In recent months, economic fallout from the coronavirus outbreak has upended some of the buzziest startups, notably ones that had secured billions of venture capital dollars without demonstrating a clear path to profitability.
On Friday, Amazon announced it has acquired self-driving vehicle company Zoox. The startup reportedly had a round of layoffs in April and faced difficulties raising new cash. Its sale resulted from a wide range of challenges in keeping a company in the autonomous driving space afloat.
It also brings Amazon into the ranks of other corporate efforts to build autonomous vehicles.
In 2019, Argo AI closed a $2.6 billion deal with Volkswagen, making Ford and Volkswagen equal minority shareholders in the self-driving company. Uber acquired Pittsburgh-based Otto, which offers self-driving robot technology and services for research and industrial clients, for more than $600 million in 2016. And General Motors bought Cruise the same year.
Amazon’s deal to buy Zoox was reportedly valued at $1.2 billion—a significant haircut from the $3.2 billion figure the startup reached less than two years ago when it raised $500 million from investors including Grok Ventures and Primavera Capital Group. To date, Zoox has raised $990 million, according to PitchBook data. Its last round was a $200 million convertible note from Lux Capital in October.
With a new cash fountain, Zoox will be able to continue development of its robot taxi with the goal of deploying the vehicles.
In February 2019, Amazon participated in a Sequoia-led $530 million Series B for Aurora, which is developing hardware, software and data services needed to power self-driving tech. But Zoox marks Amazon’s first acquisition in the autonomous vehicle industry.
A handful of startups in the space have been facing pressure to reduce costs as they undergo testing phases. Companies such as Waymo, Cruise and Pony.AI have suspended testing due to the pandemic. And in April, Ford said it was postponing plans to launch its autonomous vehicle commercial services with Argo.AI to 2022 due to the coronavirus outbreak.
“In the near term, we expect a pullback in investing in autonomous technology as automakers and suppliers reduce spending in the space,” said emerging tech analyst Asad Hussain in PitchBook’s mobility tech report. “This pullback will primarily affect earlier-stage providers with lower market share, shorter cash runways and fewer established partnerships.”
The autonomous vehicle industry is expected to grow to $41.4 billion by 2030, according to a PitchBook report, through the sale of vehicle software, sensors and other hardware. Investment in the industry reached a record $3.4 billion in Q1, driven largely by Waymo.
The article has been updated to reflect that Argo AI is an independent company.
Leah Hodgson contributed to this report.
Featured image via Gabe Pierce/Unsplash
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