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Waymo’s $2.25 billion could hint at the self-driving industry’s correction

On some fronts, the splashy investment actually highlights an industry struggling to match its own hype.

A Waymo self-driving car in California

Alphabet's Waymo may be one of the closest autonomous-vehicle companies to commercialization.

Photo: Glenn Chapman/AFP via Getty Images

It's not often that you can consider an investment of $2.25 billion a warning. But Waymo's splashy funding news on Monday could be seen as just that — about internal attitudes to the company and the wider driverless car industry.

Waymo said that it raised $2.25 billion in a funding round led by Silver Lake, Canada Pension Plan Investment Board and Mubadala Investment Company. Additional cash came from Magna International, Andreessen Horowitz and AutoNation, as well as the autonomous vehicle outfit's parent company Alphabet.

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The grab for outside cash reflects both internal dynamics at Alphabet, which is sidelining projects without clear paths to profitability, and an overall slowdown in the race to create truly self-driving cars, according to Sam Abuelsamid, principal analyst at Navigant Research.

For a long time, Wall Street and Silicon Valley had a rosy view about the future of self-driving technology, but development hit technological and regulatory speed bumps over recent years.

"What we've seen is a significant slowdown in plans for when and where they're going to deploy autonomous vehicles while they work to figure out both the technological challenges and how to prove that they are in fact safe," Abuelsamid told Protocol.

Waymo did not reveal the total valuation for the round, but Abuelsamid guesses it was "no more than $50 billion." That would be a big step down from previous estimations: Morgan Stanley analysts valued Waymo at $175 billion in 2018, but latterly cut that by 40% last September to $105 billion.

Proponents of self-driving technology say the benefits could be huge, both to public safety and to profit margins: Dan Ammann, the head of GM's autonomous driving subsidiary Cruise, recently valued the industry potential at $8 trillion. But there are lots of people fighting for that market, from legacy automakers to challengers like Alphabet and Uber, and development of the technology is taking longer than many expected.

Waymo got an early start and is likely one of the closest players to commercialization, according to Mike Ramsey, senior research director for automotive and smart mobility sectors at Gartner.

"The Waymo Driver has driven more than 20 million miles on public roads across over 25 cities, and over 10 billion miles in simulation," Waymo said while announcing the new cash infusion. It also touted Waymo One, a public ride-hailing experiment in Phoenix that it says "has already provided thousands of fully driverless rides to our riders, in a high-speed mixed usage market area larger than San Francisco."

But the rides offered to the public still feature safety drivers. And the overall industry has suffered a number of public safety setbacks, including fatal crashes involving vehicles with assisted driving features from Uber and Tesla that have drawn the scrutiny of government safety watchdogs like the National Transportation Safety Board.

There have been other multibillion-dollar investments in the market — in fact, more than $250 billion in capital investments have been made in the market across more than 450 companies already, according to Pitchbook data.

"I expect you'll see a lot of consolidation over the next year and a half. Smaller companies will get acquired or fade away, and we're going to end up with a dozen or fewer companies that have a major stake — including Waymo," Ramsey said.

There have also been delays — like GM pushing back its expected launch of an autonomous commercial service, which was originally scheduled for 2019. And many automakers promised that 2021 would be the year that autonomous vehicles go mainstream, a prediction that now looks unimaginable.

And at Alphabet, the development of the market may not be moving fast enough for Ruth Porat, its chief financial officer. Since assuming that role in 2015, she has reined in Alphabet's "other bets" — the non-Google parts of Alphabet's business that lean toward the experimental.

Because Alphabet's financial statements lumps all those other bets, including Waymo, together, it's hard to get a good idea of the project's financial particulars. But pulling in outside funding is likely a sign that Waymo's costs caught Porat's eye, according to Abuelsamid.

"My guess is that she took a look at what's going on with the automated driving market and realized 'this will take many more years before we start to get to some significant scale, and Alphabet doesn't want to put many billions more into this,'" he said.

Some of the funders behind this new round, including AutoNation and Magna International, are already partners with Waymo. Bringing them in now could help strengthen relationships while building some independence within Alphabet as the sector nears commercialization, Ramsey said. That's something that Waymo's chief executive, John Krafcik, wants: He has said that becoming an independent company "has always been the evolutionary path."

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But the fact that Waymo went to existing business partners may also suggest that the company turned to them to maintain the project, according to Abuelsamid.

"My guess is that Porat basically told them if you want to keep going, you'll have to go elsewhere for money," he added.

Microsoft wants to replace artists with AI

Better Zoom calls, simpler email attachments, smart iPhone cases and other patents from Big Tech.

Turning your stories into images.

Image: USPTO/Microsoft

Hello and welcome to 2021! The Big Tech patent roundup is back, after a short vacation and … all the things … that happened between the start of the year and now. It seems the tradition of tech companies filing weird and wonderful patents has carried into the new year; there are some real gems from the last few weeks. Microsoft is trying to outsource all creative endeavors to AI; Apple wants to make seat belts less annoying; and Amazon wants to cut down on some of the recyclable waste that its own success has inevitably created.

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Mike Murphy

Mike Murphy ( @mcwm) is the director of special projects at Protocol, focusing on the industries being rapidly upended by technology and the companies disrupting incumbents. Previously, Mike was the technology editor at Quartz, where he frequently wrote on robotics, artificial intelligence, and consumer electronics.

People

Google's union has big goals — and big roadblocks

Absence of dues, retaliation fears and small numbers could pose problems for the union's dream of collective bargaining, but Googlers are undeterred.

Recruiting union members beyond the early adopters has had its challenges.

Photo: David Paul Morris/Getty Images

When the Alphabet Workers Union launched with more than 200 Googlers at the beginning of the year, it saw a quick flood of new sign-ups, nearly quadrupling membership over a few weeks. But even with the more than 710 members it now represents, the union still stands for just a tiny fraction of Google's more than 200,000 North American employees and contractors. The broader Alphabet workforce could prove difficult to win over, which is a hurdle that could stand in the way of the group's long-term ambitions for substantive culture change and even collective bargaining.

The initial boom of interest from Googlers was thrilling for Alex Peterson, a software engineer and union spokesperson. "It's really reinvigorating what it means to actually be a community of Googlers, which is something that's been eroding over the past four or five years, or even longer."

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Anna Kramer is a reporter at Protocol (@ anna_c_kramer), where she helps write and produce Source Code, Protocol's daily newsletter. Prior to joining the team, she covered tech and small business for the San Francisco Chronicle and privacy for Bloomberg Law. She is a recent graduate of Brown University, where she studied International Relations and Arabic and wrote her senior thesis about surveillance tools and technological development in the Middle East.

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The uprising has sparked a tense debate about the right way to stitch together the digital scraps of someone's life to publicly accuse them of committing a crime.

Rioters scale the U.S. Capitol walls during the insurrection.

Photo: Blink O'faneye/Flickr

Joan Donovan has a panic button in her office, just in case one of the online extremists she spends her days fighting tries to fight back.

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Issie Lapowsky
Issie Lapowsky (@issielapowsky) is a senior reporter at Protocol, covering the intersection of technology, politics, and national affairs. Previously, she was a senior writer at Wired, where she covered the 2016 election and the Facebook beat in its aftermath. Prior to that, Issie worked as a staff writer for Inc. magazine, writing about small business and entrepreneurship. She has also worked as an on-air contributor for CBS News and taught a graduate-level course at New York University’s Center for Publishing on how tech giants have affected publishing. Email Issie.
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How Google workers secretly built a union

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Google employee holds a sign as thousands of employees walk off the job to protest the company's handling of sexual misconduct claims on November 1, 2018, in Mountain View, California.

Photo: Mason Trinca/Getty Images

More than a year ago, activists inside Google began to seriously investigate how they could go about creating a union. Frustrated with conflicts over fair treatment of workers, sexual harassment and equal pay, and facing punishment for organizing a massive walkout, some workers started to talk quietly about more official organizing. In January 2020, a group reached out to the Communications Workers of America to learn the first steps, and began quietly discussing structure and bringing more workers on board without tipping off Google leadership. Recruiting was limited to a group of closely-connected friends, peers and colleagues and secret word-of-mouth discussions, meaning that most Google workers had no idea the union was being formed.

Dylan Baker, a software engineer who joined the recruiting process in October, described a careful process fearful of Alphabet retaliation. "We needed to keep things under the radar. We added one person at a time, very incrementally," they said. Almost every worker they approached about the union agreed to join. "From here, I think every single person has a lot of reasons and a lot of things that they want to change," they said.

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Anna Kramer is a reporter at Protocol (@ anna_c_kramer), where she helps write and produce Source Code, Protocol's daily newsletter. Prior to joining the team, she covered tech and small business for the San Francisco Chronicle and privacy for Bloomberg Law. She is a recent graduate of Brown University, where she studied International Relations and Arabic and wrote her senior thesis about surveillance tools and technological development in the Middle East.

Power

In antitrust suits, Facebook’s biggest liability is Zuckerberg’s own words

The suits from a coalition of 48 attorneys general and the Federal Trade Commission lean heavily on Zuckerberg's emails.

The lawsuits quote Facebook's CEO extensively on the topic of acquiring potential threats.

Photo: Alessio Jacona

Mark Zuckerberg's private communications about competition have gotten him in trouble before. Back in 2012, just before Facebook went public, Business Insider published a damning trove of instant messages from the CEO's Harvard days, in which he admitted to simultaneously building what would become Facebook and working on a dating site for Cameron and Tyler Winklevoss.

"I'm going to fuck them," the now infamous message reads. "Probably in the year …*ear."

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Issie Lapowsky
Issie Lapowsky (@issielapowsky) is a senior reporter at Protocol, covering the intersection of technology, politics, and national affairs. Previously, she was a senior writer at Wired, where she covered the 2016 election and the Facebook beat in its aftermath. Prior to that, Issie worked as a staff writer for Inc. magazine, writing about small business and entrepreneurship. She has also worked as an on-air contributor for CBS News and taught a graduate-level course at New York University’s Center for Publishing on how tech giants have affected publishing. Email Issie.
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