Cruise: from a cold email to a $1bn-plus exit
Varun Jain, early stage VC, Qualcomm Ventures
Cruise Automation is being acquired by General Motors (GM) for $1bn-plus. Qualcomm Ventures, the investment arm of chip maker Qualcomm, invested in Cruise in November last year and I led the investment. We are the third-largest investor in the company. We will be forever grateful to Kyle [Vogt, founder and CEO] and his amazing team for giving us the opportunity to be a part of their journey, and I have no doubt this decision by GM will prove to be a seminal moment in the future of self-driving cars.
When I reflect on our investment in Cruise, I can think of at least three key lessons that I have picked up from seasoned investors and founders over the years, which in many ways have shaped my decision to invest in this exceptional company:
Live in the future
The most disruptive companies are often the ones trying to shape a future that seems farther away than it actually is. They use this limited window of uncertainty to solve some really hard problems that will eventually become their moat.
Not just Cruise but effectively all the other investments I have been fortunate enough to lead have been driven by this belief – Even, interest-free alternative to payday loans; Flirtey, on-demand drone delivery service; and Navdy, smartphone-enabled head-up display for cars. In fact, this is a theme that reverberates across our portfolio, which includes companies such as Waze, Magic Leap, Fitbit, Xiaomi, Matterport, Blippar and others.
Be less opportunistic and more thesis-driven
While there is some level of opportunism in every deal, at Qualcomm Ventures we generally resist the temptation to invest without delving deep enough to formed an independent point of view on what will it take to succeed in a given market. Cruise was no different.
I started looking at the autonomous vehicle market early last year and spent significant time in understanding the nuts and bolts of the underlying technology, the strengths and weaknesses of each stakeholder, and identifying areas where startups can make a significant dent.
For instance, it was clear to me quite early that since a self-driving car at its core is a machine learning application on steroids, it is critical to collect high-fidelity training data by test-driving vehicles in hyper-congested city traffic where these vehicles are finally supposed to operate, and not just in closed parking lots or highways.
Once we realised that Cruise was the only company successfully and safely navigating this non-trivial hurdle, it was clear they were building a unique asset, which will be of tremendous value even if the regulatory framework does not evolve as quickly as we hope.
This is a sales job
While VC is different from a traditional sales job given the amount of attention we pay to selecting who we do business with, it often requires many of the same skills. I am in my third year in VC, and have yet to reach a point where every person I need to contact is within two degrees of separation. Moreover, it is not immediately obvious to most founders why they should accept capital from a corporate fund at an early stage. That said, I constantly try to not let these factors be a limitation and have never shied away from using every tool in my arsenal to get a meeting with founders I really want to know.
For instance, when I first came across Cruise, I was immediately impressed with Kyle’s background and wanted to learn more about his thesis. However, since I did not have any immediate connection to him, I sent him a thoughtful cold email explaining why we should meet and what I can bring to the table. It worked, Kyle and I kept in touch and we moved super quickly to lead an opportunistic round once the company reached the desired milestones.
The investment in Cruise has been an incredible learning experience for myself and the entire Qualcomm Ventures team. We wish the Cruise team the best of luck as they, along with GM, work to turn self-driving cars from a distant dream to an everyday reality.
Building a high-tech portfolio of pioneer companies
Patrick Eggen, Qualcomm Ventures senior director, Early Stage Fund
As early-stage lead for Qualcomm Ventures, I am constantly meeting companies that reflect the next generation of compute platforms beyond the modern-day smartphone. As an investment group, we have been inspired by the oft-referenced – and rightfully so – 2013 phrase from Chris Anderson: “Peace dividend of the smartphone war” which serves as an elegant metaphor for the hardware renaissance.
Anderson posits that the guts of a smartphone – consider all the sensors, GPS, camera, core processors, memory and so on – are now available today for modest prices. This has enabled startups to build viable low-cost devices. I would take this position a step further and say that this trend has effectively created the entire early-stage hardware and connected device ecosystem of today. The smartphone is effectively catalysing all these new compute platforms.
My team identified this trend early and actively deployed capital along this framework. As part of a world leader in mobile technologies, we did not want to sit on the sidelines. We wanted to make bold bets irrespective of the technological and regulatory unknowns. We wanted to ride the peace dividend theme into the frontier.
Given this, Qualcomm Ventures has emerged as a leader in early-stage, so-called frontier tech investments. Specifically, we concentrated our early-stage capital across three different themes:
• Sensor and machine learning-enabled use-cases that leverage existing smartphones, for example crowdsourced data, business insights.
• Next-generation multimedia based on the growing computing capabilities of high-end smartphones, such as augmented reality (AR), virtual reality (VR), 3D data capture.
• Most importantly, potential next-generation computing platforms and native experiences that evolve from mobile, including drones, automotive and robotics.
AR and VR
While many have been enamoured by the category, few investors have the appetite to invest today. Qualcomm Ventures was a pioneer in this space and identified category leaders at the early stage.
On the AR front, we scoured the world for companies with both technical chops – computer vision-based – and Madison Ave marketing pedigree. For instance, we were the sole seed and series A investors in UK-based Blippar, a unique AR company monetising at scale. Recently, it launched a visual search platform in an ambitious attempt to index the real world.
Qualcomm Ventures was also an early investor in Magic Leap, the leader in next-generation AR, creating the category known as “cinematic reality”. We also invested at the seed round in Matterport, which offers a comprehensive, full-stack 3D data-capture platform. Matterport’s technologies let users create immersive 3D digital models of indoor spaces. Once 3D sensors become ubiquitous in the smartphone, we believe that this will unlock a number of consumer use-cases. Additionally, Matterport resolves the content-creation bottleneck in VR, as it is one of the rare companies creating immediately digestible content for this new medium.
Artificial intelligence
The subject of artificial intelligence (AI) is everywhere these days, but how close are we to substantial impact? To date, many AI applications are arguably underwhelming. Enter deep learning, based on neural networks.
Deep learning involves training a computational model to deduce meaning from information. Our portfolio company Clarifai uses this approach to bring the world’s best image-recognition technology to market. Local image recognition in the form of brand logos, auto tagging and even people’s faces presents overwhelming opportunity for future use-cases and business models, particularly as it relates to mobile. As its software can rapidly analyse video clips to recognise more than 10,000 objects or types of scene, we believe this will change the way you search for photos or videos on your phone.
Drones – unmanned aerial vehicles
Qualcomm Ventures has quietly amassed one of the more prolific drone portfolios in the market, having invested in six companies in the space – fitting since this “smartphone with propellers” represents another emerging computing paradigm.
I work closely with colleague Gareth Keane, who drives most of our investing activity here. We led the last round of 3DR, which takes a full-stack approach and produces ready-to-fly consumer drones – think under $1,000 at your local store. In terms of enterprise use-cases, Qualcomm Ventures was an early investor in Skycatch, which offers the most comprehensive end-to-end solution aerial data imagery related to drones. We have also backed enablers in the drone ecosystem, namely Swift Navigation, which offers precision GPS solutions down to the size of a nickel. This is critical for UAV enterprise use-cases in precision agriculture, automotive and mining.
Robotics
Robotics further leverages all the components of the smartphone revolution. Think of it as a smartphone without the screen. Robots could fundamentally change the nature and use of human labour across industries in the future. More specifically, the next wave of marketplace innovation could see the introduction of robotics to create more attractive unit economics.
Varun Jain highlighted two of his portfolio companies exploiting this disruptive trend in a recent post. While both investments are not public yet, the first focuses on the urban transportation market by building an on-demand self-driving taxi service for congested city centres. The second targets the food and package delivery market by building an on-demand drone delivery service for suburbs.
While they attack different markets, both share the same disruptive theme of offering superior services at a lower price point than legacy human-powered services. While still in the early days, I see a similar analogue playing out in the food technology space, as evidenced by our North American QPrize winner, TeaBot – a full-stack tea-vending robot.
Automotive
The automobile represents another frontier compute platform. Historically this giant, sleepy industry has been saddled by slow product cycles that are now being fundamentally disrupted. We are spending our time in four primary areas – telemetry, infotainment, advanced driver assistance systems, and autonomous vehicles. The combination of low-cost breakthrough sensors – such as Lidars, a surveying technology that measures distance using a laser – and sensor fusion algorithms will bring advances like lane detection, collision avoidance and drowsiness detection to the vehicle.
Qualcomm Ventures is an active investor in the category with exposure in the infotainment and autonomy buckets. We have hedged our bets in this market by investing in solving the biggest problem for the 250 million existing cars on the road via heads-up display provider Navdy, and at the same time investing in the aforementioned self-driving car company, which can replace human drivers. Given the regulatory unknowns and market timing issues, this justifies our hedged bet.
The future
New categories necessitate big, early bets – bets that we are willing to take. As experts in mobile, we are especially comfortable backing new applications and computing platforms that leverage the smartphone.
With hardware technology as plentiful and cost-efficient as it is these days, a new wave of internet-of-things disruption is just around the corner – and these connected devices will only get smarter and more useful with each new sensor that is added. Akin to how Waze exploited GPS to spawn a new era of location-aware apps, each new sensor makes a new generation of applications possible. This is the underlying thesis behind our OpenSignal and Sense360 investments.
By using our knowledge of the mobile space as a guiding light, we see huge promise in:
• Sensor and machine learning-enabled use-cases that leverage existing smartphones.
• Next-generation multimedia based on growing computing capabilities.
• The evolution of the mobile computing platform into new verticals.
In 2016, we look to continue to push what constitutes the frontier and identify new categories and opportunities beyond our current comfort zone.
This is an edited version of an article first published at medium.com