This is an interesting purchase for Amazon on a number of levels. Obviously they have a huge delivery fleet that could benefit from self driving vehicles. And a giant company like Amazon must love an opportunity with an enormous addressable market such as this one.
But the timing is interesting too IMHO. Amazon played the long game a little bit here and waited until self-driving technology was in the "trough of disillusionment" [1] to pounce on a promising startup. It saved itself billions of dollars in the process, let some of the pretenders fade away, and gave itself better odds of success.
Self-driving tech is still a slog though, and success is not guaranteed by any stretch. But I give them kudos for this.
Considering how far behind they are from competitors like Google, I wouldn't exactly call it a winning strategy. And they are going to spend billions on the acquisition anyways, regardless of how good or bad the technology is. To me this move seems more like desperation than brilliance on Amazon's part.
> how far behind they are from competitors like Google
Zoox run their tests in San Francisco, a city known for chaotic traffic conditions. They do so rather successfully (see their YouTube videos). This accomplishment alone means they are not really "far behind".
I live in San Francisco in a particular neighborhood where there is a large amount of self driving cars being tested. I assure you, none are ready for prime time. I had one almost drive directly into me last week but I saw the operator take control of the wheel urgently.
Doesn't SF have wide, neatly planned streets and great weather all year? I can't imagine these cars driving on some narrow European roads from the medieval times in the winter
A look at google maps shows the city is splits in large perfect squares of roads themselves split in smaller squares. It's typical US modern layout, the antithesis of European layout.
I would consider it somewhere in between the grid of Manhattan and the winding chaos of Boston. There are definitely fewer weather events. I don't any single self tech could successfully navigate snow.
In raw tech for "self-driving car" Amazon does not have the expertise or personnel, but they have wider transferable experience in cultivating the R&D of such a project what with their dabbling with SLAM-driven drones and their work in robotics.
So they're not starting from zero + a speculative acquihire if that makes sense, at least in my opinion
Interesting, rather than 1 employee driving 1 van, the same employee could command/oversee N number of self-driving deliveries. Self-sanitizing machine would also ensure "contact-less" delivery.
Certainly nothing brilliant about the acquisition. I'm with you there. It's just an M&A deal. But considering the (relatively) cheap price, there's a chance it eventually pays off to be a transformative catalyst for the business.
Amazon's market cap is currently $1.2 trillion. If they spent $2.5B to acquire zoox, that is only 0.2% of market cap. Not a bad risk/reward ratio.
Hard to tell since you haven’t defined any particular reward. Keep in mind the risk/reward ratio for a particular investment would be the same regardless of the percentage it made up of the larger portfolio.
Self driving software will be winner takes all, or a maybe two companies will sell software. Pretty easy to see 20M units/year at $5000 each, so call it 100B in revenue per year with profit margins of 50%. The winners will likely see close to a trillion increased valuation. There is a natural monopoly for the first successful movers.
As a side note, risk/reward ratio is the same, but when making bets with positive expected return, you must consider bankroll size and risk of ruin. The VCs are realizing they can’t play a $300M/year game where the probability of winning is 20%, even though the expected return is 100x.
First mover advantage snowballs: real-life client deployments increase the miles driven hundredfold and the revenue increases the resources devoted to mapping and to fix rare situations with manual fixes to either maps or AI.
The behemoth company with custom mapping of every road in your country and manual remapping of construction sites will provide a far better experience than the scrappy AI start-up. (And they can probably leverage that to gain better insurance rates, or to get driving licences in places where second movers can't.)
It does mean that buying the alternative will usually be a "crappy" choice. Leaving the incumbent with the ability to charge a margin and hire better devs. There will be other players who are competitive locally, or provide "good enough" solutions for some customers.
* Assuming any player finds a viable business model, and that our current understanding of ML, Computer Vision, and control systems is sufficient to produce a commercially viable product.
I think that's where "good enough" comes in. It's likely that some companies will be just compliant, whereas the market leader is well ahead of compliance. e.g. a car that safely comes to a stop in an unhandled situation vs. a car that can handle the situation. It's also possible that the space also reaches commodity status where no differentiators emerge ( as one would expect with a big S curve in performance ).
Yeah... except this is more complex than Gartner's hype cycle captures. This isn't k8s or openstack.
There are real technical challenges to making this work, not that it doesn't magically solve all things - it can't solve anything yet. The long tail still appears quite long.
The hard thing to do, which Bezos does very well, is to stay focused, patient and stay invested. Now it’s even easier to be even more patient as amazon has a very deep pocket.
Well, I mean, back in 2006, Bezos' company was saying that they could be launching into space as early as 2010, so I don't think it was self imposed silence for that long. (Source: https://www.wsj.com/articles/SB116312683235519444)
The government budget crisis that the pandemic will cause as tax receipts decrease and outflows increase might be a catalyst for this.
I could see a big company or conglomerate of companies being willing to take over part or all of certain parts of road development and maintenance as long as they can have one or more dedicated autonomous lanes.
I imagine that there will be a lot of room for creative solutions over the next 10 years.
That’s frankly dystopian. It’s much worse than deregulation; it’s the dissolution of a uniform state. A return to the Middle Ages, its warlords and its robber barons.
> That’s frankly dystopian. It’s much worse than deregulation; it’s the dissolution of a uniform state. A return to the Middle Ages, it’s warlords and it’s robber barons.
You just described my best guess of the future (at least of the US).
In fact, you might be able to say that we are already moving that direction given how much influence large corporations and industries have over our government.
Note that I am not happy about my prediction, but my eyes are open to what is happening around me.
I suggested that tax receipts (the amount received by government) will decrease due to reduced economic activity during the pandemic. This is a fact (it has already happened).
This would give the tech companies an opportunity to solve some governmental budget shortfalls by relieving some of the burden in exchange for some access rights.
Sadly Detroit's Big 3 announced that they believe electric cars are the next big thing so they're cutting back on research for autonomous cars. They're blaming it all on the pandemic. I said publicly that Tesla and Comma.ai would eat their lunch. Now I can add Amazon to the list!
There are numerous Tier 1s (Bosch, Continental, ZF) working on providing autopilot like tech to auto manufacturers. Additionally companies have there own efforts (GM super Cruise for example which btw has nothing to do with Cruise and is developed separately). Comma has open sourced all there code, so good chance the OEMs have someone looking at it.
Apart from GM's supercruise which is only avaialable on a top end Cadillac CT6, there is nothing that rivals OP or AP. Telluride/Pallisade are good but not close to either of above products. Not sure whats holding manufacturers back
Because under Amazon funding will no longer be an issue. They will be able to install devices in Amazon's rather large fleet and gain millions of miles of experience on roads all over America. It will accelerate their development process significantly.
I recall Zoox dumped their CEO founder quite suddenly, this announcement reminded to look up the story. Food for thought re founders and controlling stakes in startups.
Employees will make peanuts to nothing if Zoox gets sold for < 3.2 billion. This will make many folks who work at Zoox very unhappy esp with the amount of stress that engrs are taking every day. I hope engrs make some money here otherwise bye bye loyalty.
If you want certainty and no chance of winning big, join a Fortune 500 company. If you want uncertainty and a small chance of winning big, join a startup.
For the engineers, they wouldn't likely win big on a sale below a certain value, but that doesn't make it a total loss. They'll have a job at a FAANG with likely a higher total comp than before. Replace stock option lottery tickets with regular RSU dumps at a decent paycheck.
These risks are the same as for any tech startup company. Many people have made a similar gamble with equity. And in the meantime, salaries for AV software developers, machine learning engineers are not exactly below market.
Salaries are usually range from 20 -50% of a total package. True it’s a gamble but folks expect the equity of same or higher value of that of a public company, esp if they work 80+ hour weeks. If they don’t get it, I do see them staying for a bit.
Wow, I never thought about it before but partial self-driving assistance makes a lot of sense for deliveries.
I live in a pretty quite neighborhood in a suburb of Chicago and I see Amazon Prime vans drive by all the time. The driver parks, hops out, runs around to grab the package, drops it off, drives on, and repeat.
This is a great scenario where you don't need total autonomy all the time: the delivery person could drive the highways and complicated parts, and then when there's a cluster of deliveries where the speed limit is 25mph and the roads are clear and regular, the van could go from house to house, with the delivery person hanging out in back or something.
It's not full self-driving, but it seems like it could make deliveries a little more efficient.
I was under the impression that freeways were the easiest target for self driving. The lack of pedestrians, bicycles and unprotected left turns makes it much more predictable. It's hard for humans because the speed is much faster than human reaction time evolved for, but that's not as much an issue for self driving. Tesla for a very long time only supportted self-driving on freeways.
Neighborhoods are the complicated parts: they're filled with pedestrians, cyclists, kids, animals, and uncontrolled intersections.
AFAICT, a self driving car has to pretty much assume that every pedestrian might suddenly dart into traffic, it can't really tell the difference between a normal pedestrian and a drunk heads down in their phone.
But keeping speeds below 20mph opens up a lot of opportunities simply because stops are basically instantaneous at that speed and because car-pedestrian collisions under 20mph are almost never fatal.
"Results show that the average risk of severe injury for a pedestrian struck by a vehicle reaches 10% at an impact speed of 16 mph... The average risk of death for a pedestrian reaches 10% at an impact speed of 23 mph" [1]
But, importantly, that's for human drivers, who are probably braking when, or at least after, the collision occurs. An AV that completely fails a detection wouldn't necessarily even try to stop.
Can someone explain why non car companies are buying self driving car tech? Do they think they will end up with some sort of kit they can just attach to existing cars? Are they trying to pivot into being car manufacturing companies? Or is this just a play to develop the AI then sell that to someone else?
Amazon is now a major shipping and delivery company, in addition to everything else (as of last year, they were apparently delivering half of their packages themselves [0]). My guess is they would like to automate that.
Delivery is a huge portion of Amazon's costs, and most of that cost is the last mile of the delivery. What are the biggest costs of last-mile delivery? Human labor costs and fuel. What's Amazon putting money into? Self-driving vehicles (less human labor time) and electric vans.
Bias note: I work for Amazon, but not in that department.
My take about Amazon interested in this is that in a giant list of AWS offerings, there will be a sensor suite processor service called SDS (Self Driving Suite) which will be installed physically inside the car as a server box. Amazon AWS has some experience in building hardware, AWS Snowball for e.g. Ofcourse it will communicate over 5G for non-immediate processing and will run through 3 intermediate AWS services before running the actual processing job on EC2 instance. One of them being SFS or Sensor Fusion Service, which combines geospatial data (from AGS + IPS) with up-to-date road data from other SDS equipped vehicles(1). The billing will be a bit complex so it will require ABS to optimize the billing based on location, mileage and other AI-driven metrics.
Amazon previously purchased Kiva for their warehouse robotics systems [1]. It's safe to assume that Amazon wants to extend that out to the delivery side as well.
>Can someone explain why non car companies are buying self driving car tech?
Because warehouses and the freight terminal (truck terminal in the consumer goods case) that necessarily surrounds them have a need for things that can roll around autonomously while not colliding with things.
There are existing solutions for this but they're far behind the state of the art for self driving vehicles that aim to eventually be used on public roads and they have several weak points that make them less competitive in very dynamic warehouses (variable contents and throughput, as opposed to a warehouse that feeds a manufacturing operation which will have more fixed contents and less variable output) that mostly handle lightweight goods (which is part of why amazon uses so much human labor in its warehouses). I wouldn't be surprised if Amazon was trying to scoop up Zoox on the cheap for their own internal use. They already bought a warehouse automation company. The probably have a list of things they want to automate and figure that buying a company that already has competence in the space (even if they're not a front runner) is the best way to meet their needs.
Of course the delivery network serving the area surrounding the warehouse facility can also make use of self driving tech but self driving on public roads is a much harder and farther off problem and I don't think solving it is their primary goal for this purchase.
In Amazon's case they are a major investor in Rivian, an electric truck company that they are reported to be buying 100,000 electric delivery vans from over the next decade.
Ford another major Rivian investor has partnered with and invested in autonomy startup Argo AI
Rivian has said that their vehicles will have level 3 autonomy but if you look at the sensors the vehicles will include they would probably could be level 5 capable with the right software. Perhaps both Amazon and Ford are planning on bringing their own software to run on Rivian's hardware to turn the stock Rivian into a level 5 vehicle? It seems like it could be a smart play since the autonomy software will probably be the highest margin part of the vehicle.
Imagine Amazon with a radically different UI: a physical store on wheels that automatically stocks itself with products you’re likely to buy and then drives itself to your house. You go inside and take what you want; then the vehicle returns to base and stocks itself for the next customer.
Amazon Treasure Truck is a step in this direction, you order and the truck comes near you. I can see similar pop-up store variations on this. Consider a truck pulling into your neighborhood with clothing. Walk inside, try on what you like, take what you want and go home.
Scalability is a resource problem when you don't require as much human management and overhead. Its simply a resource allocation problem.
Dark horse suggestion: Patent portfolio. It’s possible that self-driving implementations will be patent encumbered, so they’re actually buying leverage to keep the fees reasonable.
As much as a technology or retailer company, Amazon is a logisitics company and they are buying a logistics technology that may drive down their delivery costs in an extreme way.
Well Amazon has several business units that could probably do something productive with this. The obvious one is of course their delivery fleet, which at some point will start benefiting from autonomous driving. We're talking about a logistics operation that is large enough that they operate their own planes and airports.
Then there's AWS, which is also used for machine learning and other purposes. I imagine this company has a lot of the right kinds of skills they'd want to tap to offer off the shelf solutions in that space. Even if they'd ditch the product that could be valid.
But of course these solutions include bespoke self driving solutions for those car manufacturers needing to catch up in a hurry. They are going to spend billions doing so and that are going to be in need of exactly the kind of services and scale that AWS provides. IMHO most of them are going to not succeed with in house solutions and are going to be looking for something off the shelf. At least, I don't see the likes of Kia, BMW, Chrysler, etc. turning into the type of software companies that can actually do this half decently any time soon. So, that means AWS offering all or most of this as a service sounds like a good idea.
Of course the theory and practice of acquihires are two things. Most of them flat out fail and are nothing more than a big corporation scratching the backs of investors (e.g. on their board) by bailing out their failed investments. A lot of exits in the startup space fall in this category. Investors hate having their investments go bankrupt. An acquihire you can still spin as a success. A bankruptcy is much harder.
They've already acquired Kiva (moving robot shelves) and Canvas (robot navigation) for the warehouse logistics. If you see the self driving cars as an extension of the logistics (delivery) then it does make sense.
The automotive industry has plenty of OEM suppliers for various vehicle components, so there would be nothing unusual about a third party company providing self-driving hardware and software for traditional manufacturers' cars.
when you're successful in one sector, the logical progression is to leverage that success to move into a new sector.
Microsoft has done it for the browser market. Amazon has done it (more than once i might add) with online selling platform, into SaaS platform, which they now leverage into other businesses.
Monopoly laws that were used to prevent this (ostensibly unfair practise) has lost their teeth.
The companies are discussing a deal that would value Zoox at less than the $3.2 billion it achieved in a funding round in 2018, according to people familiar with the matter.
That doesn’t necessarily mean that investors or founders lose money. The investors could get a liquidation preference and the founders still become hundred millionaires.
Zoox has a hell of a liquidation preference overhang. The common stock options could very well be worthless -- a lot of factors at play here, all of them well outside the purview of non-executives.
If it’s stock options at the last round valuation then they will be worthless. In theory the 409A valuation should be adjusted but in practice it’s most likely still at the 2018 round value.
I’m just saying asking is free. Better to have the conversation than regret. The worst that happens is OP is told no and/or the equity is worthless and moves on to a better opportunity.
Yes, that is a critical step, of course. But the "last mile" problem is only a part of the logistics business. Trucks drive loads of packages between warehouses/fulfillment centers before being placed on smaller vans for home delivery.
Introducing Amazon ElastiChute! Are you tired of employing delivery drivers who take a few seconds of their day to go to the bathroom?
With Amazon ElastiChute, you can seamlessly transfer hundreds of physical packages from delivery van to a client's front door. ElastiChute elastically expands to envelop a package and jettison it at just the right speed at a customer's door.
Or you get enough vehicles running 24/7 that you can get the customers to come get the package: "Free delivery if you can come pick your package from the van between 545am and 555am on the 24th" and then you can notify the customer as the van arrives. You make the van into a mobile Amazon Locker Hub or whatever those are called (we have one in my apartment complex). You can even schedule a half dozen deliveries at once for houses close together with a larger window: "Your Amazon Delivery Hub Van will be located 100 yards from your home to the west, at 123 Main St. from 5PM until 6PM tomorrow, please enter 123456 to get your package."
You have to remember it's a completely different situation for companies like Amazon, Cruise versus Rivian, Tesla etc.
The former has a restricted use case. Specifically, driving around specific suburban cities where if conditions are bad or issues are found they can easily just fall back to human drivers.
The latter is trying to do self-driving under all conditions, all scenarios and where it's much harder for Rivian/Tesla to determine if it's safe or not to use self driving.
I guess they are playing for a portfolio approach. With investments in a bunch of different companies, in-house drones, and robotics research. Very interested in how they integrate them into Amazon, if at all.
I feel it was only a matter of time. Amazon is competing on every front. And any transportation initiative would be core to their business. I won't be surprised if they bought an airplane company.
What are the chances that there is no rational thinking behind this deal? What I mean is, what if some Amazon exec said, "Hey, sounds like a cool project, let's throw a couple $b their way and write it off as R&D in the worst case?" Or maybe that exec is buddies with a VC who lost a ton of money on Zoox, and the exec decided to bail out the VC at the expense of Amazon shareholders? Or maybe someone at Amazon really likes Jesse Levinson?
Companies don't make billion dollar purchases with no due diligence with just one person involved in making the decision. And they don't buy companies just to immediately write them down.
Amazon is one of the most successful companies in the world. They didn't get there by acting like children.
I've worked at Amazon. I've worked with CorpDev there to try and help facilitate some acquisitions. Based on my experiences there I'd also go with the "less than zero" position. This is not a company that makes any acquisition decisions lightly. Frugality runs deep.
Collective decision making and financial due diligence can't always stop you from making dumb decisions. Especially at the most successful companies in the world.
But no company makes billion dollar acquisitions without involving the entire C-suite in particular CFO/Legal and the Board. And they sure as hell don't do it without proper due diligence.
But the timing is interesting too IMHO. Amazon played the long game a little bit here and waited until self-driving technology was in the "trough of disillusionment" [1] to pounce on a promising startup. It saved itself billions of dollars in the process, let some of the pretenders fade away, and gave itself better odds of success.
Self-driving tech is still a slog though, and success is not guaranteed by any stretch. But I give them kudos for this.
[1] https://www.gartner.com/en/research/methodologies/gartner-hy...