On Monday, it was announced that Gores Group, the Beverly Hills private equity firm with more than $4 billion in capital invested, has agreed to buy Luminar, an eight-year-old startup in light-detection and radar (lidar) technology which is used in the sensors that power autonomous vehicles.
Attracting nearly as much fanfare is the investment vehicle, which is not (entirely) self-driving. The deal will be done under a reverse merger, enabling Luminar to avoid the hassles of the IPO process by being acquired by an already-listed company.
Luminar can do this by using a special purpose acquisition company (SPAC) bearing the name Gores Metropoulos. This particular avenue for accessing the public capital market has become increasingly attractive to issuers, with 48 so-called SPAC IPOs logged as of July 2020, raising about $18 billion for the year to date, surpassing the entire SPAC capital raise for all of 2019, with another $5.4 billion expected by year end.
Upon the transaction closing, the merged company will retain the name of Luminar Technologies and remain listed on the Nasdaq under the ticker LAZR.
Road to riches
The Luminar deal implies a pro forma enterprise value of $2.9 billion, and market capitalization of approximately $3.4 billion. The deal will include $400 million in cash from Gores Metropoulos, which is sponsored by affiliates of Gores Group and of family-owned investment firm Metropoulos & Co.
Another $170 million in cash will be invested by institutional investors including Peter Thiel, special situations investor Crescent Cove, Moore Strategic Ventures—whose recent investments include a Series C funding round in luxury electric car maker Fisker, and VectoIQ, a boutique capital advisory firm that specializes in the emerging mobility as a service (MaaS) sector.
There’s also support from Volvo Cars Tech Fund, the venture capital arm of the automaker, which from 2022 will integrate Luminar’s hardware and software in its global vehicle platform.
“This milestone is pivotal not just for us, but also for the larger automotive industry,” said Austin Russell, Founder and CEO of Luminar, which produces the only lidar sensor on the market that meets performance, safety and cost requirements for Level 3 through Level 5 autonomous vehicles.
“Eight years ago, we took on a problem to which most thought there would be no technically or commercially viable solution. We worked relentlessly to build the tech from the ground up to solve it and partnered directly with the leading global automakers to show the world what’s possible. Today, we are making our next industry leap through our new long-term partnership with Gores Metropoulos, a team that has deep experience in technology and automotive, and shares our vision of a safe autonomous future powered by Luminar,” Russell said upon the deal’s announcement.
The Luminar story marks the first big IPO of a darling of the lidar industry, the “deep-tech” trend that has piqued the disdain of Tesla CEO Elon Musk, the autonomous driving kingmaker who has called the sensor technology a “fool’s errand” and “lame.”
But its founders have been extravagantly rewarded by venture capital, with equity investments hitting a record $1.3 billion in 2019. PitchBook analyst Asad Hussain expects the automotive Lidar industry to reach $20 billion in value by 2030, implying a 10-year CAGR of approximately 31%, an estimated based on increased unit sales as measured by content per new vehicle, and partly offset by declining manufacturing costs that will bring prices down.
”We believe cheap, effective lidar solutions are likely to hit the market before there is a viable solution for self-driving technology using only cameras,” Hussain reported in an industry commentary earlier this spring. “Lidar systems have already become significantly cheaper. Over the past few years, long-range lidar systems have decreased from over $75,000 per unit to the mid thousand-dollar range. We believe individual lidar units will need to price in the low-to-mid hundred-dollar range for mass-market deployment in automobile platforms.”
A packed lot
Industry players have followed the money, which has followed more players, which have boasted increasingly idiosyncratic and specialized patent propositions. The major figures include Silicon Valley’s Velodyne Lidar, as of May 2020 still the sector’s most richly valued. That company was started by David Hall, the investor of 3D “surround view” lidar “back in the day” (2005), and has since leveraged the technology for 250 automotive partners worldwide, along with applications in construction robotics and precision farming. It has also skillfully defended its sizable patent portfolio in global infringement cases.
There’s Israel’s Innoviz, backed by Canadian automobile tech firm Magna International, Ireland’s Aptiv, and SoftBankVentures Asia. Earlier this year, it executed a major breakthrough on the Chinese market, having been selected by China’s Shaanxi Heavy Duty Automobile Co. (a.k.a. Shacman Trucks) to partner in a proof-of-concept project to bring driverless trucking operations to a major Chinese port.
There’s Australia’s Baraja, whose backers include Sequoia Capital and Australian follow-on investor Prisma which has developed a “Spectrum-Scan Lidar” that offers “inherent interference immunity”—i.e., blocking signal interference from other lidars.
In March, Munich-based lidar startup Blickfeld, a relative newcomer since its debut in 2017, announced a Series A financing round, led by the venture capital arms of German tech supplier Continental, Bayern Kapital, Fluxunit-OSRAM Ventures and TEV (Tengelmann Ventures), the latter company having achieved renown as a skilled spotter of European unicorns.
Blickfeld’s technology is a solid-state sensor that’s distinguished by its small-size and its ability to deliver high-resolution, 3D performance in adverse environmental conditions—making it particularly well-suited to “industry-agnostic” applications as well as security.
…And a major strategic technology
Lidar is uniquely well suited to optical collection capabilities in airborne intelligence, surveillance and reconnaissance (ISR) operations. Because it uses light instead of radio waves, lidar enables inherently covert optical communications between land, air, sea and space nodes. This particular application, known as Software Defined Multifunction LIDAR (SDML), has been developed and refined by U.K. defense contractor QinetiQ, and is said to allow data transfer rates many times faster than traditional radio frequency (RF) communications).
And the dealmakers have made it to this part of the lidar field, as well. Last fall, QinetiQ more than doubled its size on the U.S. market after acquiring Manufacturing Techniques Incorporated (MTEQ), a Virginia-based provider of advanced sensors that works closely with the U.S. Army.