In the race to become the world-leader in autonomous cars, automakers around the world — as well as software companies like Google and Apple — are spending billions of dollars to self-driving cars. And while every single major automaker today has its own crack team of engineers working on bringing self-driving cars to market, those same companies are just as eager to license or acquire technology developed by independent third-parties if they feel it will give them a competitive edge against their rivals.
As a consequence, there days, any autonomous vehicle startup worth its salt can expect to be acquired for a considerable sum, either because an automaker believes it has developed a truly unique approach to autonomous vehicle technology, it wishes to hire the talent behind the company, or it doesn’t want the technology acquired by anyone else.
Even Detroit automaker General Motors — which has been developing autonomous vehicle technology for more than 20 years — is more than willing to pay a handsome sum for any company it believes could help it win the race to bring a self-driving car to market.
It proved as much this past week by announcing its intent to acquire Cruise Automation, a three–year old San Francisco startup focused on autonomous drive technology, for an unconfirmed $1 billion.
Making the announcement in an official press release last Friday, GM said it was looking forward to adding “Cruise’s deep software talent and rapid development capability to further accelerate GM’s development of autonomous vehicle technology.”
While the official price on the table for Cruise has not been confirmed by either GM nor Cruise, sources close to both companies told Fortune that the deal was worth “north of $1 billion” in a combination of cash and stock compensation. Cruise, which had previously developed a $10,000 limited-production semi-autonomous aftermarket cruise control system called the RP-1 for certain model-year Audi A4 and S4 cars, has to date enjoyed a fairly healthy relationship with its investors, raising a total of $18.8 million in three funding rounds from early 2014 through until November 2015.
Founded by former Kyle Vogt, co-founder of Justin.tv, SocialCam and Twitch (the two latter being acquired by Autodesk and Amazon for $50 million and $1 billion respectively) Cruise’s mission to date has been to develop a set of products to bring autonomous vehicle capabilities to cars which left the factory with none. A clever and unique twist on autonomous vehicle technology, the RP-1 kit — which sold out really quickly when the company announced it back in June 2014 — consisted of a roof-mounted sensor pod (containing multiple different types of sensors inside it), a set of vehicle actuators (to allow the system to control the brakes, steering wheel and accelerator) and a computer system designed to be the brains behind the brawn.
Using far fewer sensors than systems being tested on the road by Nissan, Google or Tesla, Cruise claimed its system was far more cost-effective than the alternatives but just as good. Although a Cruise-enabled Nissan LEAF was involved in a collision with a Toyota Prius in San Francisco earlier this year, the company seemed to be making great progress with its technology, reportedly working to bring its system to multiple different cars from a variety of manufacturers.
Reportedly, GM and Cruise first came together when GM was considering investing in the startup. Impressed by the company, sources say GM decided instead to acquire the technology outright for use in its own cars. While GM’s own in-house autonomous vehicle programs are just as advanced as the technology being developed by Cruise, we’re guessing GM’s real interest lies in the affordability of Cruise’s kit.
Ensuring that rival automakers Audi and Nissan — cars from which Cruise has already developed its own autonomous vehicle interfaces for — don’t get their own ideas about acquiring Cruise was likely an added bonus.
After news of the acquisition broke on Friday, Cruise’s website — which had shown a demonstration video of its system in operation — switched to a list of job postings at Cruise’s San Francisco Headquarters. While it’s not clear if GM will look to expand Cruise’s presence in Detroit, it seems Cruise will continue to operate for the time being with some autonomy of its own from San Francisco.
Considering that’s where many other automaker also base their own autonomous vehicle research centers, we think that’s a smart move.
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