Last week, Cruise announced it will suspend its self-driving taxi program across the country after losing its permit to operate in San Francisco due to an incident with a pedestrian.
The announcement came almost exactly a year after another autonomous vehicle startup — Ford Motor-backed Argo AI — shuttered after raising $3.6 billion in funding from investors such as Ford Motor, Volkswagen Group and Lyft.
The moves are another blow to a sector where venture dollars have slowly been decreasing.
Thus far this year, autonomous driving startups have raised less than $4.5 billion — which puts the sector on pace for its lowest funding total since 2020, per Crunchbase data.
Deal flow also has declined significantly — with only 139 deals completed so far this year in the sector — the lowest number in at least six years.
Funding to autonomous vehicles hit a high in 2021 — as did most venture-funded sectors in what was a record-breaking year for VC investment — when the industry received $12.5 billion in 264 deals. That was led by Cruise raising and upsizing a massive round worth $2.75 billion total.
However, cracks in investors’ belief in the sector may have started the following year. In February 2022, SoftBank did not release a promised $1.35 billion to Cruise 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.
It is now clear SoftBank and its Vision Fund were going through their own internal issues, but that does seem to be the first domino that fell in a chain of bad turns for the autonomous driving sector.
Still some big rounds
That’s not to say funding has dried up entirely.
Pittsburgh-based self-driving commercial trucking startup Stack AV reportedly raised $1 billion in September (from SoftBank, no less), and others such as Beijing-based Didi Woya, Fremont, California-based Pony.ai, and others have raised big rounds.
But there seems to be little doubt investors have been pulling back on the sector — and Cruise’s recent announcement likely will not help.
Last year, Ford said Argo AI tried but wasn’t able to attract new investors before it closed. Big automakers seemingly are now more willing to try to develop more of the technology internally than invest in startups.
When Argo closed, Ford said it may buy autonomous-vehicle technology in the future and Volkswagen — another Argo AI backer — said it will continue working with its in-house Cariad unit on the tech.
That, however, also seems to be facing issues as just last month Volkswagen announced it wanted to cut 2,000 jobs at its Cariad unit as part of a restructuring plan.
Autonomous vehicles seem to be the future, but right now investment seems hard to come by as both automakers and VCs are shifting gears.
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