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SoftBank’s next bet: $940M into autonomous delivery startup Nuro
- lettergram 8y agoI feel like when ever you need to put that much money into an idea, it’s likely not an effecient use of money. For instance, if you invest in 200 startups at $5m each, you’re more likely to get better returns, than betting almost $1b on a single company. There’s higher risk with the one company (probably). Further, and to the point on efficiency. There is diminishing returns to the effectiveness of investment, in most cases. You can get to MVP for most companies with very little, if any capital. Then the product in most cases should sell itself (needing less investment). At $1b you’re either artificially propping the market, blundering around for an idea, or have a high capital intensive industry like building rockets or railroad tracks. I understand they may be building autonomous vehicles, but certainly the winner of that race is going to Win using technology, not manufacturing the vehicle. Perhaps I’m wrong, idk.
- gomox 8y agoLiquidation preferences make it so that usually the large investment is a lot less risky than the smaller ones. It's also a lot less likely to have outsized returns (50x?), but at those levels of capital, almost no investment is able to.
- plouffy 8y agoIt's also a capital issue. Softbank has so much money, that looking at $5m companies is just not worth their time.
- izzydata 8y agoWouldn't there be problems with investing in 200 competing businesses?
- GistNoesis 8y agoInvesting money disproportionately also have a self-fulfilling prophecy effect. It gives your player such a disproportionate advantage over the others, that others probably won't be able to compete, therefore improving your odds of success.
- jamestimmins 8y agoPresumably it also ensures that competitors will have an incredibly hard time raising money.
- subjectHarold 8y agoIt really doesn't. You may be able to push up the price but higher prices mean lower returns. What you are hoping for is that you will pile money in, for some unknown reason other people will panic and try to bid, and then you sell to them. Just fyi though: I have worked in markets for about ten years...I have seen this over and over. I studied economic history...I have read about this over and over. And the subject almost never makes it out alive. Usually, this is psychological. Most people get involved with clear heads but that clarity doesn't survive the rush of the bull market/greed...they want more, they start to believe their own bullshit, they end up fully invested at the top...they get carried out of the market.
- kkotak 8y agoCases in point Groupon, Uber, Magic leap, Instacart, Theranos.
- iooi 8y agoPerhaps there is a (small) chance that the people in charge of managing SVF's $100 billion fund have a better idea of how to manage that volume of money than you. The overhead of sourcing and dealing with 200 investments is not small: they've only managed to invest $50 billion of their fund. Their minimum check size is $100 million. [1] [1] https://www.axios.com/softbank-vision-fund-1517515371-c269cc95-dbb9-4457-8ac3-f7e444d10570.html https://www.axios.com/softbank-vision-fund-1517515371-c269cc...
- fierro 8y agois there a word for this misstep or bias or whatever it would be called? When you make an un-credentialed analysis/criticism of another entity's action when that entity specializes in and is ostensible optimized for that action? I see this on HN all the time, it's quite tiresome.
- eanzenberg 8y agoFanboyism
- camdenlock 8y agoDunning-Kruger effect?
- mhb 8y agoArrogance
- delish 8y agoOther people are using words like "arrogance", "fanboyism", but there's a fun, short, free book on the question, "Under what circumstances are you justified in choosing to avoid epistemic modesty and assert that you know better than experts?" It's Inadequate Equilibria by Eliezer Yudkowsky: https://equilibriabook.com/inadequacy-and-modesty/ https://equilibriabook.com/inadequacy-and-modesty/ Yudkowsky agreed with a small group of economists, and disagreed with the Japanese equivalent of the Federal Reserve. You might think, "The Japanese Federal Reserve has every incentive and resource to be correct about growth policies, and this small group of economists has no insight they don't have," but the story is more complicated than that.
- fipple 8y ago200 companies at $5m is only a billion dollars. Softbank is deploying close to 100 times that, so they write checks 100 times the size.
- bluGill 8y agoSome things are fundamentally harder (more expensive) than others. Anyone here can make an autonomous car in a couple days (raspberry pi, GPS, some stepper motors...) - fortunately we are all smart enough to know that if we put it on public roads it would kill someone and so we don't. There are vast orders of magnitude more effort required to make the above contraption safe. I don't know how much it takes to build a safe autonomous car - and nobody else does either as it is uncharted territory. Google and a few others have made progress but they have limits which they are still trying to figure out.
- maxxxxx 8y agoManaging investments in 200 companies is a lot of work though.
- stanfordkid 8y ago> I feel like when ever you need to put that much money into ?an idea, it’s likely not an effecient use of money. For instance, if you invest in 200 startups at $5m each, you’re more likely to get better returns, than betting almost $1b on a single company. There’s higher risk with the one company (probably). There are fewer entities that can place bets like that, which means that it is unexplored and likely has more opportunities. Seed funds with $20mm are a dime a dozen. With this being said the failures are much more catastrophic when such investments are done blindly, without fundamental market / technology forces (e.g take a look at Theranos or Better Place). I believe this is what you are alluding to. Good investments in this $100mm + category are precisely justified in terms of demand and precisely justified in proof of technology execution -- they are largely for scaling technology to fit a known demand. A fundamental paradigm shift happened in the past decade which Peter Thiel describes as "moving from the world of bits to the world of atoms" ... this necessitates larger capex to win. With software the scaling costs are constant, with atoms -- they become linear. This paradigm shift was driven by mobile technology and AI ... so the world is completely different from the days when spreading 10 $1mm bets was a solid strategy. One of the fundamental problems with applying past intelligence is that it was built on top of a different world.
- mikekchar 8y agoSometimes I think Softbank is actually just parking money. For example, their Uber investment doesn't make any sense to me except that they have preference. If you've got billions it's probably hard to find opportunities with potential upside but limited downside. I also vaguely wonder about their connection with Saudi Arabia. My understanding is that the money isn't just available -- it comes available as investment opportunities arise. In other words, they need to find opportunities to spend a couple of billion here or there, but where it's a quick pitch to the investors who are fronting the money. I have no idea if this investment is part of that "Vision Fund", though, and it's pure speculation on my part.
- leowoo91 8y agoBut are there regulation in place for such vehicles?
- sonnyblarney 8y agoSo probably a 5-10B valuation - without a viable product, a customer, or a dime in revenue. It's one thing for FB to buy a massive social network for billions: they can effectively calculate how much it's worth because they know how it would monetize. But this is getting bonkers because there are so, so many things that can go wrong. Do consumers give a rats if their groceries are delivered by a person or by a robot? Will they respond well to the fact they have to walk outside? How do they deliver to apartments? Regulations? Safety? Theft? Service costs? Operational performance? And all of this assumes the 'self driving' part just 'works'. I get the market is 'monstrous' ... but this is a lot of money one would expect when all of the above is taken care of.
- deleted 8y ago[deleted]
- puranjay 8y agoI think they pitched it as something as disruptive as Uber, but for deliveries. And who wouldn't want to go back half decade and get in on the ground floor of Uber?
- mandeepj 8y ago> Do consumers give a rats if their groceries are delivered by a person or by a robot? Of course, they will. When savings will be passed to you.
- solarkraft 8y agoI'm guessing they have considered this.
- muzz 8y ago$2.7B according to the Reuters article today. Sounds very dilutive-- SoftBank got a huge chunk of the company. https://www.reuters.com/article/us-nuro-funding-softbank/driverless-delivery-startup-nuro-gets-940-million-softbank-investment-idUSKCN1Q01MI https://www.reuters.com/article/us-nuro-funding-softbank/dri...
- dmode 8y agoI believe another self driving car company, Aurora, also raised $500mn recently [1] I don't really understand how these companies are attracting these massive sums, given that even a company like Google has made limited progress in 10 years after investing several billions. On top of that there are heavy weight car manufacturers like VW and BMW who are also investing in this technology. [1] https://techcrunch.com/2019/02/07/amazon-sequoia-invest-in-self-driving-car-startup-aurora/ https://techcrunch.com/2019/02/07/amazon-sequoia-invest-in-s...
- deleted 8y ago[deleted]
- john_moscow 8y agoIt might come with a sweet cashback, let's call it.
- hermi 8y agotbh might not even be that If you only charge the LPs on deployed powder.... well
- bluGill 8y agoBig car companies generally invest in someone smaller for tech like this. If it works they can choose to buy the company, or just buy parts from them. If it fails they can stop throwing good money after bad without demoralizing their workforce with a large layoff.
- Fricken 8y agoWaymo's autonomous vehicles are just barely good enough, which isn't yet good enough to build a viable business off of. The cost and complexity of deploying autonomous vehicles does not yet match the value proposition. Waymo's progress had plateaued, and it's reasonable to presume that many of the other outfits working on autonomous vehicles will arrive at the same plateau shortly if they haven't already. Fundamental research is needed to get off that plateau, the solutions are unknown. If we take just barely good enough as the status quo we can expect over the next several years, then Nuro is well positioned. You can actually build a revenue generating business with just barely good enough autonomy doing unmanned delivery. Aurora is good because they acknowledge that building capable autonomous vehicles is still an applied science problem. There is still invention that needs to be done.
- aresant 8y agoI had a really interesting meeting with a huge institutional investor last week ($50b+ balance sheet) that has a ~$2b allocation to VC. They said that softbank has almost had a "chilling effect" on their VC group - especially around investments that are truly capital intensive. Their strategy has shifted away from Series A and towards Series B / C where they can either co-invest with SoftBank, or if wait and see where Softbank invests before they pick a horse in a category they like so they at least have that info in as part of their investment calculus. EDITED last paragraph for clarity
- eanzenberg 8y agoThat's a great risk-management strategy. Let's put all eggs in one basket and not do any homework. Lol!
- nopriorarrests 8y agoWell, consider that softbank-sponsored startup will outspend all the competitors on client acquisition, and can bleed the competitors dry by providing services below cost. Do you _really_ want to invest in startup which is competing against some entity sponsored by softbank? I mean, softbank investment is competitive advantage in itself, just because of it's sheer amount.
- eanzenberg 8y agoIf it works. You also have huge companies (AAPL, GOOG, AMZN) who are in this market and invest billions as well, but have massive amounts of revenue. Raising $1b for a what, $3b valuation, puts you out of reach of m/a for probably everyone and requires you to get in $300M revenue yearly at some point with huge amounts of growth potential.
- Lordarminius 8y ago> Do you _really_ want to invest in startup which is competing against some entity sponsored by softbank? Yes. If they have a good idea, large market, great product, good marketing and outstanding team.
- Animats 8y agoSoftbank again? They've become the world's largest source of dumb money. There's a bunch of these things. Starship Technologies has a little stroller-sized vehicle that's occasionally seen driving on Redwood City sidewalks. Nuro's is sub-car sized and can operate on roads. Slowly. It can't unload itself, so the customer has to go to it. Remember Amazon Prime Air, drone delivery from five years ago? What happened with that?
- fierro 8y agoinnovation takes time. There's no obvious reason to me that automated deliveries can't materialize in the future.
- Animats 8y agoSomebody needs to solve the "last 20 meters" vehicle to doorway problem.
- aezell 8y agoI don't know if you meant this as a joke but it's one of the funniest things I've read on this site in a long time.
- Animats 8y agoIt's not a joke. Self-driving vehicle stops in front of apartment building. Customer gets text message to come down and unload the thing. That's what this is. Not a competitive business model. Might work in suburbia in warm dry climates.
- ztratar 8y ago"Not a competitive business model" is a stretch. You might be right, but you should have pretty high uncertainty about that claim. If driverless tech reduces the delivery cost down 10x, the average consumer might be very willing to walk out to the street. Some might even do it in the rain (umbrella, etc).
- dcplogic 8y agoSaudiBank?
- dmix 8y agoLooks like both of the founders were team leads at Waymo: > I am one of the founding team members of the Google self-driving car project. https://www.linkedin.com/in/jiajun/ https://www.linkedin.com/in/jiajun/ > I built and then led the computer vision, machine learning, behavior prediction, and scene understanding teams for Google's self-driving car project. https://www.linkedin.com/in/dave-ferguson-565b974/ https://www.linkedin.com/in/dave-ferguson-565b974/
- Liquix 8y agoI'd be curious to learn how companies in this space are planning to address the potential issue of physical robberies/hijackers/bad actors.
- yunyu 8y agoI don't think most people would risk arrest for the possibility of scoring a few heads of lettuce.
- dsfyu404ed 8y agoIn places where the police response to petty theft is basically "catch and release" they will. Obviously the long term solution is just not to deploy the service those markets. Edit: People will steal anything if the risk/effort/reward numbers make sense. People commit felony crimes against pizza guys for $50 and a few pizza all the time. I can see people stealing groceries if the risk and effort dips low enough.
- deleted 8y ago[deleted]
- rasz 8y agoYou might want to check the number of homeless in the affluent west coast cities this type of startup inevitably aims for.
- samcday 8y ago> “We’ve spent the last two and a half years building an amazing team, launching our first unmanned service, working with incredible partners and creating technology to fundamentally improve our daily lives,” Nuro co-founder Dave Ferguson said in a statement. Is anyone else getting really tired of hearing this kind of rhetoric? This is a company that, if successful in its mission, is going to help eliminate a whole bunch of jobs (delivery drivers, auxiliary grocery chain workers, etc). Yes, it's gonna provide a cool upside - I can have robots deliver my toilet paper to me without having to leave the comfort of my home! But do we really need to describe that as "fundamentally improving our daily lives"?
- xiphias2 8y agoI think autonomous drivers as amazing as they help the economy of cars to go from gas to electric much faster. I just hate air pollution as I'm feeling its toxic effects on my body much heavier than other people. On the other hand I'm sceptical that any company can compete with Waymo's experience or Tesla's amount of data. Tesla's business model of giving away sensors for free gave it an enormous advantage in acquiring data (which is crucial for deep learning ).
- useful 8y agoIt moves the needle in ways that have not moved much since the advent of fast food and microwave dinners. - It saves you time. - It reduces your need for expensive appliances and electric bills. - It reduces your need for an expensive car. - It reduces food waste/spoilage. - It allows cheaper access to delivery for all, especially the disabled/elderly.
- sonnyblarney 8y agoInstacart/deliveroo provide all of those advantages - plus - someone to unload the groceries and bring them to your door, which is definitely better. And a human to talk to if there's an issue. Consumers don't care one bit that their groceries were delivered 'autonomously'. The 'advantage' of the 'self driving' in the end must be cost - and frankly a significant reduction in cost - or it won't pan out. In this scenario, there still has to be a picker, a checkout, a loader, and some human overhead on managing a live fleet of cars. The 'savings' will be on the cost of the driver - and that's it. There's also a deficit in experience related to the fact it might not work well for apartment buildings and can't unload etc.. After all the fuss, ops and overhead, this tech has to take the average grocery+delivery bill down by a fairly quantifiable amount or else it won't make sense to use it. It will happen eventually, it must may not be this company at this valuation.
- TomK32 8y agoPut enough money into those startups and they can lobby to ban human drivers and make AI drivers mandatory. That would solve so many problems!
- maxxxxx 8y agoI am a little afraid of that. This is probably the dream of all rent-seekers. Have mandatory, IP protected tech that's mandatory to use.
- dsfyu404ed 8y agoIf you're wondering what that looks like then look no further than the post-conviction alcohol and/or location monitoring industry.
- neosat 8y agoIt's important to realize that Softbank's strategy may not be just to look at the startup's chances in isolation but looking at the whole portfolio of companies in a space (self-driving vehicles) and look at a range of capabilities there. With their investments and their people on the boards of these companies, they can 'do more' to accelerate and make things happen which may not otherwise happen. So their view includes both the individual company, but also how it fits into the entire picture and that may give them an additional perspective and consequently a different notion of value than you or me as individual investors or analyzers would have.
- dawhizkid 8y agoSurprised how critical comments are...IMO autonomous delivery vehicles are much more likely to go to market sooner than autonomous taxis for the simple reason that the barriers to getting regulatory approval are going to be much lower because you aren't dealing with human lives. At the same time, food, grocery, and same day delivery are becoming more popular.
- DGAP 8y agoThey'd only work for campuses, with elevators in all the dorms.
- dawhizkid 8y agoWhy is that? I thought they drive on roads?
- nopriorarrests 8y ago>you aren't dealing with human lives except pedestrians and other drivers. so, in fact you do.
- dawhizkid 8y agoNot to the same degree. And given how much smaller these things are than a passenger car or SUV even in the event of a crash, regardless who is at fault, I would be very surprised if the other car involved would sustain enough damage to be life-threatening. If I were Nuro, and if it isn't already factored into the design, I would purposefully design the vehicle so that the Nuro would be squished and minimize likelihood any other vehicle involved in a crash would sustain too much damage.
- pjbk 8y ago> Not to the same degree. Yes, in the same degree. It is a street vehicle. They even published their safety manifesto some months ago: https://static1.squarespace.com/static/57bcb0e02994ca36c2ee746c/t/5b9a00848a922d8eaecf65a2/1536819358607/delivering_safety_nuros_approach.pdf https://static1.squarespace.com/static/57bcb0e02994ca36c2ee7... However you may meet standards and regulations, and pass all certifications, but the issues about autonomous vehicles present big unknowns. We already have accidents and fatalities related to use or misuse of UAVs. Even small sidewalk delivery vehicles may injure or kill a baby in a stroller because of incorrect detection or malfunction, or start a major accident when other drivers need to swerve to avoid them because they entered a road or stopped without notice. Nuro is testing in Arizona like other self-driving vehicles companies. Some people are getting increasingly annoyed dealing with their behaviors and have started retaliating. With Waymo's cars, for example: https://www.azcentral.com/story/money/business/tech/2018/12/11/waymo-self-driving-vehicles-face-harassment-road-rage-phoenix-area/2198220002/ https://www.azcentral.com/story/money/business/tech/2018/12/...
- aezell 8y agoNo one wants to talk about where all of Softbank's money comes from?
- Judgmentality 8y agoDoes this mean Softbank has lost confidence in their previous investment, Cruise?
- jamestimmins 8y agoSoftBank is pretty open about spreading their bets even within a single segment.
- Judgmentality 8y agoI obviously don't have access to their term sheets or whatever information their investment companies are providing them, but the model of trying to (over)fund the segment is not how VC succeeds. Granted, people are saying Softbank is reinventing VC. But everything I've seen leads me to believe they're going to lose money in spectacular fashion, just like how Masayoshi Son lost the most money in history back when the dot com bubble burst. FWIW I used to work at a Softbank funded company. It was a fucking shitshow where the solution to every problem was to throw money at it, rather than actually try to fix the underlying problem. People are still writing articles about how this company is the future. Lucky for me I have nothing invested and can just enjoy the show from the sidelines!
- oldgradstudent 8y agoHow come every report on their "unmanned" delivery service fails to mention that there is a chase car following their vehicle and (visible in some some videos) a car driving in front of their vehicle?
- momentmaker 8y agoHow does one get the grocery? I'm assuming you'd have to be home in order get them and there would be an app that tells you an estimated delivery time and location of the vehicle.