The fledgling lidar industry is starting to feel like the California Gold Rush.

Venture capitalists are betting on a flock of startups that are racing to develop lidar units cheap enough for mass production in the auto industry.

Now Bill Ford, executive chairman of Ford Motor Co., has joined the race. His investment firm, Fontinalis Partners, took a stake last week in a San Francisco-based lidar developer dubbed Ouster.

Over the past seven years, Fontinalis has acquired stakes in mobility tech firms such as NuTonomy Inc. — a self-driving car startup based in Boston — and the ride-hailing service Lyft.

And now Fontinalis is participating in a $27 million fund-raising round for Ouster, which has begun delivering lidar units and hopes to produce 10,000 a month sometime next year.

Ouster was founded two years ago by two former engineers of Quanergy Systems, a Silicon Valley lidar supplier. With 40 employees, Ouster is a small company with big ambitions. It hopes to find a niche in an industry that is projected to generate annual global sales of $2.5 billion by 2026, up from $230 million last year, according to IHS Markit.

A lidar system is a key supplement to a self-driving vehicle's cameras and radar. The technology uses laser beams to read road conditions and convert the data into 3-D images.

Ouster's $12,000 OS1 lidar is suitable for test fleets of self-driving vehicles, but the price will have to come down for mass production.

A handful of big suppliers — such as Valeo, Ibeo and Velodyne — produce mechanical scanning lidars. The next big step will be solid-state lidar — much more compact and without moving parts — that eventually will cost a few hundred dollars apiece.

But nobody has managed that as yet, so the race for low-cost units continues to gain momentum. After 2020, as many as 15 companies will be marketing lidar units, according to IHS Markit.

One might expect Ouster to have an inside track for Ford business. But Fontinalis is not affiliated with the automaker, and Ford Motor has other irons in the fire.

Last year, the automaker invested $75 million in Velodyne to help that company mass-produce its lidar units. Velodyne has supplied lidar units for the first three generations of Ford's test fleet of self-driving vehicles.

But Velodyne does not have a lock on Ford's business, company spokesman Alan Hall said.

"We want to see Velodyne succeed, but our investment in a company doesn't necessarily indicate sourcing for production." 

Additionally, in October, Ford subsidiary Argo AI announced the acquisition of lidar-maker Princeton Lightwave. Pittsburgh-based Argo is an artificial intelligence company that is helping Ford Motor to develop a self-driving vehicle by 2021.

According to Hall, Ouster is free to pitch its lidar unit to Ford Motor – just like Velodyne and Princeton Lightwave.

“Ouster is like any other lidar supplier out there,” Hall said. Bill Ford’s investment in Ouster “is not a concern. His involvement is clear, and it’s separate from his role at Ford Motor Co.”

Indeed, Bill Ford does not make day-to-day investment decisions at Fontinalis. His partners make those calls.

Bill Ford's investment in Ouster “is not a concern,” Hall said. “His involvement is clear, and it’s separate from his role at Ford Motor Co.”