#72: InMotion Ventures' Mike Smeed on aligning corporate venture capital with strategic transformation

Hi, I'm Jeppe and welcome to my bi-weekly podcast/newsletter on Corporate Venturing.. My aim is to provide a comprehensive perspective on the latest developments in the field and its related topics, drawing from the insights of top management, venture capitalists, founders, LPs, and family offices. I aim to offer valuable information and thought-provoking content that will aid in understanding the importance of Corporate Venturing in business strategy.

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In this episode of the EU CVC podcast, Andreas and Jeppe, our in-house CVC expert talks with Mike Smeed, Managing Director at InMotion Ventures, the corporate venture capital arm of JLR (Jaguar Land Rover).

InMotion Ventures is one of the most active corporate investors in the UK, with a global presence from the UK, Bay Area, and Tel Aviv. The team focuses on Seed to Series A investments, with typical cheque sizes ranging from $250K to $2M, and has the flexibility to participate in Series B rounds when there’s strong strategic alignment with JLR.

Mike and his team back exceptional startups in climate, industrial, and enterprise technologies. Today, we’ll explore how InMotion Ventures leverages venture investing to accelerate innovation, the unique opportunities within their focus geographies — UK/Western Europe, North America, and Israel — and the role of corporate venture capital in driving impactful solutions.

✍️ Show notes

Mike’s favorite project at InMotion and why?

• The reset… on returning from an assignment in China I was asked to lead InMotion Ventures’ reset, closely aligning the corporate venturing unit to the new strategy for JLR (Reimagine).
• As we’ve seen in other CVC units, they wanted an insider to lead the fund and maximise the links with the parent company
• There’s nothing we havent touched in the last 2 years. Our thesis, our relationship with our portfolio, our platform, we’ve moved office location, new website, branding, relationship with JLR…
• We have made 23 investments (including 11 new portfolio companies) since that period and are now one of the most active corporate investors in the UK, and the second most active climate tech OEM investor in Europe

Principles of InMotion

• In our reset we spent as much time on what type of investor we wanted to be, as we did on the type of investments we wanted to make.
• We are strategically focussed in the areas we look to invest, but each investment decision is based its financial merits.
• Its important to us as a small fund, that we brought our personalities to InMotion Ventures, figured out what we wanted to be famous for, and the value we feel we can bring.
• As a corporate investor our USP is clear: our ability to support startups in their development through links to JLR, and the wider Tata Group. That is the one thing we can do that no other investor in the world can - whilst we don’t guarantee this, 90% of our active portfolio are engaged with JLR in some way. In a sector where everyone is claiming to add value, this data point is one we’re particularly proud of.
• We also have strong networks in both the automotive, and more general CVC & VC ecosystems in which we operate. In fact, we invest alongside JLR’s competitors on a regular basis. This can be helpful in supporting future raises.
• We also wanted to focus on early stage investing, unlike many CVC’s our bell curve is in Seed to Series A. This is both for pragmatic & philosophical reasons (e.g. we don’t write the biggest cheques & corporate resistance to startups lower at early stage.
• We also knew that we needed a decision making framework and governance that satisfied our parent in a heavily regulated industry whilst allowing us the agility and speed that’s required to compete for the best deals.

Example. How one of these principles drove a successful initiative?

Going to pick 2 - our value add & network. We have recently been invited to join two hugely exciting deals that would not have been possible before our reset.

• 1. One from a number of investors who recommended us as a strong member of the cap table in a deal that had already closed. Being invited to co-invest alongside Tier 1 funds after a round has closed is a signal that we’re doing something right.
• 2. In another deal we joined a round following our outreach, but in depth due diligence on us by the founder. They validated our claims with the market, and heard that we walk the walk. Having others validate you is an a true marker for success.

Challenges in implementation & how Mike overcome them?

Momentum is everything in VC. Being an active investor, who delivers against its reverse pitch is crucial, to our parent, founders and fellow investors. This is a relatively small world and people talk. Getting started was key - we made some great investments early on and have 3X’d the number of portfolio companies engaged with JLR.

Three learnings from Mike’s journey at InMotion.

• 1. Know why you’re there.
• 2. Over communicate - CVC is not well understood in the UK & Europe
• 3. This is the best job i have ever had.

A turning point. A specific moment that encapsulates your learnings journey.

About 12 months in, there was a light bulb moment… We were bringing investments to the table that were further from the parent company's core. A colleague at JLR said, “if they’re that good, why would they want to take money from us….” this showed us the progress we’d made, sometimes it’s hard to see it when you live it every day.

Deep Dive on CVC Model

How the CVC model operates at InMotion?

• IMV is a wholly owned subsidiary of JLR, an off-balance sheet evergreen fund.
• 3 board directors with DOA to approve up to an agreed annual capital deployment
• Investment thesis focused on the Climate, Industrial & Enterprise technologies that are critical to JLR’s strategic transformation; in the UK. Western Europe, Silicon Valley & Israel.
• Early Stage investor, Seed to Series A, although model permits later stage investments (can invest alongside a business unit).
• We work with BU’s on technical diligence and confirmation of strategic roadmap – but do not require a contract in place, there is no guarantee of working with JLR (has to stand up in its own right in terms of price and performance) – but if we do our job correctly you’d hope to see a collaboration between the companies.
• Spent as much time on what type of investors we want to be, as well as what type of investments we want to make….
• Value in introductions to JLR (& Tata Group), our network in UK, and territories we operate, first OEM/Enterprise investor.
• Brought learnings from VC in decision making speed, have processes in place with Investment Panel/Committees to support decisions.

Metrics and examples that highlight the success of the CVC model.

• 90% of our active portfolio are engaged with JLR in some way – 1/3rd have either a contractual relationship (customer/supplier) or in a stage of the procurement process (RFI/P/Q).
• We’ve brought adjacencies to Automotive – Verax, Beyond Math….

• CVC & active investing is the gateway to the startup ecosystem – get access to much more to support the venture clienting spaces (much often more close to the core).

Investments and Jaguar Land Rover Fit

Examples of recent investments and explain how they strategically align with Jaguar Land Rover's goals.

Ev.Energy; Cesium Astro; Beyond Math, Chipflow; Verax.

Achievments from these investments that show their impact.

• Access to unique & entrepreneurial talent: speed to market ; cost efficiency & risk sharing compared to the parent doing it themselves.
• Co-development opportunities: JLR able to shape early-stage products in a way that actively impacts their goals, without demanding exclusivity.
• Relationship with startup: acting as the translator between two very different types of entity – moving at different speeds, talking a very different language (therapist).
• Cultural change: some leaders running towards us (others running away!).

Drivers of success

Internal and external drivers that contribute to InMotion success.

• We exist to invest in exceptional startups to increase the pace of innovation and the delivery of JLR’s strategic transformation.
• We have an agreed financial metric for “fair returns”.
• Success judged on impact we are having on the parent co: through startups we invest in, their progress within JLR (as well as the wider Tata Group) and those we introduce to the company.
• Also providing insight into the startup ecosystem, eyes and ears into developing technologies, ajacancies etc.
• Also judged on impact we are having on the portfolio: how has our investment allowed them to scale: access new markets (automotive), validated their products with SMEs, helped raise future funds through association with leading OEM.

A success factor that surprised you and contributed significantly to InMotion's achievements.

VC/CVC is not very well known in the UK vs. the US. Whilst 7 out of the Top 10 listed companies in the US were VC/CVC backed, that’s 0 in the UK – been surprised by the way people in the parent company have come towards us.

Collaboration with Jaguar Land Rover

How inMotion’s work directly benefited Jaguar Land Rover?

• Chipflow – semi-conductor crisis, bespoke chips at relatively low volumes. Was something that JLR “might” want to look at in a few years. We made the investment and within 6 months had designed a custom chip (would normally have taken X years and $X millions), now looking forward to doing this to the next step and producing it.
• Back to the timescales – being an investor keeps JLR at front of mind, in a heavily regulated industry, things take time, startups more likely to be patient with an investor rather than a “normal” customer.
• Verax AI: As part of JLR’s Generative AI strategy the business is implementing safeguards to make AI ethical, secure and risk-managed. Met Leo and immediately recognised the impact they could have on JLR’s ability to leverage Gen AI in a responsible way, but also understood the huge potential financial upside of investing. Became first strategic investor on the cap table in a matter of weeks, followed on in seed a few months later. JLR and Verax now collaborating as design partners on the startup’s first product, the Verax’s Control Centre, with the JLR data team shaping the Verax product so it is built in a way that directly gives them the visibility and control they need.

Portfolio companies whose growth particularly stands out, especially in terms of synergy with Jaguar Land Rover.

• Bumper: regularly award winning, amazing business model, expanding within JLR dealerships.

• Zeelo: met through a seed programme we were running in 2016. Impressed by their ability to leverage AI to accurately predict demand and identify routes. Gave them office space, invested again at Series A and Series B. Following extensive R&D and product development our team connected Zeelo with JLR’s property team. Zeelo began offering commuter services to the 5,000 JLR employees commuting to and from the Gaydon HQ in 2018. InMotion Ventures was the first corporate investor on the cap table, and in 2018 JLR became the startup’s first enterprise customer. Today JLR is one of Zeelo’s largest customers, last year experimented with EVs, and now we’re exploring rolling out the service to other sites in the midlands. Today Zeelo is global leader in transportation services, half a million rides per month, on the Financial Times FT 1000 list and recently launched in USA.

Journey in venture

Early experiences shaped Mike’s career in venture capital.

• I have a finacial background, worked in Frankfurt, Geneva, London, Shanghai and New York – so suppose I was destined to be involved in invrstment at some point.
• I have found my niche at the periphery of large organisations, rather than in the Core keeping the lights on.
• Finance roles mean you are used to having a foot in each camp (BU team and finance team) being punched in the face from both sides.
• Also fascinated by creative people – I am not creative in the slightest but always admired them.

A defining moment.

I have them quite regularly now, as our external & internal comms plan is highlighting the value the CVC can bring to new audiences.

A personal challenge of failure & how Mike overcame it.

Our first IC - Dec 2022. 4 investments discussed, 0 approved - and sent packing. Was meant to be the Christmas party day and the team were all sat in a meeting room unsure where to go from there. One of the loneliest days of my professional career. We overcame it through incredible hard work, and we haven’t had one rejected since!

Advice to young people in the industry.

A piece of advice for young people.

This is a relationship business as much as a financial one. see the value in building and nurturing relationships, do what you say you’re going to do and be prepared that 99% of an investment is incredibly boring!

A personal advice that is needed to succed in this field.

• Authenticity is critical, this is not a game. Founders are putting everything on the line in support of their vision and treating them with respect and fighting their corner, is our job.
• Invest in people you genuinely like: this is a long game, you work with founders for 5, 7, 10 years. You have difficult conversations, often at unsociable hours. In an industry where you can literally choose who you work with, do not underestimate the value of picking decent people. And that goes both ways

An actionable advice to implement right away.

• Listen - a lot. There are lots of resources out there on CVC, however your parent will govern how your CVC operates, there is no one model that works.
• Give thought to what genuinely interests you, understand when to say no. This is a super competitive industry. It is notoriously difficult to break into. There’s a temptation to jump at the first opportunity. However, as an investor you need to be all in on your thesis. Only join a fund that is investing in something you’re genuinely passionate about, if you don’t, it’s going to be a very taxing job.

Most counterintuitive learning

The most counterintuitive thing learned in corporate venture.

• How open and collaborative it is. We are more likely to invest with JLR’s competitors than we are with any other CVC or VC. That is at extreme odds with the corporate attitude to liaising with competitors.
• CVC leaders are incredibly generous in terms of time - many have spent time with me, youtube & GCV are incredible resources.

Why was this learning unexpected? How did it change Mike’s perspective on the industry?

Working in a corporate bubble its easy to think that its the centre of the universe - in CVC and VC we know that some of the issues we are trying to solve are beyond the resources of individual funds or companies - it will only be solved by working together.

I hope you enjoyed this newsletter. If you have any suggestions or contributions that you would like to share with me, please do not hesitate to reach out. I would be delighted to hear from you.

/Jeppe