Role and Scope of SPACs for Autonomous Vehicle Technology

According to the latest market report, the autonomous driving industry is experiencing rapid growth. It has received funding of US $19.3 bil...

According to the latest market report, the autonomous driving industry is experiencing rapid growth. It has received funding of US $19.3 billion from 2014 to 2019. Though funding for the autonomous driving industry is at an all-time high, the seed funding rounds are not getting enough investors, and this trend is likely to continue next year.

While Mergers and Acquisitions partnerships are on the rise, the trend shows a substantial tech\nical barrier for new startups. Instead of competing against each other to produce superior products, incompetent startups are sharing resources to offset costs. Most startups in autonomous driving technology don’t have the funds to move ahead with the new technology.

What is a SPAC?

SPAC stands for Special Purpose Acquisition Company. It works on the principle of “blank check” Shell Corporation that takes companies public without going through the traditional IPO process. The SPAC shows allow retail investors to invest through leveraged buyouts.

In the SPAC funding model, investors write blank checks to SPACS, which can take two or more years to target and acquire new firms. SPACs are not commercial companies. Their sole purpose is to raise money for startups without listing an IPO. SPACs can raise good capital for companies working on autonomous vehicle technology.

After building a company, the SPAC can go for a public listing of the company where investors and the general public can buy the company shares. After the SPAC deal is closed, the startup replaces the SPAC on the market and functions like a publicly listed company.

What Role will SPAC Play in Autonomous Vehicle Technology Startups?

The startup founders are more likely to exit startups in the near future in search of new avenues. They have two options to sell their startup to a more prominent company to liquidate the entity. Another option is doing an IPO, which involves selling your shares. SPAC is a popular option to get the required funding to move ahead.

Launching an IPO is problematic as it involves negotiations with all stakeholders. On the other hand, SPAC discussions are more straightforward and offer capital certainty to capital-hungry autonomous technology startups. A few SPAC shows can get the required funding in a short time.

Autonomous vehicle technology is the future. As the technology progresses, you will see people taking the backseat and artificial intelligence working behind the steering wheel. A world full of autonomous driving cars is still a distant dream. But several technology startups are working hard to realize this dream. These startups need capital to test autonomous technology and make it work on real roads.

Startups Face Strong Competition from Corporate Competitors

Every large and small company is venturing into developing platforms for autonomous driving technology. Big corporate companies have large funds to back their projects and test new technologies. On the other hand, small startups with revolutionary ideas find it tough to gather capital to test their inventions.

Also, government rules related to autonomous driving are adding to the difficulties of the startups. They have to deal with many safety and legal issues that become considerable hurdles in their success.

The well-funded startups are going to usurp a large market share and give tough competition to corporate incumbents. The market opportunity presented by autonomous driving technology is enormous, which has attracted several new investors to this domain. It is easier for investors to create a special-purpose Acquisition Company and fund promising startups in their innovation journey.

This emerging technology has far-reaching applications that can be hard to imagine right now. According to the leading market survey, around 270 plus startups and companies are working on autonomous driving technologies. Some are creating software platforms, while some are investing heavily in R&D to develop smart sensors.

To sum up, the investors have several good opportunities to invest in autonomous technology startups that are eagerly awaiting capital in the form of SPAC to fund their innovations.