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Our latest insights piece is from Jeremy Luzinda, Investment Associate at Haatch.
When I first opened Diode’s pitch-deck, I felt as though I opened an ever deepening wormhole of opportunity. Few things excite me as much as when I come across founders building products in early markets that have strong underlying momentum.
If you’ve been out for drinks recently and had the ‘future of transportation’ discussion, you’ll agree they tend to involve autonomous or electric vehicles (EV) and in some cases — both. Imagine a future of autonomous electric vehicles, think Uber 2.0 without drivers. Uber has accelerated a disassociation of transport and car ownership. So, how far-reaching is the prospect of driverless Uber taxis taking you to the station for your morning commute? In any case, an overarching constant is electric vehicles.
Let’s go deeper; Our thesis
Fast growing market
The EV market is here before our eyes, has momentum and Europe is ahead of the curve.
Last year, Europe overtook China as the largest EV market globally for the first time ever. The EV market didn’t slow-down, consider this against the backdrop of Europe’s total car market dropping 22%, stifled by the global pandemic. The Nordics, especially, present a case for precedence — last year 75% of new car registrations were electric (that’s insane!). To add, last year’s growth across the Nordics wasn’t abnormal. What wider Europe and other markets have learned from the Nordics’ success case is that the speed of transition from petrol/diesel to EV is closely related to policy instruments.
Policy as a driving force
We’ve seen it in fin-tech and other markets and we’re seeing it with EV — regulatory drivers are accelerating adoption.
The Norwegian government have made bold claims that by 2025, all new cars sold will be zero-emission. Beyond the Nordics, globally we’ve seen fiscal incentives and regulation make EV adoption more attractive through introducing or strengthening CO2 emission standards and zero-emission vehicle (ZEV) mandates. Focusing on the UK, the government announced that by 2030 all new manufactured vehicles have to be EV. There’s also the salary sacrifice scheme which improves affordability through considerably lower BIK rates compared to hybrids and petrol/diesel vehicles. Enterprises like Eon have embraced this scheme and have made EV’s available to all 10,000 UK employees. When we considered “why now?”, the answer couldn’t be more clear.
Fleets are the bridge to crossing the chasm
We see the bridge to crossing the chasm to mass-market adoption as fleets and company cars.
We see two main reasons for this:
- The ROI of EV is more clear and immediate for businesses due to reduced upkeep costs, policy incentives and market pressure to decarbonate operations.The majority of the policy incentives are targeted at fleets and company vehicles and so we’re seeing uptake driven by fleet adoption vs families buying EV’s.
- The second-hand market for EV’s is currently very small, in part, due to availability of vehicles, and their respective second hand cost. However, vehicles that are taken into businesses via Salary Sacrifice or Company cars become well maintained “young” second hand vehicles after 2–3 years making them more affordable for families, creating a path to wider market adoption.
We’re already seeing companies like DPD migrate their fleets to EV’s.
Diode are a SaaS solution for employers, employees and consumers helping them transition to EV. They assess their suitability, generate a tailored charge point roll-out plan and manage procurement of charging infrastructure through a competitive tender process. In brief, they help you decide if EV’s are the right option for you, work-out the operational logistics of how to transition to EV’s and help you find and buy the right charge points.
When a business is looking to transition their vehicles to EV’s, they turn to organisations such as leasing companies, vehicle manufacturers, dealer groups, energy companies or consultancies for help. These organisations tend to partner with one provider to “tick-the-box” and therefore massively limit optionality. Businesses don’t receive independent recommendation and might end up with too little, or too much infrastructure. Additionally, they have very few tools in their arsenal to educate and guide their customers — queue Diode. Diode look to become a core part of the transaction and also empower businesses to capitalise on the bottom-line improvements with EV. There’s also massive amounts of white space in the market as presently, the alternative are costly consultancy type projects which are time consuming.
Team Diode are well positioned for this market.
Jon Horsfield (CEO) was previously Head of Sales at Podpoint (acq. by EDF), focused on sales into peoples Homes, Vehicle manufacturers, fleets and leasing companies. His experience is already paying dividends as the team have built an impressive qualified pipeline. Building the technical infrastructure is Tristan, previously at Element Energy — a leading low carbon consultancy. He was part of the team who produced the largest study on EV charging behaviour for the National Grid ESO. Managing customer relationships and growth is Dan, CMO, who was part of the early growth team at Unidays.
We were also excited to see some small validation in a recent study around remote working which found that 1/3 of businesses would consider installing charging points in employees homes.
With an active acquisition market i.e. New Motion, Ubitricity, Chargemaster, Podpoint, Greenlots etc being swooped up by the big energy players (Shell, EDF and BP) and fleets being the route to EV adoption, we see a future where Diode is a prime target for acquisition. In the long-term, we envision EV being a beachhead and Diode becoming a broader energy company and increasing share of wallet given their access to individuals and companies’ energy habits.
It’s fair to say, we’re energised thinking about their future.
We’re always on the lookout for Founders building exciting start-ups. We’re a sector agnostic fund investing in all models with a mandate to invest in digital and software led start-ups from our SEIS and EIS funds at Pre-seed and Seed. If you’re a product-led Founder interested in having exited-Founders on board, I’d love to hear from you: https://haatch.com/pitch/
FYI — we heard about Diode through our Open-pitch Form ?