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Sunday, March 13, 2016

GM Buying 3 yo Self-Driving Tech Startup for $1 Billion

General Motors announced Friday it is buying Cruise Automation, a San Francisco self-driving vehicle startup, the latest move by the auto company as it competes with Silicon Valley to develop self-driving cars that could be used in ride-sharing fleets.

GM and Cruise did not disclose the value of the deal. Technology website Re/Code cited sources as saying GM paid $1 billion. If correct, GM has just set a new precedent for valuations in the automotive technology start-up market.

GM intends to use Cruise’s technology and people to accelerate its effort to develop vehicles that can operate without a human driver, potentially as part of ride-sharing fleets “as soon as possible,” GM President Dan Ammann said in an interview.

“We will be committing considerable resources to recruit and grow the capability of the team,” Ammann said.

Cruise has been working to develop hardware and software that could be installed in a vehicle to enable the car to pilot itself on a highway, without the driver steering or braking.

GM initially planned an investment in the company but moved within five weeks to buy Cruise outright, said venture partner Nabeel Hyatt of Spark Capital, an investor in Cruise.

"They moved faster than most Silicon Valley companies would move," he said.

Cruise, which has 40 employees, was launched in 2013 and has raised $20 million in venture capital, founder Kyle Vogt said in an interview.

Vogt impressed Silicon Valley venture capital fund Signia Venture Partners by demonstrating an Audi A4 that could be controlled by a game console, said Signia principal Sunny Dhillon.

More recently, Cruise was working on a system that could make a car "fully driverless," Vogt said.

A flurry of investments by traditional auto companies reflects a fear among industry executives that the century-old business of building and selling cars that people drive themselves is at risk, even though global vehicle demand is strong.

In January, GM said it would invest $500 million in ride-hailing company Lyft Inc and followed that by forming a new car-sharing operation called Maven. The company has also established a separate unit for self-driving vehicle development.

Other automakers are moving into ride sharing and self-driving vehicles, as are some traditional auto suppliers.

Germany’s Continental and Delphi Automotive among others are seeking technology companies to buy for intellectual property and programming talent.

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