Smartcar raises $24 million to build platform for ‘computers on wheels’

Smartcar.com CEO Sahas Katta and John Tough, Energize Ventures Managing Partner, join Yahoo Finance to discuss the funding raised towards automotive climate technology, incentives for people to invest in this, and strategies for growth in expanding EV and renewable energy markets.

Video transcript

AKIKO FUJITA: Well, a rush of investments into climate tech led to a record year for the space in 2021. And our next guests are looking to keep that momentum going by leading the push in mobility software solutions. Let's bring in Sahas Katta. He is the CEO a SmartCar.com. He's joined by John Tough, Energize Ventures Managing Partner.

Sahas, I want to start the conversation with you, because you are announcing this $24 million funding round-- series B round, I should say. Talk to me about your company and where you see yourself positioning in this transition we're seeing in the auto space.

SAHAS KATTA: Absolutely. Thanks so much for having me on the program, Akiko. It's been a pleasure today. Well, Smartcar's starting point is a developer platform for cars. But before I really jump into what we do, I'm not sure everyone knows what is a connected car. Cars have really become computers on wheels over the past few years.

All these cars are now shipping with 4G or 5G connectivity built in, just like your phone. In fact, nine of 10 cars that shipped last year are internet connected. And it's been a really incredibly exciting time for the automobile industry. But even with all this progress, it's been really hard to go build apps for cars. Every brand uses its own fragmented systems. And at Smartcar, we've built a platform that lets a lot of innovative mobility companies build apps for cars using a single integration.

AKIKO FUJITA: John, you're obviously backing Smartcar, but you've made a lot of investments in the climate space overall. I know we're not talking just about EVs here, but talk to me about what's appealing to you about this company and how you think this moves the ball forward in this transition.

JOHN TOUGH: Sure. Yeah, great question. At Energize, we invest in digital solutions that accelerate the energy and sustainable transition. We firmly believe that mobility and software are colliding. And that's creating an opportunity for more climate-forward solutions.

At Energize, we do believe specifically that Smartcar can help connect new stakeholders in the climate movement. First and foremost, we believe that utilities, energy providers, firms that are looking to better manage how electrification of mobility will impact the grid and reduce strain-- and we believe that Smartcar can help bridge those two parties by connecting new applications to utilities.

BRAD SMITH: Sahas, would love to know what type of data and access to that data that both the services side and the driver's side is able to take away from these solutions.

SAHAS KATTA: Yeah, absolutely. So Smartcar's starting point, it's a very customer-focused company. We're driven by product-driven growth. There are now over 100 million compatible cars on our platform across North America and Europe. And one of the exciting things about what we're doing is that we're enabling consumers to, for the very first time, have access to their own vehicle data and have a choice of the type of apps that they want to use with their vehicle.

And when we kind of look forward at what people are doing with this, we're seeing consumers connect all sorts of really exciting applications to their car for the very first time-- whether it could be something like an energy utility company, an application that helps you charge your car at the right time of day to save money on charging your vehicle, or an app that gets you insurance that lets you pay by the mile rather than judging you based on an irrelevant factor like your credit score, or even an application that lets you rent out your spare car to make an extra buck on the vehicle that would normally be sitting parked in your driveway. These types of applications are creating new forms of mobility that we're incredibly excited about.

AKIKO FUJITA: John, we have seen a flood of money pouring in to climate solutions. Just a few days ago, we heard BlackRock's Larry Fink saying the energy transition is the biggest business opportunity of our time. And yet when you look at the breakdown of where those funds are going, it's still very concentrated in EVs, in these mobility solutions that some would argue aren't really what's going to move the needle in a significant way. Why do you think that's the case?

JOHN TOUGH: The data, as Larry Fink pointed out, is overwhelming that there is more capital moving into our space. And at Energize, we're very excited about that. Mobility is such a tangible form of energy. And that makes it more easy for capital to move in the space.

But there is no one silver bullet to address climate change. And so generally, the position for us, and I know for Smartcar, is that anything we can do to help accelerate the transition to more sustainable opportunities, whether it's mobility or other areas, is a win for the economy.

BRAD SMITH: And, Sahas, just coming back to you very quickly here as well, the 22 different vehicle models and makes in 31 countries, you know, what are the next steps in kind of ramping up as, you know, the roadmap for many of the kind of behemoth automakers and manufacturers out there-- as they're getting closer towards realizing real scale for their production of electric vehicles?

SAHAS KATTA: Absolutely. One of the nice things about Smartcar is that we're really agnostic across brands. And part of the reason we raised our capital for our series B and announced it recently is because the adoption of our platform across all our customers has really been rapidly growing. And there's been increasing demand from new markets that we've been entering like Europe as well.

So we're really deploying our capital on two different fronts. First, we're really scaling our engineering organization to advance the product. And second, we're investing heavily in sales, marketing, and success to really accelerate our go-to-market efforts. And we just want to get to that point in the coming years where consumers who now have an expectation that they can really use the app that they love with their car do have a huge ecosystem that they can choose from, and really achieving this by putting really friendly API documentation, SDK, and tools in the hands of developers to let these folks go build really amazing products and services.

AKIKO FUJITA: And finally, John, we were talking in the last hour about the sheer amount of money that is going towards these early, you know, seed rounds. There's a lot of VCs out there who have a lot of cash on hand, in part because they were able to cash in from those big IPOs last year. And yet our reporter was saying that there's new data out there that points to VCs just spending two minutes on a pitch deck before signing off on that check. What are you seeing? And does that make you a little uneasy considering what we have seen in the past?

JOHN TOUGH: You know, history tends to repeat itself. I would say that the amount of capital that goes into renewables and sustainability is still only a fraction of what it deserves, the space deserves. Newer investors are coming to the space. There are a tremendous number of generalists who are now trying to figure out how to invest in this theme of climate tech.

We believe that there are great long-term investors for hardware and technical risk out there. But generally, the best returns will happen in digital solutions and capital-light business models, just like Smartcar, that can help enable this transition. And that's where we believe great returns will happen.

BRAD SMITH: Great to have you both here with us today. Certainly appreciate the time, and congratulations on this movement on the investment front. And we've got to check back in in the future as well to see how this continues to scale up. That, once again, is John Tough, Energize Ventures Managing Partner, as well Sahas Katta, who is the Smartcar.com CEO.