Insights

Why Investors Are Abandoning Automotive Startups For Now

Featured In Forbes

By Matthias Bentenrieder and Andreas Nienhaus
This article first appeared in Forbes on June 9, 2020.

Once the darlings of venture capital and private equity, mobility and automotive startups are falling on hard times in 2020, thanks to the coronavirus pandemic.

With people stuck at home and travel almost eliminated, mobility wasn’t a particularly exciting theme for investors in the first few months of the year, and the money for these startups has been evaporating. The expectation is for the various mobility segments to continue to suffer in the second quarter because of the global recession anticipated in the wake of COVID-19.

In the first quarter of this year, the pool of funds invested in mobility and automotive enterprises — particularly those in ride-hailing, ride-sharing, and micromobility services — shrank 16 percent as people were no longer willing to get into the same car or share the same bicycle or scooter as strangers who could be infected. Global funding to private companies only attracted $77 billion in Q1 2020, down from $92 billion in the last three months of 2019, according to CB Insights market analyses.

With many people stuck at home due to COVID-19, mobility wasn’t a particularly exciting theme for investors

One of the biggest losers was China — a reaction to the country’s nationwide lockdown that went into effect in the second half of January. From December 2019 through February 2020, the number of Series A deals fell 74 percent, according to numbers from incubator Startup Genome published on nextweb.com. When indexed to the decline in the rest of the world, China’s numbers were down as much as 57 percent. China and the United States have been the top two destinations for mobility and automotive startup capital for the past several years, reflecting not only the sheer number of enterprises, but also the number of already large and successful startups in both of those countries.

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