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Why Did BMW’s Startup Garage Invent The Venture Client Model?

An innovation model that was born out of 'common sense'

30Aug

The automotive industry is a $10 trillion market: '20x as large as the $500 billion advertising business that Facebook and Google are vying for,' BMW’s Gregor Gimmy noted at the 2015 presentation to a roomful of Tel Aviv’s entrepreneurs. Gimmy was there to introduce the BMW Startup Garage — a lean startup from within the BMW that came about without an executive, top-down order, and was not based on any consultancies, or accelerator-operator blueprint on 'how to work with startups'.

Gimmy and the Startup Garage Co-Founder Mathias Mayer went about creating the Garage just like a startup. They created a cool logo with a top designer from Barcelona — not from Corporate CI. They quickly put together a state-of-the-art website, by using something forbidden by BMW - WordPress: 'Had we asked for approval for this, the Startup Garage would still be under construction.'

In time, the pair unveiled the site to leaders who returned very positive support. It wasn’t long before they were receiving messages from across BMW’s departments with warm regards for their new 'Venture Client' model.

The Venture Client model was born out of 'common sense,' based on personal experiences of what startups really need from corporates (Gregor has 10+ years Startup experience as a Founder and CEO of multiple companies), and BMW’s innovation strategy and culture (Matthias has 10+ years experience at BMW).

Gimmy and Mayer shared some time with us on the I/O podcast last week.:

'Basically we asked, ‘What can we offer to the best startup on earth with the best technology, lots of cash, and the most talent to get them to come to us and not to someone else?’ The best thing we could offer is to be their first — hence, venture— client. No VC or accelerator out there would say they can achieve that value proposition because they are not clients, they are investors. Ultimately, what makes a startup successful is a good client. That was really what kicked off the thought of being a Venture Client and working with startups at a much earlier stage than we normally do, and getting them to succeed faster.'

A BMW car is split into five innovation areas: Connected Drive (connectivity), Efficient Dynamics (Making engines efficient), Emotional Experience (what makes a car emotional to drive), Electric Mobility (everything around electric engines, batteries, etc.), and Lightness (any new materials that make the car lighter). Startups are invited to join if their technology contributes to any of these five areas. 90% of applicants come from outside of Germany, with startups from Canada, Finland, Israel and other countries.

To attract the very best applicants, BMW takes no control of any IP or equity, and startups aren’t limited by any exclusivity agreements.

The application process is easily processed and always accessible on the site. It is ongoing, meaning they do not have batches or cohorts, nor are they limited by a project budget. The model functions on a case by case basis. Before startups are ever accepted, the internal clients are identified from within BMW who have a strong interest in using a startup’s technology in the future line of BMW vehicles or services. These internal clients then engage the startup in a real innovation project, like they would with any other technology partner, like Bosch or Conti. Startups do not work on a demo project or participate in a Demo Day. They work on the real stuff from day one.

In highly complex industries, engineers working on today’s products are implementing plans that were developed one or two years ago. To integrate at full scale, startups need to work with the engineering teams responsible for the plans in vehicles - five, 10 or 15 years down the road. It is a program unparalleled by any accelerator program, or investor relationship.

Beyond the five-step order process (which you can hear more about on the podcast), BMW works with startups in three other areas:

1. Learning — We teach startups about the automotive industry. What’s the quality? What’s the purchasing process? Because we want them to learn how the automotive world works, so they can work more efficiently in this environment.

2. Networking — We have a networking model, in which we have startups connected with key people within BMW. For example, a purchasing guy, or a quality guy, or manufacturing people.

3. Selling model — We help startups define the business model of the technology for BMW. For example, if a startup says they’d like to license the technology to us, we might go into a revenue share. We want to help startups define a long term relationship and hook up with our supplier network because often it’s very important that our startups work with our supply network.

It was a German company, Bayer, that developed the gold standard of innovation models copied by the American Labs at Bell, DuPont, and Kodak - at the turn of the 20th century. Now it’s another German firm, BMW, trying to bring clarity to the process of uncertain investments that has driven today’s corporations to adopt startup-driven models. Corporate Accelerators and Corporate Venture Capital lead this century’s wave of startup-driven innovation models, but Gimmy and Mayer believe they’ve found the most efficient way with their Venture Client structure.

Key Principles of the Venture Client Model

- A Startup needs a great client more than anything.

- Accelerators are best left to independents.

- Highly-specialized industry knowledge is of most interest of startups.

- Startups develop their projects at home and only visit the company to execute on the order with engineers and innovation managers. - No need to build out a new space for the startup relationship ('a very Lean approach', as noted by Gimmy).

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