Funding for autonomous vehicle startups is again on the rise, and self-driving cars on city streets aren’t the only investment opportunity as the technology becomes a key part of commercial transportation.
In Q2 2024, autonomous driving startups received $2.9 billion in funding, according to PitchBook’s latest Mobility Tech report, more than any other area of the vertical—defined as innovations advancing the transportation of both people and goods. This was self-driving technology’s strongest quarter since its peak in Q3 2021.
Though the promise of self-driving passenger cars are likely what most people think of when someone says “AV,” those vehicles only make up a portion of the potential market.
Startups are looking for those other opportunities. Their big question?: “Where are there unique business cases in which autonomous driving really solves something definitive?” said Jonathan Geurkink, a PitchBook analyst covering mobility tech and supply-chain tech.
One definitive advance is in supply-chain yard operations, where—according to VC-backed AV maker Outrider—over $60 billion is spent annually to move large containers from trucks to designated spots in a yard and then back again, enabling a massive range of goods to reach their end markets.
Outrider, founded in 2017, is a Colorado-based startup building autonomous electric vehicles and software to address what Geurkink describes as a “bottleneck in the distribution system.” The company last raised a $73 million Series C in late 2022.
“Pretty much everything you’re wearing or ate today, the buildings and chairs you’ve sat in, everything that we eat, use, and make, is passing through these yard environments,” said Andrew Smith, CEO of Outrider.
Outrider’s vehicles are all-electric and move trailers in yard environments. Smith said on average, each AV makes about 6-12 trips per hour, moving trailers that weigh up to 60,000 pounds with each trip.
Powered by its software, Outrider says it can drop one of its new autonomous vehicles into existing supply chain operations and have the system run smoothly. This is similar to how a Waymo self-driving vehicle is able to drive alongside a manned car.
Yard operations are just one example of how autonomous vehicles are being integrated into daily transportation.
Companies like Alameda, Calif.-based Pyka, which builds autonomous driving planes for cargo transportation to inaccessible areas, are also gaining traction. The company just raised a $40 million Series B this week.
And Gatik, which specializes in trucks for local goods distribution to customers like Kroger and Walmart, raised its latest funding round in August, bringing its total funding to $273 million.
A major concern for AVs in general is how they will be integrated into existing transportation. At the Goldman Sachs Communacopia & Technology conference in San Francisco earlier this month, Lyft’s CEO David Risher spoke about the company’s plans to experiment with the integration of autonomous vehicles into its operations, including by partnering with startups. Risher referred to AV development as a “tailwind” for Lyft and the rideshare industry.
Rideshare platforms like Lyft and Waymo are also looking for ways to introduce autonomous vehicles into their current systems. Instead of paying a driver for a ride, for example, Risher’s model for Lyft would have customers paying the AV’s owner.
Outrider’s vehicles operate in a more isolated environment, but the strategy of slow integration by dropping autonomous vehicles into the same environment as human-driven ones is similar.
“Outrider built its system specifically to address the legacy of tens of thousands of existing distribution yards,” Smith said. “We’ve developed these autonomous systems to link directly to what customers are doing [already].”
What remains for most AV developers is the question of how and when people will adapt to this new technology. Lyft and Uber drivers have already protested driverless cars, adding to general unease about human labor being replaced by AI technology.
But removing humans from riskier and more laborious working environments like supply yards could move people to safer jobs that utilize human abilities for applications that AI and automation just can’t touch.
“The whole idea of this automation for our customers,” said Smith, “is to allow human capital to be allocated towards higher and higher purpose.”
Featured image by anucha sirivisansuwan/Getty Images
