Self-driving startups race down a narrowing road
DETROIT/SAN FRANCISCO: Lei Xu and Justin Song once worked at electric carmaker Tesla Inc, one of the hottest companies in Silicon Valley. But with interest and investments in autonomous vehicles mounting, they left to pursue what they see as the next big thing.
Their company, Nullmax, is one of more than 240 startups worldwide, including 75 in Silicon Valley, attempting to design software, hardware components and systems for future self-driving cars, according to a Reuters analysis.
Xu and Song are bankrolled by corporate money, but unlike many of their fellow entrepreneurs, they skipped funding from Silicon Valley venture capitalists. Founded in August 2016, Nullmax got US$10 million from a Chinese firm, Xinmao Science and Technology Co.
By seeking corporate backing in China, the Nullmax founders managed to sidestep an issue facing other startups in the sector: While big automotive and technology companies are pouring billions into the autonomous vehicle space, Silicon Valley investors so far have been fairly restrained in increasing their bets.
Headlines have been dominated by old-line players such as General Motors Co, which jolted the industry last year when it bought a tiny San Francisco software company called Cruise Automation for a reported US$1 billion.
Just this week, top-tier supplier Delphi Automotive PLC acquired Boston-based software startup nuTonomy for US$450 million.
Now, “every startup thinks they will get a billion dollars” in valuation, said Evangelos Simoudis, a Silicon Valley venture investor and an advisor on corporate innovation.
However, investment in untested startup companies remains relatively modest despite all the buzz and lofty expectations.
Total funding of self-driving startups from both corporate and private investors has barely topped US$5 billion, the Reuters analysis of publicly available data shows.
With the notable exceptions of Andreessen Horowitz and New Enterprise Associates, few of the big Valley venture capital firms are heavily invested in the sector.
Overall, only seven of the top 30 self-driving startups have received later-stage funding, the Reuters analysis shows, an indication that some venture capitalists are ambivalent about the industry’s potential.
Sceptics note that few of the startups are making money. And established auto and parts compa- nies have not demonstrated a clear path to revenue and profitability in autonomous vehicles despite their big bets in the space.
Another sticking point: While the initial wave of self-driving vehicles is expected to begin commercial service in 2019-2020, experts expect the transition from human-driven to automated cars could take a decade or more to roll out.
Cautions Sergio Marchionne, chief executive officer of Fiat Chrysler Automobiles: “You can destroy a lot of value by chasing your tail in autonomous driving.”
All told, US automotive and technology firms likely have invested some US$40 billion to US$50 billion in self-driving technology in recent years, mainly through acquisitions and partnerships. — Reuters