Investments in Waymo might signal a new chapter

Maybe Waymo is no longer impervious to the massive costs involved in researching and developing self-driving technology. Maybe the company is preparing to spin out from its parent company.

Or maybe this was the plan all along, as CEO John Krafcik said.

Whatever the behind-the-scenes machinations, most industry experts and analysts concurred that Waymo's first external funding round marked a significant juncture for the former Google Self-Driving Car Project, which has been at the forefront of the push to commercialize autonomous-driving technology for more than a decade.

Last week, Waymo announced it raised $2.25 billion, with private equity firm Silver Lake, Canada Pension Plan Investment Board and Mubadala Investment Co. leading the round. Additional external investment is expected soon.

"This is along the evolutionary path we have already imagined, that the company would move in the direction of more independence and autonomy," Krafcik said last week.

As parent company Alphabet has increasingly focused on financial discipline, some industry experts thought the external funding infusion signaled that even a company with pockets as deep as Alphabet's had financial boundaries for a project that has consumed billions since its inception.

Others, however, weren't convinced this was about pinching pennies.

"It's not that Google is cash poor," said Mark Boyadjis, global technology lead analyst for IHS Markit. "It's that this makes sense for Waymo to become more self-sufficient. They got a cash infusion from companies that aren't tied to any automaker, and that allows them to stay unbiased and maintain their cross-industry development."

Those developments were on display last week. At the same time Waymo announced its funding, it unveiled a new delivery-minded arm called Waymo Via. It merges the company's long-haul tractor-trailer fleet with some Chrysler Pacifcas outfitted for delivering packages and auto parts for partners such as AutoNation and UPS.

As the broader industry's ambitions to launch passenger-carrying robotaxis have largely lagged, there's been an increasing shift toward delivery applications.

Amid all these changes, Waymo is also upping its technology game, unveiling the fifth generation of its self-driving system last week. The system could be used in delivery vehicles or in the Waymo One autonomous taxi program. It arrives with a number of enhancements to its sensor stack and computing power. Raising external money may help the company stay the course in developing a system most consider the front-runner in the self-driving realm.

"Developing autonomous technology is capital-intensive, and raising outside funding helps companies cut costs and limit downside risk," said Asad Hussain, mobility analyst at financial data company PitchBook. "Raising outside capital should free up Waymo's team to redouble its focus on developing technology and not on reducing expenses."

Some of that technology may be developed in the Middle East. With Mubadala, the global investment company based in the United Arab Emirates, aboard, Krafcik left open the possibility Waymo could conduct operations in that country.

Other investors included Alphabet itself, venture capital firm Andreessen Horowitz, global supplier Magna International and AutoNation. AutoNation invested $50 million, according to a regulatory filing.

"We've had some additional inbound interest and will be evaluating other future potential external investors as well," Krafcik said.

Waymo did not disclose the valuation of the company. Investment bank Morgan Stanley estimated its value was $105 billion in September 2019. A year earlier, the company said Waymo was worth $175 billion. The cut came amid broader industry doubts about on the readiness of self-driving technology.