Uber's self-driving unit gets its own CEO and a $1 billion investment


ASSOCIATED PRESS

As Uber finally closes in on its IPO, its self-driving car unit is getting a big cash infusion and some independence. The company announced tonight that Toyota, Denso and Softbank are investing a total of $1 billion in its Advanced Technologies Group (Uber ATG), in a deal that values that part of the company at $7.25 billion. This adds onto Toyota’s $500 million investment last year, which the two said would lead to the creation of an autonomous fleet based on Toyota’s Sienna minivan.

So far, many of the big car companies are teaming up to develop autonomous tech combined with ridesharing angles as it’s expected to be a huge market in the next few years. According to Uber CEO Dara Khosrowshahi, “The development of automated driving technology will transform transportation as we know it, making our streets safer and our cities more livable. Today’s announcement, along with our ongoing OEM and supplier relationships, will help maintain Uber’s position at the forefront of that transformation.”

In the statement Toyota EVP Shigeki Tomoyama said “Leveraging the strengths of Uber ATG’s autonomous vehicle technology and service network and the Toyota Group’s vehicle control system technology, mass-production capability, and advanced safety support systems, such as Toyota Guardian™, will enable us to commercialize safer, lower cost automated ridesharing vehicles and services.”

The deal won’t close until Q3, which should be well after Uber’s initial public offering that’s on track to occur in May. It’s also being announced after Arizona prosecutors announced they did not find the company criminally liable for a 2018 self-driving car crash that killed a pedestrian. The deal makes Uber ATG its own corporate entity that’s controlled by Uber. Reuters reports that it has ATG head Eric Meyhofer as CEO reporting to a newly-formed board of directors, with six appointed by Uber, one by Toyota and one by Softbank.

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Startups Weekly: Lessons from a failed founder

I sat down with Menlo Ventures partner Shawn Carolan this week to talk about his early investment in Uber. Menlo, if you remember, led Uber’s Series B and has made a hefty sum over the year selling shares in the ride-hailing company. I’ll have more on that later; for now, I want to share some of the insights Carolan had on his experience ditching venture capital to become a founder.

Around when Menlo made its first investment in Uber, Carolan began taking a step back from the firm and building Handle, a startup that built tools to help people be more productive. Despite years of hard work, Handle was ultimately a failure. Carolan said he shed a lot of tears over its demise, but used the experience to connect more intimately with founders and to offer them more candid, authentic advice.

“People in the valley are always achievement-oriented; it’s always about the next thing and crushing it and whatever,” Carolan told TechCrunch. “When [Handle] shut down, I had this spreadsheet of all the people who I felt like I disappointed: Seed investors who invested in me, all the people at Menlo and my friends who had tweeted out early stuff. It was a long spreadsheet of like 60 people. And when I started a sabbatical, what I said was I’m going to go connect with everyone and apologize.”

Today, Carolan encourages founders to own their vulnerabilities.

“It’s OK to admit when you’re wrong,” he said. “Now I can see it on [founders’] faces, I can see when they’re scared. And they’re not going to say they’re scared but I know it’s tough. This is one of the toughest things that you’re going to go through. Now I can be there emotionally for these founders and I can say ‘here’s how you do it, here’s how you talk to your team and here’s what you share.’ A lot of founders feel like they have to do this alone and that’s why you have to get comfortable with your vulnerability.”

After Handle shuttered, Carolan returned to Menlo full time and made the firm a boatload of money from Roku’s IPO and now Uber’s. Anyway, thought those were some nice anecdotes that should be shared since most of our feeds are dominated by Silicon Valley hustle porn.

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IPO corner

Funds on funds on funds

There were so many fund announcements this week; here’s a quick list.

Extra Crunch

Lots of great new exclusive content for our Extra Crunch subscribers is on the site, including this deep dive into the challenges of transportation startup profits. Plus: When to ditch a nightmare customer, before they kill your startup; The right way to do AI in security; and The definitive Niantic reading guide.

Lawsuits

Sinema, that one MoviePass competitor, has run into its fair share of bumps in the road. TechCrunch’s Brian Heater hopped on the phone with the startup’s CEO this week to learn more about those bumps, why its terminating accounts en masse, a class-action lawsuit its battling and more.

Photo by Stephen McCarthy / RISE via Sportsfile

Startup capital

Battlefield!

TechCrunch’s Startup Battlefield brings the world’s top early-stage startups together on one stage to compete for non-dilutive prize money, and the attention of media and investors worldwide. Here’s a quick update on some of our BF winners and finalists:

#Equitypod

If you enjoy this newsletter, be sure to check out TechCrunch’s venture-focused podcast, Equity. In this week’s episode, available here, Crunchbase News editor-in-chief Alex Wilhelm, myself and Phil Libin, the founder of Evernote and AllTurtles, chat about the importance of IPOs. Plus, in a special Equity Shot, Alex and I unpack the Uber S-1.

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Equity Shot: A deep dive into the Uber S-1

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

It’s time for another Equity Shot, a quick-take episode centered around a breaking news event. This time, as you already guessed, Kate Clark and I sat down to dig into the Uber S-1. It’s a huge, complex document, but we did our best to summarize what’s inside.

First, we talked through yearly results, looking back a half-decade into Uber’s revenue growth. In the filing, Uber reported 2018 revenues of $11.27 billion, net income of $997 million and adjusted EBITDA losses of $1.85 million. We highlighted those numbers, talked about operating losses and the company’s gyrating net results that included the positive impacts of various divestitures.

Yes, this S-1 required a bit more unpacking than most. We apologize for the frantic scrolling, we were pouring through the document live and we were a bit excited. This is an IPO that’s been talked about for years and will be easily one of the largest floats of all time.

Anyway, an S-1 brings insights to more than just a company’s financials, so we spent time highlighting key stakeholders, or, in other words, the people are are going to get really really really rich off Uber’s IPO. That includes Uber co-founder and chief executive officer Travis Kalanick, famous venture capital firms like the SoftBank Vision Fund and Benchmark, and more.

The IPO, remember, is expected to sell $10 billion in stock (primary and secondary) and value the company at $100 billion or more.

If 30 minutes digging through the S-1 wasn’t enough for you, don’t fret, we’ll be following the Uber IPO for weeks — probably months — to come.

Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple PodcastsOvercast, Pocket Casts, Downcast and all the casts.

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Travis Kalanick stands to make billions from Uber’s IPO

Uber co-founder Travis Kalanick, who resigned from the company in 2017, still stands to make billions in the company’s initial public offering, expected in May.

The ride-hailing giant dropped its S-1 this afternoon, confirming plans to trade on the New York Stock Exchange under the ticker symbol “Uber.” The company did not disclose the valuation it’s seeking but is said to be planning to sell around $10 billion in stock.

The filing highlights Uber’s key stockholders, including Kalanick, who owns 8.3 percent of the company’s pre-IPO shares valued at roughly $9 billion, assuming an initial market cap of $100 billion.

Uber has raised nearly $20 billion in a combination of debt and equity funding, making it the most well-capitalized pre-IPO business ever. Its IPO will make history as the eighth largest debut in U.S. history, Axios reports.

According to the filing, the SoftBank Vision Fund owns 16.3 percent of pre-IPO shares. Its remaining largest shareholders include Benchmark (11 percent), Uber co-founder Garrett Camp’s startup studio Expa (6 percent), Saudi Arabia’s Public Investment Fund (5.3 percent) and Alphabet (5.2 percent).

Uber’s early stakeholders, though not mentioned in the filing, will undoubtedly make a lot of money on the IPO, too. That includes Menlo Ventures, Lowercase Capital and First Round Capital, as well as a bunch of individual investors.

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WTF is Baillie Gifford?

The SoftBank Vision Fund has been screaming from the venture headlines the last few months, driven by eye-popping rounds (and valuations!) into some of the most notable startups around the world. Yet, SoftBank isn’t the only player rapidly buying up the cap tables of top startups. Indeed, another firm, more than a century old, has been fighting for that late-stage equity crown.

Baillie Gifford .

… Who the what?

When our fintech contributor Gregg Schoenberg interviewed Charles Plowden, the firm’s joint senior partner, about the firm’s prodigious investing, we realized that we have never gone in-depth on one of the most influential investors in Silicon Valley. So here goes.

Baillie Gifford is a 110-year-old asset management firm based out of Edinburgh, Scotland, and has long had a penchant for pre-IPO tech companies. The firm was an early investor into some of the world’s most valuable private and public tech companies, boasting a roster of portfolio companies that includes unicorns from nearly all generations in modern tech, including everything from Amazon, Google, and Salesforce to Tesla, Airbnb, Spotify, newly-public Lyft, Palantir, and even Space X.

Baillie Gifford’s reach stretches way beyond the 280/101 corridor. The firm has an extensive history of investing across geographies, with one of its first and most successful investments coming from an early entry into Chinese e-commerce titan Alibaba. More recently, Baillie Gifford even held a stake in recently IPO’d Chinese electric autonomous vehicle manufacturer NIO, and one the firm’s largest current holdings is South African internet conglomerate Naspers — who itself is an active investor and developer of emerging market tech infrastructure.

The firm’s low profile belies its aggressive capital deployment strategy. According to data from Pitchbook, Baillie Gifford was involved in roughly 20 deals in 2019 and was involved as a lead or participant in transactions worth over $21 billion in aggregate total deal size — beating out behemoth Tiger Global who tallied roughly $13.25 billion on the same metric.

The firm has about $2 billion focused on private companies, so while it is aggressive in getting into later-stage rounds, it is not nearly operating at the scale of say the Vision Fund or Tiger Global. While the asset manager primarily focuses on public-equity investing, the firm has participated in investment rounds as early as Series A according to Pitchbook and CrunchBase data.

Overall, the firm manages $221 billion in assets under management as of January 2019.

As one of the earliest asset managers to invest in pre-IPO tech companies, Baillie Gifford has sourced investments through its long-standing reputation as an investor. The firm first began really diving into private tech investing in the wake of the dot-com bubble. The firm doubled down on the tech sector at a time when few others were investing and sifted through the blood bath to find cheap entryways into companies that are now amongst the world’s largest.

Today, however, the landscape is undoubtedly much different. Tech companies now make up four of the top five largest companies in the world by market cap, and seven out of the top ten. Now, everyone wants a piece of the pie and there seems to be more checks being thrown at founders than most can even fit in their wallets.

With more capital at their fingertips than ever before, founders are opting to keep their startups private for longer in order to avoid the stress of having to deal with short-term public market investors who are more often than not looking for the first opportunity to cash out. So why, amongst so much choice, do companies continue to partner with Baillie Gifford?

Plowden has some insights on that front in our interview, but the summary is that Baillie Gifford just sees itself as a partner. Unlike its peers and most investment managers, Baillie Gifford has no outside shareholder owners to report to. As a partnership, wholly-owned and run by just 44 partners, the firm doesn’t face the organizational constraints that beset most firms that manage billions and billions in assets.

The result? In short, Baillie Gifford has quietly been making a killing, and probably drinking some good scotch along the way as well.

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