CARY, N.C. -

When Fraser McCombs Capital, an investment firm in the auto technology and mobility space, started nearly a decade ago, “a lot of people thought we were crazy,” says managing partner Chase Fraser.

“Auto tech didn’t exist, really,” Fraser said in a phone interview. “I’d raise money and people said, ‘well, are you going to go invest in somebody that makes transmissions?’ … These were guys htat didn’t understand ‘our space.’”

At the time, the model was to invest in software companies designed to help dealers increase sales or service — companies that would hopefully be acquired by one of the large players, like the entities now known as the Cox Automotives, Reynolds and Reynolds or CDK Globals of the world, Fraser said.  

He says it is still a “great market” for those types of companies and noted that about a third of FMC’s portfolio are those software systems designed to help auctions or dealers.

“But what happened is Silicon Valley decided to pay attention to the automotive industry,” he said.

Thus, entities in spaces like ridesharing and other new entrants in the auto ecosystem were born.

Such technologies are often referred to by the “CASE” acronym, meaning connected, autonomous, shared and electric, and “that’s really our thesis,” Fraser said of FMC, which is a venture capital firm that specializes in early- and late-stage auto tech companies.

Current investments include Aurora Labs, Autopay, Autotalks, Azevtek, Bypass, DigniFi, GuardKnox, KEEPS, Luvewave, Motorq, Optimus Ride, Via, Vroom and what3words.

Previous investments include autoniq, Dataium, eSupply Systems, Frontier Car Group, Scout, Showroom Logic and uParts, the majority of which have been purchased by large auto players like KAR Global, IHS, Reynolds and so on.

“I feel like we were one of the early ones, certainly, to do this. I don’t want to say that we were the first, but we were certainly an early one,” Fraser said. “And there’s a lot of other folks doing it. There’s a lot of investors now that think automotive’s a very interesting place to invest money.”

Count Quin Garcia and the team at Autotech Ventures among those.

The firm’s focus goes a bit broader than automotive and looks at “ground transportation” — or put differently, “movement of people and goods along the surface of the earth,” said Garcia, who is managing director at the firm.

“What makes us excited about this whole ground transport space is the fact they’re undergoing massive change right now, and that massive change has been driven initially by the entrance of the tech giants into the transport space,” he said, giving the examples of Google, Apple, Microsoft and Amazon entering transport in some form or fashion, be it autonomy, connectivity, service/parts and so forth.

And it’s not just the U.S tech leaders. Tech giants from South Korea, Japan and China have also entered the fray.

“All those big powerful tech giants who had made their trillions in market cap on shaking up electronics and media industries and consumer packaged goods and the like, they identified transport as a really attractive sector and they all entered the space,” Garcia said. “And that caused a lot of the incumbents in the transport sector to feel threatened.

“Those incumbents have started to embrace startup as a form of innovation,” he said. “And they started to do projects with startups and invest in startups and acquire startups.

“You've seen the hit parade of successful startup companies that have emerged over the last 10 years because all of these transport incumbents are partnering with them and leveraging them and acquiring them.”

That’s where Garcia’s firm comes into play: to act as a “bridge” between the tech startups and transportation incumbents. The thinking is, the strength of the tech startups is their ability to innovate; their weakness is scaling.

The strength of the incumbents is scaling; but they can’t innovate at the same speed as a startup.

“And so, we bridge together between these transport incumbents and these little startup companies to help them join forces to solve transport problems and commercialize new tech and business models,” Garcia said.

Autotech Ventures is also looking for pain points, specifically those of large companies in the transport space and how startups can help solve those issues.

“We’re out there listening to large corporations in the transport space and they’re telling us the pains that they’ve experienced,” Garcia said. “So, we behind us have the world’s largest group of transported automotive corporations as our partners for pretty much every segment of the value chain, from new car dealer, used car dealer, vehicle auction, trucking firm, repair shop chain …  tires, cars, motorcycle, leasing, fleet management.”

And in addition to figuring out the needs of these large entities in the space, Autotech Ventures talks with about 1,000 startups per year, who share their respective plans to solving the pain points.

“We’re looking for these enormous pain points that represent huge market opportunities and we're looking for startups who are uniquely qualified to solve those pain points,” Garcia said. “And then we’re investing in those little companies; we’re helping those little companies grow. And then we’re helping those companies connect up to these large corporations to leverage the scale of the corporations.”

Arguably the most notable of Autotech Ventures’ investments has been in ride-sharing company Lyft, which is now publicly traded. But their investment across “CASE” goes much deeper, including DeepScale, which provides computer vision in autonomy. The firm recently sold that to Tesla.

Portfolio company XNOR.AI was recently purchased by Apple, to be used for both connectivity and autonomy purposes.

But the firm actually uses the acronym, “CASED,” to add in a fifth element: “digitization of enterprise,” Garcia said. And that’s reflected in some of their investments, as well, including that of Work Truck Solutions.

Within Work Truck Solutions is an online marketplace for new and used work trucks called Comvoy.com, which Garcia said is, “the first real marketplace for those types of vehicles.”

Speaking of digitization, one of FMC’s investments has been in the aforementioned Vroom, a digital retailer of used vehicles that is certainly well capitalized.

In fact, the $254 million Series H round of funding in December led by Durable Capital Partners LP brought Vroom’s total funding to $721 million.

Speaking more broadly about the used-car retail market, Fraser, the FMC managing partner, said: “I think the buying and selling of used vehicles, in particular, has to change.”

FMC invested in Vroom, but also “looked at Carvana early before it was public.”

Generally speaking, Fraser believes that, “CarMax at some point is going to be a massive player in that (online retail space), where they’ve got all these locations, but what CarMax is incredibly good at is buying right and then their ability to move vehicles around the country. And that is a big advantage, once they decide they want to get deeply into that business, and they’re really kind of in it now, to be honest.

“But it all starts with used vehicles and streamlining the online buying purchase process,” Fraser said. “A great place to start was with used vehicles. It will certainly transcend into the new-vehicle dealerships, without a doubt.”

Speaking of CarMax, in late January, the company announced it had invested $50 million in Edmunds and is obtaining a minority stake in the company, while also partnering with Edmunds.  In a news release, CarMax said the partnership gives it another leg up digitally, including in its new omni-channel venture that allows shoppers “to buy a car on their terms, whether completely from home, in-store, or a seamlessly integrated combination of both.”

 Stay tuned for part II of this feature, where we explore which pieces of the “CASE” ecosystem are generating the most interest from investors.