Nvidia GTC: Paradise by the Dashcam

Maximum hype is achieved in a market at the point at which the delta between market expectations for a new technology’s potential is at its greatest remove from actual commercialization.  This point was either reached or approached with General Motor’s acquisition of Cruise Automation.

The topic is front of mind in the midst of the discussions of deep learning and petabytes at the Nvidia GPU Technology Conference in downtown San Jose.  You can talk about redundant neural networks and transformative artificial intelligence and virtual reality all you want, but $1 billion is $1 billion.

The untold story behind this acquisition, aside from the $700M that ended up in founder Kyle Vogt’s pocket and the $300M+ in cash and/or stock divided by his partners, is the bidding war that drove the purchase price to such dizzying heights.  We can only speculate as to the names of the bidding parties but we can see what was at stake. 

Serial entrepreneur Vogt is said to have performed his best Cheshire Cat, keeping his counsel while the parties fought it out in private – unlike the headline-grabbing struggle for Waze two years ago.  That may be why the Cruise acquisition captures the imagination.  The news came out of nowhere.  There were no press leaks or media taunts.  (Remember Garmin gulling TomTom into overpaying for Tele-Atlas?)

The frenzied pursuit of automated driving touched off by DARPA and carried forward by Google has made progress toward achieving automated driving a “manhood” test for car companies and Silicon Valley and Chinese start-ups.  The billion-dollar bubble of Google’s Waze acquisition, fueled by a bidding war with Facebook, is firmly in the rearview mirror – along with HERE’s acquisition by the Daimler-BMW-Audi consortium – while the battle has shifted to this emerging and enigmatic application.

We don’t quite know why we are pursuing automated driving (because the army wanted it! Remember!), but like a dog after a car, we are as one in pursuit.  It’s importance and necessity is accepted as fact outside of any defined and stated customer demand.  (Don't worry, Strategy Analytics consumer research shows increasing interest in individual automated driving elements, if not for automated driving in its entirety.)

The map’s importance is accepted and a given, particularly with Amazon and Microsoft indicating interest in investing in the HERE Consortium, but automated driving advocates have discovered the map is not enough.  It’s not only the road, it’s what is surrounding the road (road furniture) that must be scanned and understood as well as all the signs and signals.

Cruise’s aftermarket system promised to make ANY car an automated driving vehicle, but what was most important was the potential inherent in the Cruise concept.  The reality was almost irrelevant - hence the hype.

In moments of hype creation a concept or product’s potential is WAY more interesting than its reality or even revenue.  Maximum success with an early investment practically dictates the infamous pre-revenue play.  Waze’s acquisition by Google wasn’t pre-revenue, but it was close – and the less revenue the better when you are spending $1B, right?

So, now, anyone with a dashcam has instant billion-dollar credibility.  Further evidence of this is Lytx’s acquisition by GTCR for $500M in cash.

Lytx, previously known as DriveCam, had only recently become profitable and installed a little more than 100,000 of its camera-based driver monitoring systems in the past year, but GTCR cited substantial “white space” opportunities for the company.  It’s hard to know whether to laugh or cry at the “white space” locution by the acquirers.  It’s always good practice to baffle the business press with bullshit especially when you are the latest sugar daddy to overpay for a telematics asset.

But I don’t begrudge my telematics brethren an extravagant exit.  May we all find our own extravagant exit one day – and I don’t mean a fancy funeral.

The Lytx and Cruise acquisitions mean Caruma, Carvi, Nauto, Nautel, Phantom Intelligence, Navdy and a host of other dashboard devices are getting a good long second look as is drive.ai and George Hotz’s comma.ai.  Just as OBDII devices flashed spectacularly through the sky last year before crashing to earth, dashboard devices have seized the imagination.

Not all of these devices are created or positioned equally, but all are looking at the Cruise and Lytx acquisitions and asking themselves: “Could that be me?  Should that be me?”  (I imagine STEM-focused parents berating their sons and daughters to start sharpening up their programming skills and hacking the family car)

Lytx clearly has its sights set on transitioning from a fleet driver monitoring solution to automated driving.  That is the white space that GTCR is presumably referring to – but it will be a big leap for Lytx.

A company like Caruma, on the other hand, stands out from its dashboard rivals and has the added attraction of being pre-revenue!  But I’m not going to handicap the prospects for the company or its rivals here.

Suffice it to say the entire industry is in maniacal, manic pursuit of automated driving regardless of consumer demand, regardless of the impact on vehicle sales, regardless of realistic application scenarios.  Automated driving is the auto industry’s mission to Mars and in pursuit of that goal no sacrifice is too great.

This all-consuming effort animates nearly every conversation at nVidia’s GPU Technology Conference which I think is a good thing.  It’s definitely fun with deep-pocketed auto makers and Internet giants weighing their options.  And who doesn’t like the prospect of a big fat juicy exit?

To quote Meatloaf: "I'm prayin' for the end of time."

Roger C. Lanctot is Associate Director in the Global Automotive Practice at Strategy Analytics.  More details about Strategy Analytics can be found here: https://www.strategyanalytics.com/access-services/automotive#.VuGdXfkrKUk