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- Five lidar firms went public through special-purpose acquisition companies (SPACs) in 2020, and one venture capitalist told Insider more could do so this year.
- While Tesla CEO Elon Musk thinks self-driving cars don’t need lidar, nearly all of his competitors disagree.
- That means lidar could play a major role in an autonomous-vehicle industry that could be worth $170 billion by 2040.
- Lidar also has a number of applications beyond self-driving cars, including phones, warehouse robots, and medical devices.
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Special-purpose acquisition companies (SPACs) took over Wall Street in 2020, changing the way startups go public and demonstrating investors’ eagerness to take bigger risks on young companies for the opportunity to earn greater returns in the long run. That was particularly true in the automotive industry, which saw a number of unproven electric-vehicle startups go public through SPAC mergers, in some cases years before they planned to begin deliveries.
SPACs, which raise money from investors with the sole intention of buying another company, eliminate some of the work startups do before a traditional IPO and allow them to share financial projections with potential investors, something they’re not allowed to do while preparing for a traditional IPO. The latter is helpful for companies that don’t have much revenue.
As shares of EV companies like Tesla and Nio soared last year, startups and SPACs sensed an opportunity. At least seven EV companies went public through SPACs in 2020, and some of them have higher stock prices than Ford and Fiat Chrysler.
That enthusiasm also made its way into the autonomous-vehicle industry through startups that make lidar sensors, which bounce beams of light off nearby objects to measure how far away they are. In 2020, five lidar companies — Velodyne, Luminar, Innoviz, Aeva, and Ouster — went public through a SPAC or announced their intention to do so. Dan Ratliff, a principal at the venture-capital firm Fontinalis Partners — which invested in Ouster — told Insider he thinks more will do the same in 2021.
Stock Market Many see lidar as a must-have sensor
Nearly every company developing autonomous vehicles sees lidar as an essential piece of a robust automated-driving system. Tesla CEO Elon Musk is a rare exception. He’s called it a “crutch” and a “fool’s errand” and said Tesla wouldn’t use it even if it were free. Tesla’s approach to automated driving relies heavily on cameras. As Musk sees it, if humans use their eyes to understand their surroundings while driving, cars can do the same with cameras.
But according to Huei Peng, the director of Mcity, an autonomous-vehicle research center at the University of Michigan, cameras aren’t great at determining how far away an object is, a task where lidars shine.
“It gives you very precise range measurement,” Peng said of lidars. The sensors are also less sensitive to weather and light conditions than cameras are, Peng said. They’re not fooled by shadows and they see just as well in the dark as in the light.
If lidars make their way onto a significant number of autonomous vehicles, that will create a major opportunity for lidar suppliers and their investors. The research firm IDTechEx predicted the market for automated-driving technology news will be worth $57 billion in 2030 and $173 billion in 2040.
But interest in lidar firms has outpaced even that of companies making other kinds of hardware found in autonomous vehicles, like cameras and radars, experts told Insider. They gave two major reasons for that disparity.
The first is that the lidar industry is much younger than the camera and radar industries, which means there’s an easier path for upstarts to break in and significant rewards for those that can establish a dominant position first, said Alexandre Marian, a managing director in AlixPartners’ automotive practice.
The second is that lidar makers have made technological advancements and cost reductions in recent years. High prices were once a major barrier to the wide adoption of lidar, but a number of companies have said they’ve cut the cost of each unit to around $1,000 or less (one early Velodyne model sold for $75,000).
“There has been tremendous progress in lidar technology news,” said Sven Beiker, the managing director of the mobility-tech consulting firm Silicon Valley Mobility.
Stock Market Lidars have many uses outside of self-driving cars
But, like any other investment, lidar startups aren’t a sure thing. Kyle Vogt, founder and CTO of the autonomous-vehicle company Cruise, said on Twitter earlier this month that investors are giving lidar companies valuations based on revenue projections that assume they won’t be competing with each other for business from a relatively small number of automakers and robotaxi firms.
“It’s totally possible the numbers will be correct for one of these companies,” he said of the revenue projections lidar startups have made. “But it’s not possible for all to be correct.”
There’s also the risk that as the lidar industry matures, it begins to look more like the markets other automotive suppliers face, which feature fierce price competition that hurts profit margins, PitchBook mobility analyst Asad Hussain said.
Ratliff disagrees with Vogt’s analysis, noting that lidar companies have plenty of potential applications outside of the automotive industry. The sensors can guide robots in warehouses, keep track of trucks in freight yards, improve phone cameras, and help medical devices measure biometric information, experts and companies have said.
“There’s just a massive opportunity,” Ratliff said. “It’s a sensor for capturing anything 3-D in this world.”
The market for lidar sensors is large enough that the top suppliers could be worth tens of billions of dollars, Ratliff said.
“The customers are all there today,” he said. “If you had that perfect sensor today and you could manufacture it, you’d be doing billions of dollars in revenue.”
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