Automakers use their Silicon Valley offices to stay ahead of the curve in high-tech innovation. The local automotive centers are playing a bigger role in car companies’ investment and technology strategies. And, as they grow, they need to attract more highly qualified staff.

The last 18 months have seen huge automotive deals moving in and out of Silicon Valley, whether it is General Motors buying Cruise Automation for $1 billion or investing $500m in Lyft, or Intel acquiring Israeli advanced driving systems provider Mobileye for $15 billion. Two years ago, Ford invested in lidar supplier Velodyne, while earlier this spring, it bought Palo Alto-based ride-sharing and transport service firm Autonomic. Silicon Valley automotive centers are not necessarily the main actors in such acquisitions, but they are facilitators between manufacturers, tech firms and investors. And they are increasingly involved in buying and investment cycles. The battle for new ideas and the software engineers needed to develop them is fierce.

Many opportunities seen

With many carmakers and suppliers well established in Silicon Valley, they are making their mark on the local tech scene. And startup and technology firms are showing plenty of interest in working with traditional automotive players. “Until recently, I still had to explain what the hell a car company was doing in Silicon Valley,” says Dragos Maciuca, technology leader at Ford’s Research and Innovation Center in Palo Alto. “I had to be proactive in promoting Ford and doing outreach to the talent and technology we were looking for.” Times have changed, however. “Around two years ago, something happened, and things changed almost overnight,” Maciuca says. “Now everyone gets it. Instead of me going out, I’ve had to hire tech scouts just to filter the incoming opportunities.”

Maciuca, a 20-year veteran of the Silicon Valley high-tech scene, attributes the change to growing interest in automotive technologies such as autonomous driving, but also to car companies’ increased ability to speak the language of venture capitalists, notably around Silicon Valley strengths like software, sensors and compute platforms. Although Ford doesn’t have a direct corporate venture group in Silicon Valley, Maciuca works with the carmaker’s business development group as soon as he spies a competitive advantage. “My biggest paranoia is that a competitor finds a startup that I am not aware of,” he says. “It’s fine if we knew them and passed on them, but I want to avoid not knowing about them.”

Porsche Digital has engaged in global corporate venturing in particular for artificial intelligence. In April, it invested in Israeli firm Anagog, which specializes in AI for mobility services, such as anticipating customer behavior around parking. Managing director Thilo Koslowski says the company is working on incubation with companies in areas including IoT links between vehicles and home, as well as blockchain.

BMW’s Mountain View-based Group Technology Office also works closely with the premium car maker’s investment arm. Simon Euringer, who heads the center, says he often provides a deeper understanding and engineering knowhow of IT projects on behalf of i Ventures, BMW’s €500m corporate fund. “Many venture capital firms look at economics and investment and are not necessarily technology driven. That is where we help,” he says.

Attracting talent with real products

Hyundai Cradle, the Korean car group’s high-tech investment arm, is also stepping up its activities. Vice-President John Suh says the company has gone from making one or two investments each year, to what is likely to be around eight in 2018, many related to connectivity and electric powertrain development. Cradle typically invests from series A – which supports companies after seed funding – up to series B, past the development stage; sometimes it even goes up to series C, when a company looks to scale for larger operations. Cradle typically takes minority stakes of 20-30%, and often co-invests with venture capitalists. As part of Cradle’s expansion, Suh plans to add in-house engineering resources, mainly to help develop and improve collaboration with startups (and further ‘cradle’ new ideas) and develop viable use cases. “This will help us realize strategic value,” Suh says.

Hyundai Cradle is just one example of a car company looking for high-tech experts. Along with startups, firms in Silicon Valley compete for IT workers with in-demand skills such as machine learning. That is evident in rising salaries, as well as the flexible working hours, free lunches and coffee, on-site gyms and yoga classes that are increasingly hygiene factors at many offices. BMW’s Euringer acknowledges that it is hard to afford and retain talent. However, he points to the transformative technologies in the automotive industry, such as autonomous driving and electrification, which excite employees and entrepreneurs. These topics represent a big change even from a few years ago, when the automotive industry would concentrate on issues such as having bigger in-car infotainment screens or making incremental gains in fuel efficiency.

Says Euringer: “Today we are talking about groundbreaking topics, and that makes automotive exciting to employees.”

The BMW executive also notes the advantages that an established firm like BMW can offer employees or startup entrepreneurs. In a region renowned as much for failed companies and developing concepts as for success, car companies set out a clearer path to products entering the real world. “If you work for three startups that didn’t make it,” he says, “at some point you want to do something that will have an impact in the world, rather than forever working towards a concept.”

BMW’s clear schedules for product releases, offer such a path toward commercialization. For example, the BMW i20 model, which will have Level 3 autonomy, is scheduled for release in July 2021. “When we say we will ship it in 2021, we will ship it,” Euringer says.

Other automotive centers in Silicon Valley also view this capacity to move from ideation into reality as a key advantage when it comes to attracting talent and getting the attention of startups. Porsche’s Koslowski stresses, for example, that the company’s facility in Santa Clara is a “strategic competency center” that does more than just experiment with ideas. “We develop solutions that actually work,” he says.