Uber ATG And Aurora Merge To Staggering $10B Valuation

As rumored earlier, Uber
UBER
has sold their ATG self-driving unit to Aurora, a high-flying startup in the space. Sold isn’t quite the right term — the larger ATG will merge with the smaller Aurora, except Aurora represents 60% of the deal and huge $10B valuation, and ATG plus $400M will earn Uber and its investors a 40% stake — a drop from the $7.25B valuation given to Uber ATG last year by Toyota, Softbank and Denso.

Aurora, on the other hand, jumps from a valuation close to $2.5B to around $6B for its part of the deal. This in spite of the fact many wondered where Aurora was going after it lost its major partner in Volkswagen, and one of its key investors bought Zoox. Also telling is that Uber ATG has almost double the employees that Aurora had.

The resulting company will have a special relationship with Uber, and Uber’s CEO will sit on its board. Cars using Aurora’s driver will go into the Uber ride-hail network when the time comes, it is not clear if that will be an exclusive relationship in either direction. In a way, that’s all Uber ever needed from the very expensive ATG, an assurance that they would be a player in the robotaxi world when it came time for robotaxis to supplant human driven Ubers. The Robotaxi world is, at its core, the business of selling rides, and Uber has the largest brand in the world in selling rides, though far from the most loved brand.

The image of the brand may have played a big role in ATG’s fall in contrast with Aurora’s rise. It was never one of the top teams out there, but the tragic fatal accident in Tempe Arizona let it marked for life. Indeed, it’s odd that the peak valuation investment came a year after that fatality, otherwise one might claim that the loss of valuation could largely be attributed to it, making it one of the most expensive corporate safety errors.

Another odd factor is that Aurora had recently shifted focus towards trucking and away from their original plan of partnering with automakers to produce a driving system for robocars and robotaxis. Now they have linked up with the world’s #1 taxi company, a company which made two forays into trucking, one of which was a catastrophe for the company and the other of which was more quietly shut down.

The resulting valuation, at $10B for the combination, is astonishing for a company with no finished product and no users. It’s a sign that the “robocar winter” that came from the “trough of disappointment” in the hype cycle didn’t last too long, and mostly took place among auto OEMs, not startups and high-tech companies. That slowdown was the talk of 2019, and in spite of Covid, it seems a memory in 2020.

Let’s look at the assets within the joined company:

1. Uber ATG’s software stack never showed signs of being very good. At the time of the fatality, it looked like one of the lesser ones out there. Aurora’s is hopefully better.
2. Aurora purchased Blackmore, one of the more interesting FMCW long-range LIDAR companies, whose instrument returns the velocity of every point, not just the distance.
3. Aurora’s push into trucking is a path to quicker revenue than the car-driving products.
4. Aurora has partnership deals with Byton, FCA for commercial vehicles and a few others that should be going strong, but its partnership with VW ended, Amazon
   AMZN
   has bought Zoox and Hyundai has started Motional. Even so, if they can develop a good stack, other partners can be found.
5. Uber ATG brings in relationships with investors Toyota, Softbank and Denso.
6. Uber retains the top position in the world in selling rides, and while many have tried to clone Uber (with some beating it in Asia) it’s done pretty well, if it can keep this up.
7. Aurora’s founding team boasts a stellar C.V. While Waymo is the widely recognized leader, it was Chris Urmson who led Waymo there from a technological standpoint.

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