Waymo, the autonomous driving unit of Alphabet, announced Tuesday that it has raised a further $750 million in external investment. This investment is right behind the $2.25 billion financing the company raised in March — its first-ever non-Alphabet investment.
Waymo’s idea of raising $3 billion in external investment when its parent company is cash-rich Alphabet might raise some eyebrows. However, companies like Waymo and Cruise, the autonomous vehicle (AV) unit of General Motors, going for external funding only highlights the financial strain that autonomous driving technology development can place on companies.
The massive investment that Waymo has raised also signifies the trust investors have in Waymo, as it continues to be a market leader in the AV market. With investors consistently rewarding more prominent companies than smaller startups in the AV segment, market consolidation can be an expected outcome in the future.
That said, the AV segment has only found new wings amid the economic slowdown, as the concept of social distancing plays to its advantage — cue the driverless taxis that will become conceivable with the introduction of truly autonomous cars.
Surveys of urban residents have shown that people who use public transport for short trips would look to shift to driverless taxis if given an option — considering the new normal of social distancing. Waymo’s self-driving minivans that have operated across Arizona and California would likely find more takers once operations resume post-pandemic.
In its statement, Waymo mentioned that the financing was an extension of the previous $2.25 billion investment. This round, like the previous one, was advised by T. Rowe Price Associates, Perry Creek Capital and Fidelity Management & Research Co. while including participation from external investors.
“We’ll use this injection of capital to deepen our investment in our people, our technology, and our Waymo One and Waymo Via operations,” said John Krafcik, the CEO of Waymo, in his statement. “COVID-19 has underscored how fully self-driving technology can provide safe and hygienic personal mobility and delivery services. We’re grateful these partners share our mission to make it safe and easy for people and things to get where they’re going.”
Krafcik mentioned that Waymo’s recent interest in external investment was not rooted in concerns about a pandemic slowdown. Waymo’s sentiment is in line with the current market scenario in which Cruise has raised over $7 billion from external investors, including Honda Motor Co., while Ford-backed Argo AI committed Volkswagen to an investment of $2.6 billion.
Over the past decade, Waymo and Cruise have steadily widened their lead in the AV segment, with the companies needing the fewest human interventions for every 1,000 miles driven. Waymo vehicles currently clock 13,219 miles on average before they require human intervention, while Cruise vehicles clock 12,221 miles on average before taking assistance.
The financial enormity and the technology’s complexity would mean that several smaller firms will either fold or will consolidate with bigger rivals. Recently, Starsky Robotics, an autonomous trucking startup, had to shut its doors after the company was overwhelmed by the “unmet promise of artificial intelligence to focus on a practical solution.” This, combined with investment drying up, proved to be too much for Starsky.