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Self-driving startup Aurora will raise $2 billion in SPAC merger

Self-driving startup Aurora will raise $2 billion in SPAC merger


The SPACs are now coming for autonomous vehicle startups

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Self-driving technology startup Aurora, which was founded by the former head of Google’s autonomous vehicle program, is the latest company to announce that it’s going public by merging with a special purpose acquisition company (or SPAC). The deal will give Aurora about $2 billion in new cash when it closes, which will help the startup in its quest to become a provider of self-driving hardware and software to companies in the trucking and ride-hailing industries.

Aurora is merging with a SPAC called Reinvent Technology Partners Y that’s already listed on the Nasdaq stock exchange, and is run by LinkedIn co-founder Reid Hoffman, Zynga founder Mark Pincus, and investor Michael Thompson). That trio is also in the process of taking electric aircraft startup Joby Aviation public with another Reinvent SPAC.

Aurora’s co-founders came from Google, Tesla, and Uber

Founded in 2017, Aurora has a short history. But its executives have deep and diverse experience with autonomous vehicles. Chris Urmson, who architected Google’s self-driving car project before it was spun off as Waymo, started plotting Aurora in 2016. He eventually recruited Sterling Anderson, who was the head of Tesla’s Autopilot team until he reportedly resigned over disagreements about Elon Musk’s push to advertise that the company’s cars would be capable of “full self-driving.” Urmson also tapped Drew Bagnell as a co-founder. Bagnell had been a self-driving engineer at Uber after the tech company poached him from Carnegie Mellon (as part of a much larger raiding of the university’s vaunted robotics division).

Since then, Aurora has been developing the hardware and software required to allow vehicles to drive themselves — a package of technologies that it calls the Aurora Driver. The startup already has deals in place with companies like Uber, Toyota, and Volvo to use the Aurora Driver. Aurora also bought Uber’s entire self-driving division at the end of last year.

The deal with the Reinvent SPAC will value the self-driving startup at $11 billion and is expected to close in the second half of 2021. Just under $1 billion will come from the SPAC itself, while the other $1 billion will come from a consortium of investors that includes Uber, Volvo, and PACCAR (a trucking company that Aurora also has a deal with), as well as T. Rowe Price, Fidelity, Sequoia Capital, and others.

Aurora said in presentations and filings made public Thursday that it plans to have trucking customers start using the Aurora Driver without humans behind the wheel in late 2023, and in ride-hailing vehicles in late 2024.

Aurora expects to lose money until at least 2027, which is why the SPAC merger is crucial. The next two to three years are going to be very expensive for Aurora as it continues to prove out its technology to the point that it can start making money selling it to other companies. Aurora lost $214 million across 2020 (with $179 million of that going to research and development), and that cash burn has only accelerated since, as the startup lost $189 million in the first quarter of 2021 alone (with $159 million spent on R&D in the quarter). Aurora has pitched investors that putting money into a technology this expensive is worth it, though, because the startup believes the autonomous vehicle industry will be dominated by very few players. In one slide, it compares the self-driving industry to the digital ad duopoly held by Facebook and Google.

The deal announced Thursday is just the latest in an increasingly long line of SPAC mergers in the wider transportation industry, which is resulting in huge injections of cash into startups that need the money. Faraday Future is expected to start trading on the Nasdaq next week in a deal that will net the EV startup $1 billion in fresh cash. Lucid Motors will pull in an astonishing $4.4 billion when it goes public soon after. LIDAR companies like Luminar, Velodyne, and AEye have also gone public by merging with SPACs.

Not all the deals have gone well. Some startups have struggled with the scrutiny that comes with being publicly-traded, like Lordstown Motors, whose CEO already resigned following an investigation into false statements he made about preorders. Velodyne is already locked in a legal battle with its own founder, who was ousted from the board of directors following the merger. EV startups like Lordstown Motors, Canoo, and Nikola are all facing federal investigations.

At the very least, Aurora’s founders can’t sell shares for four years and some of the SPAC’s leaders agreed to similar terms, in a show of commitment to seeing this through.

Self-driving startups had not jumped into the SPAC fray until now. But that may be changing. In addition to Aurora, fellow autonomous vehicle startup Argo AI is reportedly in talks to go public in a SPAC merger.