This article was translated from autocarweekly public account
Author: Finance Street Old Li
The charm of autonomous driving startups and investments lies not in business, but in everyone’s definition of success.
Recently, the German Federal Motor Transport Authority (KBA) approved Mercedes-Benz’s L3-level autonomous driving system, which means that Mercedes-Benz’s L3-level autonomous driving vehicles can not only be driven on the road, but also exported to overseas markets. This news certainly has milestone significance in the field of autonomous driving, meaning that for the first time globally, L3-level autonomous driving vehicles have achieved large-scale production and multi-country sales.
As the saying goes, “The sun rises in the east and it rains in the west.” In China, another forefront of autonomous driving, the situation is different: since the beginning of 2021, many giant companies such as Huawei have been promoting their top-level autonomous driving capabilities, but no mass-produced products have been seen yet; the situation for autonomous driving startups is even worse, as dozens of leading startups have fallen into “people shortage” and “money shortage”.
Old Li had engaged in primary market investment in smart cars, and had encountered many autonomous driving startups. Today, Old Li wants to talk about something interesting: how do autonomous driving companies “trick” investors? Why is the industry deemed reasonable by mere existence? Why are there no losers in the autonomous driving industry?
“Tricking” is a Skill
“Tricking” is a skill, and it is the deepest impression that Old Li has gained during his research on autonomous driving investments.
There is often a gap between ideals and reality, and investment in autonomous driving is far less complicated than imagined. Old Li’s partner had once decided on an investment in a Pre-A autonomous driving company in half an hour, with an amount far exceeding Old Li’s expectations. Old Li was puzzled by this, but gradually realized that this was a game problem, and more so a human problem, where even rational investors cannot resist the imagination of money.
All industries follow a common investment logic: how long is the track, how difficult is it, and how likely is it to be successful. Following this logic, the autonomous driving industry is a sector with a very long track, extremely difficult, and low possibility of success.
It can be said that 90% of the companies in the autonomous driving industry will end up going bankrupt; if the core technological bottleneck is not overcome, even the last giant company’s autonomous driving business may also fail. One indisputable fact is that the difficulty of the autonomous driving industry is not a matter of who can succeed, rather whether the industry as a whole can succeed.In a long period of time, investors also asked these questions to entrepreneurs, and interestingly, these doubts have been cleverly resolved by the founders of autonomous driving companies. It must be said that many autonomous driving founders not only have high technical levels, but also have strong persuasive abilities.
Firstly, there is the issue of the track. In 2015, when autonomous driving investment was the hottest, many investors didn’t even look at the quality of the companies, as long as the technical team was okay, everyone would actively invest. The reason is simple. The imagination of autonomous driving is too strong. When advanced autonomous driving is realized, human travel and life will be completely changed. At a investment committee meeting, the founder of an autonomous driving company affectionately compared autonomous driving to the “21st century equivalent of the Internet” and the breadth of the track is beyond doubt, which immediately piqued the interest of investors, who naturally would reach into their pockets.
Secondly, there is the problem of technology. Autonomous driving is a typical technology-based industry, and in recent years, there has been a rule in the investment industry that a new technology can make a big leap after 5-8 years of capital cultivation. In the field of new energy vehicles, the typical technology that makes the biggest leap is power batteries. As early as 2012, when CATL was first established, power batteries were labeled “poor performance, high cost”. The essence of investing in power battery companies is to increase research and development through capital to achieve performance improvement and scale cost reduction.
Autonomous driving entrepreneurs used the same logic to tell investors that future autonomous driving technology will be like power batteries, which will achieve the effect of quality improvement and efficiency, with the completion of technology iterations over time. In the eyes of many investors, the next CATL is likely to emerge in this field.
Different autonomous driving companies are also telling different stories, from initial high-speed scenario autonomous driving to low-speed scenario autonomous driving, from open scenario autonomous driving to closed scenario autonomous driving. Chinese autonomous driving companies have created the world’s most abundant, diverse, and comprehensive autonomous driving scenario application system, which is reminiscent of Luckin Coffee.
Existence is reasonable for autonomous driving. A thousand readers have a thousand Hamlets, and from different perspectives, everyone has completely different expectations for autonomous driving. In China’s frontier innovation and entrepreneurship battleground, autonomous driving companies are mostly “from the same root.” Some renowned predecessors from famous universities and enterprises have trained a large number of autonomous driving entrepreneurs. Five years ago, everyone believed that autonomous driving was not only a blue ocean, but also would overturn the way human travel.# China’s Autonomous Driving Industry in 2015
In 2015, China’s autonomous driving industry was just beginning to take shape, alongside the rise of new energy passenger vehicle market. Thanks to the rapid development of intelligence and interconnectivity, autonomous driving became the focus of public attention.
To be frank, compared with entrepreneurs in the electric vehicle field, those in the autonomous driving industry face much greater challenges. This includes two factors: Firstly, from a technical perspective, the difficulty of autonomous driving far exceeds that of electric vehicles. If electric vehicle development is like climbing Taishan Mountain, then autonomous driving would be like scaling Mount Everest; secondly, from an industrial perspective, the basic foundation for autonomous driving industrialization is practically non-existent. Consumer electronics has already accumulated industrialization experience in the consumer battery industry. While power battery entrepreneurship involves adjusting focus, autonomous driving virtually has nothing but the concept.
Despite this, investors are still very enthusiastic about investing in the autonomous driving field. According to statistics from the National Strategy Institute of China’s Automotive Industry, in the past five years, autonomous driving has been the most funded segment in the automotive industry by far. Personally, I feel that all funding comes from investors. Take an example from my surroundings, one of my partners insisted that a relevant layout must be made within such a large playing field for autonomous driving. Regardless of how good the subject is, it needs to be seized first.
However, good funds and good targets complement each other. In the autonomous driving industry, there are very few “good projects,” which means the requirements for funding a good project team are relatively strict. Small and medium-sized funds find it difficult to invest. When the industry’s funds far exceed the number of projects, more and more entrepreneurs will emerge.
Not everyone is suitable for entrepreneurship, nor is everyone suitable for being a manager. This statement is exemplified in the autonomous driving field. Autonomous driving is a typical technology-driven industry, so early entrepreneurs mostly have top-notch technical backgrounds. Due to the influx of hot money, more and more “scientists,” “prodigies,” and “industry experts” have jumped aboard the autonomous driving entrepreneurship bandwagon, regardless of whether they possess core technology or their rank within the field. They transform into founders and entrepreneurs overnight.
Under a nebulous goal and a thorny road, many technology-based autonomous driving entrepreneurs have failed to play the role of “co-founders,” leading to the exodus of key management personnel. After their departures, they set up more “new companies” and obtained more “new financing.” More and more companies are created within autonomous driving industries.
Those who dare to embark have no failures
In China, whenever an industry is flourishing, there will always be those who propose the “bubble” theory to explain it. This has been the case for the past new-energy vehicles, and it is currently the case with autonomous driving.
Recently, many external voices have been unfriendly to the autonomous driving industry. In my opinion, this should be viewed from two sides:One is to recognize the bottleneck of technology. As Mr. Li, our partner, often says, many external personnel regard autonomous driving as just a typical “follow-the-leader” mentality. When the industry is thriving, they follow the trend and cheer for it; when the industry is struggling, they push it down. Judging from the development pace, the development of autonomous driving technology is spiral-shaped, with technological breakthroughs leading to industry development, which in turn spurs more technological breakthroughs. The external environment should provide enough flexibility for these technological breakthroughs, which is something that investors haven’t done in the past but are doing now.
Two is to redefine success. Companies are essentially combinations of people, and autonomous driving companies are essentially combinations of talent. If we were to set a high coefficient of education for companies, autonomous driving companies are the top companies in the automotive industry in terms of academic qualifications. It is this group of people who created China’s autonomous driving ecosystem. Although the road ahead is long and winding, the autonomous driving industry has been successful from a development perspective, keeping pace with the European and American countries.
Mr. Li will not elaborate on industry views. Instead, he would like to share his personal view on success with everyone. Frankly speaking, he is very envious of the entrepreneurial team in the field of autonomous driving. In Mr. Li’s view, everyone is successful, whether they are grassroots, mid-level, or senior-level employees. For senior management, whether their technological level is high or low, they are all successful.
With the entry of industry giants such as Huawei, there is less and less room for development for autonomous driving startups. Even if the CTO has three heads and six arms, their technological ability and resource coordination ability are difficult to match against the behemoth-level companies. The key to defining success at the senior management level is not whether the company stands out, but whether the individual can stand out. Many co-founders and high-level employees of companies have earned a lot of money through various means during the burning money process, and the return on investment and influence are much higher than before they started their businesses. In the industry, there has emerged a large number of millionaires under 30.
In fact, the power and responsibility of entrepreneurs are interdependent. The greater the power, the greater the responsibility. Many companies are ultimately sustained by their founders. During the entire process of starting a business from scratch, the initial team has gone through the baptism of fire.
Middle-level employees may be a group of more successful people than senior management. Without the pressure of entrepreneurship at the top, and without the heavy burden of grassroots research and development, many middle-level employees of autonomous driving companies have evolved into roles of uploading and issuing orders. On the one hand, they enjoy the salary and welfare brought by the autonomous driving dividend, and on the other hand, they gain management experience brought by the growth of the company. Every day, they think about how to develop their careers to the next level.## Translated English Markdown Text with HTML Tags
Old Li once conducted a survey on a waist-level autonomous driving company, whose middle-level staff exceeded ten people, and their average annual salary exceeded 1 million RMB. To be frank, based on personal education and age, this salary is considered outstanding even in the finance industry. However, due to the excessively high popularity of the domestic autonomous driving industry and the scarcity of talents, “the rising tide lifts all boats” on middle-level staff prices.
For middle-level employees, if the company succeeds, everyone benefits and they even have the opportunity to be promoted to department managers or even vice presidents. If the company fails, however, employees do not have to suffer any consequences, killing two birds with one stone.
Old Li has always advised new graduates not to join start-ups as it is not conducive to their personal development. However, the autonomous driving industry is different. Many grassroots employees joined the company immediately upon graduation. Autonomous driving start-ups are attractive to grassroots employees for three reasons: 1) salary and benefits, 2) upward mobility, and 3) accumulation of technical knowledge. Even if the company fails, employees can still jump to tech giants like Huawei, without explaining much here.
The capital market has always emphasized “being friends with time”. Old Li believes that this statement seems more appropriate in the field of autonomous driving. In a difficult and long-term field where one wishes to overturn the travel ecosystem, patience is crucial. As bystanders, it is wise to catch the wind and sail with the tide. Find your own opportunities in the wave of autonomous driving, as this may be the greatest gain that practitioners can currently achieve.
This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.