Google's Waymo company received $2.25 billion in financing after only one year of operation

In the past 2010s, self-driving car technology has emerged around the world. Which company is the industry leader in this field? It is undoubtedly Waymo, a subsidiary of Google. Waymo's driverless taxi company has been operating for only one year. According to the latest news from foreign media, on March 2, Waymo announced a major financing news, saying that it received $2.25 billion in the first round of external investor financing in the company's history. 

According to foreign media reports, in addition to the parent company Alphabet, investors also include auto parts supplier Magna International, American auto dealer chain AutoNation, Canada Pension Plan Investment Board, and three other large investment companies: California private equity investment company Silver Lake, well-known venture capital firm Andreessen Horowitz, and Middle Eastern sovereign wealth fund investment company Mubadala Investment Company.

Waymo did not announce how much the company was valued at in the latest funding round.

Last September, U.S. investment bank Morgan Stanley cut its estimated valuation of Waymo to $105 billion from $175 billion, saying the commercialization of driverless cars and technology was taking longer than expected.

Introducing external shareholders

Waymo’s funding round comes as Alphabet seeks outside investors to help fund its increasingly expensive ambitions for its “other bets” — innovative research and development companies — outside of its core Google business. More than a year ago, Alphabet’s life sciences company did receive $1 billion in funding led by Silver Lake.

The outside funding round suggests that some of Alphabet's other innovative R&D companies, such as Waymo, need far more money than Alphabet itself is willing to provide. In the past, most R&D companies have been funded by revenue from Alphabet's cash cow, Google, which makes most of its profits from its dominant digital advertising business.

Since Pichai became the CEO of Alphabet, the outside world has also paid close attention to how he will deal with the innovative R&D business that is not economically efficient. Pichai said that some promising projects will be more independent, introduce external investors, and implement stricter financial discipline.

Among these innovative R&D projects, Google has previously absorbed and merged many companies. In addition, many businesses have failed and Google has cancelled project teams, including satellite Internet access, robots, high-altitude drone Internet access, etc.

There is a view that with further independence or absorption by Google, Alphabet's innovative R&D business as a separate section may be cancelled, and Google and Alphabet may even merge into one company. Last year, Alphabet's innovative R&D business lost nearly $5 billion in funds and has become a burden for Google. Google's policy on handling these R&D businesses has also been questioned by Wall Street analysts.

Use of funds

"We've always approached our mission as a team sport, working with our OEM and supplier partners, our operating partners, and the communities we serve to build and deploy the world's most experienced self-driving system," Waymo CEO John Krafcik said in a blog post. "Today, we're expanding that team with the addition of financial investors and key strategic partners who bring decades of experience investing in and backing successful technology companies building transformative products."

The company said the new investment will be used to recruit employees, develop technology and run global operations. Waymo added that its self-driving technology has accumulated more than 32 million kilometers of driving on public roads.

Waymo is the earliest company in the world to develop autonomous driving technology and has been in this field for ten years. In the past, multiple autonomous vehicle test reports released by the California Department of Motor Vehicles showed that Waymo is in an industry-leading position in the field of autonomous driving technology and even has a considerable advantage.

According to foreign media reports, at the time when Waymo conducted this round of financing, Waymo and other autonomous vehicle companies found that wider commercial use was more difficult than expected.

Last summer, US media reported that many of Waymo's driverless taxi services still had safety drivers, indicating that operating costs were still very high. However, Waymo later announced that it had removed safety drivers from more and more vehicles, making them truly driverless taxis.

In Phoenix, Arizona, many local residents also saw Waymo self-driving cars coming to pick up guests, with no one in the car, which provided an exciting urban transportation experience.

It is not yet clear what percentage of Waymo's driverless taxis are completely without safety drivers. What is beyond doubt is that after the safety drivers are eliminated, the cost of Waymo's driverless taxis will be significantly lower than that of traditional taxi companies and online car-hailing companies, and it is expected to seize more urban taxi market share.

Last fall, Waymo closed its Austin, Texas, factory, affecting at least 100 employees in what it called an “abrupt” closure. Waymo said it was an internal business relocation.

Double the number of employees

Previously, a report by an authoritative American technology media showed that Waymo’s employee headcount had nearly doubled from 800 a year ago to 1,500.

The company’s annual operating costs are estimated to be around $1 billion, while its self-driving taxi business — Waymo One — reportedly generates only a few hundred thousand dollars in revenue per year.

Waymo has not yet disclosed the number of passengers on its fleet of more than 600 self-driving taxis, but said in December that more than 1,500 people use its ride-hailing service each month and that it has provided more than 100,000 rides since the service launched.

“Waymo is a recognized leader in autonomous driving technology, the only autonomous vehicle company to offer public driverless taxi services, and is successfully advancing its fully driverless experience,” said Egon Durban, co-CEO of investor Silver Lake, in a statement. “We are highly aligned with Waymo’s commitment to making our roads safer, and look forward to working together to help Waymo’s autonomous driving system advance and scale in the United States and beyond.”

Google first began testing self-driving cars equipped with lidar sensors, radar, cameras and powerful onboard computers on San Francisco roads as part of a secretive project in 2009. In 2016, the unit was renamed Waymo and led by Krafcik, the former president and CEO of Hyundai Motor Co.'s North American operations, when it was spun off as an independent subsidiary of Alphabet.

Waymo One hasn't expanded beyond Phoenix in terms of geographic reach, but it's slowly moving toward a wider launch in the continental United States. To that end, a Waymo One app for iOS launched on the App Store late last year. Like the Android version, Waymo One for iOS offers driverless taxi service anywhere in Phoenix 24 hours a day, 7 days a week. It prompts customers to specify a pickup point. Just like in a typical ride-hailing app, users can also enter payment information and rate the quality of the ride using a five-star scale.

Waymo is set to significantly expand its operations in the coming months, with the company expected to add 62,000 Chrysler seven-passenger sedans to its fleet and a deal with Jaguar Land Rover to equip 20,000 of the company's I-Pace electric SUVs with its self-driving system by 2020.

However, it should be pointed out that compared with Tesla's autopilot system, Waymo's system is slower in adapting to new cities, and first needs to be familiar with the local terrain and road conditions. Tesla has already conducted a "shadow test" on a large number of electric vehicles that have been sold without affecting the owners, and has learned a lot about road conditions. Therefore, Tesla's autopilot system can be quickly put into use in a wider area.