
GM to Acquire Autonomous-Vehicle Technology Developer Cruise Automation (YC W14) - Element_
http://techcrunch.com/2016/03/11/gm-buys-self-driving-tech-startup-cruise-as-part-of-a-plan-to-make-driverless-cars/
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ig1
If the rumours are true on GM acquisition of Cruise for >$1bn it's a major
home run for YC; founder Kyle Vogt’s second YC unicorn (after Twitch) and
third YC exit (after SocialCam).

(Twitch and Cruise will be the only two YC unicorns to have exited and Kyle is
co-founder of both. I imagine he'll soon have a queue of VCs lining up to fund
his next thing....)

~~~
BinaryIdiot
> I imagine he'll soon have a queue of VCs lining up to fund his next
> thing....

That's assuming he's not going to continue working on Cruise at GE. I would
suspect he'll work on it for at least a year or two though depending on how
passionate he is about it he may just stay at GE for along time.

~~~
chatmasta
I suspect the vesting schedule of his GM options will impact his decision
making more than mere passion. ;)

Speaking of, what does a typical vesting schedule look like in stock-based
acquisitions? Is it always negotiable or is there an industry standard? I
assume it's not the same 4/1 used in normal employee options, or else no
founder would sell to a company requiring him to work four years to realize
the full value of the acquisition.

~~~
hkmurakami
There's no standard. It can be anywhere from 1-4 years with various cliff
terms.

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jamesfzhang
Acquisition price of over $1 billion: [http://recode.net/2016/03/11/gm-spent-
over-1-billion-on-self...](http://recode.net/2016/03/11/gm-spent-
over-1-billion-on-self-driving-startup-cruise-the-largest-y-combinator-exit-
ever/)

~~~
Animats
That cites another story which doesn't have a figure.

Neither GM nor Cruise has announced a number. Fortune says "No financial terms
were disclosed, but Fortune has learned from a source close to the situation
that the deal is valued at “north of $1 billion,” in a combination of cash and
stock."

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jonknee
$1B sounds like a lot, but remember last year when car makers spent $3B for
Nokia's mapping company HERE?

[http://thenextweb.com/mobile/2015/08/03/nokias-here-maps-
sol...](http://thenextweb.com/mobile/2015/08/03/nokias-here-maps-sold-
for-3-billion-to-audi-bmw-and-mercedes/)

There will be fortunes made and lost on the basis of automated features in
cars over the next decade, GM definitely wants to be in the winner's circle.

~~~
mtgx
Which was actually a major loss for Nokia, considering it bought the service
for $8.1 billion a few years earlier.

[http://www.bloomberg.com/news/articles/2007-10-01/nokia-
to-p...](http://www.bloomberg.com/news/articles/2007-10-01/nokia-to-
pay-8-dot-1-billion-for-navteqbusinessweek-business-news-stock-market-and-
financial-advice)

------
FreedomToCreate
Seems like a typo. GM is investing heavily into research and development.
There jobs postings in Detroit for electrical and software engineering has
skyrocketed. Being more objective and looking into Cruises history, they are
not remotely worth 1 billion dollar, nor does it look like they have any
technology that would be worth that much. Unless GM was that desperate and the
Cruise guys amazing negotiators, I am skeptical on the 1 billion dollar price.

~~~
tommynicholas
Definitely not a typo, validated by many sources, and the founder of Cruise
already has 2 9 figures exits so selling for much less than this wouldn't make
too much since to him 2 years in.

~~~
shubhamjain
I guess Twitch.tv is the only startup the founder had an exit from.

~~~
justin
As one of the JTV founders, Kyle participated in the sale of Socialcam :)

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misterlittleb
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
$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
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
But, doesn't the price they pay matter? Doesn't paying more than 100x the
amount invested in the company seem foolhardy?

~~~
mikeyouse
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
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.

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HLSalumin2
The acquisition price can't be right. If the price was north of $1B, GM would
be required to file and disclose the price as the acquisition was material. GM
itself is worth less than $50B, so an acquisition for over 2% of the value of
the company certainly would be considered material and require disclosure to
the SEC and investors. That price can't be right.

~~~
foobarqux
GM probably desperately needed to jump start their tech to be competitive and
there was only a single acquisition option. Not acquiring Cruise may have cost
them more than $1 billion.

~~~
ocdtrekkie
We're a decade out from self-driving technology being consumer-ready. Plenty
of time to acquire or develop in-house down the road. As more people
experiment with it, and more hardware and software specifically designed for
it is available, it'll be easier to put together such a system.

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packetized
Between this and the $500mm investment by GM in Lyft [0], it's interesting to
see the battle lines already being drawn in autonomous transport: Uber/Tesla
vs. Lyft/GM.

[0]: [http://www.marketwatch.com/story/why-general-motors-
invested...](http://www.marketwatch.com/story/why-general-motors-invested-in-
lyft-2016-01-04)

~~~
ghaff
Along with any of a number of other auto companies and their suppliers. I'd be
very surprised if this plays out as any sort of winner takes all over the
coming decades that this will play out.

~~~
packetized
Oh, of that there's no doubt. It's just interesting to already see _some_
battle lines being drawn, at this relatively early stage of the technology.

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Matt3o12_
I have not been following cruise's development very well. Can somebody tell me
how advanced their technology is to this day? What products have they
developed so far and what are they currently developing? Their homepage just
tells me that they have (or will) merge(d) with GM and has a link to job
offerings.

~~~
ModernMech
Their whole model was that they would beat the competition to the punch by
using off-the-shelf hardware (mostly Velodyne pucks [1]), retrofitting stock
cars (they started with an Audi A4 and then moved over to Nissan Leafs), and
using textbook algorithms (Kyle competed in the DARPA grand challenge in 2004.
Most of the algorithms and methods Cruise used date back to that era. e.g.
map-based localization, sample-based planners, etc. ). Their business model
was to develop a fleet of autonomous cars and then license them out to other
companies to use.

Honestly, as far as I can tell their biggest asset is a relatively complete 3D
LIDAR map of San Francisco. Other than that, I don't think they were really
set up to compete against the likes of Google, who has the resources and man-
power to develop custom cars, algorithms, and sensors. Given this, from the
start I thought the company was designed to flip. Originally I figured they'd
sell to Google, but looks like I was wrong about that.

[1]
[http://velodynelidar.com/vlp-16.html](http://velodynelidar.com/vlp-16.html)

~~~
tavert
They had been hiring quite a few people from Tesla's autopilot team, FWIW.

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zeeshanm
> GM recently formed an internal autonomous vehicle development team and
> entered into a strategic alliance with rideshare service Lyft earlier this
> year – adding a whopping __$500 billion__ to Lyft’s latest funding round to
> help build a connected network for self-driving cars.

WTF?

~~~
Cshelton
Obviously a typo...

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pj_mukh
Woo! Go Kyle! First Twitch then Cruise. Maybe this will help GM catchup with
Tesla (in terms of deploying tech and not just R&D).

~~~
hobo_mark
Do you want to feel bad about yourself?

Kyle appears to be 30-31 years old.

You're welcome.

~~~
noir_lord
Why would someone else's success who is younger than me make me feel bad?

~~~
hobo_mark
It was meant as an encouragement to do better.

~~~
noir_lord
It's nice to be reminded how differently people look at the world, to me
someone doing great things at a young age is someone doing great things,
jealously doesn't even cross my mind.

If you compare yourself to everyone else there are going to be lots of people
'ahead' of you all the time (to quote a well known film 'there can be only
one'), seems like a waste of time to be concerned with how other people are
doing.

I ride in a bicycle club, I'm probably one of the slowest riders there but I
don't care since the only performance I care about is me from a month ago.

------
revorad
Isn't this the biggest YC exit yet?

~~~
makoz
Wasn't Twitch around one billion as well?

~~~
adventured
$970 million in cash

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Cyph0n
Good to hear. Cruise seems like a pretty interesting little startup with a
smart approach to the expected problem of having both regular and self driving
cars on the road in the future. Now that it has the backing and resources of a
large automaker, the sky is the limit. Good luck guys!

------
akramhussein
Really great outcome - it's hard to fight this space with so many well backed
players - and Cruise had a novel solution and strategy.

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Aoyagi
Yeah, Cadillac must be really happy that they wasted their time on the
SuperCruise technology... or how is this going to work out?

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peter303
There could be a market for the "IBM PC" or Android of smart cars, i.e.
standardized hardware and software interfaces for interchanging parts and
manufacturing them cheap. The IBM PC was not the top technology, but standards
made it easier for most to get into the market.

~~~
bliti
It won't happen. Car companies suffer from a huge NIH syndrome. The entire
parts supply chain benefits from re-engineering everything. Its baked into the
culture.

~~~
ocdtrekkie
At the very least, any inter-car communication will need to be standardized.
And even if they add some proprietary cruft to ensure replacement parts are
acquired directly from them, it's likely over time the different technologies
developed by different manufacturers will start to converge.

~~~
bliti
I don't think this will happen either. Manufacturers won't even standardize
connectors. It's futile because it's cultural.

~~~
ocdtrekkie
We managed to get OBD2 standards out there. And driving systems are a matter
of public safety.

~~~
bliti
True, although the obd standard defines an interface and not an
implementation. Which would make things much simpler. I hate to be a Debbie
downer but it just seems impossible.

~~~
ocdtrekkie
We've got a while for them to figure it out. I don't see self-driving cars in
consumer hands for a decade or so.

~~~
bliti
True. I'd say semi autonomous in a decade and fully in twice that due to
infrastructure costs.

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fudged71
Congrats to the Cruise team and YC! Hard tech is alive and well :)

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sachinag
YC company, as well.

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mtgx
How much, or how little, is the Cruise kit's focus on digital security as
well, and not just the "self-driving" part?

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vivekmgeorge
Smart move in the near term, but at the end of day this is a race to the
bottom for everyone invovled in the car ecosystem. Cars and ride sharing will
become a commodity in 10-15 years just like online storage is today.

Tesla is best position overall. They're building the best battery tech (for
any use) and charging stations all over the world.

~~~
csours
I think that the business will be split between sharing and owning in the
future, but the exact proportion remains to be seen.

Be careful not to fall prey to the Availability Heuristic[1]: If you live in a
city, remember there are a lot of people who live in the 'burbs or far outside
a city.

Also, many people actually like driving.

Disclaimer: I work for GM, any opinions here are solely my own.

1\.
[https://en.wikipedia.org/wiki/Availability_heuristic](https://en.wikipedia.org/wiki/Availability_heuristic)

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Animats
I don't think GM spent $1BN to buy Cruise. That's might be GM's total spending
on autonomous vehicles, including the Cadillac/CMU effort and the Delphi work.

I'm surprised GM bought them. Cruise is basically lane keeping plus smart
cruise control, with extra hype. Their driving record isn't very good.[1]

[1]
[https://www.dmv.ca.gov/portal/wcm/connect/bc21ef62-6e7c-4049...](https://www.dmv.ca.gov/portal/wcm/connect/bc21ef62-6e7c-4049-a552-0a7c50d92e86/Cruise_Automation_01.08.16.pdf?MOD=AJPERES)

