For the first four months of the year, it seemed like funding to autonomous driving startups — once a super hot sector — was slowly driving off a cliff.
However, since then venture funding has kicked into another gear.
Through April, less than $800 million was raised by startups in the autonomous driving industry, per Crunchbase data. However, since May 1 nearly $2.7 billion has come pouring into the sector — mainly through a handful of big deals that seem to show investor interest is not stuck in reverse.
Some of those deals that helped lead the turnaround include:
- Self-driving car startup Wayve led the reversal in early May, when the London-based startup raised $1.05 billion in a SoftBank-led round — marking one of the largest funding deals on record for a British startup.
- Two weeks ago, auto giant General Motors agreed to pump another $850 million into San Francisco-based Cruise — which is just restarting its driving programs in Phoenix, Dallas and Houston.
- Finally, just last week Toronto-based autonomous trucking developer Waabi raised a $200 million round co-led by Khosla Ventures and Uber. The company is looking to deploy its driverless trucks as soon as next year.
Those rounds now put venture funding in the sector on track to have its best year since 2021 when investment hit an incredible $12.7 billion — something that seemed unfathomable just about seven weeks ago.
Startups in the sector have already raised nearly $3.5 billion so far this year, putting it on pace to best the $5.7 billion last year and the $5.9 billion in 2022.
Ups and downs
Of course, big money and big valuations were once the norm for the industry.
In 2021, Cruise scooped up the largest round of any venture-backed U.S. startup — upsizing a round to $2.75 billion and valuing the company at more than $30 billion. Other startups in the sector such as Nuro, Horizon Robotics and Momenta also all scooped up rounds of $500 million or more.
However, the tide of venture started turning in early 2022 and autonomous driving startups felt the full effects. Incidentally, Cruise was one of the most affected, when SoftBank did not release a promised $1.35 billion as part of an agreed-upon deal when the autonomous carmaker completed a commercial deployment of vehicles. Instead, General Motors acquired SoftBank’s equity ownership stake in Cruise for $2.1 billion.
Eventually more bad news came to the space as Ford Motor-backed Argo AI shuttered after raising $3.6 billion in funding from investors such as Volkswagen Group and Lyft. In early 2023, autonomous trucking startup Embark Trucks, once valued at $5 billion, announced it was laying off most employees and winding down operations.
Then late last year, Cruise suspended its self-driving taxi program across the country after losing its permit to operate in San Francisco due to an incident with a pedestrian.
Not dead yet
Through all those travails, however, the industry is making a comeback.
It is hard to pinpoint one reason why, although there seems to be excitement over driverless trucks — perhaps as the industry has seen a driver shortage. Aside from the recent Waabi round, in Q3 last year Pittsburgh-based Stack AV — founded by the same folks behind Argo AI — raised a cool $1 billion from the SoftBank Group.
The other driving force could be (you guessed it!) AI.
Many startups like Wayve and Korea-based 42dot have pushed the AI angles of their companies hard, calling themselves mobility AI companies or something similar. In Wayve’s case, its technology works through embodied AI, where the vehicle is powered by artificial intelligence software and interacts with and continuously learns about the world. That differs from earlier attempts which relied more on lidar, radar and 3D.
It also may be a case where many of these large automakers who have invested billions of dollars in the space are just not willing to cut their losses yet. The space was heavily infused by corporate capital, and perhaps those investors are not ready to answer to disappointed shareholders quite yet.
Whatever the reasons, investors have picked up the pace when it comes to putting money into autonomous driving startups. We’ll see if it’s smooth or bumpy roads ahead.
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Illustration: Li-Anne Dias
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