Goodyear Ventures seeks more than financial return

AKRON — Goodyear has been buying more companies than most people might realize.

While it might not be buying them outright, it's taken venture-capital stakes in a dozen fledgling companies over about the last two years through Goodyear Ventures, an investment fund the company founded in 2020 and seeded with $100 million.

Unlike most venture capitalists, Goodyear's not strictly concerned about getting a direct return on its investment via a sale of its portfolio companies, or by them going public.

Instead, Goodyear is investing to establish strategic relationships and gain expertise in the fields of mobility and autonomous vehicles, sectors the big Akron tire maker said it believes are the keys to its future success and in which it already has invested millions itself.

"The intention of kicking this fund off was that Goodyear has really sworn to strategic relationships with startups that will help us learn about mobility trends and also bring the best of Goodyear to those startups to help them with their growth," Goodyear Ventures Managing Director Abhijit Ganguly said.

Goodyear mostly has stuck to the themes of mobility and autonomous vehicles, but even within those, Goodyear has found opportunities with young companies involved in a variety of technologies and applications.

Goodyear Ventures' most recent investment is in Seattle-based Recurrent Motors Inc., a company involved in the analysis of electric-vehicle battery health. Goodyear Ventures was one of several participants in a recent founding round of $4.5 million that Recurrent said would provide not only capital, but "noteworthy partnerships."

Goodyear didn't disclose how much it invested or what portion of Recurrent it purchased — as has been the case with its other acquisitions.

At the end of March, Goodyear Ventures invested in Nova Labs, a San Francisco company involved in decentralized, long-range wireless communications that could play a role in the development of autonomous vehicles. Goodyear reportedly was one of 10 participants in a $200 million Series D funding round for Nova Labs.

Other investments include Gatik AI Inc. (rhymes with attic), a California company that is developing autonomous trucks for "middle-mile" deliveries, such as those between a retailer's warehouses and its brick-and-mortar stores. That company already is operating its trucks in several U.S. states and Canada, and it said it's expanding throughout the U.S.

Other investments include:

• Envoy Technologies, a California company that provides on-demand, shared electric vehicles that it markets as a community amenity;
• Formant Inc., another California company that offers a robot command center to deploy and manage robots and the data they collect; and
• Starship Technologies, a San Francisco company that provides autonomous robots that make local deliveries of food, groceries and packages.

While the money raised is important to the young companies seeking capital, "partnership" is a word you'll see used quite a bit by the portfolio companies. And for Goodyear, it's really the main point of the whole endeavor.

"With any company we invest in, our strategic interest, our learning goals and our relationship-building goals are a fair amount of our interest," Ganguly said.

"We are not a pure-play financial player, we are a strategic player — and definitely, we start with the question of, 'How will this startup help us?'"

Not that Ganguly doesn't want to see his portfolio do well in terms of direct investment returns; it's just not the most important measurement of Goodyear Ventures' success.

"How do we define success? Financial success is one answer, but there is strategic success also," Ganguly said. "I'm extremely happy with the way the portfolio is operating and performing (financially), but even happier to see some of the strategic relationships we've built with some of the portfolio companies. ... That is a bigger measure of success for us."

Ganguly and his staff of four, evenly split between Akron and San Francisco, still conduct due diligence on their prospective investments — at the very least, they want to form relationships with partners that have staying power — but the emphasis on strategic alignments gives them some leeway. They invest in some very early-stage companies, as well as some who have already previously raised significant amounts of capital and are well along in their efforts to take their products to market and grow.

"We are a stage-agnostic corporate venture capital fund," Ganguly said. "If the strategic fit is strong, we will invest in the company and start working with them on a strategic basis."

It's an approach more and more large companies like Goodyear have been taking in recent years, Scott Shane, founder of Shaker Heights' Comeback Capital, said. .Shane's firm links investors from outside the region with companies in the Midwest seeking capital. He's also a professor of economics who teaches venture capital and entrepreneurship at Case Western Reserve University.

"With corporate venture capital, you have this array where this pretty large number, maybe 40-ish percent of corporate venture capital, is purely strategic in nature, or almost purely strategic," Shane said. "And Goodyear would be in that camp."

That strategy also means that corporate venture capitalists measure their success differently than their financial counterparts do, which Shane said also allows the corporate funds to sometimes pay more for their investments as well.

"Let's say with the $100 million fund of Goodyear, when it's done, there's no profit — all they do is get their $100 million back. For a traditional venture capitalist, that's a failure," Shane said, "but if they found a single thing that enhanced productivity at a Goodyear factory or something like that, and Goodyear reduced a cost by 10%, that's a huge win for the company even though the fund doesn't look like it made a return. … The CEO of the company would be extremely happy with that."

Toward such ends, Ganguly said his team links the portfolio company with other people in Goodyear's operations.

"We stay engaged until that relationship and linkage is solid and strong, and then it falls on the people within the companies to take the work forward," Ganguly said.

For the portfolio companies, there are advantages as well, including access to new markets with more customers and technical help, Shane said.

Gatik, which has been in Goodyear Ventures' portfolio since fall 2021, has been pleased with the relationship it has built with its much larger partner so far, said its head of policy and communications Richard Steiner.

Gatik is using Goodyear's knowledge of tires and its investments in tire sensors and communications capabilities to enable its vehicles to operate more efficiently, handle and stop better, and reduce maintenance.

"It's very much a strategic and technical partnership as much as it is an investment in the company," Steiner said. "This is adding direct value to our service and vehicle performance."

Ganguly declined to say how much of Goodyear Ventures' $100 million he's invested so far, but he said he's far from done.

Unlike traditional venture capitalists, though, he doesn't have investors pressuring him to deploy capital quickly, or to exit portfolio companies per a specified timeline to book investment returns. Goodyear doesn't need to sell the stakes its venture fund holds to fund future investments, as it could easily provide Goodyear Ventures with additional capital if needed, he said.

"Because of the strategic nature of our interest, I don't have a strategic partner who's giving me those restraints," Ganguly said.

The fund has been busy, he said, but isn't nearly done. In the meantime, Ganguly seems to be enjoying his role in running Goodyear Ventures.

"We've made connections with some of the leaders in mobility, and mobility itself has been a very exciting space," Ganguly said. "I can't wait to see what's ahead."