Self-driving startups race down a narrowing road

Nullmax CEO Lei Xu drives a Lincoln MKZ sedan equipped with self-driving hardware and software in Fremont, California. (Reuters)
Updated 27 October 2017

Self-driving startups race down a narrowing road

SAN FRANCISCO: Lei Xu and Justin Song once worked at electric carmaker Tesla, one of the hottest companies in Silicon Valley. But with interest and investments in autonomous vehicles mounting, they left to pursue what they see as the next big thing.
Their company, Nullmax, is one of more than 240 startups worldwide, including 75 in Silicon Valley, attempting to design software, hardware components and systems for future self-driving cars.
Xu and Song are bankrolled by corporate money, but unlike many of their fellow entrepreneurs, they skipped funding from Silicon Valley venture capitalists.
Founded in August 2016, Nullmax got $10 million from a Chinese firm, Xinmao Science and Technology.
By seeking corporate backing in China, the Nullmax founders managed to sidestep an issue facing other startups in the sector.
While big automotive and technology companies are pouring billions into the autonomous vehicle space, Silicon Valley investors so far have been fairly restrained in increasing their bets.
Headlines have been dominated by old-line players such as General Motors, which jolted the industry last year when it bought a tiny San Francisco software company called Cruise Automation for a reported $1 billion. Just this week, top-tier supplier Delphi Automotive acquired Boston-based software startup nuTonomy for $450 million.
Now, “every startup thinks they will get a billion dollars” in valuation, said Evangelos Simoudis, a Silicon Valley venture investor and an adviser on corporate innovation.
However, investment in untested startup companies remains relatively modest despite all the buzz and lofty expectations.
Total funding of self-driving startups from both corporate and private investors has barely topped $5 billion, the Reuters analysis of publicly available data shows.
With the notable exceptions of Andreessen Horowitz and New Enterprise Associates, few of the big Valley venture capital firms are heavily invested in the sector. Overall, only seven of the top 30 self-driving startups have received later-stage funding, the Reuters analysis shows, an indication that some venture capitalists are ambivalent about the industry’s potential.
Skeptics note that few of the startups are making money. And established auto and parts companies have not demonstrated a clear path to revenue and profitability in autonomous vehicles despite their big bets in the space. Another sticking point: While the initial wave of self-driving vehicles is expected to begin commercial service in 2019-2020, experts expect the transition from human-driven to automated cars could take a decade or more to roll out.
Cautions Sergio Marchionne, CEO of Fiat Chrysler Automobiles: “You can destroy a lot of value by chasing your tail in autonomous driving.” All told, US automotive and technology firms likely have invested some $40 billion to $50 billion in self-driving technology in recent years, mainly through acquisitions and partnerships.
The full extent is hard to know because big players such as Alphabet, whose Waymo subsidiary is considered among the frontrunners in the arena, have not revealed the full scope of their investments, although it is believed to be in the billions. Among the top corporate investors in the sector are Samsung Group, Intel, Qualcomm, Delphi and Robert Bosch. Corporate investors also have backed five of the six self-driving startups with valuations of $1 billion or more.
Whether the industry is poised to produce more such unicorns is now a topic of much debate.
Two former investors in Cruise Automation, for example, are poles apart in their views of self-driving vehicles and technology. Veronica Wu, managing partner in Palo Alto-based Hone Capital, said her company continues to invest in “quite a number” of self-driving startups, while acknowledging that the technology will take time to deploy.
“It’s a matter of when, not if,” she said. “We’re fairly optimistic.”
In contrast, Sunny Dhillon of Signia Venture Partners, another Cruise investor, said his firm does not see any attractive investments in the sector right now.
The hefty price paid by GM for Cruise, he said, “made the space very frothy, with every computer vision and robotics PhD student seemingly emerging with a new self-driving car startup.”
In addition, he said many established players “already have made their big investments (and) acquisitions” in the sector. That could limit investors’ potential returns and entrepreneurs’ payoffs down the road.
Quin Garcia, a partner in San Francisco-based AutoTech Ventures, concurs that the space is crowded and valuations are inflated. There may still be “a select few IPOs, but there will be many failures of autonomous vehicle startups” by 2021, he said.
Those odds haven’t deterred Nullmax founders Xu and Song, who are looking to differentiate themselves.
With many self-driving startups looking to supply US and European automakers, the Chinese-born entrepreneurs, whose specialties are camera-based vision systems and artificial intelligence, are focused on China. They expect to deliver the first partially automated systems to Chinese automakers by 2020.
The US-educated entrepreneurs, both 35, now work out of a small shop in Fremont, not far from Tesla’s sprawling home factory.
Xu once worked at Tesla as a senior engineer while Song specialized in supply chain and quality engineering. Tesla declined to confirm their prior employment.
Xu said the company employs about 50 people, most of them in a larger office in Shanghai.
He said the company wants to keep a foot in California, which is a hub of US tech talent, and where regulators have smoothed the way for testing of self-driving vehicles.
As for how Nullmax plans to cash out, Xu navigated around that question.
“We’re pretty busy,” he said. “We don’t have much time to think about an IPO right now.”
— Reuters


Beijing tariff demands may expand US-China ‘phase one’ trade deal significantly

Updated 20 November 2019

Beijing tariff demands may expand US-China ‘phase one’ trade deal significantly

  • Beijing wants Trump to eliminate the 15 percent tariffs on about $125 billion worth of Chinese goods imposed on Sept. 1

WASHINGTON: A “phase one” trade deal between the United States and China was supposed to be a limited agreement that would allow leaders from both countries to claim an easy victory while soothing financial markets.
But it may morph into something bigger if US President Donald Trump agrees to Beijing’s demands to roll back existing tariffs on Chinese goods, people familiar with the talks say.
China’s commerce ministry said this month that removing tariffs imposed during the trade war is an important condition to any deal. The demand has US officials wondering if higher Chinese purchases of US farm goods, promises of improved access to China’s financial services industry, and pledges to protect intellectual property are enough to ask in return.
Two people briefed on the talks said Trump has decided that rolling back existing tariffs, in addition to canceling a scheduled Dec. 15 imposition of tariffs on some $156 billion in Chinese consumer goods, requires deeper concessions from China.
“The president wants the option of having a bigger deal with China. Bigger than just the little deal” announced in October, said Derek Scissors, a China scholar with the American Enterprise Institute in Washington.
Scissors, who consults with administration officials, said whether Trump will agree to remove existing tariffs depends largely on whether he believes it will benefit his re-election chances. Some White House advisers would like to see China agree to large, specific agricultural purchases, while the US maintains existing tariffs for future leverage.
That would help Trump’s farm belt constituency while allowing the president to campaign on maintaining his “tough on China” stance, which holds appeal to voters in key states like Ohio, Michigan and Pennsylvania.
But Beijing is balking at committing to a specific amount of farm product purchases, within a particular time frame, and wants to let supply and demand dictate deals instead.
Beijing also wants Trump to eliminate the 15 percent tariffs on about $125 billion worth of Chinese goods imposed on Sept. 1, as well as provide some relief from the 25 percent tariffs imposed on an earlier, $250 billion list of industrial and consumer goods.
One Washington-based trade expert said that to achieve the $40-50 billion in annual Chinese purchases of American farm goods touted by Trump in October, he would likely have to eliminate all of the tariffs the US put in place since the trade war started in 2018.
Trump and US Trade Representative Robert Lighthizer recognize that making such concessions for a “skinny” trade deal that fails to address core intellectual property and technology transfer issues is not a very good deal for Trump, a second person briefed on last weekend’s trade phone call said.
Trump is the final decision-maker in the US on any deal, and hasn’t committed to any specifics so far, White House advisers say.
The president said Tuesday that China “is going to have to make a deal that I like. If they don’t, that’s it.”
A ‘phase one’ trade deal, once expected to be completed within weeks of an October news conference between Trump and Chinese vice premier Liu He, could now be pushed into next year, trade experts say.