and defiant toward its critics. The taxpayer bailout and Chapter 11 gave the company the chance to force itself to change, and change it has, with GM Ventures leading a quiet charge.
Earth2Tech has a crisp recap of what GM Ventures has invested in so far and what the guy who's running it, John Lauckner, thinks is the roadmap for bringing new technology to bear on the challenge of making superior automobiles. It's rather head-spinning with you place it in the context of a GM that at one point was selling basically the same four-door sedan across three brands -- Buick, Oldsmobile and Pontiac -- and gave us such classics as the Aztek and the Cimarron.
Does expertise count for something in VC?
The typical Silicon Valley-centric VC firm doesn't necessarily invest from a place of deep expertise among the partners. At times, their true focus seems to be investing in leaders who have an unwavering devotion to the VC's exit strategy and a beefy ROI. GM Ventures, by contrast, can draw on the General's deep understanding of what works and doesn't work in the auto industry. GM has launched plenty of successful cars and invented plenty of technologies, but it has also failed many times.
As a result, GM Ventures' strategy seems highly targeted for a success rate that's unusual for VC. In fact, Lauckner's objective looks a lot like the creation of a supply chain for the advanced cars and "mobility solutions" that will move us away from the familiar vehicles of the past, built with sheet metal and powered by gas, and toward the lightweight, electrified, networked vehicles that will define the future.
Perfecting startup investment, with a return for the taxpayer
The GM bailout was controversial but necessary. Skeptics -- and taxpayers who figure they'll never get their money back -- should look to GM Ventures evidence that their billions were well spent. The global auto industry is only going to become more ferociously competitive in the decades to come, as China and India enter the game in a big way. China in particular can place big bets on new auto technologies and bring them to market at breakneck speed.
But America still has a competitive advantage in our startup business culture and the VC structure to fund it. It's the opposite of command-and-control, in that it matches money to ambition and sets it free. That GM has entered this field is further evidence that the company doesn't just want to be different -- it is different.