For the first four months of the year, it appeared that financing for autonomous driving startups, which was previously a hot area, was gradually dwindling.

However, since then, venture funding has increased significantly.

Startups in the autonomous driving market raised fewer than $800 million through April, according to Crunchbase data. However, since May 1, approximately $2.7 billion has flowed into the industry, primarily through a number of large transactions that appear to demonstrate investor interest is not stuck in reverse.

Some of the deals that contributed to the turnaround include:

• Wayve, a self-driving car firm, spearheaded the reversal in early May, when the London-based company raised $1.05 billion in a SoftBank-led round, one of the largest fundraising transactions ever for a British business.
• Two weeks ago, General Motors agreed to invest another $850 million in San Francisco-based Cruise, which has just resumed driving programs in Phoenix, Dallas, and Houston.
• Finally, last week, Toronto-based autonomous trucking firm Waabi secured $200 million in a round sponsored by Khosla Ventures and Uber. The business intends to deploy its driverless trucks as early as next year.

These rounds now put venture capital in the sector on course for its strongest year since 2021, when investment totaled an astonishing $12.7 billion — something that seemed unthinkable just seven weeks ago.

Autonomous Vehicles Startup Funding

Startups in the area have already raised roughly $3.5 billion this year, on track to outperform last year’s $5.7 billion and $5.9 billion in 2022.

Ups and Downs

Of course, enormous money and high valuations were previously the standard in the sector.

In 2021, Cruise received the largest round of funding of any venture-backed startup in the United States, raising $2.75 billion and valued the company at more than $30 billion. Other startups in the industry, including Nuro, Horizon Robotics, and Momenta, have raised $500 million or more.

However, the tide of investment started to change in early 2022, and self-driving businesses faced the full impact. Cruise was one of the most affected, as SoftBank failed to release a promised $1.35 billion as part of an agreed-upon arrangement after the autonomous carmaker completed a commercial deployment of vehicles. Instead, General Motors paid $2.1 billion for SoftBank’s stock share in Cruise.

More bad news arrived in the space when Ford Motor-backed Argo AI halted down after receiving $3.6 billion from investors including Volkswagen Group and Lyft. Embark Trucks, an autonomous trucking business formerly valued at $5 billion, stated in early 2023 that it will lay off the majority of its staff and cease operations.

Then, late last year, Cruise paused its self-driving taxi program across the country after losing its permit to operate in San Francisco owing to an incident involving a pedestrian.

Despite these challenges, the sector is making a comeback.

It’s difficult to pinpoint a single reason, but there appears to be excitement about driverless trucks—perhaps because the sector has a driver shortage. Aside from the current Waabi round, Pittsburgh-based Stack AV, formed by the same people who founded Argo AI, raised a cool $1 billion from the SoftBank Group in the third quarter of last year.

The other driving force might be, you guessed it, artificial intelligence.

Many startups, including Wayve and Korea-based 42dot, have heavily promoted their AI offerings, referring to themselves as mobility AI companies or something similar. Wayve’s technology operates via embodied AI, in which the vehicle is driven by artificial intelligence software and interacts with and continuously learns about its surroundings. This varies from previous attempts, which relied heavily on lidar, radar, and 3D.

It’s also possible that many of these huge manufacturers, who have invested billions of dollars in the field, are simply unwilling to cut their losses at this time. The area has been significantly loaded with corporate cash, and those investors may not be ready to account to disappointed shareholders just yet.