All posts in “entrepreneurship”

Let’s meet in New York to talk token sales

I’ve been holding a few micro meet ups over the past few years and thought I’d start it up again in honor of token/ICO mania. I’d love to hear what you all are working on in the New York area so we’ll all meet at Union Hall in Brooklyn next Wednesday at 7pm.

The event is very informal and we’ll plan the next few months of micro-meetups during the event. My goal is to do a few pitching workshops in February and March and then do a real pitch-off in the Spring in preparation for VC season. If you’re interested in talking tokens or honing your startup craft come on out. You can RSVP here.

Featured Image: Klaus Vartzbed EyeEm/Getty Images

Indiegogo now lets you fund via token sale

Crowdfunding service and Kickstarter-competitor Indiegogo is now offering an ICO service alongside its partner, MicroVentures. The company will allow users to participate in SEC-complaint ICOs and, like its slow-burning equity crowdfunding service, will pick and choose startups that match certain exacting criteria.

These tokens sales will be SEC complaint and the sales are performed within current SEC regulations. Their first client, a fan-controlled football league, is in pre-sales now.

“Our ICO service is designed to allow the maximum number of investors to participate in ICO token pre-sales and sales,” said Slava Rubin, Indiegogo Founder and Chief Business Officer. “We believe cryptocurrency and blockchain technologies constitute an important step towards democratizing finance and introducing new levels of utility and liquidity to fundraising instruments. We want to make ICOs accessible to everyone, not just accredited investors.”

Companies can apply to sell their token on a new website and will receive guidance from MicroVentures to keep them on the right side of SEC guidance.

Rubin said that Indiegogo was well-placed to run ICOs thanks to their global reach and compliance skills.

“We have 10 million monthly users and reach people in 232 countries and territories. We can amplify token sales to a broad community of accredited and non accredited investors,” he said. “When we launched equity crowdfunding in 2016, we partnered with a FINRA registered broker dealer called Microventures. This partnership allows us to navigate the various securities and other relevant laws and maintain a strict level of compliance for token sales. Token sellers value this because the laws governing token sales are still evolving and we’re able to conduct sales and pre-sales in compliance with the relevant laws.”

Don’t expect to hop on, press a button, and immediately fund your potato salad token, however.

“Due to curation, they can be sure their token sales will be in good company,” he said.

What happens when you sell your startup?

Entrepreneurship is not just about starting businesses. Getting out on the other side, ideally richer than before, is just as important.

Unless you’re one of the lucky few who start and take a company public in an IPO, the other option for a successful “exit” from that business is to sell it. This exit opportunity is especially important for startups that raise venture capital. VCs are duty-bound to return capital to their investors — hopefully with more than they started with.

However, the market for startup equity isn’t very liquid. Unlike the public stock market, where investors can liquidate their positions in a fraction of a second, VCs usually have to wait years for a liquidity event. How that process works — the actual deal-making and negotiating — is a bit beyond the scope of what we can do today, but here we’re going to take a look at how the money shakes out of a company.

This is the fourth and final installment in a series called A Startup Takes Flight. We started by making up a company — the Internet of Wings, a provider of drone-delivered chicken sandwiches that’s since pivoted into general food delivery — and examined some of the most common financing terms entrepreneurs and VC investors discuss.

In the first installment, we looked at the basics of SAFE notes and how they convert to equity with terms like discounts and valuation caps. Then, in the second installment, we saw how VC investors use pro rata terms to maintain their proportional ownership in a startup. In the third article, we learned what happens when growth markers aren’t hit, and saw how full ratchet and broad-based anti-dilution protections come into play when a company raises a down round.

It is now time to get our fictitious investors a liquidity event from our little drone startup. Let’s sell our company!

Liquidity event dynamics

There are a number of terms connected to the sale of a startup, and in this section, we’ll explore the two most important ones. By looking at liquidation preferences and seniority structures, we get an understanding of how much money a shareholder is entitled to and when they’re able to get it.

Liquidation preferences: Participating versus non-participating stock

As we’ve mentioned in earlier installments of this series, startup investors receive so-called “preferred” stock, whereas employees and founders receive common stock. Preferred shares can carry a number of rights and privileges to which mere commoners aren’t entitled — like anti-dilution protections, voting rights and claims to board seats, among many others — but perhaps most important to the discussion of liquidity events, preferred shareholders can receive what are known as “participation rights.” Terms like “participating preferred stock” and “non-participating preferred stock” refer to whether investors receive these rights; let’s get into what these terms mean.

In short, participating preferred shareholders are entitled to receive their initial investment, plus a pro rata share of the remaining capital in a liquidation event. Here’s a simple example to illustrate this. Let’s say we have a company, Acme Inc., and it has received $20 million in investment for participating preferred shares, representing 20 percent of the company’s capital structure on an as-converted basis. (Common shareholders account for the remaining 80 percent.) Acme Inc. is later sold to another company for $80 million in cash. Those participating preferred shareholders not only recoup their $20 million, but they’d also be entitled to 20 percent of the leftover proceeds of the sale, an additional $12 million in this case [20% * ($80 million from the acquisition – $20 million already returned to participating preferred shareholders)]. So participating preferred shareholders in Acme Inc. would get a total of $32 million back, leaving just $48 million for common shareholders.

This is why participating preferred shareholders are sometimes accused of double dipping, precisely because they take two slices of the capital pie. It’s important to note that there are a few clauses that can serve to limit the financial impact of participating preferred shareholders, such as capping the amount of money they can take from the remaining proceeds.

Non-participating preferred shareholders, on the other hand, don’t get this opportunity to double dip. They are only entitled to either their initial investment amount or their pro-rata share of proceeds from a sale. (Note that, depending on the deal terms, investors can be entitled to a multiple of their initial investment, but the overwhelming majority of VC deals carry a 1x or smaller liquidation preference.)

In the previous example, had Acme Inc.’s investor been a non-participating preferred shareholder with a 1x preference, they’d be entitled to either the $20 million they invested, or 20 percent of the $80 million sale ($16 million in all). In this case, they would take their $20 million back, leaving $60 million to be distributed to Acme Inc.’s founders and employees.

What happens if the proceeds from liquidation don’t cover the preferences to which investors are entitled?

In these two contrasting examples, it’s easy to see why non-participating preferred stock arrangements are more favorable to startup founders and employees; it leaves more money on the table for them. That’s why issuing non-participating preferred stock is the standard practice for most technology startups. According to the most recent quarterly report on venture deal terms from Cooley, a major Silicon Valley law firm, more than 80 percent of the VC deals struck in Q2 2017 had no participation rights attached. However, what holds true for technology doesn’t hold true for startups in other sectors. Most notably, participating shares are standard-issue in life science venture capital deals, a topic discussed at length by Atlas Venture partner Bruce Booth in 2011. Crunchbase News confirmed with a current life sciences investor that this is still the case.

There’s one last question that’s important to address here: What happens if the proceeds from liquidation don’t cover the preferences to which investors are entitled? To refer to our examples above, what if Acme Inc. sold for less than $20 million, which would mean non-participating shareholders wouldn’t be covered? Or, for those double-dipping participating shareholders, what if the company sold for less than $32 million? In both of these cases, shareholders would convert their shares to common stock. They would then receive a proportional share of the proceeds alongside other common stockholders.


Besides liquidation preferences, the other term that has the greatest bearing on the liquidation process is seniority. Basically, it describes a stakeholder’s position in the line to get their money back. The closer to the front of the line you are, the more likely you’ll be able to get what’s owed to you in the event of the sale or bankruptcy of a company.

In the “big picture,” creditors are senior to shareholders, meaning that the company will first have to repay its debts before its shareholders can cash out. Within each type of stakeholder — again, creditors and shareholders — there can be many different tiers, but here we’ll focus just on the seniority structure of shareholders.

One of the other privileges given to preferred shares is seniority to common shareholders, so in the event of an acquisition or bankruptcy, preferred shareholders — the investors — get access to proceeds from that liquidation event before common shareholders (founders, employees and service providers to the company).

But not all preferred shareholders are necessarily created equal. Depending on the seniority structure, some investors are closer to the front of the line than others. The two most common seniority structures are the “standard” approach, and what’s known as pari passu. Let’s take a look under the hood, shall we?

In the standard approach, seniority is ranked in a sort of reverse chronological order. It’s a “last in, first out” situation. Investors in the most recent round — in the case of Internet of Wings Inc., it’d be the Series C preferred shareholders — are the first in line to receive their payouts, whereas investors from earlier rounds will have to wait their turn. This can lead to a situation where, if the company was liquidated for a very small amount of money, earlier investors and common stockholders get nothing. But that’s how it works.

Lee Buchheit, a legal expert specializing in debt crises, describes the pari passu clause as “charming.” The term, according to Buchheit, is “short, obscure, and sports a bit of Latin; all characteristics that lawyers find endearing.” Translated literally, it means “with an equal step,” and in the case of financial seniority, it basically means that there is no seniority. For preferred shareholders, it means there is no orderly queue, which may sound like a bad thing. But it allows all involved investors to gulp down their liquidation preference payments at once, with seed preferred shareholders getting the same access to a payout as Series D investors.

As an aside, these are not the only two ways to structure financial seniority. There’s also a hybrid approach where investors are put into different tiers of seniority but, within each tier, liquidation preference payments are distributed pari passu.

And before we see how these terms affect how money is returned to shareholders, let’s quickly check in on our company.

State of the Wing

It’s been a little over a year since Jill and Jack raised a down round at Series C to keep funding their enterprise.

Despite a somewhat rocky start and a thin budget, the duo and their team managed to turn what was a failing business into, well, not exactly a raging success. However, it was something they didn’t feel shame about. After all, their struggles had been loud and public.

To that end, they worked tirelessly to make their drones quieter. After all, it was the noise that scared away many of their customers, consisting mostly of small restaurant owners looking for a better, faster delivery method.

It turns out that Jill’s earlier idea of using feathers to reduce noise wasn’t so cockamamie after all. After consulting with a food safety expert, though, they realized that using actual feathers would get them into even more hot water with the government. It took more than a year to settle the case with the FAA after the steak tartare incident at LAX.

In an after-work meeting at that Mission cantina Jill said, “We don’t need the FDA, USDA or whatever alphabet soup agency that deals with this sort of thing on our case again. Feathers are out.”

“You mentioned bio-mimicked material before. Owls have these super fluffy feathers on their, uh, undercarriage that help them stay deadly silent. I have an ornithologist friend who moonlights as a material scientist. We could get him to develop some proprietary fluff for us,” Jack offered.

“Give him a holler,” said Jill. “No use in chickening out now.”

After months of tweaking and testing, this improbable combination of bird scientist and polymers aficionado had developed a material that was uniquely suited to the task of reducing the drone of the drones. It had the added benefit of making the engine housings appear to be covered in thick white down, which went a surprisingly long way toward relieving customer anxiety over sharp, whirling propellers.

Meanwhile, the little drone startup that could had caught the eye of a corporate development executive at Sahara, and she kept that eye on our startup for the past several quarters.

The mechanics of startup finance are not that confusing or opaque.

We all know Sahara, the online shopping conglomerate that’s metastasized into other industries, ranging from infrastructure and abortive attempts at phones to grocery and food delivery. Its founder desired to build an ecosystem wider and deeper than any rain forest, aspiring to offer more products and services than there are grains of sand in the wide, desolate expanse of north Africa. And, for most intents and purposes, that’s what Sahara has achieved. But like the slow, creeping spread of the real Sahara desert, the company managed to keep adding more products and services. And the next one was drone delivery.

The Sahara executive was intrigued by the team and the Internet of Wings’s adoption by real, brick and mortar businesses. Indeed, it was brick and mortar businesses that the company had successfully competed against for years, so much so that restaurants, coffee shops, bars and other food service businesses seem to be the only ones left. But it was that market — restaurant delivery in particular — in which Sahara had not yet found a toehold.

The Internet of Wings, she thought, would be that foot in the door.

Sahara’s offer — $75 million to buy IoW’s business, the drones, intellectual property and the services of its team for the next three years — was not the first acquisition offer Jack and Jill had received, but it was the best. And considering that they’d raised a Series C round explicitly to fund the company as it found a final resting place, taking the offer was aligned with their original plan.

Put to the board in a hastily called meeting, the decision to accept Sahara’s offer was approved.

The deal

Internet of Wings Inc.’s board decided to accept Sahara’s offer to buy the entire company for $75 million in an all-cash deal.

Here are the clauses of the Internet of Wings’s investment agreement that will be important for this transaction:

  • As is common practice in tech startups, investors’ preferred shares were non-participating.
  • Seniority is standard (last in, first out).
  • All outstanding options will convert to common stock during the liquidity event.
  • From the seed round through Series B, investors had a 1x liquidation preference, but due to the adverse conditions the company had experienced leading up to its Series C round, investors in the Series C round received a 2x liquidation preference.
  • We’re assuming the company has zero debt and no dividend rights. We’re going to make this as vanilla as possible.

To illustrate the process more clearly, we’re going to show how each investor decides how they approach the choice between taking their liquidation preference payment or converting to common stock and redeeming their proportional share of the proceeds available to investors in their seniority level. And for each seniority level, we’ll plot how much of the $75 million acquisition they received.

We start with the most senior investors. Because Internet of Wings’s most recent financing round was a Series C, shareholders of Series C stock are most senior.

In this case, because Series C shareholders attached a 2x multiple to their liquidation preference, they will get more money by taking the liquidation preference payout than by converting to common shares. Cormorant Ventures receives $12 million (twice its investment in the round) and BlackBox Capital receives $8 million (again, twice its investment in IoW’s Series C round).

Series B and earlier shareholders only have a 1x multiple on their liquidation preferences, and we’ll see how that affects decision-making.

In this case, it makes more sense for the Series B shareholders to simply take back their initial investment rather than converting to common shares, and we’ll notice that this is a pattern. Cormorant Ventures collects its $10 million, Provident Capital takes its $1.5 million and BlackBox Capital receives its $3.5 million. At this point, almost half of the $75 million paid out in the acquisition has now been accounted for.

Moving down the seniority ranks, we now have our Series A shareholders, which also have a 1x multiple on their liquidation preference.

Here, too, it makes more sense for investors to take back their initial investments according to their liquidation preferences.

It’s in the case of the two participants in the seed round that things get marginally more interesting, but — spoiler alert — it will still make more sense for them to take back their initial investments.

Here’s why it’s interesting: both investors in the seed round committed $2.5 million, and as we showed in the first installment of this series, the terms of a seed deal matter quite a bit. BlackBox Capital opted to go with a valuation cap, while Opaque Ventures was able to buy shares at a 20 percent discount. Because of IoW’s Series A valuation and how that round closed, BlackBox came out ahead in the round, both financially and in terms of proportional ownership of the company.

So what is left? As it turns out, quite a bit. After all of the preferred shareholders cashed out, common stockholders get whatever is left.

Despite all the trials and tribulations of getting the company started, it looks like it was all ultimately worth it, at least for our founders. Here, as the last recipients of proceeds from the acquisition, final payouts are determined based on ownership ratios in the company. Because Jill holds approximately 48 percent of the remaining stock, she gets that share of the heretofore unallocated $26,125,009.50. Jack, holding roughly 32 percent of the remaining stock, gets 32 percent of the remaining proceeds. And employees receive a collective bonus of 20 percent of the remaining capital.

Investor performance

One of the most common measures of performance in the VC space is also one of the simplest. Calculating the multiple on invested capital (MOIC) is as easy as dividing the amount of money received after the company winds up by the total amount of money invested.

So, as we can see here, Internet of Wings Inc. was not a home run. Silicon Valley investors talk a lot about finding the companies that will deliver a 10x return on the capital they invested, and IoW didn’t achieve that for its shareholders.

Although “price matters” may sound like the most painfully obvious statement ever, price really does matter, but not for an immediately obvious reason. Remember that preferred shareholders carry the option to convert their shares to common stock and receive their proportional share of the payout. That conversion threshold — the proceeds from a liquidation that would make common shares more valuable than simply the liquidation preference payout — is different for each set of shareholders, and it depends on the terms of the deal. In the case of Internet of Wings, for every single investor to convert to common shares, the company would have to sell for about $118 million.

Here’s the approximate conversion thresholds for the other shareholders, rounded up to the nearest $1 million increment:

  • Series C – $73 million.
  • Series B – $104 million.
  • Series A – $117 million.
  • Seed – $118 million.

That’s why Series C shareholders were the only ones that had any incentive to convert their shares, because the $75 million in proceeds from the sale was above that conversion threshold. (And, for the record, if IoW sold for anything less than about $48.9 million, Jack, Jill and their employees would have gotten nothing from the acquisition of the company.)

What we learned

Obviously, every deal is different, but the principles remain the same. Professional investors are in the business of generating returns for their limited partners. It’s difficult to predict how an investment is going to work out until it works itself out. But as we’ve shown here, that working-out process doesn’t need to be difficult. It’s just a series of rational decisions based on what will generate the highest return on investment.

We looked at the effect liquidation preference multiples have on investor decision-making and how a standard seniority structure works during an acquisition. And, we’ve learned the all-important nature of price, both to returns and to investor decision-making.

Throughout this series, we’ve shown that the mechanics of startup finance are not that confusing or opaque. Although we used deliberately simple examples, the “real world” isn’t that much more complex. Of course, there are many more legal terms than the ones we’ve discussed throughout the series, but we selected terms like liquidation preferences and pro rata because they have the greatest bearing on the financial outcome of a company. For all the other covenants, clauses and contractual agreements, find a good lawyer and get venturing.

Featured Image: Li-Anne Dias

Neos launches IoT powered home insurance UK-wide

What do you get if you combine the Internet of Things with the business of home insurance? UK startup Neos is hoping the answer is prevention rather than (just) payouts.

Its home insurance product is intended to lean on sensor tech and wireless connectivity to reduce home-related risks — like fire and water damage, break ins and burglary — by having customers install a range of largely third-party Internet-connected sensors inside their home, included in the price of the insurance product. So it’s a smart home via the insured backdoor, as it were.

Customers also get an app to manage the various sensors so they can monitor and even control some of the connected components, which can include motion sensors, cameras and smoke detectors.

The Neos app is also designed to alert users to potentially problematic events — like the front door being left open or water starting to leak under their kitchen sink — the associated risk of which a little timely intervention might well mitigate.

It sees additional revenue opportunity there too — and is aiming to connect customers with repair services via its platform. So the service could help a customer who’s away on holiday arrange for a plumber to come in and fix their leaky sink, for example (there’s no smart locks currently involved in the equation though — Neos customer can name trusted keyholders to be contacted in their absence).

“The vision really is about moving insurance from a traditional claims, payout type solution… to one that’s much more preventative, and technology’s really the enabler for that,” says co-founder Matt Poll. “We also think that customers get quite a raw deal from their insurance company… for being a really good customer and not claiming… And no value.

“So what we’re trying to do is to provide value to customers throughout the term of their policy — allowing them to monitor their own homes, using our cameras and the devices that we give them. If there is an issue, they’ll get alerted. Most importantly they or us through our monitoring center and assistance service can put the things right… In that sense both the customer and us benefit if we’re successful.”

On the insurance cover front Poll claims there’s no new responsibilities being placed on customers’ shoulders — despite all the sensor kit that’s installed as part of the package. “There’s no responsibility placed on the customer. We’re really clear about that,” he tells TechCrunch. “Customers do ask this question — oh what if I don’t arm the alarm, does that mean I’m not covered? And our answer is simply of course you’re covered.”

The startup was founded 18 months ago by Poll, an ex-insurance guy, combining with a more technical co-founder. The team market tested their proposition last year in and around London, partnering with Hiscox on the insurance product offering for that trial. They’re now launching their own branded, own insurance offering nationwide.

Neos is actually offering a range of home insurance products, including a combined contents plus buildings insurance offering (or either/or), across three pricing tiers — aiming to support different levels of coverage and different types of customers, such as flat vs house dwellers, for example, or homeowners vs tenants.

While it’s generally aiming to be tech agnostic when it comes to which smart home sensors can be used — supporting a range of third party devices — Neos has developed its own smart water valve, for example, as Poll says it couldn’t find an appropriate existing bit of IoT kit in the market for that.

“It uses machine learning to monitor an individual’s water signature within their property over a period of a couple of weeks and then we can identify from that if there’s any leaks — small or large — and most importantly if a leak does arrive the customer or our monitoring sensor can turn the water off remotely,” he notes.

It’s also built its own hub to control the firmware on the third party devices its platform is integrating with. “We want to put ourselves out there to give customers the best solution for the job and move as the market moves,” says Poll on Neos’ overall philosophy towards hardware.

Despite all this additional kit to be installed in customers’ homes, Poll bills the insurance products as competitively priced (and positioned) vs more traditional insurance offerings. Neos’ prices vary from “approximately £15 to £50 per month”, which it says includes “all the necessary hardware, 24/7 monitoring and assistance plus the comprehensive insurance cover”.

“We’ve got some good early traction and I think the price point that we’ve come in at is attractive, and the value proposition is there,” says Poll, noting that the product will be on price comparison sites “by the end of this month — at the very latest”, as well as being offered through property website Zoopla, which is a distribution partner (and investor) in Neos.

He also says the insurance quote process has been radically simplified by Neos drawing on a range of publicly available data so that potential customers don’t have to answer to a large number of questions just to get a quote.

“We can actually give customers a full quote from just their postcode and their address,” he says. “We use 261 different data sources… One of our partners and early investors is Zoopla. They have a lot of data that they provide us. We also use data from Landmark and Land Registry — local authority data.

“Because all this data’s publicly available. We don’t ultimately need to ask how many bedrooms or bathrooms you’ve got — in most cases we already know that data. Actually in most cases we know the square footage of your property which is a much more accurate predictor of risk anyway.”

Another strand of the go-to-market approach is it’s also working with existing insurance brands to white label its offering — setting it up to scale more quickly into markets (and regulations) outside the UK.

“We’re just about to launch an Aviva-backed solution,” says Poll. “A lot of the big insurers are looking in this space but haven’t done anything… So we’ve had a lot of interest outside of just our direct Neos brand from larger insurers based here in the UK, Europe and also in the US.”

He says Neos is also hopeful of signing a “large scale partner in the US” — one of the top five home insurance companies — which would be a second strand to its white labeling/enterprise solution bow if they nail that deal down.

“Markets like the US… are very different from a regulation point of view and cost of entry for a small business like us to enter, so that model makes sense. But we’re very much — certainly now and we’ll always be — focused on the Neos direct to consumer brand,” he adds.

Poll says he’s hoping for a minimum of “tens of thousands” of customers within a year’s time for Neos’ b2c play — and “ideally” significant growth above that. “If you add in the b2b play as well in terms of customers actually utilizing our platform I think the potential is significantly higher than that,” he adds.

The startup has previously raised £5m in Series A funding led by Aviva Ventures and with BBC sporting personality Gary Lineker also investing. As well as Zoopla, another strategic partnership is with Munich Re, which has also invested.

Interesting takeaways from its beta period include that customers were keen to have help installing all the sensor kit (Neos is offering an installation service for a fixed price if users don’t want to fit the kit relying on its instructions themselves), and that security concerns appeared to be more of a smart home driver for the product than risks such as water leaks, so Neos tweaked some of the sensor bundles it’s now offering.

Poll also says customer feedback from the trial pushed it to offer a fix on premiums for their first three years (assuming a customer makes no claims) to reassure potential customers that it isn’t seeking to use smart home hardware to lock then in to its products and then quickly inflate premiums.

“It’s interesting how customer perceptions are,” he says, arguing there’s “a mistrust of the insurance industry as a whole” — which is something else Neos is hoping can be fixed with a little IoT-enabled preventative visibility.

Quantifying the driverless startup boom

For driverless car startups, raising capital seems to happen on autopilot. Investors and acquirers have put billions into the space over the past couple of years in the race for early mover advantage. They’ve shown no desire to hit the brakes lately either, as indicated by a spate of recent deals, including last week’s $450 million sale of autonomous driving software developer NuTonomy to Delphi Automotive.

In an effort to put the deal-making in perspective, Crunchbase News has aggregated some of the metrics for startup investment in the space. Our chief finding — that autonomous driving is a red-hot sector — is already obvious.

But in addition, we found:

  • Startup investment so far this year is more than double 2016 totals.
  • While Silicon Valley is a known hotspot for autonomous driving, Israel is a pretty solid No. 2 for startup deals, with three of the 10 largest rounds this year. Intel’s $15.3 billion purchase of Mobileye, an Israel-based startup, is also the largest M&A deal for an autonomous driving-related company for this or any year.
  • Self-driving tech rounds are pretty crowded. For U.S. investments in the space this year, we found just one financing — Ford’s investment in Argo AI — with a sole investor. (And that wasn’t a traditional VC deal, as it has Argo developing technology specifically for Ford.) On average, U.S. autonomous vehicle-related deals this year had an average of seven listed investors per round.

Valuations for self-driving tech companies are going up along with round sizes, Chris Stallman, partner at transportation-focused venture firm Fontinalis Partners, tells Crunchbase News. Part of the impetus comes from automakers and suppliers, many of whom are aggressively expanding their autonomous vehicle capabilities and are making early acquisition offers to promising companies.

“They are attempting to shore up their supply chains and are fearful of becoming too tied to a technology company that may ultimately be acquired by a competitor,” Stallman says. Meanwhile, traditional VCs and corporate venture investors are also actively extending term sheets to talented startup teams.

In the following sections, we look at some key metrics for the driverless car startup space: year-over-year comparisons, largest recent rounds and biggest M&A deals.

Investment revs up

It seemed like 2016 was a remarkably bullish period for autonomous driving investments. But at first glance, 2017 makes last year look kind of slow.

So far this year, investors have poured about $1.4 billion into companies in the space, more than double 2016 levels ($630 million), according to Crunchbase data. Deal count is relatively flat, with about 43 rounds in the first 10 months of this year compared to 48 in all of 2016. We compiled a list of noteworthy deals for this year here and for 2016 here.

As always, metrics are imperfect. For one, some companies, such as Lyft and Uber, aren’t known as self-driving car startups, but do have partnerships, internal R&D and strategic plans tied to the technology. For this exercise, we focused mostly on companies that principally characterize themselves as autonomous vehicle technology companies, leaving out ride-sharing and new auto brands. Also worth noting is that the biggest deal for this year, Ford’s $1 billion investment into Argo AI, has characteristics of both a venture deal and an acquisition.

There also is some blurring of categories, including companies that operate in sectors like automotive safety or mobility as well as autonomous vehicles. (When looking at more mature companies in the space, another consideration is that many, such as computer vision juggernaut Mobileye, started out before driverless vehicles existed as a discrete category.)

The biggest deals of 2017

Not only are autonomous vehicle startups raising big rounds, they’re doing so at fairly early stages of development.

In the chart below, we look at the 10 largest rounds for self-driving tech companies this year. Half of the top 10 are less than three years old.

Have checkbook, want startup

Acquirers also have continued to snap up autonomous vehicle companies this year. By far the largest deal related to the space — Intel’s purchase of Mobileye — involved a mature, publicly traded company. But buyers were also picking up early-stage startups, including October’s sale of NuTonomy to Delphi Automotive.

In the chart below, we look at the largest M&A transactions in recent years involving self-driving technology startups:

Parking all that capital

For autonomous vehicles, arguably the most crucial capability is being able to brake when necessary. For autonomous vehicle investors, however, the greatest concern seems to be whether they’re accelerating fast enough.

“Although valuations have crept up, I don’t think we have reached an oversaturation in autonomous vehicle companies,” Stallman says. One reason automakers are motivated to move fast is that much of the early innovation in autonomous vehicles came in the years following the 2008 financial crisis, when U.S. car companies were struggling for survival and R&D suffered. Now they’re having to catch up.

Yet while they’re paying handsomely for self-driving talent, investors and acquirers are cognizant of the risks Stallman says. Deploying autonomous technologies on the road safely requires overcoming a tremendous number of challenges and will require better perception of the vehicle’s surroundings, better maps, better processing capabilities and better decision making.

Like other segments of venture capital, there will be winners and losers. In this space, however, the race to the finish line is happening at an unusually rapid pace.

Featured Image: Li-Anne Dias