When the Mobility Bubble Bursts, Which Companies Go ‘Pop’?
Who's the harbinger of the impending deflation?
Theranos is a classic tale of hubris and schadenfreude, a blood-testing tech company that generated massive press, with a female CEO straight out of Gattaca who attracted hundreds of millions of dollars from investors, that is now imploding because its technology never worked.
Every sector gets its Theranos—so, who is the Theranos of the mobility space?
The answer starts with "mobility," a word that bores me to tears. What does mobility mean? I’m already mobile; Americans are among the most mobile in the world, but in transportation, mobility ≠ "Mobility", the new buzzword for companies that don’t have clear strategies in a world of increasing connectivity, autonomy, and electrification. (Case in point: BMW has for the last few years been beating the drum that they are no longer a car manufacturer, but a "mobility provider"—whatever that means.)
Mobility is used so broadly that it has become meaningless, and yet billions of dollars are flowing into disparate companies converging on what they hope will be a pot of gold, but will more likely be an expensive grave.
Bubble, thy name is Mobility. The criteria? Big fundraising, big name investors, beaucoup press, and the high expectations that come with big promises.
Let’s take a look at our candidates, courtesy of a flood of suggestions that came in when I posed the question online. Let’s start with the ride-hailing business, dominated by what are called TNCs, or Transportation Network Companies.
Is it Uber? They’ve raised just short of $9 billion. Yes, billion. And yet some say things look bleak! How will they ever become profitable? I don’t know. People love the service, but when every “independent contractor” is running two or three competing apps that pay them the same or more, it’s hard to see how this can end well for the big U. They got hammered in China. Uber's plan is to bet everything on self-driving cars, but the technology isn’t fully baked, and the legal issues have yet to be worked out. Michigan’s new policy won’t be enough to keep the lights on, and comes with caveats. They need the big urban centers, or else. How long before Uber dies? They could go public, raise more money and buy more time, as Tesla did, but Uber may not want to show their hand. Maybe they could fall back to become the Uber of trucking via their acquisition of Otto. Oh, the irony. Either way, there’s a clock, and only Travis Kalanick knows.
Lyft? They’ve been trying to sell themselves to ... well, basically anyone, it seems. There was the GM rumor, but that got them a $500M investment, not an exit. I really enjoy when Lyft talks about the self-driving future. It’s hard to believe they’ll be around to see it without an acquisition. It’s too bad, because I want them to survive. Every market needs competition. Also, I miss the pink mustaches.
How about those semi-stealth software companies?
NuTonomy? They’ve only raised $20M, so nowhere near Theranos territory. They are building self-driving taxis, but using someone else’s cars. Which means they’re up against Google, Uber and basically everyone else building self-driving platforms—plus everyone building cars and developing autonomy. (So, everyone. Except FCA, of course.) What’s defensible? Who knows? Ripe for acquisition if they have anything proprietary, but too soon to do anything. My gut? Not the right contender.
Nauto? They’ve only raised $15M, which Uber loses in a sneeze. Nauto’s aggregated autonomous driving platform actually makes sense, and with backers like BMW and Toyota—who actually need some out-of-the-box thinking—Nauto shouldn’t even be on this list. Whomever suggested it is a jerk. I’ve seen a bit of what they’re doing. It's good stuff.
What about Drive.ai, the guys George Hotz likes to make fun of? The ones developing LED signs with text and emoji to go on top of self-driving cars? It’s easy to see why, but like Nauto and NuTonomy, their $12M in funding doesn’t put them in Theranos territory. Is it silly? Maybe, for now. Personally, if I saw a happy face on top of a car, I’d ram it, but Drive.ai is working on a real problem, and has smart money behind it.
Is it Comma.ai? Of course not. George Hotz’s first prototype, the Tesla Autopilot-replicating Comma One, was impressive right up until its cancellation. With only $3.4M raised, they wouldn’t be Theranos even if they closed doors tomorrow. I’m confident Hotz has something more than just an open source platform. So, no.
Cruise Automation? Already acquired by GM. Why was this even suggested?
How about all those new-ish car companies?
Is it Tesla? Nah. They're not so new anymore. Their Theranos moment came and went when the Model S came out and changed the automotive landscape forever. Fiercely loyal owners loved them despite teething pains, and Tesla Autopilot is state-of-the-art for semi-autonomous driving suites. Tesla has weathered numerous minor setbacks, and will survive in some form. Why is every new car coming out marketed as a "Tesla-killer"? Because Tesla has set the bar for automotive startups, and not just automotive.
Zoox? Now you’re talking. A $305M fundraise suggests high hopes and big risks. Crunchbase says they’re a robotics company pioneering mobility as a service—including a “breakthrough, fully automated, electric vehicle fleet and the supporting ecosystem required to bring the service to market at scale.” Them’s fighting words. That means they overlap with a lot of big players, so many that Zoox deserves their own article just to sort it out. We’ll know more as soon as they come out of stealth mode. I heard a rumor of a big name joining management, someone so big that if he’s going to Zoox, they’ve got something good coming. So, probably not Zoox.
How about the “luxury mobility company” Lucid Motors? Previously known as Ateiva, their alleged “Tesla-killer” looks like a Renault Safrane that’s been to the gym. It that a good thing? If you liked the Safrane, and especially if you liked the Ford Scorpio, this is the car for you. They’re $131M into this thing, and although the narrative focus is on the electric bits, you can’t go after Tesla without autonomy. Lucid’s site talks a lot about “space” and “experience,” which is fine, but so far it feels like Tesla Lite. I’m willing to give them a shot, because they’ve yet to do anything dumb.
Next EV? I love a company that’s raised $500M about which little is known other than they tested a great-looking supercar at the Nurburgring. They’ve got the longest Crunchbase company bio I’ve seen among Mobility startups. They haven’t made a lot of promises, but no one raises $500M without big plans. Theranos? Not enough information.
How about LeEco? The second-most entertaining of the “Tesla-killers” is already nipping at Theranos’s tail, because the Chinese-owned company’s Chairman has said they’re already running out of money. One of the most dominant companies in Chinese consumer electronics, they just couldn’t wait to lose their shirts by entering the car business. Will they survive? Public companies like LeEco don’t just go away, but their subsidiaries can. They apparently have not one, but two overlapping automotive projects within an incredibly ambitious mobility/lifestyle ecosystem, recently announced in a lavish launch event. What is the relationship/conflict/overlap between their LaSEE electric vehicle unit and Faraday Future? Unclear. Why are there two? Baffling.
Ah, yes, Faraday Future. This is the big one. With 1,000 employees, rumors swirling of unpaid bills for their $1B factory in Nevada, and last year’s CES misfire—where they revealed a supercar concept instead of an anticipated 5-7 passenger CUV/SUV—this “Tesla-killer” has the most to live up to. I’ve seen pictures of one of the concepts they’ve yet to reveal, and it resembled a better looking Renault Avantime. Promising in theory, but without the LeEco ecosystem, it might just be a Tesla Model X Lite. I’m rooting for Faraday. They’re thinking big, but when top staff are leaving before the first product debut, one has to wonder. I can’t wait to see their reveal at CES next month.
What about the automotive manufacturer-backed vertical sharing models like Car2Go, Maven, and ReachNow? There’s no evidence these can become profitable, but they’ve got big backers waiting for the market to catch up to the product. I am highly optimistic in the near- and mid-term about horizontal sharing models like Turo and Getaround, who are exploiting vulnerabilities the big car rental companies continue to leave open. One or more vertical sharing plays are doomed. Horizontal sharing is safe.
So, who is the Theranos of mobility?
For all those who want to say Faraday, well, that would have been too easy.
The next Theranos is most likely anyone going all-in on self-driving cars, whose legalization and cultural acceptance may not occur on investors' timelines. The more money spent to date, the closer the Theranos moment. I’m not an analyst, but if Uber doesn’t go public, I don’t see how they can survive.
Unless, of course, electrification doesn’t reach critical mass soon enough, in which case one or more pure EV startups must go away. Which one will it be?
We'll revisit this topic after the Faraday Launch event at CES 2017.
Do you have tips, leaks or inside information you'd like to expose to make this debate more entertaining? Please DM me anywhere, or post it in the comments for extra points.
Alex Roy, entrepreneur, President of Europe By Car, Editor-at-Large for The Drive, and author of The Driver, broke the Transcontinental “Cannonball” Record in 31 hours & 4 minutes, and has set multiple driving records in Europe & the USA in the EV, 3-wheeler & Semi-Autonomous Classes. You can follow him onFacebook, Twitter and Instagram.