Arguably, the biggest news in the autonomy space this week was SoftBanks’ Vision Fund’s investment of $2.25B into Cruise Automation, GM’s autonomous vehicle unit. Beyond the amount of money involved, it’s worth considering some of the industry-wide implications.
The self-driving game just got much more expensive
Building self-driving cars is incredibly expensive. It’s unclear how much money Google has put into Waymo to date. But it was already over $1.1B in 2015
and clearly, they’ve put in a lot more in the past three years. SoftBank’s investment puts the recent investment in Cruise at $3.35 billion
, which turns self-driving into an arms race between Waymo and Cruise. Cruise’s shares are likely too expensive for a private player to buy and SoftBank will need a return on its investment – meaning that Cruise will, in all probability, need to eventually IPO.
This raises the stakes for all other players in the space. Self-driving car startups that have only raised hundreds of millions of dollars will need to raise far more to keep playing in the main game, or they’ll be forced to focus on a smaller problem space. The thing that these startups have going for them is that SoftBank just set a price for what self-driving companies could be worth – giving them ammunition to justify raising outsized “me too” rounds.
Competition for talent is growing
One of the key upsides to Cruise’s selling the company twice — first, as a startup to GM, and again, with an infusion of external investment from Softbank into a separate entity — is the benefits that it’ll be able to offer future employees. As Cruise’s CEO Kyle Vogt told TechCrunch, the most important aspect of this investment is the fact that Cruise is now able to offer its employees stock and equity again, which helps to “attract the greatest minds in the world.” In an already hyper-competitive market, hiring perception engineers just got even more expensive.
Cruise is GM’s big bet on the future
At the end of its life, Yahoo’s stake in Alibaba was worth far more than the company’s core assets
. An independently priced Cruise could command a much higher multiple as a technology stock while still remaining mostly on GM’s balance sheet. Much like Yahoo, GM’s transition from old guard to new could depend on a lucrative bet in these early innings.