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Can anyone explain why does Waymo need to raise any money? Doesn't Alphabet have practically infinite pockets? If they are confident of Waymo, why would they wa

• yumraj 6y ago
  Diversify the risk. Even founders who can self fund, raise money from investors as you don't want to own all the risk in any risky endeavor.
• matt_the_bass 6y ago
  That’s a good point. But maybe they don’t have 100% confidence so they want to share the risk. Or maybe alphabet doesn’t see the self driving VEHICLE as their product. Maybe they see the consumer data as the product and want someone else to pay for the effort to collect it.
  • somethoughts 6y ago
    My take is that there are two interests in self driving cars for Google Proper (i.e. Search, Maps, Youtube, News, Ads). * Free version of Uber/Lyft based on a Google ad/maps referral as described by this patent [1] * Free up peoples commute times so there eyeballs are free to use Google more (watch Youtube, use Google Search, read Google News). Perhaps even access free in-Waymo wifi that only allows Google domain access. They have monopolies in these two areas and therefore neither requires 100% ownership in Waymo. [1] https://techcrunch.com/2014/01/23/google-awarded-patent-for-free-rides-to-advertisers-locations/ https://techcrunch.com/2014/01/23/google-awarded-patent-for-...
• bdcravens 6y ago
  Risk transfer.
• julianozen 6y ago
  I think also Google share holder probably wont stomach unlimited investment in this. It allows Google stock growth to not be hampered by this investment
  • enitihas 6y ago
    How can such a small investment hamper Google stock growth. This might be even less than the average daily volatility in the stock price.
  • jfoster 6y ago
    Depends on the shareholder, doesn't it? Some might buy Alphabet because of Waymo.
• chubot 6y ago
  I think you answered your own question: if they are confident of Waymo As I said a couple months ago, the "Waymo" name is a sign. If they really believed in the product, it would be called "Google Self-Driving Cars". https://news.ycombinator.com/item?id=22632588 https://news.ycombinator.com/item?id=22632588
  • nitsky 6y ago
    Lots of conglomerates have sub brands to avoid antitrust attention. Also maybe they don’t want consumers to think the cars are watching them.
    • Isamu 6y ago
      “We will drive you to your requested shopping destination after this brief targeted advertisement for laundry detergent.”
      • galuggus 6y ago
        Or the car will take a detour past certain billboards
        • ori_b 6y ago
          Too crass. The billboards will display video ads optimized for the occupants passing by.
      • mav3rick 6y ago
        Hyperbole clearly. Feel free to not use the taxi if you care. But of course you'd want to rant on HN
  • mtmail 6y ago
    Different brands can make sense though. Youtube isn't called Google Video and Blogger isn't Google Blogs.
    • 6y ago
• jdoliner 6y ago
  Alphabet wants Waymo to become a company that can make it on its own steam, rather than be dependent on the Google revenue stream. For the first several years of Waymo's life they did exactly what your describing, but now they're at a point where they want to "push it out of the nest" a little bit. Sharing the profits is probably not much of a concern, if Waymo doesn't manage to become self sustaining there won't be any profits to split, so it makes sense to optimize for that.
  • goodbyegti 6y ago
    Indeed, and when it kills someone, nothing to do with Google.
    • azinman2 6y ago
      But it would have everything to do with Waymo. Clearly this is something they’re thinking about, and one hopes they learned a lot from Uber’s accident in AZ. I think if anything, it causes the bar to be super duper high to fully launch, which is why I’m very pessimistic on Level 5 driving happening anytime in the near future. AGI is not solved, not even remotely, and if death is the consequence, Waymo will probably dissolve before launch.
      • njarboe 6y ago
        Are humans AGI? They kill 35k on US roads alone each year. If Level 5 means 0 deaths per year, then it will never happen until the singularity. It is quite possible America's safety first attidue will let 35k people die a year because automatic cars would kill hundreds per year, but I hope not.
        • rhacker 6y ago
          I wonder if all this AI to build self driving cars should have gone into AI that simply saves lives a lot more easily: - detect if the driver is insane, drunk, swerving (tired?), stolen. - detect baby in the backseat parked, and temp rising? If all the AI did was decide you're unfit to drive, that it take over for a few minutes to get to the next stop and pull over and call the cops on you, we might save more lives by that alone.
• empath75 6y ago
  Bringing a car to market is going to require a lot of partnerships with a lot of companies, and google might prefer that they have skin in the game.
• foobookar 6y ago
  It’s not about needing money. But obviously there are investors who want to be involved. Would you rather that they fund you or your competitor?
• sidibe 6y ago
  It aligns other companies' interests with theirs.
• fossuser 6y ago
  GoogleX projects can 'graduate' and become their own companies that issue their own stock. Employees of Google that work on GoogleX projects that graduate no longer technically work for Google, but for the new company and they no longer receive Google shares, but new company shares (in this case Waymo, Loon is another example [0]). This forces the company and employee incentives to be aligned since the value of the employee equity is tied to the success of the specific GoogleX project and not Google itself. When a company graduates if a lot of employees don't want to stay on the project and choose to stay at Google, that itself might be a bad sign (though it could also just be employee risk preference). I think companies graduate when they're less pure R&D and closer to marketability. If they can't survive on their own at that point it may be because there isn't a market, the timing isn't right, or any other reason that can cause a startup to fail. This system prevents Google from pouring money into something that's never tested in an environment where it can actually fail. It puts moonshot projects in an environment where they're truly tested and don't just become places where money is spent without any ability to measure success. It's my understanding that graduated companies have their own hiring methods and can make their own independent decisions in general. They would also need to raise their own money. [0]: https://loon.com/ https://loon.com/
  • TacoToni 6y ago
    Interesting! I had no idea.
    • ktta 6y ago
      You can get more info about this by reading up on GoogleX, but more importantly the articles that came out when Alphabet was formed. Those graduated companies would need a parent company, and that company was Alphabet. It was done to separate these graduated companies from Google's name (and accounting depts).
  • jeanvalmarc 6y ago
    It seems like a slightly bizarre system: have any of the "graduated" companies actually been successful by conventional (i.e. profitable) metrics?
• crazygringo 6y ago
  Very simple: Google shareholders don't want to be tied up to that extent in self-driving cars. By keeping Waymo separate, shareholders can make their own choice as to how much they want to invest in search/advertising vs. self-driving cars. They're drastically different risk/reward profiles. Obviously this isn't something a company usually does, but that's because either a division is small, or it has significant links to the rest of the company, or there's a clear joint strategy. But Waymo is expected to be huge, and there's really essentially zero link to the ads/search/cloud/media that is Google's bread and butter.
  • ketamine__ 6y ago
    I'm a Google shareholder. If Waymo is a good business I have no problem with Google holding all of the equity.
• dodobirdlord 6y ago
  From the last time this story was posted I recall that Alphabet was only offering Waymo investment opportunities to automakers. This would be an important aspect of fostering strategic partnerships, since Waymo is probably not planning to get deep into the car manufacturing business.
• csours 6y ago
  All of the reasons other commentors gave, and also to show it has value. Think of it like getting a credit card while you can still technically get money from your parents (weak analogy). If you can get money from someone else it shows that it has value in the marketplace generally.
• heymijo 6y ago
  Fossuser gave the best answer thus far to your question. [0] A few confounders I haven't seen though: 1) Waymo is its own entity, but its brand is linked to Google/Alphabet. A reader of this article will be clear on that by the time they have gotten through the sub-headline. Any success or catastrophic failure of Waymo/self-driving will have Google spoken of in the same breath as Waymo. 2) Capital Allocation & Diversification - Google had $119 Billion of cash on hand at the end of FY2019 earning no return. More than any other company. - Alphabet is not Berkshire Hathaway waiting in the wings to deploy its capital in a downturn or buy up unrelated businesses. - Diversification is a fine strategy, but when you have this much capital to allocate—and ostensibly Alphabet has this much because they don't know what to do with it—not fully funding Waymo itself doesn't make sense. 3) The Waymo blog post about this that Rutledge linked below gives a possible alternative [1] > “Today, we're expanding that team, adding financial investors and important strategic partners who bring decades of experience investing in and supporting successful technology companies building transformative products. With this injection of capital and business acumen, alongside Alphabet, we’ll deepen our investment in our people, our technology, and our operations, all in support of the deployment of the Waymo Driver around the world.” Building technology is hard, but building out a car company that can produce vehicles on any scale is also hard. Tesla and Elon now know this. So maybe by opening up to outside investment they allow strategic partners to share in the risk and outsized reward of success. Curiously though, only one of the six outside investors listed seem to be "strategic." That would be Magna International, "a leading global automotive supplier." The other investors are: - AutoNation: a used/new car buying/selling website - Andreessen Horowitz: VC firm - Canada Pension Plan Investment Board - Silver Lake: private equity - Mubadala Investment Company: United Arab Emirates sovereign wealth fund From the outside looking in, I have further questions as to how those are "strategic" investments that could help develop and/or bring Waymo cars to market. tl;dr Alphabet/Google has so much capital it needs to deploy not using it to fully fund Waymo is curious. Waymo is not a distinct brand from Google/Alphabet. It's not readily apparent how six of the seven outside investors chosen for the "strategic" investment add value beyond capital. [0] https://news.ycombinator.com/item?id=23157082 https://news.ycombinator.com/item?id=23157082 [1] https://news.ycombinator.com/item?id=23156434 https://news.ycombinator.com/item?id=23156434
  • 6y ago
• EpicEng 6y ago
  A company has to be able to operate on its own. Look at BRK; they don't fund every last bit of debt for all of their holdings. They will pull profits from company A even if A needs money to e.g. invest in operations if they can get credit at a decent rate. They may put that money in company B which has more growth potential and is not in as good a position to take on debt to do so.
• KKKKkkkk1 6y ago
  If I were one of those new investors, I'd ask the same question. Alphabet has been involved in Waymo for 12 years. Why does Alphabet feel that more cash is a better investment than more shares in Waymo? What does Alphabet know that I don't?
  • RivieraKid 6y ago
    Maybe they want to diversify risk.
• goldenshale 6y ago
  Investors could start getting angry if they feel that Google is blowing large amounts of cash on endeavors that continue to fail. By doing it this way they get a major stake in the potential success of their spin-offs, but they are able to continue delivering profits rather than sinking cash in one black-hole big idea after another. It's probably a matter of walking the line between short-term value of the already successful business versus long-term but riskier value of the potential moonshots.
• code_duck 6y ago
  "Raising money" means people are buying in. So, I'd ask the opposite. Not why they need money, but who feels the desire to invest.
• summerlight 6y ago
  External investments can prove that Waymo was able to convince its own value outside of Alphabet, which might be a significant signal for future investors. Alphabet can (and will likely) invest $xB more money for initial business ramp-up but if you want to create the next Google probably money from their own pocket might not be enough. This is particularly important as they need to heavily invest into physical assets with very high upfront costs. FYI, Uber has 10 millions of drivers across the world and if you want to match that number, you're gonna need $100B even with super conservative assumption of $10k per car (and the actual cost will likely be much higher). Doing something like this by Alphabet alone is extremely risky given that the technology is still in a very young stage.
  • tgsovlerkhgsel 6y ago
    That assumes they want to go 0-100 in an instant, instead of building out a fleet as a region becomes available. Regulation is still a major hurdle. Cars will quickly start paying off, even if each car only pulls in 10 rides of $10 each every day, it'll probably pay for itself in a year.
• dntbnmpls 6y ago
  > Can anyone explain why does Waymo need to raise any money? Doesn't Alphabet have practically infinite pockets? If they are confident of Waymo, why would they want to share the profits with anyone else ever? It's not just about getting money, it's also about getting money from the right people. Investors with the pull/clout/insight/etc they need. Investors who know people or who know people who know people. Perhaps people who have political connections or regulatory access. People with insight in the automotive industry. People with ties to media for favorable coverage. It's about getting money from people in position to help them. It's like a movie production that bring in producers who has connections to local governments that can expedite the process of shutting down a bridge or highway to film on for a day. Alphabet has "limitless" amount of money but there is also a "limitless" amount of money outside of alphabet wanting to buy into waymo. So for waymo, it's really not about getting money but getting the right type of investors. It's a two way street. Investors want to buy into waymo and waymo wants to buy into investors.
• scottlocklin 6y ago
  Because google finally realized it's impossible and so they're selling this turd to the greater fool.