The EV company that many consider the Tesla of truck makers is poised to go public worth upward of $70 billion, no small feat for a startup whose vehicles are just hitting the market this year.
But the financial success story behind Rivian’s gambit is emblematic of a much larger shift that could make waves in the private markets for many years to come.
In some ways, Rivian may seem an unlikely candidate for the next tech sensation to wow Wall Street.
The big money backing the EV industry’s hottest IPO in years didn’t come from Silicon Valley’s usual cast of mainstream VC characters. Rather, Rivian raised capital through a mix of strategic and financial investors from the old economy and the new that at first glance may seem strange bedfellows: Corporates with ties to the legacy automotive industry co-investing alongside the most powerful ecommerce mogul in the world.
And yet, this kind of grouping of investors is now common on cap tables of startups in autonomous driving, micromobility and last-mile delivery in addition to the red-hot EV ecosystem. Of the roughly $75 billion in VC-backed global mobility deals this year, the majority had participation from corporate venture capital (mainly from the auto sector), according to PitchBook data.
When Rivian goes public, the 14.4% stake owned by Ford Motor Co. will be worth almost $7.6 billion if the deal lands at the upper end of the estimated IPO price range. Shares owned by Manheim, a unit of auto marketplace Cox Enterprises, will be worth over $2.9 billion. And there’s the 15.7% stake held by Saudi Arabia’s Abdul Latif Jameel, which in its early years was a Middle Eastern distributor for Toyota and has since diversified its holdings into areas like financial services, energy and healthcare.
Now these backers all stand to make huge fortunes on paper with Rivian. They’re involved not just for financial returns but because they’re all auto industry veterans strategically trying to cement their position in the industry of the future.
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Just a few years ago, venture-backed tech IPOs were in a deep freeze as mature, Silicon Valley-funded unicorn powerhouses like Uber and Airbnb spurned the public market, instead favoring the vast pools of capital they could tap in the private market.
But today it’s a mixed bag, at least in the mobility sector. Over the past year, a flurry of not-so-mature EV and other mobility startups have made a quick dash to Wall Street before making any revenue, relying on an unorthodox path via SPAC deals. And they’ve performed poorly overall. The latest evidence is PitchBook’s EV/Mobility SPAC Price Change Index, which tumbled over 20% in the third quarter.
And yet investors are piling into mobility deals at record levels, especially in the EV segment.
When mobility startups weigh their later-stage options to finance their growth in this environment, it’s going to be compelling for many of them to stay private longer as the likes of Uber did before them, said Asad Hussain, a senior PitchBook analyst who covers the sector.
This year, investors have been lining up mega-rounds at a blistering pace to fund the capital-intensive mobility market. And many of the deals are being led by automotive and energy incumbents like GM, Toyota, BP and Shell—corporate titans that are rushing to catch up in the net-zero race to decarbonize planet Earth. It’s a top theme of the COP26 climate talks that got underway in Glasgow this past week.
In September, China’s Momenta, an automotive-focused AI specialist backed by both GM and Toyota, announced a $400 million round led by the former. Just on Thursday, Momenta revealed that yet another $200 million has been added to the round—the company has now raised a total of $1.25 billion to date, according to PitchBook data.
Of course, the mobility bonanza has also won over another batch of non-VC titans that includes Tiger Global, which this week led a $600 million investment in delivery-robotics maker Nuro. And Rivian’s second-biggest institutional shareholder is T. Rowe Price.
The deal-making race has resulted in notable setbacks, like GM’s partnership with Nikola, whose stock is trading below its market debut price of over a year ago.
The EV truck maker has been troubled ever since short-sellers (and later federal regulators) accused the company of making false claims, and GM decided to shelve plans to make a new investment in the company. This week Nikola disclosed it’s in talks with the SEC to settle fraud allegations for up to $125 million.
Top carbon-heavy companies from around the world are providing much of the capital for new firms that have cropped up in the past couple of years to specialize in mobility deals. Silicon Valley’s Autotech Ventures is backed by the pension of auto-parts maker BorgWarner and Japan’s Bridgestone, according to PitchBook data. Israel’s Maniv Mobility raised a $100 million fund in 2019 with help of corporates including BMW, Lear, Hyundai and Shell, which this week restocked its CVC arm with $1.4 billion.
Specialization is shaking up the long-staid VC industry, as a wider variety of firms dedicated to mobility-type strategies raise large war chests to compete.
Make no mistake, the dream of a net-zero future is sending shock waves throughout the private market as investors and corporations alike race to position themselves to win in tomorrow’s new economic order.
Featured image courtesy of Rivian
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