Automotive Startup Activity Swelling

According to AngelList, there are at least 6,600 automotive startups, with a $4.6 million average valuation. 475 of those are electric vehicle startups with a $5 million average valuation. Indeed, the electrification of vehicles and move towards autonomous driving is having a huge impact, the likes of which the automotive industry has never seen.

This is causing the car manufacturers and Tier One suppliers to rethink everything, particularly since even consumer giants want a piece of the automotive opportunity as well.

Raja Tabet, corporate vice president, emerging technologies at Cadence has been watching this space very closely for the past few years.

“You see traditional consumer giants wanting to get into the automotive industry. It’s the people who define what the system company is all about. It’s the people who control the hardware, the software, the operating system, the middleware and they have been extremely successful in that domain. Now that the automotive OEM is recognizing that differentiation in their future products will depend greatly on electronics and software, they want to take a chapter from that same book from the consumer giants and the internet giants. they recognize that they really need to control a great deal of the system stack for differentiated functions like autonomous driving,” he observed.

Interestingly, Tabet said OEMs have made firm decisions to be in full control of their ADAS solution, from a hardware and software perspective and are changing the traditional game to have more ownership of their system solution.

He also noted that Cadence has identified 37 startups just working on LIDAR solutions, many of which are really well funded. “There is a great deal of venture capital money that’s also excited about taking a bite out of this huge opportunity in automotive.”

Further, Tabet said that automotive is expected by far to be the highest growth area in the next five to seven years thanks to electronic content in the car. “There are billions of dollars worth of opportunity for many of these startups and whoever develops the best LIDAR technology or radar technology or CAN bus technology or future technology has the opportunity to really make a lot of money. There are tons of these startups out there but they all are niche players — they hire experts that know how to do LIDAR, or they hire experts that know how to do radar but they need help to build the rest of the system.”

This represents opportunities for hardware, software and services providers to help some of these startups with their design enablement with tools, flows, IP, consultancy around functional safety, reliability, etc.

Finally, at a high level, Tabet added, every OEM has by now determined their differentiation. “For instance, many OEMs have made a decision that they will have direct control over autonomous driving technology choices both on the hardware and the software side. At a lower level as for what this means exactly, will OEMs truly build their own SoC, are they truly going to build their own ADAS software or are they going to partner on the software or hardware? This is where there is still variability. Overall, however, all of the OEMs have decided they will invest heavily in electrification and ADAS, and be in control of technology choices. Some are partnering in executing the technology, and some have ramped up teams to be self-sufficient in creating future autonomous driving technology.”

How this plays out for the foreseeable future should be inspiring for entrepreneurs, to say the least. What I’ll also be watching for is how the technology developed for automotive inspires other use cases across our increasing connected lives.