Autonomous Vehicle Startups Attract 76% of All Auto Tech Investment

Autonomous Vehicle Startups

Automotive tech startups are attracting close to $4 billion worth of investment since the start of 2017, according to a report by CB Insights. However, two-thirds of the amount, or 76 percent, are going into the pockets of startups developing technology for autonomous vehicles thus leaving other industry segment vulnerable to under-funding and respectively slower growth and progress.

Investment in Auto Tech is Booming

Investment in auto tech is booming in the past five years, increasing from $686 million in 2013 to the impressive $4.57 billion in 2017 to date. The self-driving vehicle industry is promising huge profits and lucrative return on investment for all parties involved in manufacture and distribution of autonomous cars, so large corporations and VC investors are eager to pour money securing a share of future profits.

(Image Source: CB Insights)

In fact, the bulk share of auto investment goes to companies that are developing assisted and autonomous driving as well as driver safety tools, connected vehicle/driving data, fleet telematics, and vehicle-to-vehicle communication. A growing percentage of those funds will end up at auto cybersecurity startups as adoption of self-driving vehicles grows and security becomes a real issue.
The number of deals across the industry is also a sign the market is in a bull run with the number of funding deals increasing from 45 in 2013 to 170 in 2017. Dollar financing is also on the increase reflecting the investment mood of leading manufacturers like GM and Ford as well as funding spree by new market entrants such as Waymo, Uber, Amazon, and other companies entering the autonomous vehicle market.

Larger Funding Rounds Ahead

A specific trend to watch is the growing money amount of individual funding rounds with Chinese startup NIO alone rising over $1.6 billion in 2017. They plan to develop connected autonomous electric vehicles and other tech startups may follow suit in the next few years along with established manufacturers.

While in 2015 the number of autonomous vehicle deal was half the number of deals in other segments, the past two years saw drastic increase in deals involving self-driving tech. Last year, the number of autonomous car deals surpassed all other auto tech deals for the first time in history and maintains its lead in 2017.

(Image Source: CB Insights)

Resource intensive tech such as sensors, vision, 3D mapping, data collection, and truck platooning will get even more funding in the next few years as these technologies become more practicable. In 2017, large funding rounds in these segments include companies like Nauto, which raised $159 million in Series B for AV data collection, LeddarTech – getting Series C funding worth $101 million for development of solid-state lidar sensors, and Peloton Technology that develops truck platooning and raised $60 million in Series B financing in 2017.

One should also bear in mind that a number of promising stealth startups are developing cutting-edge tech for autonomous vehicles and will need funding once they hit the market running.

More Auto Startups Get Further Financing

Seed funding is less than a third of all deals in auto tech in the past year but not because of lack of promising startups in the field. Startups that got seed funding in the last few years are getting further financing, which in turn increases the overall amount of non-seed funding. Overall, seed funding in the sector retains its last year levels.

Another symptomatic trend is that auto tech startups attract the attention of a more diversified pool of investors with new entrants including investors from the aerospace industry, semiconductor manufacturers, and companies that are less closely related to the automotive industry. All in all, we’ll see the autonomous vehicle sector attracting the bulk part of the auto tech funding for a few years from now.

By Kiril V. Kirilov

Tech

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