Updated: Dec 17, 2018
This is an excerpt from ‘Corporate Venturing and the Future of Mobility, Automotive and Travel’, a new report from Global Corporate Venturing and Leif Capital, which is sponsored by BP Ventures, Denso International America, and JetBlue Technology Ventures.
If you’re an investor or a start-up in the mobility, automotive and travel industry and have news and views of interest to the corporate venturing world, please contact me firstname.lastname@example.org. But please, no PR people. I mean no offense. It’s just that I want to hear from the engineers, not the oily rags – so to speak. (And I’ve done some oily rag work myself, by the way).
JetBlue Technology Ventures, the magic sauce of industry and investment expertise
Kaloyan Andonov spoke to Bonny Simi, president of JetBlue Technology Ventures and an active airline captain. Simi talked about the winning team formula of her venturing firm, how people will be flying on electric aircraft by 2025 and about disruptive trends in the travel tech space. She is among the speakers at this week’s Global Corporate Venturing and Innovation Summit in Monterey.
You are an active pilot. How does your passion for flying translate into the world of venture investing?
I would say, there are two things from my previous roles that tie into my venturing role. On the one hand, I am an active airline captain for JetBlue Airways, and actually I flew 200 people from JFK to Charlotte and back over the weekend. Because I have been in the aviation industry for 30 years, I can bring a lot to the table for startups. I understand the viability of a given technology. The other part of my background is that I was the head of talent for JetBlue. That role prepared me the most for my position at JetBlue Technology Ventures. I oversaw all the hiring for the airline for five years. My team and I have hired probably around 15,000 new JetBlue crewmembers from gate agents and pilots to IT and commercial executives, over that period. So, one develops a keen eye for talent. When investing in early stage startups, it is more about the “who” than the “what.” In other words, understanding the person so we can invest in the person.
In that sense, I would like to stress here that JetBlue Technology Ventures would not be successful without our team. I do want to highlight Raj Singh. He is the managing director who oversees the investment side. While I oversee the entire firm, my focus is mostly on the outside and bringing in deal flow as well as introducing startups to potential investors and partners as well as ensuring we are supporting the future vision of JetBlue. I think the magic sauce that makes us successful is precisely having one person understanding the industry very deeply and another monitoring the investment side. In cases where you have a CVC led by someone with a VC background only, it can be challenging for that person to understand the corporate side. If it is led by someone only with industry background but no investment experience, it is difficult for that person to truly understand the venturing world. I think the biggest lesson from us as a corporate venturing arm is to make sure you have both – the “corporate” and the “venture capital”.
You have developed a keen eye for talent, so what do you look for in startup founders?
It is very rare that we would invest in a company with just one founder, so it is the founding team that is really important. So, we look for a good mix of people with deep technical background, the CTO-type of person, and someone with a vision, i.e. the CEO-type of person. We need a team who are together able to think of the bigger picture (we want to see a path to at least $100m in revenue) and we also want them to have the team to execute on the vision.
JetBlue Technology Ventures (JTV) was founded fairly recently, in 2016, and you have started actively building a portfolio. What are the major considerations in your investment thesis?
We consider investments at the intersection of travel and technology, in a broad sense, extending beyond airlines. We are currently focusing on five “themes.” The first are startups improving the customer journey: from the first moment a person thinks about travelling until the moment they come back home and say: “Wow! That was amazing!”
Another area of interest is enterprise software that allows us to provide great services, i.e. everything spanning from omni-channel communications through AI-powered assistance to the future-of-work technologies at a large company like JetBlue. Another area we look at is maintenance and operations, which encompasses anything that will help improve or create more efficiencies in our operations, e.g. predictive maintenance and 3D printing, weather or air traffic delay predictions. We also look at revenue management fintech applications as well as loyalty programmes. We also invest in regional transportation technologies, which touches on the question “Will airlines exist in the future?” We believe they will, though likely more for long-haul travel. We believe that the regional transportation sector (1000 miles or less) is ripe for disruption with everything from electric “jets” to vertical take-off and landing (VTOL) “flying cars.”
What disruptive trends or developments do you see in your areas of interest?
Currently we are looking at specific technologies that are rapidly disrupting the travel space: artificial intelligence, augmented reality, blockchain, the internet of things (IoT), 3D printing, predictive analytics and electric propulsion. The latter is very interesting. Just as electric propulsion is disrupting automobiles, it is doing the same with VTOL for helicopters and other regional aircraft. You will be flying on electric aircraft by 2025, if not sooner.
We also see interesting applications of blockchain in distribution. There are many intermediaries in selling airline tickets and hotel bookings, and blockchain could reduce these intermediaries the same way it is now starting to disrupt the “middle man” in banks when it comes to transferring money.
Another disruptive trend is using machine learning to process massive datasets, both on the operational side, such as predictive maintenance, and on the revenue side for dynamic pricing.
And then we see augmented reality technologies being used in manufacturing and also for training purposes. While manufacturing does not apply to us directly, we do provide extensive training.
As for 3D printing applications, we are particularly focused on printing of interior aircraft parts. If you think about your tray table or seat – these are easily breakable elements and if we have way to 3D-print them and replace them quickly, it does make a big difference in terms of efficiency.
Are JTV’s investment goals primarily strategic, primarily financial or a mixture of both?
We are definitely a strategic investor. That said, there is nothing strategic about losing money, so we very carefully screen investments to ensure that there will be some level of return. However, the focus is strategic, as travel is a space that is being rapidly disrupted. We always take minority stakes and provide strategic support to the startups. We always take an observer seat, so we know what is going on in our portfolio companies, which literally gives us a seat at the table for the future of travel.
Aside from financial support, in what other ways do you help your portfolio companies?
Every startup is different and has its unique needs. Some need expertise in the airline and hotel space, which obviously we bring (a member of our team understands the hotel space very well). Another example of expertise is regulation and working with industry. We have experience working very closely with the FAA [Federal Aviation Administration] on many matters including aircraft certification, safety reviews, operations and more, so we can help our startups understand and work with the FAA.
Sometimes, startups need help with public relations and marketing, so we bring some top-name firms to do it for them. Sometimes, of course, we become the customer of those startups.
Other startups need that we vouch for them in subsequent rounds. Travel tech is a space that is not readily understood by traditional VCs, so we become someone that can validate the investment.
In some cases, we provide mentorship to first-time founders and sometimes even give them free office space in our lab in Silicon Valley. As a matter of fact, we have startups in our office that work from there as their home office. And finally, probably the most valuable thing we can offer is our network with other airlines and hospitality companies around the world and connecting the startups with them.
With the rise of technologies like drones, some believe that we may have flying cars sooner than autonomous cars. What is your stance on the investment potential and opportunities in the urban air mobility space?
I would say we are very bullish in that space. We do believe that these new vehicles will be piloted much like for cars, where there is autonomy but you still need a driver. We anticipate it will be many, many years before there will be fully autonomous airborne vehicles in passenger service. As for “flying cars”, what prevents them from becoming commonplace right now is that they are not practical, because they are expensive, burn a lot of gas, and are noisy. However, once you switch over to electrical, they can be quiet and very cost efficient. The power density ratio in batteries, within the next year or two, will get to the point allowing to power up a four-to-six-passenger vehicle that can fly for 100-200 miles. So, it is all about the batteries and when the batteries will be ready. And we believe the necessary formula will be there in the next few years.
Are you currently investing in any companies developing batteries?
No, but we are observing this space very closely. We do not do a lot of hardware investments per se but it is a space that we spend a lot of time looking at. Our unit is not just about investments. We do market intelligence on the industry for JetBlue, so we know what is going on.
Your most recent publicly disclosed deal was in Skyhour, and online gifting platform for travel. Are there any other interesting deals down the pipeline to be publicised soon?
Skyhour sits within the fintech and revenue side of focus. It is actually a common-sense thing. If you want to gift Starbucks coffee to someone, you give them a Starbucks gift card. And the problem with flight gift cards is somewhat annoying, as people lose them. So, Skyhour provides a way of gifting travel online, a piece of the flight and not the whole thing. Then flight hours can be accumulated across many gifters, and redeemed when sufficient hours are in an account. It is a very seamless experience for people to book travel that way. It is a fascinating e-gifting of travel that has never been done. We are curious as to how it will play out for us strategically. And this startup is allowing us to do that as an external R&D and if it works out well, we can become a direct customer.
You are one of the still few women leading a corporate venturing unit. What do you think can be done to motivate more women to work in VC in general and corporate VC investing, in particular?
I think it is incumbent upon the entire industry to make sure that you have a diverse pool of candidates when a slot is available. I am not saying people should just go out and hire women. You need to hire the best candidate. However, you would be surprised how many amazing women there are out there who do not even get an interview. So, my plea to the industry is: when you have an opening, go out and do the hard work to find at least one female candidate. And then let the slate play out as it is. If the best candidate is a man, then hire the man. You may be surprised how many times the best candidate is a woman!