A quick peek inside Fontinalis, one of Detroit’s best-known young venture firms
Fontinalis, the 12-year-old early-stage venture company based in Detroit, is known for being among the first investment outfits to focus entirely on mobility as an overarching theme. It wasn’t a surprising mandate, as the outfit co-founders include Bill Ford, Henry Ford’s great-grandson and the chairman of the Ford Motor Company.
Even so, the company has used its ties to the traditional automotive industry to compete effectively against and invest alongside many Silicon Valley venture companies over the past few years, creating an interesting portfolio. It was involved in Postmates, which Uber acquired as part of an all-stock deal, and Lyft, for example. It also backed the self-driving startup nuTonomy, which was sold to auto supplier Delphi Automotive for $ 450 million in 2017. Some of his newer bets include Gatik, a startup developing an autonomous stack of vehicles for B2B short-haul logistics; Robust.AI, a startup working on a cognitive platform for industrial-grade robots; and Helm.ai, a maker of driverless car AI.
To get a better sense of what makes a deal appealing to Fontinalis, and to understand how a Detroit venture company ensures that the founders it wants to work with are front and center, we recently worked with Dan Ratliff, an investor, spoke to Fontinalis, who joined the company almost seven years ago. Our chat has been slightly edited lengthways.
TC: Are you a native of Detroit?
DR: I am a native of Michigan. I grew up in the metropolitan area. I went to Michigan State. I’ve been here all my life, except for a year in Nashville for graduate school, and when I graduated I moved straight to downtown [in Detroit].
TC: Where does the name Fontinalis come from?
DR: It’s a Latin name and the name of a conservation group outside of Bill [Ford] Cultivated many of his thoughts on protection and spent much of his youth fly fishing. He also joked that there was no way that this name was adopted.
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TC: How much of the company’s funding is from Ford Motor Co.?
DR: Fontinalis is very separate in terms of design. We wanted to be independent and not a strategic VC or Bill’s family office. From day one we went to outside LPs and pulled 20-30 LPs into our first fund, including high net worth companies [individuals], Family offices and some institutions. Ford wasn’t even an LP. The company has since been added, but not in a majority position. We also now have a handful of corporate investors, including an unannounced OEM and insurance company. And we have family offices with connections to mobility and the transport industry who have a keen interest in how mobility develops and affects their companies. We have raised $ 260 million for our funds to date.
TC: That’s a surprisingly conservative amount in the current market. Obviously we are seeing a money robbery like no other on the coasts.
DR: We see this as an opportunity for several decades, but there is a chicken and egg problem in the Midwest. There is no such thing [ample] a base of angel investors. There are a handful of venture funds out there, but not like on the coasts where you have a lot of founders or people who have been part of companies that have made a lot of money and understand the risk / reward profile. Here, [people are] more conservative; They might have made their fortune in more traditional, as opposed to high-growth, start-up industries.
I think Duo Security is selling to Cisco [for $2.35 billion in 2018] and StockX’s incredible rise, we’re developing the right tailwind to build an ecosystem, but it takes a lot of different things, including people who are used to working in high-growth companies and willing to take risks [in the form of equity grants and less] Salary.
TC: Fontinalis has a wide range of bets including a cognitive platform for robots. What is the through line?
DR: The company’s high-level mission is to invest in companies and technologies that impact the efficient movement of people and goods. The automotive industry is one component, but so are supply chains and logistics, as well as AI and big data and their effects. So we will invest in all modes of transport – road, rail, bicycle, air. We also invest in vertical technologies like cybersecurity and additive manufacturing.
TC: These are mostly seed and Series A checks?
DR: We invest in areas A and B as well as in startups in the seed stage and in later investments. We see ourselves bringing the same value that a strategic investor could bring without the terms and conditions attached, as we work with many other corporate VCs and mobility-focused VCs and we are trying to see if we can help with that [business development] Page to get the startup in front of the right person at the right company.
TC: Is there a particular focus on trying to fund startups in Detroit and the wider Midwest?
DR: Our mandate is not geographically specific. We have investments on both coasts of northeast Boston, Tennessee [where Fontinalis’s portfolio company, FreightWaves, the market forecasting and analytics platform is based]. We have offers in Switzerland and Israel. We look globally; We are more concerned with creating added value.
TC: One of the other founding partners of Fontinalis, Chris Cheever, is based in Boston. Has the company ever considered moving outside of Detroit?
DR: No, two of our founding partners are based here. A lot of the companies we’ve funded are also coming because of the infrastructure here on the manufacturing side and things like the Michigan Mobility Center, and we can both facilitate many of these launches and be a constant man on the ground ‘for companies that aren’t based here .
TC: Does Detroit have professional service companies to host startups?
DR: We have seen a number of law firms over the past five years [that work with startups] Plant flags in Ann Arbor and it’s encouraging to see.
From a business perspective, you also have the University of Michigan research corridor, as well as the automotive and OEM suppliers, and access to mechanical and electrical engineers whose skills are as strong and competitive as anywhere in the country. There has been a major focus over the past five years, including from policy makers in cities and states. [to strengthen Michigan’s positioning] including through the Office of Future Mobility and Electrification and Detroit’s arm for economic development, which brings startups to the city. There are tons of resources in the back of what you saw on the property page and all that [billionaire investor] Dan Gilbert did [for the city]This includes buying skyscrapers, creating Class A office space, and remarketing.
TC: I had the chance to speak to Dan about the quality of life there, and he’s obviously a big advocate.
DR: Michigan and Detroit are super unique. The suburbs have a really strong school system and Detroit is fantastic to live in. It feels like its own startup, with new restaurants and new buildings and people all over the terrace, even if Detroit retains its historic flair with lots of 100-year-old buildings. You also have the Great Lakes and skiing and the great outdoors. You can make comparisons with other startup hotbeds, but there are certain aspects that can be found in Michigan.
TC: Anecdotal, does it feel like people who grew up there are staying instead of going in other directions?
DR: When I was a college student, 75% of people said, “I’m going to Chicago or New York.” That has changed. Now people are moving to downtown Detroit. There is high-end real estate, one aspect of walkability, and if you are a sports or music fan the access to such things is second to none. You don’t have to plan anything as there are 10 different things to choose from on a Friday night, from theaters to stadiums to art galleries. There are a ton of things that attract different types of people.