Amazon pays $1.2 billion for self-driving startup Zoox

Zoox, one of the most lavishly funded independent self-driving startups, has been acquired by Amazon, the companies announced on Friday.

Venture capitalists, hungry for a stake in the much-hyped self-driving industry, poured hundreds of millions of dollars into Zoox between 2016 and 2019. But as self-driving companies have failed to hit self-imposed milestones over the last couple of years, investor enthusiasm has cooled.

Zoox’s own plans were breathtakingly ambitious. The company planned to not only develop self-driving software, but to build its own vehicles and create a ride-hailing service. As recently as 2018, the company was aiming to launch a fully self-driving taxi service by 2020.

But like most other self-driving companies, Zoox has been forced to push back its timetable. Zoox fired CEO and co-founder Tim Kentley-Klay in 2018. That’s never a good sign for a startup that’s still years away from launching its first product. Zoox hired former Intel executive Aicha Evans to replace him in 2019.

In April, in the midst of the coronavirus pandemic, Zoox laid off more than 100 safety drivers—though it said it hoped to bring them back once the pandemic was over. With cash dwindling and little appetite from venture capitalists emerging, Zoox began looking for a buyer.

The search evidently didn’t go well. A 2018 fundraising round had valued the company at $3.2 billion. Amazon scooped the company up for a reported $1.2 billion.

A “revolutionary passenger experience?”

In Friday’s press release, Amazon offered few details about its plans for Zoox. For now, the company will be operated as an independent company by its current leadership team—Evans and co-founder Jesse Levinson. Zoox will apparently continue focusing on the taxi market. According to Amazon, “Zoox’s ground-up vehicle focuses on the ride-hailing customer, with tightly integrated features designed to provide a revolutionary passenger experience.”

But it’s easy to imagine Zoox eventually pivoting to provide either delivery services—competing with UPS and FedEx as well as startups like Nuro—or long-distance trucking services. As the world’s largest online retailer, Amazon is one of the biggest customers for both types of services.

The Zoox acquisition continues a trend of self-driving projects becoming subsidiaries of larger firms. Market leader Waymo is part of Alphabet, while Cruise and Argo are owned by GM and Ford, respectively. All of those companies have—like Zoox—been granted a significant level of autonomy from their parent companies.

Meanwhile, independent self-driving companies have struggled. Apple acquired self-driving startup Drive.ai last year—though that appears to have been mostly a talent acquisition effort. Starsky Robotics, a startup focused on trucking, shut down in March.

The combination of general economic uncertainty and slow progress for self-driving technology could make it increasingly hard for the remaining independent self-driving companies—including Nuro, Aurora, and Voyage—to continue as independent companies. If they can’t find ways to launch profitable commercial service, they may be forced to sell to follow Zoox’s lead and sell to a bigger company with ample cash reserves.