Technology firms are slowly tightening investments on future large projects due to heavy economic consequences during post COVID-19.
Google’s moonshot factory, X, is a unit in charge of dream-like and ambitious projects, which are supposedly attractive enough to attract enormous investments, especially from companies with billion USD budgets and global dreams.
The riskiest investments in Silicon Valley includes self-driving car, traffic system transformation, and space exploration – all of which had consumed gigantic amounts of money, especially during the recent years, where technology had been all booming.
In these projects, investors readily prioritize technology advances over profits, despite slow developments. However, the heavy economic consequences from COVID-19 seem to had set the end to this boom of investments, seeing that most projects do not generate positive results.
In particular, self-driving cars are supposed to be commercialized, but instead stay as only future prospects – and this is the same for many other leading projects. For example, we have the once-popular electric bike sharing that now have vanished from the world’s streets, and commercial rocket companies that are now facing constant project cancellations and no revenue as their investments drain.
So, have Silicon Valley finally been disillusioned by reality?
According to a survey by the University of San Francisco, US, early this year had shown that investors’ faith in technology is at its lowest compared to the past 16 years. Some even predict that the COVID-19 pandemic is going to completely annihilate this field in the near future.
And true to that, many moonshot projects had not been able to hold their promises from before COVID-19. We have seen the “Softbank epoch”, named after a Japanese bank that constantly invest in the most promising projects in the last 10 years, offering nothing but one disappointment after another, with millions of USD down the drain due to unprofitable companies and even bankruptcies.
And the biggest disappointment seems to be self-driving cars. Since Google’s investment in 2009, many investors had predicted that they will be on the road earliest in 2017. And yet there is still nothing happening half way through 2020.
The field had also suffered heavily from COVID-19, leading to lower budgets and constant delays in developments. Uber had even eliminated its untouchable golden goose, while General Motors and Zoox reduced their operations. Ford is no different, having announced that their self-driving project is now pushed back to 2022.
Waymo, a Google subsidiary, once successfully attracted 2.25 billion USD in investments for its self-driving project in March – and this is a prime clue to how expensive this technology is. Even the parent company only gained 34 billion USD in profits for 2019.
“There has been no investment that had generated revenues. Google even had to find external investors, showing how inexplicably expensive this project is,” said Greg Sands, an expert from risk investor company Costanoa Ventures, Sans Francisco.
Heavy losses but no returns, along with slow progresses had turned many investors to other easier technological challenges like food delivery. In fact, slow delivery bots on the sidewalks are showing better prospects at generating revenues, while being less ambitious than dreaming about completely automatic cars.
A more expensive venture, space exploration, meanwhile, is witnessing clearer failures in tech: the satellite operator OneWeb had filed for bankruptcy in March, while smaller companies are struggling with low amounts of orders and constant delays in rocket launchings.
One most vulnerable investment is the lightweight rocket, which can carry up to 2 tons of goods to the low earth orbit (LEO).
“There were around 4-5 rockets ready for launch right before the pandemic. This is an extremely competitive field, with multiple startups fresh in the field. These firms are severely lacking in capitals, and had been reduced to staff cutbacks and lower competitive edges”, Eric Stallmer, President of Commercial Spaceflight Federation – the self-proclaimed representative of space companies, had said.
The success of companies like SpaceX, which had recently brought human to the International Space Station (ISS), had at least shown that the space firms can expect investments from the US Government for trusted projects, however.
The US Government are also investing in small space firms via its Defense Innovation Unit (DIU) and Defense Advanced Research Projects Agency (DARPA). “The US Air Force’s AFWERX Program is also looking for companies in search of support. Their message being: ‘we want to investment, how can we help’”, said Stallmer.
Sharing electric bikes is not anything far-fetched, even realistic in terms of technology. However, its supporters tend to believe that electric bikes can completely transform cities, as well as human’s means of transportation.
Experts estimated that there are around 3 to 5 billion USD invested in this field in the past 2 years, since leading companies like Lime, Bird, Jump, and Skip introduced their own electric bikes in both great speed and quantities.
However, Uber had recently sold Jump – once regarded as the best manufacture of electric bikes, to its very own competitor, Lime, claiming that the project is draining their money. Moreover, most companies in the field seem to make little profit, while having to shoulder the huge burden of managing and maintaining thousands of public bikes.
Some express positivity, however, as they believe that the pandemic may be kick to the field, for public transports may carry high risks of coronavirus infection. They claim that electric bikes will be the best choice for cities where personal cars are not popular.
“I believe that profits will be tremendous. Investors are looking for the next Tesla, and electric lightweight transportations are with great prospects and huge markets, no less than Tesla. It can be personal bikes, not sharing though, as this will eliminate the need for logistics resources,” said James Gross, co-founder of Micromobility Industries, which specializes in collaboration with electric bike firms.
However, such a goal is still faraway for Silicon Valley, which is still stuck in the hope of creating a connected sharing transportation network.
In conclusion, while the current situation is yet lethal for the aforementioned fields, investors will be more likely to tighten their budget for the “moonshot projects”. “We will surely witness the comeback of simple principles that focus on efficiency and profits. People will have to adjust their expectations, and acknowledge this new reality,” Sands commented.
And investors will turn their sights on to companies which focus on technical, medical, and scientific problems, instead of those popular user-based projects of the last few years.
Meanwhile, computational biology, quantum computing, and DNA sequencing, are costly programs which are hard to get successful commercial-wise, yet will stay attractive to investors that want answers to the most important problems of the current world.
Source: TelegraphRelated posts: