Mobility Innovators

Sebastien Bihari [00:00:00]:

The micro mobility space, for us, it’s an important one, and we strongly believe it’s here to stay. It plays an incredibly important role to, for example, reduce congestion and CO2 in cities such a no-brainer. It also helps democratize transport in the city, gives you much more flexible options. But I think there’s a couple of challenges the industry is going through rough phase at the moment. As you correctly said, economics is one. Secondly is regulation and also safety. And I think for operators, all modes of transportation, I think will remain important as long as they can fund it. Even if it, as long as it’s not loss making, they’ll keep it because it gives them extra modes in the system. And for a passenger, so to say, a another reason not to use his or her own car.

Jaspal Singh [00:01:16]:

Welcome to the Mobility Innovators Podcast.

Jaspal Singh [00:01:22]:

Hello everyone. Welcome to another episode of Mobility Innovators Podcast. I’m your host, Jaspal Singh. Mobility Innovators Podcast invites key innovators in the transportation and logistics sector to share their experience and future forecast. In this episode, we’ll be discussing the VC perspective on mobility sector and slowdown in the funding activity.

I’ll be speaking with an amazing investor who not only has acumen of financial market, but also quite well versed in the mobility and automobile space. He’s the General Partner of Vector Partners. The fund has reached a first close of Euro 50 million and looking to raise Euro 125 million in total the fund, invest in early stages startup in the mobility technology sector, focusing on software, AI, Machine Learning, and data-driven business model.

Prior to launching the fund, he was a managing director and head of automotive investment banking in MENA Region with BNP Paribas. He’s a global citizen and live and work in many countries.

I’m so happy to welcome Sebastian Bihari, General Partner of Vector Partners. It’s now time to listen and learn.

Hello, Sebastian. Thank you so much for joining us on the show. I’m really looking forward to our conversation today.

Sebastien Bihari [00:02:39]:

Hey, thanks for having me.

Jaspal Singh [00:02:42]:

Great. I, so today I’ll be spending time getting to know more about you, your professional journey, and your thought on innovation and technology trend in the mobility sector.

But to start with, I would like you to share some fun fact with our listener, or are there any interesting fact about your career that are not on Linkedin, it’s quite rich, but probably something you’re hiding from others?

Sebastien Bihari [00:03:06]:

Yeah. Hiding, definitely lots of closets. Lots of skeletons in the closet, like everybody. No, I think I’ve obviously spent a lot of time in business and finance but there’s, there’s certainly a couple of items that, that maybe don’t come through in my CV immediately.

For example, I lived in New Orleans for a year during my undergrad year. Amazing place. Although I try to avoid it in the summer. It’s a little bit too sleepy for me.

Sebastien Bihari [00:03:38]:

But you may recognize any way that I’ve lived in a couple of places, so my accent in English is probably a mix between, you know New York, London, the south in the us. I can’t being a southerner, but at least I’m familiar with this slang a little bit. But so that’s definitely one thing that didn’t come through my CV.

Second maybe is that I’ve been quite a techy from the early days. Born in 1979, so seventies kids which means I had the privilege to still start working with an IBM PS-2, you know, black and white queen 16 megahertz, squeezing the last bit out of the machine. Did quite some coding back then, the classic Pascal a little bit ventured into assembler, but sort of dropped it. I was just on the, on the, on the cusp and, you know, object-oriented languages came about and I immediately moved to that.

Did websites also for companies. That was during the times when you still had to code HTML yourself, you know, and fool around with, with C++ and PhP. So I think that that makes me a little bit of a hidden tech nut. Explained some of the things that I do these days. And also what I’ve done in my past is I used to be a bit of a press photographer.

Jaspal Singh [00:05:16]:

Okay.

Sebastien Bihari [00:05:18]:

Not in a big way, but stuff that made it international magazines, and newspapers. My dad was a hobby photographer, so we had the equipment and the lab at home, and I sort of fell into it in my late teens. And, but it got me to interesting places. I remember I was in, sorry, just after the end of the war. So you, there’s a couple of things I think I’ve done that are not very business and finance like but that, that’s still part of me

Jaspal Singh [00:05:49]:

Not quite interesting. And now I can see how the creativity and technology things coming to your mind, because that’s actually, I want to learn more because you did your University of Innsbruck in International Economics & Business Studies and later MBA from Columbia Business School. Mostly your career was in private equity, and finance space. You were head of BNP Paribas as the Managing Director and Head of Automotive Investment Banking.

I’m very curious to learn why you decided to become a Venture Capitalist, because you were doing great in your career. You were working with one of the top company, and why did you focus on mobility and transportation? Because that’s very niche area, and not many people find it very sexy or find it very innovative, so what make you to move into that area?

Sebastien Bihari [00:06:38]:

Yeah, good point. Good point. I think it’s I agree. It looks a little bit strange from the outside but’s less so actually when you understand the trajectory a little bit better. First, I sort of pivoted into mobility already quite a while ago in the, like in 2000s, back then still working on deals. But like car makers, suppliers Germany, the US, you know, the good old bread and butter business components and vehicles back then still, you know before I did my MBA, still part of the team that sold Chrysler to Fiat. So, yeah. I’ve gone full circle with this industry. I’ve been there when it was still, you know, restructuring cyclical asset heavy. I’ve been with this industry more or less since then. And two of my things, two of my hobbies came together during that time. The one was my interest and passion for cars and vehicles and transportation, and the other one was tech, right? So it was sort of a starting Vector was a natural evolution following that. And the second there is probably that I think the transitioning from banking to VC is much more natural than people think. It’s actually, most people actually have no clue what a banker actually does.

Jaspal Singh [00:08:11]:

I think that

Sebastien Bihari [00:08:14]:

Cause banking is a very wide, wild, wide fee. But if you’re investment banking in M&A and particularly in sector teams also if you work in private equity, which is probably I’d say in the middle between VC and banking we literally spent decades doing pretty much exactly what we do on a daily basis right now. So we’ve worked with management teams, helped them grow their business, that’s a board meeting, whether that’s you know, strategy sessions and so forth, raising capital, scrutinizing and thinking through business plans like doing them yourself. The financials making investments, selling businesses. Right. IPOing them and due diligence in them. So ironically, I think most successful private market founders have come from banking. There must be a reason for that.

Sebastien Bihari [00:09:16]:

It’s a good school and sometimes it makes me a little bit stunned about the cowboy approach in venture capital. I think this is something I see changing over the next decade. Time will tell, but when I draw parallels from how private equity has evolved over the last 10-20 years, there’s people should look at that, and it’s not far-fetched to believe that, that it’s going to go the same direction. It’s going to institutionalize, it’s going to professionalize much more. And I think you know, throwing 300 million into, into FTX is not going to happen that easily anymore.

Jaspal Singh [00:10:06]:

That’s a biggest story of 2022. But I think you’re right. What you are bringing is that experience from Private Equity or coming from banking when you scrutinize deal in a way, look at the profitability, look at the dividend, not just carried away by the hype and innovation and all, but you also look the underlying business it’s like.

Sebastien Bihari [00:10:30]:

There’s a ton of processing involved, and PowerPoint and calls and you name it. But, but you run the entire thing one way or another. Right. depending on your role and how you’re involved. And, ultimately you don’t get many, you don’t get very far if you don’t understand it. And there’s not many founders. Out there in startups who really understand P&L below the top line. Right. So helps.

Jaspal Singh [00:11:03]:

It’s very true. And, I think bringing investor, like, you actually bring a lot of value for them because you are the one who can advise them on those things. And because the founder is sometime only having knowledge about the technology and product, so they don’t know about how the business work, how the cash flow work.

Sebastien Bihari [00:11:23]:

Yeah. I think, yeah, startup team needs to perform on so many different dimensions, right? Yeah. And sometimes it’s the founder who is let’s call them a business polyglot, right? For lack of other words, or it’s, it’s a highly complementary team. But equally, I think you know, as a financer for such a business, you add value on various dimensions, right? And the more dimensions you can tick, the better, obviously, right?

Jaspal Singh [00:11:58]:

Yeah.

Jaspal Singh [00:11:59]:

No, great. Thanks for that. And, I think that’s why the Vector fund is focusing on this sector because of your experience and knowledge, and you did your first close off the fund, which is EUR 50 million, quite remarkable being a first fund it’s a quite big size this year, and you’re looking to raise ERU 125 million. Just want to understand what is your investment thesis? What is your geographic focus, and what is check size usually, right? And what is your investment strategy? Like, how do you evaluate these company? How do you make bet on these ventures?

Sebastien Bihari [00:12:36]:

Yeah, I mean, I’d say we are typical classical series A fund.

Jaspal Singh [00:12:42]:

Okay.

Sebastien Bihari [00:12:45]:

Here and there, I think we consider opportunities starting at Seed stage or even at Series-B. But that’s more the exception. I think we’re typical Series-A which means that we don’t like many other funds, for example, deploy, let’s say 30% of their capital on seed stage and keep 70% for follow-ons, we’re different than that. We, without, with us it’s a bit 50-50 initial deployment at Series-A and 50-50% for Follow-ons. So, a much more classic structure. And I think the focus on Series-A has two, two drivers. Number one is that we believe we can add most value as of the Series-A. We are sector focused fund, which means we leverage our knowledge of the sector, our network in a sector, our ability to hopefully help these companies commercialize and make the right strategic decisions on that growth, whatever it, it might be.

Sebastien Bihari [00:14:06]:

And the second is that we, I feel in our sector, we are less pressured to start early to get a good, you know, seat at the table at a good deal. It’s slightly less crowded than in the Generalist B2C space. Right? you need more understanding of the sector. A large generalist fund will not regularly go to its investment committee as the lead sole investor for an autonomous technology deal, right? Yeah. that is a cyclical phenomenon. We’ve seen that it’s a less beaten path. And again, that doesn’t force us to go in as early as possible and maybe go beyond where we think we are suited, most suited for, right?

Jaspal Singh [00:15:01]:

Yeah.

Sebastien Bihari [00:15:03]:

Other than that, we’re, I mean, we are sector focused, right? We focus only on mobility technology. Many people regarding this, although people just still don’t get it. I mean, mobility, transportation is like 10 to 15% of GDP. It’s bigger than financial services, right? I mean, go figure how many FinTech funds are out there. Mobility is like, what, 5 ½ and 6 right? It’s a beautiful space.

Jaspal Singh [00:15:31]:

Oh, yeah.

Sebastien Bihari [00:15:31]:

I think we’re, I say we are at home in Europe, that’s where headquartered, that’s what our focus is. But we are nevertheless actively investing in the US and in Israel. So we are clearly not just a European fund for two reasons. First, I think narrowing down regional and sector is just dumb. And secondly, we know our sector. We really understand where you need to be to be able to harvest your opportunity, help companies you know, grow, but also exit the businesses. You need to be, at least, for example, these three regions, right? Yeah. China is an amazing and big market. It comes with both hurdles when it comes to the transferability of technology in this space is unfortunately a lot of the topics around AI and Autonomous, it’s you literally have to reinvent the deal locally.

Sebastien Bihari [00:16:36]:

Yeah. And it’s a hard market to assess without having a full team on the ground. And we have a lot of business experience and, and affinity and connections also to Japan. But at the same time, from our experience, we recognize that Japan is a more closed off market with ITSs only system, which is harder to penetrate. And there’s other interesting markets, Southeast Asia, India, which are huge. But where we see the folks at the moment more in the B2C space rather than on like real deep protect topics. So it has a reason we focus on this trying Europe, Us, Israel, which is our home turf, so to say.

Jaspal Singh [00:17:27]:

All three are great market. I was in Israel a couple of week back, and it’s great to see the innovation ecosystem there. Even the transportation, like the local transportation is not world class. But at the same time, the technology wise, a lot of the thing they’re doing, it’s quite unique. And they are building global companies based on Tel Aviv. Yeah. So it’s great.

So Your headquarters in Europe, and you’re working quite closely in Europe. And one thing we have saw in last one decade that Europe innovation ecosystem or startup ecosystem had start emerging. It was not there earlier. So 10 years back, if you talk about startup, you never think Europe as a place to start a company. But in last 10 years, I think there are a lot of startups has come up, and also we saw a lot of mobility, tech startup, which has come from Europe, and they are actually now becoming global and going out and expanding. What are you seeing? Like these many European startup which are launching product in the US. So what is your view about how this startup ecosystem is emerging in Europe, and how you think in next 10 years look like in this space?

Sebastien Bihari [00:18:36]:

Yeah, that’s a good question. It’s completely true what you said. It has really come a long way. But equally, it still has a very long way to go. I think that’s the honest truth. And the gap to the US is still massive. I’d say there’s a strong, strong gap to Israel in terms of, for example, the quality of, yeah. Not the startups. There’s a, there’s various dimensions on which a startup needs to perform. And it, many of them, I think on average, they’re still behind on that, on that global competition. In Europe, we see actually several hubs that are sort of important to us. You, you, you start recognizing certain clusters once you look at your pipeline, where stuff comes from and where peoples congregate around certain themes. So for example, Germany and the UK for instance, we see a lot of stuff around computer vision, AI, Machine Learning more the autonomous stuff, software defined next generation hardware that comes more from the US.

Sebastien Bihari [00:19:53]:

And Israel is a powerhouse when it comes to electronics and communication technology. So you in the Autotech space, you really need to play all three, right? You can’t lock yourself out of one out of these markets. And sometimes cross fertilization is equally important. We also see obviously opportunities coming out of, for example, southern Europe, like Spain or France, really southern Europe, but it’s Scandinavia. But I think that’s comparatively less, and I think except for France and the Scandinavia region, also less techno technology heavy. So Southern Europe is more B2C focused compared to what we see in other markets in Europe. So look I think in terms of launching into the US, that’s a true observation. Many of the European startups do consider that our perspective.

Sebastien Bihari [00:21:10]:

We actually only look at businesses that can scale across the pond one direction or another. So we really ignore businesses that are regionally constrained. If it’s not scalable for really a, call it a global application, forget it. It’s, I don’t want to say it’s too small enough, but it’s not right for us. and that’s why by definition we see a lot of startups that have the ambition and the capability to scale into the US and technology, they do it comparatively less aggressive than an Israeli company would scale. But you have this funny difference, right? In the US, they think about scaling it to your rather late because their whole market is so big, right? Yeah. the Israelis need to scale immediately because the whole is so small.  right?

Jaspal Singh [00:22:09]:

They have to.

Sebastien Bihari [00:22:09]:

And, in Europe it’s the middle thing where they focus first on their home country, which is sort of a midway between going for the continent. They not, right? So it’s a funny landscape.

Jaspal Singh [00:22:25]:

That’s a very good observation. And that’s what when I met a lot of these founders in Israel, the market is so small and sometimes there is no demand for their product in the local market.

Sebastien Bihari [00:22:36]:

No industry, there’s no Israeli car maker, right? So I think, and plus there’s such a deep connection, for example, between Israel and the US there’s such good business relationships that often the first commercial push goes actually into the US rather than to Europe. Which is also very natural,

 

Jaspal Singh [00:23:01]:

Which is, I agree with you. And that’s what I saw. Like there are a lot of these cybersecurity companies are now coming up in mobility sector, and their first push is toward the US because that’s a market they see. And then they will eventually expand other way, but first pushes. So, great. Thanks for sharing. I think that’s a very good perspective and in Europe, yeah. Germany is becoming like a powerhouse. I seen many of the cities, and the Berlin is emerging as a global tech startup hub now because of people are speaking many languages and there is no more constraint of language. So that’s also help. I think in Europe, that’s also a problem. Like in Canada, you see a lot of company want to go to France because of the language similarity.

Jaspal Singh [00:23:42]:

So there’s French speaking companies. So they look for that. Thanks for sharing Sebastian, now you must be meeting hundreds of industry experts, founder and ecosystem person. I see you love to talk to people and learn and exchange you know, about the future of mobility, how things are changing, how things will be in future. So I want to understand, what is your prediction for 2035, how the mobility sector will change in next 12-13 years, and how do you see the use of AI and technology will transform mobility? Because like you mentioned, mobility is a big sector. It’s contribute like 10 to 15% of GDP. A lot of people don’t realize because they don’t see it upfront, but everything is moved because of mobility. So how you think AI and technology will really redefine everything what we are seeing today?

Sebastien Bihari [00:24:32]:

Yeah, I think people often don’t see it because they cut it differently, right? They just look at SaaS right now. Then you have some funds to just focus on SaaS. Regardless to what industry is it. It’s in, right. There’s a long debate about, you know, can, what’s more sensible for being focused topically say, on AI or on the end market. We focus very strongly on an end market, because ultimately we think the priority needs to be on a particular product and a commercialization thereof, right? Understanding the product only gets you that far, right? So that’s why we’re very focused on end market competence. I think both AI and technology will obviously play a huge role in the transformation of mobility, transportation as a whole. You know, team of McKinsey summarized it very nicely once is, there’s a couple of trends coming together. Or forces coming together which is changing behavior by consumers, which is regulation and technology that overall shaped the shaped the landscape. For us, technology is changing mobility at its core. Everybody now know, knows that electrification slash energy transition is coming. Okay? That’s called it an old topic that please not debate this anymore, right?

Sebastien Bihari [00:26:14]:

Be the next tier one push for the next generation diesel. I’m like, under which stone have you been sleeping? Right? It’s just embarrassing. Digitalization and connectivity I think are going to be catalysts for a very large chunk of the opportunity over the next two or four decades. And AI will play a massive role, but obviously it, I’m not saying it comes after connectivity, but connectivity and digitalization create the data. AI can work with, right? So it, it comes in tandem, right? Yeah. now what, what does it all mean in the end? I think we think two major things will change for over the next 10 years. The one is that the, the economics of mobility will change, right? and I’ll give you an example. Think of predictive maintenance, right? This is something that connectivity, digitalization, meaning the availability of data in a vehicle and AI, the tool to analyze that data, will allow you to identify issues before they arise, right?

 

Sebastien Bihari [00:27:39]:

And think you’re a truck driver, right? You’re on the road. Yellow lights, not good, right? What does it mean? It means two-day outage. Order parts repair, not good, right? Or you’re a cab driver, right? Cab drivers or Uber drivers they depends on the country in the region. They pay high insurance for situations where they need to be insured against vehicle outage, right? Because not having a car for one day is one day less earnings, right? Name it. So predictive maintenance means you’re transforming an unplanned two-day outage into a two-hour pit stop, right? The system tells you, with high probability this is going to be the issue, or likely the issue with a high probability. It’s integrated in the value chain, meaning it knows where you’re driving it.

Sebastien Bihari [00:28:47]:

it gives you options on where you can have these problems fixed on your route. And it can pre-order or pre pre-order the parts, right? And now think the economics of a truck dollar, right? Two days outage versus like two hour pit stop, right? You can do the math, right? So it’s a good example how what’s really changing the mobility under the hood will have a huge economic impact that we’re talking big markets here. But equally asset utilization, right? I mean, you can look at cars as sort of almost some of the most expensive consumer goods, like $20K, $50k, $100k with a utilization rate of 4-5%. It’s embarrassing. It’s actually always just standing around right now, the car ownership stop. Now it’s blocks, right?

Sebastien Bihari [00:29:45]:

It’s not going to happen. Will it change? The mix will definitely change, right? But here, technology obviously will play a big part, right? With more and more automation over the next 15 years, you can drive utilization up of vehicles, right? And the other thing is obviously, which is for us at the moment a little bit, the holy grail, because this is what the industry has completely bunked and missed so far, is software upgradeability of vehicles. A vehicle you buy is just technologically locked in literally two years before you bought it, right? I mean, you know, cell phones, right? Yeah. How old are you? Smartphone, like 10-15 years, right? Are you going to buy for a $100k a car? You’ve, that’s 3-4 years old. No way. Right? So this is changing a lot, and I think this is where tech immobility will play a huge role in changing how assets are being utilized and how they’re being protected from the technological ops obsoleted, right? It’s pretty straightforward. And a lot of the topics we look at actually deal with these things.

Jaspal Singh [00:31:11]:

Very interesting. You know, I really loved your answer because here you are not making prediction about the fancy technology. Like you said, you don’t focus on product, you focus on the end use and end-users economics and utilization.

Sebastien Bihari [00:31:26]:

There needs for us, when we look at businesses, there needs to be a real economic value creation. There needs to be a real case in terms of why will people want to use this, right? Does it make somebody’s life better? And not just feel good, but is he or she willing to pay something for it?

Jaspal Singh [00:31:49]:

That’s why I loved your answer because that’s what a lot of people miss because they bet on technology, but they forgot about the use-case or economics. I mean, technology can be good, but if it’s costing you hundreds of dollars, nobody will use it. So it, unfortunately, it has come to economics and utilization.

Sebastien Bihari [00:32:08]:

It sounds easier than it is. It goes back to the old problem, right? Or the old sort of imperative. Are you solving a concrete problem or are you having a technology and you, and looking for an application

Jaspal Singh [00:32:22]:

Right

Sebastien Bihari [00:32:23]:

Now, neither can be wrong to be frank, right? But for us it’s important. It really solves a problem.

Jaspal Singh [00:32:30]:

That’s great. And in fact, I look at your website and I saw the company you have invested. So right now you have five companies which are published, and probably you are doing more due diligence with other companies. But these five companies, what I found interesting was five companies are actually solving five different problems, like

• Autonomous mobility
• Micro mobility
• Traffic management
• Predictive maintenance, which you just mentioned data analytics.

I would love to, you know, know your perspective. Why did you invest in this company? Because I think, like you mentioned, you didn’t invest in the company, you invest in this end use how these underlying technology will change the thing. So you talk about the self-driving vehicle, Roboto taxi, how it’ll change. Now, cruise and Waymo, they are deploying Robo Taxis everywhere now in US. They’re getting permission.

Jaspal Singh [00:33:20]:

They looking to expand from California, Texas going to different places. What is your prediction for 2025? Like, will we see mass deployment of Robo Taxis, or you feel we still, you know, see pilots going on and, and it’ll be like that?

And just one question I want to add, because you invested in a startup, which is building a LIDAR based system, like an advanced LIDAR based system. But there are some companies which are actually doing this vision based sensing approach especially Tesla and Toyota. They are doing the vision based. I saw couple of companies in Israel, which are using this image-based approach rather than Lidar based approach. Which technology you feel is better Lidar or Image? I mean, I know you, there may be some personal bias because invested in a startup, but why you, what do you feel about this Image based sensing approach?

Sebastien Bihari [00:34:17]:

Okay, coming to your first question, Autonomous 2025, interesting topic. I think my base observation is that the press there has gone sort of full circle first from completely uselessly hyping it, meaning in 2022, everybody’s going to have an autonomous car. That’s how it sounded. And now treating is treating it as if it would never happen, right? Obvious truth is always somewhere in the middle. I think people who’ve been in this industry knew two things. First, the last mile is super hard, right? Like with everything in life, right? It’s running the last two miles on the marathon. Good luck,

Sebastien Bihari [00:35:07]:

It’s the same there. And that’s particularly painful because it’s like 180 mile marathon, right? And you’re running the last two, you’re like, man, I really can’t anymore. But that’s how it is, because that’s how hard it’s and the second thing that I think people in industry knew all along that cost is a topic, which means that both from an application point of view and from an investment point of view it was pretty clear that commercial applications are the way to go, right? Yeah. So all this, you know, the talk about end user autonomous vehicle technology availability in the short term was, was, was way too hype at the, at the same time. And I think clearly way more, for example, they know there’s still quite some challenges ahead, but at the same time, they’re way further than people think, right?

Sebastien Bihari [00:36:20]:

And they’re in the process of, they have their strategic rollout plan. I think the last license in San Francisco is outstanding, but next year I expect them to start rolling out in two way more cities than people expect, right? Hmm. So you will see over the next years step-by-step commercial deployment of these things. What, where you will also see autonomous systems in place, increasingly is in geofenced areas, right? classic you know harbor side vehicles, stuff like that, right? Construction is a different it’s a different place because that’s, I’d say slightly technologically a different ballgame. but you will see some deployment over the next 2-3 years. I’m confident in that. In terms of lidar I’m obviously biased, but I look at this, I look at this quite cynically.

Sebastien Bihari [00:37:38]:

I think the ambition must be to build an AV stack and, and ascending capability that’s better than a human, right? Otherwise, why the hell do it, right? To be frank, a human will always be cheaper than AV stack, right? So if it’s not better, and I’m not just talking being able to drive 24 hours, but to see more than a human, then why do it now with a camera? You, a camera can see much more than a human, I can see. But at the same time, it would be illogical for me to assume that I’m not using other sensors that are available to achieve that goal. So that there’s a lot, there’s a little bit of an illogical element in this, in this view. It’s most, it’s mostly pushed for selfish reasons, saying, oh, it’s vision only.

Sebastien Bihari [00:38:37]:

And often it’s a bomb cost problem, right? It’s but that goes a little bit back to how car makers are pricing their vehicles, right? In the past, the world worked as follows. You buy a vehicle and say it’s $40K, you easily add on another $10-15k on extra equipment, right? Which means that ultimately then the volume on the extra equipment was comparatively low, right? Yeah. So, with software upgraded vehicles, the mindset needs to shift. You need to push out as much as possible uniform hardware, and can then on a software basis upgrade or unlock features, which is pretty much Tesla’s way ahead of the industry. And that changes the economics a bit. And that will allow you to, let’s say, put more hardware out. Then, you see at the moment the OEMs are not using Lidars cause they’re bad or they’re not there.

Sebastien Bihari [00:39:41]:

It’s because I could go on for this, but don’t quote. There’s lots of other reasons there. And the second thing, there is for the foreseeable future, safety remains a large concern from regulators, from consumers, right? And you saw that Tesla had to pedal back and put back, you know, radar sensor or ultrasound sensor, I forgot, but it was back into the sensor stack. Why? Because there’s only so much you can do a lot with vision in terms of death measurement, right? But there is a limit to that, right? And you know, kicking a radar or an ultrasound sensor out of the vehicle is dumb, because yeah, it makes it less complex. I get that. And sense of fusion is tricky and so forth, but the component itself is probably dirt cheap, right? Lidar, that’s expensive. So not taking a Lidar on board for pro-cross readers, I get that. But find another way to make use of it, right? Because all these sensors are made for very different purposes, right? A LIDAR sensor can detect like a flat tire lying on the highway, 200 meters ahead while you’re going high speed on the highway. No other sensor can really do that, right? So think about all the, the goodies they give you, and then it’s a balancing question of cost and functions, right?

Jaspal Singh [00:41:26]:

I think you’re right and that’s what some other guests mentioned. It’s a tradeoff between the cost and the, so do you need too much high accuracy? You need to pay more money. So probably in some vehicle you need more accuracy, and in some area, or some places, you don’t need that accuracy, so you use exactly. So I think both technology will survive, but I think also we will see more innovation in the LIDAR space. So probably the cost will come down in future, and then we will see more mass deployment. Do you feel that as well?

Sebastien Bihari [00:41:57]:

Absolutely. I think FMCW Frequency Modulated Continuous Wave radar is the not obvious, but that’s a sort of a next gen product, right? Tricky thing there is for FMCW for many of those you need lasers, for example, that are not yet available in industrial scale manufacturing. So even if you have the technology where you take the laser from, or the lenses degrade or the temperature, so we obviously in the background see a lot in terms of the b sample results from the OEMs when they test the lidars. And an FMCW hasn’t impressed us yet in terms of the sample results, but I can’t speak for the anti-industry. There’s a lot more happening. And behind the scenes, it feels like it’s the next thing, right? It’s not entirely there yet.

Jaspal Singh [00:43:02]:

So, we’ll see more innovation.

Sebastien Bihari [00:43:04]:

But with that, from here, you can go much cheaper.

Jaspal Singh [00:43:08]:

Much cheaper.

Jaspal Singh [00:43:10]:

Thanks for sharing that perspective. Now, the other company you invested is in working in a micro-mobility space and micro mobility, I would say it’s emerging as a good option. It’s like 4-5 years old industry. Not long ago. I was in Tel Aviv, and the use of this e-bike and e-scooters was crazy because everywhere you see those vehicles. Recently NACTO published a report that about half a billion trip in US has been taken place on Bikeshare. Micro-mobility system in last 20 years, or sorry, last 12 years. But micro mobility startups are not feeling the same way. I mean, we read some news about the cash flow issue, the low profitability, the vehicle life cycle. So there are a lot of push, and also the cities are pushing more and more regulation because they want to restrict the number of vehicle in the city and all.

What are your views on micromobility and how do you feel the sector will evolve in next few years? Because earlier the VCs were pushing money in the sector, and they were feeling micromobility will take over. Like it’ll be taking over the Uber and Uber will be gone, and the micro mobility will survive. But now we have a different reality. So how do you see this sector now?

Sebastien Bihari [00:44:35]:

Yeah, no, look, the micro mobility space for us, it’s an important one, and we strongly believe it’s here to stay. It plays an in incredibly important role to, for example, reduce congestion and CO2 in cities such a no-brainer. It also helps democratize transport in a city, gives you much more flexible options. But I think there’s a couple of challenges the industry is going through at the moment, as you correctly said, economics is one. Secondly is regulation and also safety. And I think for operators, all modes of transportation I think will remain important as long as they can fund it, even if it, as long as it’s not loss making, they’ll keep it because it gives them extra nodes in the system and for a passenger, so to say, a another reason not to use his or her own car, right?

Sebastien Bihari [00:45:50]:

And so there’s a strategic importance to it, to both the operators, but also the cities, which is why we think it’ll definitely stay. The cities are the ones we think are actually the most strong, the most strongly pushing for change coming from the regulatory side. But that regulatory push, ironically, fosters the adoption of technology that also allows you to become more profitable. Drover, for example, where we invested is a very good example where the city, are just fed up with scooters lying around all over the place right now. It, it’s a little bit unfair to scooters because you could also say, well, cities plastered with cars, right? It’s like, are you kidding me? Right? It’s like 99% of is everything is cars, right? A little bit unfair, but the cities want to use it in an orderly way.

Sebastien Bihari [00:46:55]:

And there is technology available, which is by the way, the one we invested in that allows you to very accurately determine the position of such a scooter. You can’t just do that with GPS. GPS, particularly in cities with lots of high rises or not good enough. There’s lots of different ways of doing this. But Drover our portfolio company does this in combination with computer vision, which means that they just don’t just exactly know where the scooter is, but they also know, they understand the context of where the scooter is, right? What surface am I riding on, right? Is it wet? Is it dry? Is it gravel? Right? Am I on the side on the curb or just off the curb? Right? And so that’s, that’s obviously convenient or helpful to regulators as well as the operators, right?

Sebastien Bihari [00:47:54]:

Because the operators, you don’t have to fish around with your phone and hope it’s compliant parking, right? You know, right. You don’t have to stay a block outside a territory because the GPS going haywire. No, you can literally park right next to it. So it’ll add a lot of comfort for municipalities, but also for operators. Because when you look at the P&L of an operator, there’s still a lot of labor cost involved searching the scooters. It is really sad in terms of how much money they need, you know? And then you look at the map and it says the scooter is here, but it’s actually behind a wall or in a garage around the corner, right? It’s like 40 yards away and you can’t find it, right? Yeah. It cost a lot of time, and that kills, not kills the profitability, but it shoots a nice hole in your P&L right?

 

Sebastien Bihari [00:48:54]:

So the guys from Drover, they knew they were ex-scooter operators, they knew exactly what the P&L problem of the operators is, and develop technology to address that, to make, to help make immobility in cities in a micromobility space, make it profitable, right? So we think there is technologies that really can play a role in changing that. And there’s another reason why I think it’s going to stay around Ola from red, blue. You know, Drovers also pointed it out quite correctly. It’s like, yeah, you know, investing or subsidizing urban mobility is much better money spent than subsidizing car traffic one way or another, right? By fuel subsidy and so forth. The impact on CO2 reduction of behavior management is significantly more sensible, right? So I think micro capability is here to stay. It’s a huge market. But I think the times are over where the operators are swimming in money and can subsidize their operations.

Jaspal Singh [00:50:13]:

So, now they need to tighten up their belt and, and look for innovative way to survive and, and reduce their cost. And I think what you mentioned is actually right.

Sebastien Bihari [00:50:22]:

Absolutely. Avoid fines. Get your P&L in order, sort out insurance safety, you know, find the black sheep in your right off lead, you know, all these things, all the stuff you can do and maybe earn some revenue, because the beauty with their model is you can use the camera for all sorts of other stuff. Capture data on potholes, parking, science, parking spots, whatever. Right? why don’t you tap into new revenue pools? You’re driving around with a data gatherer all the time, use it.

Jaspal Singh [00:50:57]:

Oh, yeah. It’s a data which it can capture the small, the remote part of the city, because generally the scooter goes to the remote part of the city, not only on the, on the main road, but you, they go totally inside the communities and localities. So you can find the data and collect the data from there. No, that’s great. I agree with you. It’ll stay here. It’s only the model will change and like you mentioned, the free money is over, so now the real work will start, like in a ride-hailing sector happen. So no more free money, and they need to be innovative to work.

Sebastien Bihari [00:51:32]:

Yeah, I agree.

Jaspal Singh [00:51:33]:

I agree. Great. Now, you briefly mentioned about this sector, about the preventive maintenance, like how it’ll change the economics. You work in an automotive sector for quite some time, like you mentioned you work with all these automotive company on their business plan strategy, and I must say like automotive sector, like everybody agree with that, is going through a once in a generation transformation change because of this electrification, which you mentioned. It’s given now. Like don’t talk about it. Don’t say that it’ll happen or not. I mean, it’s happening and it’ll happen. And the autonomous vehicle, like you rightly mentioned earlier, media was very bullish and now they’re very negative. But truth is in the middle. One of the thing happening with the technologies, like the lot of data we are collecting from these vehicles, so there was, there was a study done by McKenzie would say that these connected car can create up to 25 gigabyte of data per hour.

Jaspal Singh [00:52:29]:

So can imagine like huge data and all kind of aspect vehicle is driving at what speed, what part is moving, which part is depreciating more or utilizing more.

What are the opportunity, future opportunity you see in the sector, because I’m pretty sure you must be looking for new startup in this area. So what kind of startup you’re looking, given your background in automotive sector and you already invested in preventive health and data analytics startups. So what’s your view, how the space will change in future? So in future, probably the maintenance workshop will change. You don’t need really traditional workshop to book and city. So we will go and like, what are your prediction in this area?

Sebastien Bihari [00:53:16]:

Yeah, no, it’s, that’s a good topic. It’s true the data volumes will increase phenomenally. The core problem at the moment is that the car makers in many cases don’t have access to their data. They can’t even use it. Why? Because it’s a locked box system. Right. Or their system actually does not allow them to aggregate the data and then use it or make it available to let’s say a third party. So this is where Enterprise architecture comes in. This is for us, when you look at the strategies of the car makers over the last one or two years, you will see the term software upgradeability pop up a lot. They’ve finally, at least verbally gotten onto that. Tesla is like 15 years ahead on this. The key issue we still see is that the electronics and electric architecture vehicles is like beyond outdated.

Sebastien Bihari [00:54:24]:

Decentral. It’s a decentralized system with lots of stupid heavy ECUs. And a good example where you can see that is that this semiconductor shortage at the moment. Which restricts car makers from churning out more vehicles. I mean, their volumes around like 15-20%, which is insane, right? It’s partly due to the fact that they can’t get semiconductors. And why, because these semiconductors are so old that nobody wants to produce them anymore. And when they’re telling you all the worry, the semiconductor crisis is over in one or two years, it’s a blatant lie, or it’s complete ignorance of reality, they’re not going to get these anymore. Tesla is way less exposed to that because Tesla has a multi-domain system, right? So they work with a sort of a full brain system, which is a much more centralized architecture.

Sebastien Bihari [00:55:28]:

My car has like 250 different ECUs. The headline alone has seven, right? It’s absolutely ridiculous. So the data volumes you will see at the moment, I feel is a luxury topic because you cannot yet monetize them. You don’t have access to them. So I think the big step that needs to happen is stepping up the EE architecture of vehicles. And that allows you to abstract software, hardware, you know, treat cars as servers up, upgrade them on the go, maintain them on a regular basis. But there’s two challenges. And these challenges are quite big. The one is that the current suppliers of these electronics, let’s call it stuff, are the big tier one suppliers. And they have actually zero incentive to go there because, they can only lose. They can only lose if you go to say a Bosch and say, Hey, look, instead of your 60 ECUs, I’m going to buy like four.

Sebastien Bihari [00:56:35]:

Right? Yeah. You think they’re going to be happy about that and the second thing is that the comic has, in order to really utilize that need to transform from a hardware software driven development process to a software to hardware driven development process. And they’re struggling. It’s hard because you need to change your culture. You need to change the type of software engineers that you, that you need. Changing processes is so hard. And look at Volkswagen, how many employees does Volkswagen have? 600,000-700,000? I forgot what the exact number is. That’s how big the problem is, right? You don’t just make this a software company from day to tomorrow. They are taking some very bold moves in this regard, but it’s very hard. So you taking this together, the obvious data opportunity and what the obstacle is the industry not necessarily because they don’t want to that be mean to say. I think we have to acknowledge it’s very hard. Could they do more? Way more

Sebastien Bihari [00:58:02]:

So what they don’t do right now will make them vulnerable to new entrants. And I think on the electrification side, competition of Asia is coming. I think that’s clear. It remains to be seen; how vulnerable they can be the incumbents on the attack on software upgradeable vehicles. So Tesla, for example, is way ahead of its architecture and is one of the reasons why people buy it, right? Cause they get an upgrade. Even, if it’s senseless, it doesn’t matter. They feel, it’s not something that that’s out updated five years down the road, right? Oh, yeah. So as consumer behavior shifts I think the industry needs to eat it up, like massively.

Jaspal Singh [00:58:56]:

Really

Sebastien Bihari [00:58:57]:

But it’s hard. I fully acknowledge that.

Jaspal Singh [00:59:03]:

I really love your point about this, you know, changing approach to having hardware to software. Basically, right now they have hardware and they’re building software to use that. But actually it should be other way, it should be software.

Sebastien Bihari [00:59:16]:

A good example many OEMs are still organized around component or slash purchasing groups. So there’s an own sort of team that deals with entertainment center stack. There’s a team that deals with suspension. There’s a team that deals with say AK Equipment. You name it, right? One team that, that’s your name. It’s Right. It’s one team That’s the interior that made a ton of sense when the stuff wasn’t that integrated. Yeah. Right Now,

Sebastien Bihari [00:59:51]:

The guy wants to see the real time video feed in his entertainment system, and he wants to do something with it. Right? So you are already talking to do different companies. Right. This is tricky. And you need, we always compare it to spinal surgery in a human being. You don’t do this over the weekend. Right. This is serious surgery but unfortunately it needs to be done.

Jaspal Singh [01:00:25]:

So maybe in future we will have a, a software CEO or a CEO with a software background heading automobile company.

Sebastien Bihari [01:00:32]:

Absolutely. Look at the CTOs of Stellantis who came in from Amazon.

Jaspal Singh [01:00:39]:

So we already seeing the chain. I didn’t know that. Thanks for sharing.

So we already see these changes, like you mentioned, you need to Yeah, absolutely. In the mindset.

Sebastien Bihari [01:00:49]:

Absolutely. But, still we see a lot of CTOs staying around for one or two years and then just throwing the towel and then they move on. Right? And then it’s back to square one. Yeah. The CEOs are not stupid. They know exactly what needs to be done. And then, but it’s a political fight. It’s a resource fight. It’s a designed, it’s tough?

Jaspal Singh [01:01:12]:

It’s tough. It’s not easy. You know, this it’s a hardware driven industry, and suddenly you tell them it make no sense. But, I think in future, like what happened with Nokia, that’s a big lesson for all other companies. Nokia was a giant, but they didn’t upgrade. They didn’t work on the what customer were looking, and they are out.

Sebastien Bihari [01:01:34]:

Yeah. It’s what made Nokia particularly vulnerable was the ticket size of the purchase. Phones were dirt cheap, so they could be replaced very quickly. Now, this is very different with vehicles, right? Vehicles are much more expensive. And also I think what Tesla has shown, what Apple has shown, it’s not so easy to just build a car. All the fun, the funky gimmicks aside, right? To put a car on the road and not just designing it. That has become easier. You, I think you, you could not easily, but you could partner up with like a Magna and, and get a vehicle platform from them, from an essentially from a third party. You do your sales and whatever. There are ways around this. This is not magic anymore. And having an electric power train again, to come up with one or source one is significantly easier than a combustion power train.

Sebastien Bihari [01:02:49]:

So the barriers to entry in this industry have changed a lot, but there’s still a lot around, as we saw with Tesla, just same, physically assembling vehicle is difficult. And getting the parts, you think enterprise versus profit margin, this is your supply chain that’s in there, right? And your manufacturing chain and at the moment, the industry benefits from high practical barriers of entry, but you know, relying on them forever. It’s not smart, right? So look, this is not magic. I’m sure the industry is fully aware of this, but as we said before, it’s tough to change things to

Jaspal Singh [01:03:42]:

Change. Yeah. I mean, and it’s not possible to do overnight. Like it’s not possible. You can change these giants in one year.

Sebastien Bihari [01:03:51]:

But you could be bolder.

Jaspal Singh [01:03:53]:

Oh, you could be.

Sebastien Bihari [01:03:55]:

I always come back to the same comment. It’s like, could you do more? Yeah. A lot more.

Jaspal Singh [01:04:00]:

Yeah. That’s always true. Now, thanks for sharing that. You know, now I really want to touch a little bit about your investment side because that’s what you are doing, you love to do. Because mobility I would say is your first love or second love. But investment is definitely your first love. Like finding companies and investing in that. There are a lot of investment going on and different technology like battery technology, hydrogen fuel cell, and mobility and all. As an investor, which are the technology can innovation you are more bullish about in future because as an investor, you need to be think 10 years ahead rather than what’s happening right now. Because you need to put be on this technology. So what kind of startup you’re looking for when I go out? So, and you see startup and you say like, wow, I want to talk to these guy. I want to meet these guys or these founder, what are those area you are really excited about?

Sebastien Bihari [01:04:57]:

Well, when you mean when you mention powertrain, I have to say, I won’t make tons of friends out there, but I have to admit, we’re not very bullish in hydrogen. Maybe an odd one to hear from a mobility fund, but there’s various reasons for that. It’s as opposed to electric vehicles. We think bear actually really have an infrastructure hurdle. Just trying to get hydrogen. You can charge your Tesla out of your garage power plug from your living room. It’s going to take two days or three days. But you can do it. Right. Go find hydrogen. Right. And, when you look at, there’s a couple of good OEMs studies trade on, you know, Volkswagen trucks has done one that sort of mapped the suitability of different power trains for different use cases.

Sebastien Bihari [01:06:01]:

It’s pretty clear that from today’s perspective for say 80- 85% of use cases, EVs, so battery electric vehicles are more economical and makes more sense. But there’s clearly use cases where hydrogen will play a role, which is you need very strong power such as construction equipment or for very long haul with the route flexibility. So where your, for example, route length is less plannable. But data did a hard analysis and for most use cases, EVs will just do fine. So, yeah. Hydrogen is an important topic. We look at this more as an a general energy transition topic, but there’s lots of investments that need to be made that are not suitable for venture capital. They’re very capital intensive. They’re talking about infrastructure, investments, pipeline storage tanks, you name it. This is not technology, it’s infrastructure. So different checks is different returns. So that’s why we are not looking at this at the moment, really from a technology investment point of view, because the, the commercialization cycle is way too long on this now. Is it important? Yeah, but not for mobility in the next 15 years.

Jaspal Singh [01:07:36]:

Thanks for sharing that perspective. I really, I mean, I agree with you and I disagree with you because hydrogen, I feel they have certain use cases, the heavy use trucks, heavy commercial vehicle and all. But Tesla is proving, again, wrong, they launch the Tesla semi, which is big track, and they deliver, actually they deliver to Pepsi, and they are doing actual route, field route. So, we need to see how the comparison between electric and hydrogen will go. But, I agree with you. Electric will solve a lot of thing, and hydrogen will have use cases to solve. I mean, sometimes I feel funny. A lot of train companies are now implementing hydrogen, and I feel like that already clean, man, you’re using electric, so why you need hydrogen?

Sebastien Bihari [01:08:26]:

Although in the US for example, many trains are still diesel, right? Yeah, that’s true. So but again, whether you put the diesel in the power plant or in a train, right, you can argue now it’s more efficient in the power plant, obviously. But no. So Musk correctly said that the energy efficiency ratio is significantly higher from electrification to compared to combustion engines, which is true. You lose a lot of energy on heat. So for example, the efficiency for, for diesel engine is about 40-42%, and for gasoline engine is about 25ish. So it’s so electrifying makes principally a lot of sense. With hydrogen is more the lead cycle and the capital intensity. At the moment that is not suitable. We think it’s might be much more useful for long-term energy storage. So for example, if you have a lot of renewable energy, such as wind energy, solar energy, you might have that infrastructure installed in a region where there’s a certain better cyclicality that you want or energy from one season to another. Hydrogen is expected to play a role there going forward. So, and again, it’ll be a part of the entire ecosystem. An important one.

Jaspal Singh [01:10:14]:

Yeah. It’ll be, it’ll be an important part that

Sebastien Bihari [01:10:17]:

Will, you know, when people talk to me about autonomous vehicles or electrification, I’m warning them, these things are, you know, often way more strongly deployed already than they think. And on hydrogen, I’m the opposite. I’m like, it’ll come. I have no doubt, but it’ll take more time.

Jaspal Singh [01:10:37]:

I agree with you. Sometime, you know, the people are more bullish about things, which are not true right now, or which will take more time. And sometimes they are not that bullish, which are real.

Sebastien Bihari [01:10:49]:

We don’t know everything. We know that much. And I think it always needs somebody who’s bullish and, pursues something because that’s what drives innovation. So I hope there’s tons of people who are massively polished on age two in the next five years.

Jaspal Singh [01:11:08]:

Oh,

Sebastien Bihari [01:11:08]:

You need that. You need that.

Jaspal Singh [01:11:10]:

Yeah, I agree. Now that’s a great point. You need people who are more bullish about things because then only the innovation happen, because sometime all these idea look stupid till the time you see them in reality, like electric vehicle 10 years back, nobody believed that it’ll happen. And now yeah, whole industry is shifting to our electric vehicle.

Sebastien Bihari [01:11:29]:

Yeah.

Jaspal Singh [01:11:30]:

Now, my next question is, you mentioned that the Vector Partner is a Series-A fund. So you are investing in these early stage startup. I mean, at even Series-A fund, you doesn’t always have a big traction. So most of these companies are either achieving some kind of a product market fit, or they are having little bit of traction, but still, you are not fully sure about how the future look like. So it make a, you know, risky bet. So you need to really evaluate this company properly to make a decision and invest. So my question is like, what do you look, when you invest in these company, do you have any checklist which they need to follow or complete? Or do you have any specific due diligence process? Like some of the VCs say, oh, we look for founders, we look for market, but what’s your checklist or due process?

Sebastien Bihari [01:12:20]:

Hmm.

Jaspal Singh [01:12:21]:

What’s your secret <laugh>?

Sebastien Bihari [01:12:24]:

We are actually quite picky to be frank

Jaspal Singh [01:12:28]:

I can see that.

Sebastien Bihari [01:12:31]:

So we, we, we definitely have, we have a list. We, we, we look at businesses obviously holistically. So just having a great founder, just having a great idea, it’s not enough. And so I feel when somebody says, oh, I just look for the best founder, it’s marketing talk. It’s not enough. A couple of things are really important to us. And every, every fund, every manager has, has a, has obviously a different stack of criteria, but for example, for us, it’s super important that technology is really at the core of the business, right? So you come across lots of opportunities. There’s a clear revenue potential, there’s a clear sort of commercialization idea and a clear market. It’s not, it’s not technology driving. It’s when I’m like, you know not for us, right? Mm-Hmm. <affirmative> maybe better for, for a a a B2C fund you know, a generalist much more suitable for, for, for those kind of guys.

Sebastien Bihari [01:13:46]:

Secondly is scalability, as I said before, is very important for us, right? So we try to stay away from topics that we feel have regional applicability or yeah, or just a development tool. They need to have a purpose by themselves to generate revenue with a broader market, not just a development tool, unless you’re like Adobe, right? It’s different, right? but that’s obviously a different ballgame. But the ability to scale the business across the pond by virtually, by virtue globally is very important for us. It needs to have a cross regional applicability. And, one thing that’s also super important for us is normally the idea needs to be transformative. You can achieve a lot with just incremental change and just taking an idea, putting two things together, it’s all fine.

Sebastien Bihari [01:14:59]:

We try to look at things, for example, like we said, for example, on EE architecture, right? We know how transformative, what a gatekeeper this will be for data-based businesses, revenue models in the transportation sector, right? So we look, we try to identify topics that that really does do fundamentally change the game. And sometimes we’re lucky on that. And yeah doesn’t mean that we’re not intrigued by businesses that, that are sometimes feel more like an incremental change or a digitalization of something but ideally they really transform the game. But I think I’m almost honest enough to say that it doesn’t always need to be the case. It doesn’t need to be a Microsoft, you know, you can make, you can create a beautiful business just by doing something really better than everybody else at the moment, right?

Sebastien Bihari [01:15:59]:

Yeah. In terms of what people need to bring to the table, I mean, look, we typically started Series A, right? Which means that companies in a B2B space are in Series-A, not yet revenue generating necessarily. It’s very different to B2C where it’s just a straight curve and multiple revenue, multiple stuff, products. It needs to be a product with or a version of a product, with whom, with which you can go to a client and have this product market feedback loop. And you need to be able to start that, integrate the product, see how it goes, refine it, right? To start this sales cycle. This is very important for us. We do look at seed situations here, and then, as I said. It’s typically the more techier to topics where feel it’s important. We really like it. There’s a certain combination of things that we make us feel, we’re going to do the Series-A anyway, so let’s just do it right now as well.

Jaspal Singh [01:17:20]:

So, yeah. You know, if you,

Sebastien Bihari [01:17:24]:

I hope a little bit of a better feeling for what we value.

Jaspal Singh [01:17:29]:

No, I think, I think it’s great. And, and I love your honesty because a lot of time, like you mentioned, some people say, we look for founder, and we just look for market traction. But you, for you, the underlying technology transformation, how transformative it is, and then scalability, because that’s very much important. If you are in B2B scale, you cannot Yeah. Work in a one geography.

Sebastien Bihari [01:17:51]:

Of course, we look at the founders, of course, we looked at, at traction, but traction can come in many ways, right? And in a non-B2C space, because most of the things we touch are pretty B2B heavy. Traction comes in different forms, it’s reaching certain milestones.

 

 

Jaspal Singh [01:18:11]:

Thanks for sharing that. In fact, that’s my last question because I know you are very focused on B2B space, and with the current market condition, we all know the market is down and there are low funding activities. Some people say we are in recession. It’s different way. So what is your advice to the founder, especially in the mobility sector, the portfolio company you’re working with, and do you think it’s a time where the founder should focus from B2C to B2B? That’s the area to play where, you know, if you have couple of good contracts you can sail through, because B2C, there is no, like, not very high predictability. So what is your play here and what is your serious advice to the founders?

Sebastien Bihari [01:18:58]:

I mean, the founders should stick to their business idea, right? But obviously, don’t start an idea that that’s not going to get funding. I think what doesn’t get funding at the moment is, you know, the sort of a revenue model where you need to purchase a dollar revenue for one and a half dollars, right? So that works on a basis. I think I’d stay away from topics at what we internally call that require behavioral beta for an exit, right? If you flush money into a market and try to create a market and try to be the first that works financially and return wise, if you have an exit environment, like during the last 3-4 years, right? Now, that can’t be your base case benchmark. Right? That’s like, really? And so if you feel a topic whether it’s B2C or B2B requires a certain exit environment to even survive in a base case, that’s not good, right?

Sebastien Bihari [01:20:11]:

So, but this is tricky because as I said before, founders often engineers and they look at top line. Great, right? We’ve been around the block for a while, IPO companies, we’ve sold companies. We have a pretty good feeling for what an equity investor wants to see at time of IPO, what a strategic want to see how they think about it, who to talk to, what are the make or buy windows, right? So we have a more cynical view, I think, on what the end game can be. And I think the more a founder can educate himself really on what an end game for a business can be, it’ll do him only the best. Right? Great point. So can you value business at this stage? No way, right? You can’t look at the numbers and, and values, it’s different topic, right?

Sebastien Bihari [01:21:15]:

But if the question is, if I’m creating this type of business, right? What can, what I’m trying, what am I trying to build in the next 10 years? Is this going to be asset heavy? Is it not? Right? Is it, is this a business that can grow for a longer time? Or is it going to plateau quickly? All of this tells me that the founder needs to have a feeling for what is my P&L and balance sheet structurally looking like 10 years down the road. That tells me how other people will look at it, right? But again, this is just one dimension they should consider. The second thing they should look at revenues, revenues, revenues, why? It’s their best line of defense. It’s their best line of defense. If shit, it’s the fan revenues can help you keep your lights on, right?

Sebastien Bihari [01:22:17]:

And I see this over and over again, that founders, particularly in a deeper tech B2B space, tend to think once they have the product, the revenues in the customers will come. And I appreciate it’s a big shock for an engineer to do a cold call and to rattle the drum and, you know, selling a washing machine to Bosch, right? That’s what you need to do. That’s what it is to build a business and selling ice cubes on the North Pole. That that’s need to be your base strategy. And, and you need to develop that DNA and that approach and that hassle early on, not too early, but early on, and guide your strategy around what helps you do this better, faster, and more economically. And the other thing is maybe that they should only raise as much money as they need.

Jaspal Singh [01:23:27]:

Yeah.

Sebastien Bihari [01:23:28]:

Now, founders, I feel they almost have the fiduciary duty to take as much as they can, right? Somebody gives them 20 million instead of 10, take it, right? Run can’t blame them, right? It’s like great achievement.

Jaspal Singh [01:23:43]:

Yeah.

Sebastien Bihari [01:23:45]:

Think ahead, right? Don’t be greedy in evaluation, it’s going to bite you the next round, right? Yeah. and I see this a lot again, in the B2B, in the deeper tech space obviously money supply is cyclical. But one thing normally doesn’t change. And that is that, particularly in the deeper tech B2B space, the core technology is typically developed by the same 5 or 10 or 15 guys, right? Yea and for the first years, that doesn’t change, right? So you can layer on that, but the marginal output on the money you put in, it’s, it’s a non-attractive slope, right? So getting the balance the tipping point, right? As of when to load up on money in order to scale and, add more engineers or add more salespeople is a difficult choice to make for founders. That not in except for the last couple of years. It’s a luxury question, right? But I think thinking about what you really need to achieve to reach your core mission, your core target, how much money do you need? Obviously think with buffer, but go for what you need rather than what’s nice to have.

Jaspal Singh [01:25:19]:

Yeah.

Sebastien Bihari [01:25:21]:

Because in the end, I feel, you know, good ideas will always get money. It’s easier set than done. Founders will hate me for that sentence because fundraising is a terrible business. But again, this can help.

Jaspal Singh [01:25:36]:

No, I think, I think all these are great points. I really love what you said is the customer acquisition cost in a good period, you can spend $1.50 to earn just one, even 1 cent. And that’s what companies were doing. They were spending crazy amount of money to get such a small revenue, like all these delivery companies, 10 minute deliveries and all, it was crazy.

Sebastien Bihari [01:26:01]:

People weren’t stupid either, right? It’s like you’re your own markets, right? Yeah. And then you hope that you can move that market to profitability, right? A bit like the Uber model that works if capital is available in abundance, which is a little bit driven by interest rates, although money supply is not really steered by interest rates anymore, that much as it used to be in the past. But again, that doesn’t change exit dynamics really, right? So money supply doesn’t touch that too much. You can argue that money supply cyclical and then the exit, there’s, there’s waves of good exit windows. I get that. But again, it can’t be your base case, right?

Jaspal Singh [01:26:47]:

No, that’s a great point. Thanks for sharing. I mean, any founder who are listening, it’s great point for them. Raise money you need, not what nice to have, because it’s good to have more money in the bank, but that also spoil you and you pay more of investment. A lot of crazy expenditure. You know, yesterday I was talking with one founder and he was asking me like, I have eight employees, should I have few more? And I was like,

Sebastien Bihari [01:27:11]:

Do you need them?

Jaspal Singh [01:27:12]:

Do you need them? And what is the margin and value they will bring? Like if you, if you increase your manpower, what is the revenue jump? You will see. If you don’t see mar then why are you increasing?

Sebastien Bihari [01:27:23]:

Often is you know, close buddy house. Lars always said like, is there a guy you really need around the table to make other step? Let’s get that person right.

Sebastien Bihari [01:27:36]:

So it needs to be mission driven, right?

Jaspal Singh [01:27:39]:

Thank you so much, Sebastian. And I mean, we talk about mobility, we talk about investment and all these technology trends. So thanks for sharing your perspective. I really enjoyed it. Now at the end, we have this rapid fire question round, and it’s basically to know a little more personal side of you and what you think and what you feel. So if you’re ready, I’ll start with that.

Sebastien Bihari [01:28:02]:

Sure.

Jaspal Singh [01:28:03]:

Okay. So my first question is, if you are not in the private equity and investment space, what other profession you would’ve selected?

Sebastien Bihari [01:28:12]:

I would’ve probably studied physics or archeology. Archeology. I know it’s a stretch.

Jaspal Singh [01:28:19]:

Those two are really interesting topic. In fact, yesterday I was talking with somebody and we were discussing about physics. So it’s, it’s such a fascinating topic. So great to hear.

Sebastien Bihari [01:28:32]:

Particularly these days.

Jaspal Singh [01:28:34]:

Yeah. Oh, particularly these days. Now my second question, like, you work and, and in fact I mentioned that you’re a global citizen because you lived work and travel all over, all over the places in different part of the world, which is your favorite city in the world?

Sebastien Bihari [01:28:51]:

Ah, difficult one.

Sebastien Bihari [01:28:55]:

I love Hong Kong.

Jaspal Singh [01:28:57]:

Yeah.

Sebastien Bihari [01:28:58]:

But probably I haven’t spent enough time there and agree with the people who hate it, but I love the time.

Jaspal Singh [01:29:05]:

I love to city. It’s an amazing city. The high rises and the way people work and move, it’s a great city to be in. Now, if you love Hong Kong, the one other thing Hong Kong has is the good public transit system or mobility system. People don’t own car. But I would say which city according to you, has the best transit network in the world?

Sebastien Bihari [01:29:27]:

I’m biased. I’m from. I’m here from London, and London actually has interesting mix because they’re massive airports. Yeah. but also massive and very intensively used subway system. And it’s actually quite connected. Let’s not talk about the road transport in London, which is

 

Jaspal Singh [01:29:52]:

Good.

Sebastien Bihari [01:29:53]:

I could say very impolite things, but the, the public transports London’s actually quite ahead of quite nice other places that I know.

Jaspal Singh [01:30:05]:

It’s a favorite city for many people. You know, London they have a good system and I have good friend at TfL, so they’ll be happy to hear that. You, you love it.

Now, next question, can we take for you, and don’t know if you have answer for that, like, which is your favorite startup in mobility sector or any favorite startup in your portfolio?

Sebastien Bihari [01:30:26]:

Telling your favorite child

Jaspal Singh [01:30:28]:

Yeah,

Sebastien Bihari [01:30:30]:

That’s, that’s actually impossible to say, but it amazes, it amazes me how each of them impresses me on a day by day basis with what they do. That’s, it’s impossible to pick.

Jaspal Singh [01:30:45]:

Impossible to pick, but any particular thing which attract you in the startups.

Sebastien Bihari [01:30:53]:

It’s the combination of what they focus on, how they do it, who they are. And, and each of the startups is so different in their DNA, their team composition, which goes back to my point, right? You can’t just say, oh, I’ll take the best founder or this and this. It just highlights for me that every business is different.

Jaspal Singh [01:31:19]:

I agree. It’s sometimes the founder team and sometimes the market tracks and sometimes the technology, but you have to find the best of the mix.

Now my last question is, if you can change one thing in life, what would it be?

Sebastien Bihari [01:31:34]:

Get Up earlier.

Jaspal Singh [01:31:35]:

Get up earlier.

Sebastien Bihari [01:31:37]:

But that, that would reduce my constant desire for good coffee.

Jaspal Singh [01:31:44]:

So it means nothing.

Sebastien Bihari [01:31:48]:

I’m sure there’s many things.

Sebastien Bihari [01:31:51]:

I’m sure there’s many things. It’s how Winston Churchill, I’ll say sorry for the long lists. I didn’t have enough time.

Jaspal Singh [01:31:59]:

That’s a great point to end with. So thank you so much, Sebastian, and I really enjoyed, you know, our conversation and your point. And I really like the perspective because you are not being a technocrat and investor. Your points are coming more from a consumer side and consumer point, which is amazing to see, which I think, I hope all the founders and investor look that point, because founders sometime are so obsessed with their product, they forget about the customer.

Sebastien Bihari [01:32:29]:

Like, it’s important. It’s a product. I think a founder needs to be proud of the technology they put together but not to forget that it needs to solve a problem.

Jaspal Singh [01:32:46]:

Well, thank you so much. Thank you so much for sharing your feedback.

Sebastien Bihari [01:32:51]:

My pleasure. Thanks for having me, Jaspal. Much appreciate it.