With Fresh $2.6B, Autonomous Driving Looks As Expensive As Ride-Hailing

Morning Markets: Akin to ride-hailing, autonomous driving looks like a project whose cost has no upper bound.

Ride-hailing companies don’t make money. It’s nearly a law of business. I think that we can add another, related writ to the first, namely that autonomous driving startups always need another billion dollars.

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Or more, as we learned today on the news that Argo AI has picked up $2.6 billion in what TechCrunch calls “capital and assets” including a $1 billion primacy investment, a $500 million secondary buy of shares from Ford, among other transactions in the VW-led deal.

You have heard of Argo AI (we’ve covered it here, and here), but I doubt that you knew the scale of capital that the group has needed to power its operations. For example, Argo raised $1 billion in commitments from Ford before the current capital event.

Argo is worth around $7 billion after the transaction.

The new funds mean that Argo, one player in the realm of autonomous driving, is closer to $4 billion in capital raised than it is to $3 billion if I’m adding correctly (there’s some nuance to the deal structure). And what strikes my memory is how that sum isn’t shocking when we consider other huge deals in the niche.

Here’s a quick rundown of some recent deals in the autonomous sector:

• $100 million for Luminar’s LiDar technology in  July of 2019. The San Francisco-based company has now raised $250 million to date.
• $1.15 billion for Cruise, part of the General Motors world. The recent May 2019 transaction follows a $750 million round, a $3.4 billion round, and several smaller investments. The firm’s total capital raised is, if we’re adding correctly this early on a Friday, around $5.5 billion.
• $1 billion for Uber’s Advanced Technologies Group, which had previously found financing from Uber’s own coffers. That became ruinous, so Uber found friends to share the load.
• $940 million for Nuro, a company building a “self-driving vehicle made for local goods transportation” picked up nearly $1 billion in February, 2019. This time it was SoftBank money of all things. But what’s clear is that there are folks in the autonomous driving world willing to remove humans entirely from cars. That’s actually cool.
• $530 million for Aurora, a San Francisco-based autonomous driving startup that has now raised $690 million after counting its huge February, 2019 transaction. The firm later poured $70 million more into its coffers.

Toss in Tesla’s recent capital raises and the picture becomes even more crowded. Bear in mind that all the above rounds are merely the $100 million or greater rounds invested into autonomous driving companies since the start of 2019. Loosen the rules, say, adding rounds between $50 million and $100 million, and you can find even more deals.

All this to say that the venture-backed and corporate-sponsored bet on self-driving technology is getting longer and longer each day. And so far as I can tell from where I sit, only Alphabet’s Waymo has managed to begin anything approaching commercial operations.

How long these bets can continue before any player in the space can show even a partial return on investment in other than mark-up terns isn’t clear. But the answer as far as today goes is one word: longer.

Update: Luminar’s total funds raised was updated after publication, per the company’s own information.

Illustration: Li-Anne Dias.