SILICON VALLEY AND THE FUTURE OF THE AUTOMOTIVE INDUSTRY
Capstone Financial Group is investing significant capital, time and resources into bridging the gap between the legacy automotive industry and Silicon Valley. More than any other investment banking firm during the last 25 years, Capstone has helped transform the historical automotive supply chain by using the firm’s unmatched industry knowledge and data to forecast industry trends, then utilizing these findings to design and consummate strategic transactions, including several “roll-ups” which helped shift the balance of power from distributors to manufacturers. Much of Capstone’s game changing efforts have been related to this paradigm shift in the distribution of automotive parts and accessories, primarily brought on by disintermediation, which Capstone first predicted in 2007, and the changing methods of Internet-related supply channels.
Our efforts are now being directed towards the epicenter of another paradigm shift in the automotive industry: Silicon Valley. New vehicle sales in North America reached a peak in 2016 (propelled by the misleading increase in fleet sales) and will now start to fall, as has the percentage of young adults obtaining driver’s licenses. As automotive OEMs grapple with these dramatic shifts, they have begun investing in tangential technology and new business lines such as ride-sharing and bike-sharing. Cars and trucks are rapidly becoming revolutionary technical innovations on wheels, as the auto industry is increasingly influenced by new technologies such as artificial intelligence. Much of this automotive technology is coming from Silicon Valley, which is maturing from a cottage industry to a full-fledged automotive landscape with critical mass.
Capstone’s efforts in Silicon Valley are focused on identifying the world’s best automotive tech companies that will become integral parts of the “cooperative mobility ecosystem” as touted by most of the major vehicle OEMs, then raising the capital required for these companies to mature to the point they can join this ecosystem. These companies will be aggregatable into a multi-company enterprise capable of serving as a major platform for autonomous cars and related industry segments. The funding will not come from seed capitalists or the more prolific venture capitalists, but will be longer-term institutional and corporate capital generally available to larger enterprises. This will help avoid the laborious and inefficient multiple rounds of funding (and resultant owner dilution) so common with the current capitalization process used to fuel growth and innovation. We believe that as the industry matures, there will be considerable fallout from its disruptive trends, just as there has been in most rapidly evolving industries. For example, we believe that the 21 companies currently building autonomous cars will not all be here in 10 years, but rather the industry will be led by a few multi-company firms which will continue to make synergistic acquisitions to effect market leadership within the dozen or so future “modules” for this ecosystem.
As one of most advanced investment banking boutique firms in the country and the only one focused exclusively on the automotive space, Capstone maintains close, active relationships with thousands of auto industry players, strategic buyers, financial investors and lenders. Our pioneering IT department and proprietary database of more than 14,000 companies and investors allows us to act quickly on emerging opportunities. The future in Silicon Valley is indeed transformative and the auto industry narrative has been framed. As an historical agent of such change, Capstone is committing the resources necessary to be the investment banking firm helping to build this future.