Self-driving car sensor startups may soon detect the end of the road

A big shakeout is coming among providers of a key autonomous vehicle technology: lidar sensors, where dozens of companies — estimates range from 50 to more than 100 — have popped up in recent years.

Why it matters: The startups all promise to deliver better technology to help self-driving cars see their environments. But deploying self-driving cars at scale has proven more challenging than the industry anticipated, and many companies will run out of steam before they find customers for their technology.

The big picture: In the gold rush that has characterized the race to autonomy, perhaps no underlying technology has attracted as much startup activity — or as much investment capital — as lidar.

• Since 2015, lidar startups have raised $1.1 billion in funding, according to CB Insights, which tracks venture capital activity.
• In 2018, a total of $324 million flowed into lidar companies across 26 deals, per CB.
• Some lidar companies plan to keep riding the wave, with additional fundraising rounds likely this year, says Duncan Williams, partner at Greentech Capital Advisors in San Francisco.

Yes, but: Hardly any of these companies are shipping more than a handful of sensors to customers for testing, making it difficult to determine which companies can actually survive in the long run.

• "That will just make the shakeout that much uglier," Williams says.

Background: Lidar, an acronym for "light detection and ranging," is seen as the most promising technique for AVs to sense the world around them, often in tandem with camera and radar sensors.

• Lidar sensors work by firing off beams of laser light and then detecting objects by measuring how long it takes for the light to return to the sensor.
• Most lidar systems are mounted to the roof of a car, like a giant spinning beanie hat, creating a 360-degree 3D view of the world around them.
• Velodyne has long been the 800-pound gorilla in lidar, as detailed in Forbes, but now faces competition from all sides.
• Many of the newcomers, including Innoviz and Quanergy, are working on solid-state lidar systems, which have fewer moving parts and are less expensive.

• Ultimately, the goal is to reduce the size and cost of lidar systems while increasing the range and resolution to give AVs a clearer picture of their environment.

A reckoning is coming. AV developers have spent the past few years sampling a multitude of lidar systems in their vehicle test fleets, but decision time is nearing.

• To meet expected targets for bringing their first self-driving cars to market by 2021 or 2022, manufacturers must commit to suppliers within the next 12–18 months, if not earlier.
• Lidar firms that win production contracts will be able to use those revenues to keep their businesses going until AV volumes pick up 5–10 years from now.

The bottom line: Long term, the industry only needs 5–10 lidar suppliers, experts say. That means the majority of existing lidar startups won't make the cut.

Editor's note: This piece has been corrected to show Innoviz and Quanergy are working on solid-state lidar systems (not Luminar and Ouster, which are developing other types of lidar).