Subscription sales have helped countless software companies rack up big-time revenue. Are autonomous-driving technology startups about to borrow a page from that playbook? Some think lidar as a service may become the new business model for some of the cash strapped start-ups.
From an article at PitchBook by Priyamvada Mathur.
After a year that saw lidar startups strike key partnerships and reel in record levels of venture dollars, their next big challenge is turning to a more pedestrian question: How best to structure their basic business model.
Lidar and perception technology startups are now scrambling to dominate the niche driverless-vehicle market. And some of them are being challenged to bundle their hardware and software solution for mass adoption, gain exposure among self-driving automakers and assist them in reducing costs.
Some in the autonomous industry are looking to the way many companies learned to position themselves as cloud-based software providers and scale operations more effectively by securing a steadier revenue stream that is likely to be more resistant to demand cycles than companies offering direct sales. Notable cloud players in the mobility industry include Ride Report for mobility management and Flexport, a freight-logistics platform.
The ongoing trend toward subscription-based business models has trickled down to the lidar industry from the world of logistics automation, where startups have begun employing such models to better serve the capital needs of middle-market customers.
“This subscription model is favorable from a startup investor perspective as it positions startups more toward a full-service, recurring revenue business model as opposed to dependency on cyclical changes in customer capex budgets,” said Asad Hussain, an emerging tech analyst at PitchBook.
The first driverless tech player to take the “lidar as a service” plunge is Luminar. Earlier in January, the company made a splash at CES in part because it announced a transition in its revenue model—from direct sales to a subscription-based service offered to its self-driving technology partners.
Luminar’s shift may end up as a closely watched test case for how startups seek to land deals with future customers.
Founded by Stanford dropout Austin Russell in 2012, the company makes high-resolution perception technology that it says can track road features up to 250 meters away in real-time, read signs, recognize traffic lights and avoid obstacles.
The company has raised more than $250 million in VC financing from investors including Canvas Ventures, The Westly Group and G2VP.
Russell, who also serves as CEO, told PitchBook that Luminar’s switch to a subscription-based model comes as a vast majority of self-driving automakers are signaling an interest in subscriptions as a way to support the cost of their autonomous programs rather than shelling out billions of dollars to build those platforms.
“Having a lower barrier to entry will help us develop tighter relationships with our partners,” he said. In addition, subscribers will have access to software and hardware updates as it becomes available.
PitchBook’s Hussain said that lidar continues to command VC investor interest in early- and late-stage deals as a way to make long-term bets on the market for automobile safety applications.
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