Autonomous vehicles (AVs) have exploded onto the venture landscape in the last 24 months as one of the most exciting and potentially transformative technologies of our time. Driven by advances in computer vision and deep learning, and building on over two decades of research in the space, AVs finally appear poised to enter mainstream usage in the near future.
We recently had the privilege of investing in Optimus Ride as part of their series A — a team that we believe is one of the best teams in the world pursuing the full-stack AV opportunity. Having spent many months researching the space, we thought this was a great opportunity to share our views on the investing landscape for AVs and why we are so excited about Optimus Ride.
Much has been written about how AVs will affect the world around us and how they will transform the multi-trillion dollar transportation industry. I particularly liked this recent article by the former vice-chairman of GM. While it seems certain the world will be affected in myriad ways, as investors we think deeply about the path to that end-state, and where to make investments to help accelerate that journey.
As we spoke to numerous AV companies and experts, three themes emerged as a guide to our investment thesis:
1) The technology is really hard. Building an AV requires being at the forefront of technology across many capabilities, including machine vision, sensor fusion, control systems, and system integration. In addition, given the high demands on safety and reliability, real-world experience is extremely important. There are only a small handful of teams in the world who have both the technical skills and real-world experience that are required for success.
2) Near-term use cases are critical to success. Enabling generalized AV uses cases across all vehicle types, road situations, speeds, and geographies is the ultimate goal, but getting there will take time. Finding more achievable near-term use cases are critical, both in terms of maintaining momentum for a start-up and in enhancing the real-world experience required to service a broader and broader set of use cases. Identifying those uses cases requires a deep understanding of how the urban mobility landscape is changing and it requires the ability to work with cities and communities to define realistic roll-out plans for AV solutions.
3) The window of opportunity for full-stack AV start-ups is limited. The technology arms race for AVs across auto OEMs, tier 1 suppliers, and tech majors is well-underway. AV start-ups have a unique advantage right now in terms of speed of execution and innovation, particularly in this nascent stage of the industry. However, in the long term, access to resources will put incumbents at an increasing advantage for production-scale rollouts. Today, many incumbents are jump-starting their efforts in the space through M&A, which has led to multiple significant exits for full-stack companies (e.g., Cruise acquisition by GM, Otto acquisition by Uber, nuTonomy acquisition by Delphi). However, as the technologies standardize, only a few full-stack start-ups will be able to maintain technology differentiation, and instead, we will see an emerging ecosystem of best of breed start-ups specializing in various parts of the AV stack.
As we got to know the team as Optimus Ride over the last several months, we came away increasingly impressed by how well positioned they are across each of these themes. From a technology perspective, the Optimus team is truly world class. The team has worked together for nearly a decade at MIT building AVs, and they are one of the few successful finishers at the 2007 Darpa Urban Challenge, which has proven to be the breeding ground for most of the best AV companies today. This mix of cutting-edge research and real-world experience building AVs is extremely rare. The Optimus team also has extensive experience researching and developing next-generation urban mobility solutions. This experience has enabled them to be very thoughtful about specific use cases for early deployments, provided unique insights into customer experience requirements, and has allowed them to quickly become trusted thought partners to the cities and communities they seek to serve.
We also believe Optimus may be one of the last of the full-stack AV start-ups to get significant investor backing. Though there are over two dozen venture-backed, full-stack start-ups, there is only a small handful (including Optimus) that have the resources to break away from the pack and build meaningful stand-alone businesses or be the next huge M&A exit. As their technology lead grows, investor interest will shift away from full-stack start-ups and toward companies building best-of-breed capabilities for each piece of the technology stack — e.g., mapping, sensing, perception, testing/simulation. We are already seeing the early stages of this shift, and having met many of these companies, we are extremely impressed by what we see.
The journey to our autonomous future will be incredibly exciting and is well underway. We feel fortunate to have the opportunity to partner with Optimus Ride to help get there!