4 ms·

The article I read said Cruise took $18mm in funding and still had $10mm in the bank. Just from a back-of-the-envelope perspective, something seems strange her

The article I read said Cruise took $18mm in funding and still had $10mm in the bank. Just from a back-of-the-envelope perspective, something seems strange here. If you asked me how much money autonomous cars would take to create and perfect, I'd guess maybe $10 billion. What could Cruise have built that justifies this price? Why wouldnt GM just put $100mm or even $500mm into their own funded startup? Time will tell, but I suspect GM got swindled here.

mikeyouse 11y ago
$1B is less than 1% of annual revenues to GM, and some portion of the deal was in stock.. It's really a small bet that could speed their own efforts considerably. GM has a lab in Silicon Valley so the Cruise team will likely stay here and continue development with many more resources at their disposal.
- adventured 11y ago
  GM is also generating a billion per quarter in operating income and has $25 billion in cash. Given how important this area of technology is going to be to the future of GM, they can easily afford and justify making an acquisition like this every quarter.
  - tardo99 11y ago
    But, doesn't the price they pay matter? Doesn't paying more than 100x the amount invested in the company seem foolhardy?
    - cheez 11y ago
      I used to think that as well but time to create the knowledge could be the difference between winning or losing.
      - tardo99 11y ago
        I think that's true in markets where business cycles are measured in days or weeks. Cars take a long time to bring to market.
    - mikeyouse 11y ago
      The invested capital has very little correlation with the ultimate value of the company. You obviously want to pay as little as possible for a company you're acquiring but would you say that Google overpaid for Youtube? Youtube only had raised $11M but Google paid $1.7B to buy their team and technology after something like 18 months of operating. Many investments don't pan out, but when they do, they're worth every penny.
      - tardo99 11y ago
        Youtube had a large and expanding user base and was clearly on the way to dominating a category. Cruise has no users and basically just a technology platform. GM will regret this buy.
runesoerensen 11y ago
I'm fairly certain they didn't get swindled. GM may or may not have paid a high price, but does anything suggest deceitful or fraudulent behavior by Cruise?
ghaff 11y ago
>If you asked me how much money autonomous cars would take to create and perfect, I'd guess maybe $10 billion. And I would guess you're incredibly low. If you're using "perfect" to mean bring to market vehicles that can be sold to operate fully autonomously on public roads, you're talking about an industry-wide effort over decades. By way of context, a single company in the IT industry, Intel, spends more than $10b on R&D annually right now.

mikeyouse 11y ago

$1B is less than 1% of annual revenues to GM, and some portion of the deal was in stock.. It's really a small bet that could speed their own efforts considerably. GM has a lab in Silicon Valley so the Cruise team will likely stay here and continue development with many more resources at their disposal.

adventured 11y ago
GM is also generating a billion per quarter in operating income and has $25 billion in cash. Given how important this area of technology is going to be to the future of GM, they can easily afford and justify making an acquisition like this every quarter.
- tardo99 11y ago
  But, doesn't the price they pay matter? Doesn't paying more than 100x the amount invested in the company seem foolhardy?
  - cheez 11y ago
    I used to think that as well but time to create the knowledge could be the difference between winning or losing.
    - tardo99 11y ago
      I think that's true in markets where business cycles are measured in days or weeks. Cars take a long time to bring to market.
  - mikeyouse 11y ago
    The invested capital has very little correlation with the ultimate value of the company. You obviously want to pay as little as possible for a company you're acquiring but would you say that Google overpaid for Youtube? Youtube only had raised $11M but Google paid $1.7B to buy their team and technology after something like 18 months of operating. Many investments don't pan out, but when they do, they're worth every penny.
    - tardo99 11y ago
      Youtube had a large and expanding user base and was clearly on the way to dominating a category. Cruise has no users and basically just a technology platform. GM will regret this buy.

runesoerensen 11y ago

I'm fairly certain they didn't get swindled. GM may or may not have paid a high price, but does anything suggest deceitful or fraudulent behavior by Cruise?

ghaff 11y ago

>If you asked me how much money autonomous cars would take to create and perfect, I'd guess maybe $10 billion. And I would guess you're incredibly low. If you're using "perfect" to mean bring to market vehicles that can be sold to operate fully autonomously on public roads, you're talking about an industry-wide effort over decades. By way of context, a single company in the IT industry, Intel, spends more than $10b on R&D annually right now.