A New Normal for Autonomous Startups: Discount M&A Pricing?

Autonomous vehicle startup Zoox was valued as high as $3.2 billion after the company netted $500 million in an early funding round two years ago. Last year, the company’s worth was estimated at about $2.7 billion.

Self-driving Zoox test car (Image: Zoox)

Now media reports say Amazon is in advanced talks to acquire the Silicon Valley-based company for $1.1 billion. This would be about one-third of its 2018 valuation—and would even undercut the less than $1 billion Zoox has raised from investors over the last seven years (including $200 million last October).

Zoox declined to comment on the reports, except to say it “has been receiving interest in a strategic transaction from multiple parties.”

Bargain Shopping

Analysts say the discounted pricing is an accurate reflection of how far the market has fallen for startups specializing in autonomous vehicle technologies, with interest in the technology waning in recent years.

Grayson Brulte, an analyst who tracks new mobility markets, warns that such a deal for Zoox could have a “chilling” effect on the valuation of autonomous vehicle companies around the world.

The downward spending trend is further exacerbated by the coronavirus. A recent IHS study indicated autonomous and electric vehicle programs likely will be the hardest hit in expected budget cuts as a result of the economic slump triggered by the pandemic.

It also could help separate the winners from the losers. Market-leader Waymo has landed $3 billion this year alone from external investors.

What’s in it for Amazon?

Acquiring Zoox would expand Amazon’s growing automotive portfolio, with the potential for supplying its own autonomous delivery vehicles.

Last year the e-commerce giant led a $700 million investment round in Rivian Automotive and agreed to purchase 100,000 electric vans from the Plymouth, Mich.-based startup. It also invested in another California-based autonomous vehicle startup named Aurora Innovation.

Zoox would complement these deals. Founded in 2014, the company is developing its own autonomous-driving software, electric vehicle program and urban ride-hailing system.

Zoox had aimed to launch its own driverless vehicle later this year. That’s not likely to happen. Under Amazon, however, it could partner with Rivian on an autonomous delivery van, which the online retailer could use to help reduce shipping costs.

Getting such capability would make the $1.1 billion deal a bargain for Amazon. Of course, that’s if the deal goes through, the technology is viable and everything else goes according to plan.