And companies like Google and Facebook have a built-in advantage in that enormous data market.
Otonomo, a 50-person Herzliya, Israel-based startup is working with major vehicle manufacturers -- including Daimler and BMW -- to help them fight for that gigantic market. Founded in 2015, otonomo is "a cloud-based data exchange platform and enabling car manufacturers, drivers and service providers to be a part of a connected ecosystem. otonomo enables OEMs and fleet owners a new way of making use of the massive amount of car generated data by creating a marketplace that service providers and third party applications can tap into."
Before getting into that, let's take a look at how cars produce data and why that data has so much potential value. As Otonomo CEO, Ben Volkow, explained in a September 28 interview, "Vehicles built in the last two years send data to databases owned by the car companies every 30 seconds to five minutes. This includes from 20 to hundreds of data elements such as the vehicle's speed, acceleration, braking, fuel consumption, battery status, number of passengers, and what is playing on the radio."
Companies will happily pay for this data if it is formatted in a way that makes it easy for them to analyze. As Volkow said, "If you look at something like OnStar, it produces huge amounts of data but it is expensive to get the data out of the car and into the database. So no one is doing anything with the data. But there are thousands of businesses that want to benefit from car data -- including insurance companies, retailers, advertisers, and parking services."
Vehicle manufacturers are interested in how they could profit from this data. "The car guys see this as a new source of revenue. It's a very big market and the timing is good. They are worried about what is coming from Silicon Valley. Detroit is partnering with us to enable them to play against Google. So we started approaching the car guys." he said.
Volkow expects that by 2020, automakers will be able to make more money selling vehicle data than the cars themselves. Indeed, Tasha Keeney at ARK Invest forecasts that the autonomous taxi market could be worth $10 trillion in the early 2030s -- five times the size of today's $2 trillion vehicle market today, according to CNNTech.
Volkow earned a degree in computer science from Tel Aviv University and has more than two decades of experience in R&D, business development and management roles in the telecom industry. He holds two signaling patents and is considered a visionary and industry expert in signaling and Diameter protocol. Prior to founding otonomo, Volkow held management roles at leading smartphone manufacturers, and Panasonic Mobile Communications delivering the company's first European market products.
Otonomo -- the name sounds like 'auto' and has four 'o's that look like wheels, said Volkow -- has raised $40 million so far in three rounds from seven investors including Bessemer -- this is the third time the VC has invested in Volkow -- along with strategic investors such as Delphi and Dell Technologies.
The company has made considerable progress. As Volkow explained, "Nine months ago we started approaching the car guys and we now have 20 pilots with nine manufacturers including Daimler and BMW. We have five million cars connected. We will go live and create a business soon. GM OnStar has been around for 18 years with 5.5 million cars. We will take the data from the car guys and normalize, encrypt, and massage it then take a percentage of the revenue from selling it to companies."
Otonomo has expanded its employee base. "17 months ago it was just two people and now we have 50. 30 are in R&D in Israel We hire friends of friends -- most of whom were in the army -- units such as 8200 -- they have IQs of 140. We have 20 sales and business development guys in Israel, the U.S., Asia, and Europe. The first 20 to 30 people we hire are critical and we want people who fit out culture -- we find out what they can teach us technically and whether we will enjoy working with them."
Volkow's describes himself as a serial entrepreneur. For example, F5 Networks acquired Volkow's Traffix Systems in February 2012 for $135 million. If otonomo can really monetize car data, it would not surprise me to see Daimler, BMW and its other partners growing much faster. And Volkow would then have the biggest winner of his career.