Scott Walbrun: Promoted to Principal at BMW i Ventures

We are excited to announce the promotion of Scott Walbrun to Principal on the BMW i Ventures team. Scott joined us a little over a year ago as a Senior Associate and has worked on our investments in Fox Robotics, Mangrove Lithium, and Lilac Solutions. He also serves as a Board Observer to our portfolio companies Fox Robotics, GaN Systems, Bus.com, May Mobility, and GenXComm. In the interview below, Scott provides his insights into his current role at BMW i Ventures, how he thinks through investments, and what makes him tick as an investor.

1.     Could you share more about your background before joining BMW i Ventures?

Prior to joining BMW i Ventures, I provided M&A and capital markets advisory to technology companies and investors as a member of Jefferies’ Technology Investment Banking team. I joined Jefferies after completing my MBA at the University of Chicago Booth School of Business.  While completing my MBA, I worked at Kinzie Capital Partners evaluating private equity investments, as well as at the Polsky Center for Entrepreneurship and Innovation supporting the commercialization of science-based and deep tech companies.

Prior to business school, I spent two years managing strategic finance at Truck Hero, where I focused on executing on the company’s platform acquisition strategy, driving strategic initiatives alongside the leadership across the 13 subsidiary companies, and scaling up the FP&A function.

I began my career in Fiat Chrysler’s Finance Leadership Development Program, where I supported teams across corporate development, product development, manufacturing, and sales and marketing. The hallmark of my experience at Chrysler was the year I spent living in Mexico City, Mexico, where I was responsible for the negotiations and strategic development of a new joint venture financing company, FCA Financial Mexico.

2.     What key learnings would you take away from your first year working at BMW i Ventures?

I have learned so much over the past year that it is hard to believe that it has only been one year! I believe investing is an apprenticeship business, and this is especially true because of the early-stage of companies we focus our investments.

For example, seeing great entrepreneurs in action at board meetings helps me to recognize potential greatness in the entrepreneurs of the new companies I am meeting. Also, spending every day with industry leaders and technology innovators provides such valuable perspective not only in those specific domains, but also by building out a broad mental model that applies more generally across technology and market spaces. 

Another key learning for me is how to construct venture portfolios. When I first joined the fund, I did a deep-dive into portfolio construction to make recommendations for our newest fund. Appreciating how the Power Law defines the venture investing landscape, as well as how initial ownership levels, future dilution, probabilities of success, liquidity, and follow-on reserves all weave together is unlike any other asset class.

3.     How have the skills you developed in your pre-VC work played into your new role?

As you can probably tell from my bio, my career path has been anything but linear. However, each of my prior experiences has given me a unique set of tools that I leverage every day. For example, starting my career in automotive was essential to understanding the intricacies of this industry and the potential barriers to the adoption of new technologies. My time as an operator at the fast-growing company Truck Hero was helpful, as I handled personnel challenges and implemented repeatable, scalable processes. Working with very early-stage deep tech companies in the various accelerator programs at the Polsky Center for Entrepreneurship and Innovation has shown me how entrepreneurs overcome growing pains and break away from the proverbial “zero to one” stage. Last, my time in private equity and technology investment banking has given me a rigorous quantitative skillset to evaluate companies and better understanding of capital markets.

4.     What market verticals do you focus on?

Part of what I love best about BMW i Ventures is the breadth of verticals that we make investments in, but with a deep focus and understanding of the broader transportation industry and the ecosystem and value chain that powers it. In this first year, I have spent considerable time on robotics and automation, next-generation battery technologies, sustainability within battery supply chains, and enterprise software.

5.     Is a recession inevitable, as some economists seem to think?   

The US already met the requirements for a technical recession, so the real question is how long and how deep will this recession prove out to be?  Looking back historically, to break the back of inflation, the Fed has always had to increase the Fed Funds Rate to a level above the rate of inflation.  Today inflation is hovering in the 8-10% range, and the Fed Funds Rate is roughly half this amount. 

Therefore, there is a somewhat likely scenario where the Fed continues to raise rates over the next 12-18 months, and because technology and early-stage companies are long duration investments, valuations will continue to come under pressure.

The next question is whether the economy’s real growth will also stagnate as interest rates climb.  If real growth rates (and thus corporate earnings) face too much pressure, a more severe downturn is likely, as growth is inherently a compounding function: once it is destroyed, it must be built up from a much smaller base.

Today, however, unemployment remains at a near-historical low, consumer demand remains strong, and the Fed Funds Rate is still at a relatively historical low level, so the market environment is still relatively healthy, albeit bathed in uncertainty. Only time will tell.

6.     How has this influenced your investment approach?

The past year in venture capital has given me a short glimpse into two extremes in the venture world: the high-flying market of 2021 and the more recent, tepid environment in 2022 we are currently experiencing. 

Taking a step back, as venture capital investors, we are looking for non-consensus and correct investment decisions in early-stage companies that can create and capture immense value. These types of returns are less correlated with the broader market than investing in public stocks or bonds due to the Power Law distribution of venture investment outcomes.

For this reason alone, I think it is imperative to continue to invest in innovative companies and people throughout market cycles. Classic examples of this are Google, Salesforce, Uber, and Instagram, which were all founded and came up amid recessionary times. 

However, my investment strategy is certainly adapting to the current environment. Examples of considerations include investment-structural (e.g., valuations relative to fund size) and company-specific (e.g., risks to key milestones).

7.     What investments have you worked on since joining BMW i Ventures?

I focus on early- and mid-stage investments across sustainability & deep tech, enterprise software, mobility, and intelligent supply chain.

Since joining in August of 2021, I’ve worked on our initial lead investments in Fox Robotics and Mangrove Lithium, as well as our initial investments in the syndicates of Lilac Solutions and two others that will be announced shortly!  Additionally, I’ve evaluated and closed several follow-on investments from our existing portfolio.

Following these investments, it has been a pleasure to join as a Board Observer in Fox Robotics, GaN Systems, Bus.com, May Mobility, and GenXComm.  

It has been a busy year for us at BMW i Ventures!

8.     Into what big technology and market trend do you have the most conviction to invest?

This past year I have spent a lot of time looking for investments related to two key mega trends: the electrification of vehicles, and robotic automation, and their implications are massive.

Electrification. Electric vehicle batteries have experienced a 10x drop in the price per kWh since 2012, and they will soon be more affordable than their internal combustion engine counterparts. I believe we have reached a tipping point on this architecture, and we are in the beginning stages of switching the standard of this industry. This creates real opportunity not only in investing in the battery technologies of tomorrow, but also around investing in adjacent solutions for grid optimization & resiliency, charging networks, and sustainable critical mineral supply chains and processes.

Robotic Automation. Robotics are not only improving supply chain resiliency, improving workplace safety by automating work in dangerous environments, and creating new higher-skill jobs. Cloud computing, advances in AI/ML, and rapidly decreasing costs of sensors, screens, and processors is rapidly improving both the productivity of these solutions and the investment payback times for customers.