Capital Is King: How Wall Street Is Funding the Autonomy Economy

Executive Summary

Taylor Brownstein, Director, Technology Investment Banking, TD Cowen joined Grayson Brulte on The Road to Autonomy podcast to discuss the significant rebound in the autonomy market following the post-SPAC slump of the early 2020’s. The conversation highlights how commercialization and the Physical AI tailwind are driving capital toward industry winners, while creating a world of haves and have-nots. Key insights include the critical role of unit economics in long-term competition and the emerging opportunities in defense and industrial autonomous applications

Key The Road to Autonomy Episode Questions Answered

The Road to Autonomy Topics & Timestamps

[0:00] AUTNMY AI

The episode opens with the premise that billions, and soon trillions, in value will be created within the autonomy economy. The key to capturing this value is uncovering signals before they become mainstream headlines and move the markets.

[0:37] Autonomy is Back in Vogue

Grayson and Taylor discuss how autonomy has returned to the forefront of investor conversations. Following the bottom of the market between 2022 and early 2024, a rebound is now occurring, fueled by the Physical AI tailwind and the arrival of real-world commercialization.

[4:11] Unit Economics

The long-term success of leaders including Waymo will ultimately hinge on unit economics rather than just being the first mover. While Waymo is currently proving its technology by expanding to new cities, competitors may eventually emerge with leaner, more cost-efficient technologies.

[9:51] Dual-Use Applications

Investors are increasingly focused on “dual-use” technology, where autonomous systems are applied to both commercial and military sectors. This approach allows companies to generate immediate revenue in unregulated or industrial environments, such as mining or defense, while waiting for the broader over-the-road trucking or robotaxi regulations to mature.

[22:24] Consolidation

The market is entering a phase of consolidation where the haves will continue to raise capital while the have-nots fall behind. Larger strategic companies such as Caterpillar may look to acquire the valuable IP and data of struggling startups to strengthen their own autonomous programs.

[29:22] The Robotaxi Competitors: Waymo and Tesla

Tesla’s focus on cutting costs for the Cybercab aims for a sub-$30,000 price point, though they still face significant regulatory hurdles. Meanwhile, Waymo remains the clear leader in transformative rider experience, backed by a massive balance sheet and a stern backbone from Alphabet.

[42:38] SPACs with PIPE Capital

For pre-revenue companies, the SPAC (Special Purpose Acquisition Company) route combined with PIPE (Private Investment in Public Equity) capital remains a viable way to go public and secure the funding necessary for commercialization.

[45:05] Traditional IPOs

The traditional IPO path is currently difficult for pre-revenue autonomous companies as the market awaits mega IPOs from giants like SpaceX and OpenAI. Most companies are advised to stay private as long as possible or wait for the air in the room to clear after these major listings.

[50:55] Market Signals

The key signals to watch in the coming years include a company’s ability to reach commercial milestones and its progress on the cost curve. In the near term, the primary battle is simply getting technology on the road without a driver; in the long term, the battle will be won on unit economics.

Full Episode Transcript

AUTNMY AI

AUTNMY AI: Billions and soon trillions in value will be created in the autonomy economy. By the time a trend becomes consensus, the alpha is already gone. The gap between uncovering signals and reading headlines is widening fast. When it’s a headline, it’s no longer a signal. Enter AUTNMY AI, we decode signals before they move markets, giving you the edge while everyone else tries to decipher the autonomy economy. AUTNMY AI, your models, our intelligence. Visit AUTNMY.AI.

Autonomy’s Back in Vogue

Grayson Brulte: Taylor Autonomy’s back in Vogue. Investors are seemingly talking about it. You can’t turn on CNBC or Bloomberg without seeing robotaxi, the autonomous, this automation that. It’s not just agents, it’s starting to come into the vehicles. Now you’re sitting in the investment bank at TD Cowen. How are investors thinking about the opportunity and the autonomy economy? Is this the, okay, it’s back, or is this the, Hey, wait a second. We’re waiting to see the shooting drop, but how are they thinking about the autonomy economy today?

Taylor Brownstein: Grayson, it’s a great question and thanks again for having me on. Look, I think today you compare to where we were back in 2020, 21 at the previous height of the SPAC boom. Back then, every business was going public and folks would show up and say, here’s $10 million. What does your company do? Following that, 22, 23 into 24 was definitely sort of the bottom of the market. We’re in a really nice rebound today, and there’s a couple of factors that are driving that. The first one being is commercialization and real use cases are here. They’re here today. You see Kodiak is running trucks out in the Permian Basin. Aurora had some driver out as well. And then obviously Waymo is really leading the pack. You’re seeing that as these leading autonomy players are doing well, it’s rising the boat for most folks. That’s piece one.

The Rise of Physical AI and Market Segmentation

Taylor Brownstein: Piece two is the broader Physical AI tailwind is having folks kind reevaluate where I am allocating my dollars. Enterprise software has done very well over the past 15 or 20 years. Now you’re seeing a lot of that capital be allocated into the AI space and even within the AI space, people are starting thinking out, where do I go? Is it Robotaxis? Is it humanoids? But then there’s another layer down of sort of enablers that are also simulation testing, areas like that, that are going to benefit from this. Capital is still selective. I think this year and next year will be really critical as winners and losers will separate even further. Waymo went out and raised $19 billion. Kodiak went public, raised a pipe. Aurora’s been raising tons of capital. There’s lots of folks that are struggling to raise capital as well, and I think folks that are unable to raise capital are just going to fall further behind. It’s going to become a world of have and have nots.

Grayson Brulte: I agree with that. I was actually speaking to a friend of mine this morning and we were speaking about Waymo and we were having this really interesting debate. I was trying to say is how far is Waymo ahead and does it get to a point where Waymo is so far ahead, it’s going to be very hard or difficult or near impossible for somebody to catch up. Are we getting to that point with Waymo because they have the Google ATM machine, but then most importantly they have Sundar’s dedication to it. We saw with his pay package that was released, it’s a lot there with Waymo. It seems that there’s a stern backbone and a belief that they are all in on Waymo, and if you take Waymo’s technology with Sundar’s desire to make this work, they can get so far ahead and the question is if they do get that far ahead, how does anybody catch up on robotaxi?

Taylor Brownstein: The answer is unit economics, and we’re not there yet. We’re still in this prove yourself phase and Waymo is clearly proving itself, expanding use cases in San Francisco to the airport, now all over LA. I saw they just announced Orlando and Miami. I imagine international has to be right around the corner. You look over the history of tech companies and there’s always sort of a first mover and everyone wonders if you’ll ever catch up to them. Then folks come along with a leaner, faster technology that’s more cost efficient. They can roll out faster and you look at what Uber’s doing, placing bets everywhere in the autonomous ecosystem. I wonder you get to a point in five, 10 years where what differentiates these different technologies is going to be unit economics. How does Waymo, even though they are the first mover and they’re driving a lot of the industry, how do they maintain their advantage on the unit economic side going forward, even though they’ve plowed billions of dollars into this rollout today. They’re going to have to figure out a way to stay competitive there.

Grayson Brulte: I think on the unit economics, the signal to watch is Hyundai what’s going to come out of the savanna plants. Does Hyundai either make that data public, does Alphabet make it public? I think that’s something to watch there. But you bring up a good point about being ahead and all suddenly a new competitor comes and leapfrogs you. The one that comes to mind for me and for a lot of our listeners and viewers is Blackberry. Could we be a scenario where Waymo is blackberry and then all of a suddenly apple and the iPhone comes along? Or let’s go back even further, it’s Nokia. They got trumped by Research In Motion and then the iPhone. Could we potentially see a cycle like that?

Strategic Partnerships and Dual-Use Technology

Taylor Brownstein: Yeah, it’s interesting. We’re so in the early innings, and you have to imagine that the folks at Waymo are thinking about this as well. They’re watching what everyone else is doing in terms of taking the core autonomous technology and applying it to other industries as well. In 22 and 23, you saw a lot of folks pull away from taking their autonomous technology and applying it to multiple use cases. I think now you saw the Waabi announcement where they’re partnering with Uber to develop robotaxis. We were just at the Applied Intuition Physical AI day and they’re looking at multiple applications for their autonomous systems. Kodiak is defense. They’re working on their over the road. But then they’re also running industrial applications in the Permian Basin for Atlas. Waymo today has a very clear goal, and that is to continue to lead the pack in the robotaxi world while keeping an eye on competitors. At some point we’ll get to a point where autonomous technology becomes commoditized and then it becomes a battle of economics.

Grayson Brulte: It does. I think at the end of the day with autonomous driving that you will have a series of operating systems. You’ll have Mac OS, you’ll have Windows, you’ll have Linux, and then perhaps you’ll have Raspberry Pi in the lower compute stuff maybe. Maybe ARM does something proprietary, or Nvidia does some proprietary. We’re going to see a handful of operating systems for vehicles. And you’re going to have different operating systems for trucks because we have yet to see a self-driving car technology properly ported to truck and scale commercially. Waymo did do the VIA program, but they shut that down in 2023. Aurora had the car program before going to trucks. They still might have the car program, but we do not have any insights. That’s why I have yet to see the application transfer over. What I have seen successfully is the trucking space over the road trucks going into the Permian Basin. This week Kodiak hosted me out in the Permian Basin and we’re releasing a video in early May of this experience. It is one of the most difficult driving environments I’ve ever experienced. You have potholes that are multiple feet deep. You were dealing with windstorms, you were dealing with uncertainty. You’re not dealing with your normal traditional roads, these things are packed sand. If you were to go to put your arms out from left to right, you could not fit between two trucks in the narrow passing and the ability to move on a dime. An oil company can go to Atlas and say, okay, I need sand to go to area A, I need it to go to B, and it all has to be dynamic. We’ve seen go to the off-road and we’ve also seen autonomous trucking over the road technology and Kodiak has done this with the Army and other Department of War aspects, the dual use technology for military applications. It seems that the market is shifting away from dual use for making a car drive and a truck drive to off-road applications, into military applications, which are very close. I met an individual at Kodiak that was in the military and he was saying it’s a similar environment from a terrain perspective. Is that the new combo that you see potentially emerging?

Capital as King and the Future of Fundraising

Taylor Brownstein: There’s one underlying theme and it goes back to the Waymo conversation is capital is king. Ability to raise capital is king. What are investors looking for? That’s where this dual use comes into the conversation. The echoes of 20 and 21 are still on investors’ minds of SPACs with hockey stick projections out in 28 and 29 and 30. People want to see wins today and revenue today. That’s where that dual use application comes in. Going back to the Waymo piece, being able to raise capital is what also will keep Waymo ahead of everybody else. If you look at Aurora, for example, Aurora has held up really nicely in the market as they continue to raise capital through multiple sources, follow-ons, ATMs, 500 million, a billion at a time. Investors know that when Aurora needs to go back to the well for more capital, the capital is there. They’re in sort of a self-fulfilling cycle where they can continue to tap the market. For other folks who are trying to become sort of the next generation, that’s where the dual use starts to get really interesting. How do I put points on the board today? How do I generate revenue today? How do I show customers and technology progression today without losing sight of my ultimate goal. Kodiak has done a really nice job of wins in the Permian Basin, wins with Atlas, wins with the military, while still focused on over the road. Then there’s others like Bot Auto down in Houston. They’re a very lean team and they’re very capital conscious. That’s how they could potentially win. If you think about the world as capital is king and your approach to raising capital, that’s what’s really driving the market today and that’s what’s driving some of that dual use as well. On the Waabi scenario, it makes a lot of sense for them if they believe that their technology can port over to robotaxi nicely and it’s not distracting management. Applied Intuition is a use case of how to do it right. They have proven that they are an industry leader in simulation testing and getting there in autonomy, and now they’re looking for other use cases within autonomy. There’s no question of, can management execute? They’ve proven they can execute, and now they’re moving on to the next frontier.

Grayson Brulte: Qasar and Peter at Applied are running and operate the most interesting business in autonomy. Qasar and Peter have been on the Road to Autonomy Podcast the most. They’re building a diversified business. They’re going into defense, they’re going into all forms of autonomy from where they came from. Let’s not forget they have Detroit roots, so they understand the warts that go with it. When you bring up the Waabi scenario, I get the diversification issues. But if I look at this from an investor standpoint, your autonomous trucking, you haven’t pulled the driver, you’re not scaled commercial operations. Then you’re going to build a robotaxi partnership with Uber, with no disclosed OEM, no details on what it’s going to look like. You have that at the backdrop of their home market, Toronto with Ontario, Canada having no autonomous vehicle regulations and city council not wanting AVs in the city. It just seems to me that there’s a lot of moving parts here. Qasar and Peter built the simulation business and started spitting off cash and they were reinvesting in other parts of the business. Waabi doesn’t have the autonomous trucking business spitting off cash to reinvest.

Taylor Brownstein: With Waabi, they have proven to investors that they can deliver at some capacity. They are one of the leading technology companies in Canada and they have the backing of the government. I think it was Justin Trudeau who did a tour with them. They are a an example of the market moving towards more AI, more applications. How do I kind be more in the Physical AI market? With the large raise, they did capitalize really nicely on that.

Grayson Brulte: Physical AI is taking off because of one individual? Jensen when he went out and gave the keynote Physical AI’s here and he showed everything. Suddenly Cramer goes nuts on CNBC. It gets picked up all over the place. The next thing you know, Physical AI is the new thing. Was it Jensen that single handedly pushes into reality?

Taylor Brownstein: The underlying currents for the market we’re in today have been here for a long time. People have been trying to solve the autonomy issue. Autonomous trucking’s not just a research science project for fun. It’s solving real world problems: labor shortages, tough conditions for drivers, more productivity if you’re running operations 24/7. The safety alone on robotaxis is very compelling. With the rise of AI, the ability to get there faster has changed. More folks can do it faster and more folks can go after specific sectors. One of those sectors is defense. You are seeing a proliferation of folks getting into defense with AI applications because they’re looking at conflicts that are going on around the world. The war in Iran is largely being fought remotely. It’s being fought without boots on the ground in Iran. It’s being fought with a lot of autonomous applications and we’re just at the early innings of it. People are saying, this is real. This is here today. Military has been one of the driving forces for a lot of technology we have today. If my truck is working off road for a mining application or for an oil application, why can’t I do an autonomous convoy for the US Army and pick up a $50 million contract to help me show investors I can have some wins and that my application isn’t just dependent on regulation for autonomous trucking or robotaxis, that I can actually monetize this in many different ways.

Grayson Brulte: You’re even seeing it in the Ukraine battlefield, where now they’re taking all of the data sets from autonomy. The Department of War through the Defense Autonomous Warfare came out with a $54.6 billion budget for autonomy for 2027. The money’s clearly there. The signals are there. Are investors comfortable investing in autonomy startups focused on defense because you have something called the primes and when they don’t like something, they either buy it or try and squash it using lobbying. Are they investing in that or are they still scared of the primes?

Taylor Brownstein: Folks are raising tons of capital, billions and billions of dollars in autonomous defense applications because of all applications that are the nearest term, defense is up there. Maybe autonomous trucking too, but defense is really up there. These are use cases that can be deployed today in unregulated environments. What investors are looking at now is Anduril and Palantir and Shield AI. There’s a second layer that’s really going to benefit from these. These are the simulation, the testing, the systems guys, the chips, the edge processors, the drone companies. There’s a whole second wave that’s going to benefit from this. Investors are looking, yes, of course, I want to write a check into Anduril and Shield AI and Palantir. But where can I also put money to work in a secondary space that is a huge beneficiary of this tailwind of the Department of War investing. Those dollars will trickle down to these companies and then you’re going to see another dual use case where you’ve developed a simulation platform for autonomous defense applications and now you pivot and you take that to mining or you take it to robotaxi. Commercialization feels around the corner for almost all applications of autonomy. All of that is kind of converging at once into strong tailwinds for the industry. There’s still a lot of companies around that may or may not be around in the next 12 to 18 months. The winners are going to consolidate and be able to raise capital. Folks that are unable to continue to raise the capital they need are going to fall further and further behind.

Grayson Brulte: Caterpillar acquired the IP assets from Monarch Tractor in bankruptcy. Do you see a potential scenario where a larger company will go strategically try and buy either data or IP and merge it into their programs to further strengthen it as consolidation begins?

Taylor Brownstein: Strategics are always on the hunt for those type of assets. I have a hard time seeing a Caterpillar go and do something big and splashy. But folks are watching the haves and have nots and the have nots tend to have a lot of valuable IP and data. There’s obviously a war for talent going on in terms of engineers. I see the large guys continuing to do that. I don’t see an OEM buying a larger robotaxi platform or a tier one in the near term. We’re still in a wait and see. Mobileye is rumored to be selling their MoveIt business. There’s sort of a lot of the echoes of bad investments in autonomy that I think are still around today. Folks are cautious, but they’re excited about the tailwinds.

Grayson Brulte: We can’t talk about autonomy today without going back to the days when you had OEMs make acquisitions left and right. GM bought Cruise. Ford bought a shuttle company, and then you had Uber buy bicycle companies to gain market share. We all saw how that ended up. It seems to me that there’s a lot more discipline in the market. Is that just battle scars or what’s causing that discipline in the market?

Taylor Brownstein: I think the market’s more focused today. Uber has made several large bets across the ecosystem in autonomous driving. They’re not just spraying and praying. They’re very focused on becoming a mobility platform and partnering with multiple autonomous providers. Ambiguity around AI and mobility and autonomy has sort of cleared up and the use cases today feel real. Uber clearly sees something in autonomy today otherwise they wouldn’t be doing it at the pace they’re doing it. Discussion going on in a lot of the larger boardrooms is: Is this a use case that’s applicable to me? Is it a threat to my business? And then if it is, do I buy, do I build, do I partner?

Competitive Landscape: Uber, Tesla, and Waymo

Grayson Brulte: Uber has committed over $13 billion to various companies. Uber now owns over 11% of Lucid. There is not a technological path to removing the driver in the next 18 months. Waymo said publicly they’re going to be close to 30 cities by 2028. Uber at this point has zero cities to driver out. That is a very big gap to get over. Catching up is going to take billions and billions of dollars. That moat just keeps getting bigger.

Taylor Brownstein: It goes back to the unit economics. In 2029 you open up your Uber app and it auto selects the cheapest ride. You’re not going to care if it’s a Neuro-powered Lucid or a Waymo. You’re going to want the cheapest car. Who has the longevity and the financial wherewithal to get to that point? Folks are having to be creative and thoughtful around capital. Wave is also raising tremendous amounts of capital. It will become a game of unit economics. Waymo even today is competitive to what an Uber is.

Grayson Brulte: Elon has a gift to raise capital. A month ago I was able to go tour Giga. I was able to walk the Cybercab line and there was a manic discussion around cost. The Cybercab’s going to be sub $30,000. While they’re looking to cut cost, they’re not cutting safety. It was a cocoon of safety. I’m comfortable putting my child in that vehicle by herself. You’re going to have a market share battle between Tesla and Waymo when Tesla gets the regulatory clearance to scale Cybercab, which they do not have yet.

Taylor Brownstein: Two biggest challenges to full scale deployment is regulatory and safety. A Waymo runs over somebody or a Tesla hits somebody, that’s on the front page of the news. There’s a stigma around it. Safety is critical. That’s simulation, that’s testing, that’s validation. Tesla around FSD has had its fair share of drama. For them to be ultra cautious is a really smart move because you will get to a market saturation point in a few years. You don’t want to sacrifice safety early on.

Grayson Brulte: Tesla’s gotten a lot of negativity for the unsupervised rollout in Austin, but the city of Austin police department posts the data. You can read this. There were individuals that went to Austin, followed these vehicles, cut them off to try and cause incidents. These individuals posted videos on YouTube harassing the vehicles. If you look at the police data it tells you a reason why they’re going slow and why they’re taking this cautious approach.

Taylor Brownstein: Elon Musk is a larger than life figure so there is going to be that level of scrutiny. Waymo is clearly the leader. They have taken autonomy from something that felt like far in the future to an application today. I think they’re very far ahead but there will be a cliff where competitors will have an opportunity to catch up. I think Tesla will be able to catch up. There will be inovation to try to displace Waymo. There’s going to be more cost efficient competitors. Waymo’s lead will continue for the near future. They have a giant balance sheet. Waymo really is a great experience.

Market Exit Strategies: M&A vs. IPOs

Grayson Brulte: Do you see a hypothetical scenario where a company gets an investor with a large balance sheet that says, I want to roll this up and I want to make a run at it?

Taylor Brownstein: Where it could work is if you’re pairing a trucking and mining provider with a robotaxi provider and putting together a platform play. Consolidation more likely to happen is that companies that are unable to raise capital over the next 18 months will start to get gobbled up by the Caterpillars of the world, maybe tier ones and OEMs or Microsoft. You gobble up the assets and the IP and you integrate it into your technology stack. This year and next year we’ll see more folks try to tap the public markets. Traditional IPO path is largely shut off to pre-revenue companies today. Kodiak and Aurora went public via SPAC and are performing well. You’ll see a lot of folks look at the SPAC as a route to go public. If you can’t raise capital, you’re going to fall further and further behind. Over the next 18 months companies are laser focused on commercialization, deployment, and capital.

Grayson Brulte: How much appetite is there in the market for additional autonomous vehicle companies and trucking companies? Right now there’s two autonomous truck companies publicly traded. When Einride SPACs, you’ll have three. Is there enough appetite in the US markets? When do we get to a point where there’s too much saturation?

Taylor Brownstein: Pony and WeRide are China focused. I think we’re at a point which is healthy for the industry where folks aren’t just saying, Hey, I want to play autonomous trucking. Investors have multiple avenues to deploy capital. I don’t think we’re near a point where there’s too many autonomous players. There’s room for several more to go public. Investors are looking to put money to work in the autonomy industry.

Grayson Brulte: Do you look at it as patient capital or is this call a winner?

Taylor Brownstein: It’s both. One of the advantages of going public is you have a currency. It opens up a whole new investor base. You can go out and raise a ton of capital that not necessarily would’ve been available in the private markets. Companies may be largely tapped out in the private markets and think about the public markets. Liquidity’s very healthy. Aurora has tremendous amounts of liquidity and that allows them to raise tremendous amounts of capital.

Grayson Brulte: Do you view all autonomous driving companies going public via a SPAC?

Taylor Brownstein: It’s changed a lot since 2020 and 2021. Back then you could go public and just put big projections on a piece of paper. Today the market is still scrutinizing. Kodiak was successful because they have customers and real use cases. Einride has announced some pipe capital and momentum. SPAC vehicle makes a lot of sense for them today. The challenge is we’re kind of in a waiting period for SpaceX, OpenAI, and Anthropic. Investors are anxiously awaiting these IPOs. That’s going to suck up a lot of air in the room. Then you get to the next layer of billion dollar software companies like Databricks. I think a regular way IPO for an autonomous company is still a little ways out unless there’s a significant use case. You probably want to wait and let the dust settle around some of these mega IPOs. SPAC becomes a really powerful vehicle if there’s a need to get out there and raise capital.

Grayson Brulte: Alphabet’s putting $40 billion into Anthropic. Everybody wants to get into the foundational model game. Do you see companies staying private longer until they get to $700 million a year in revenue?

Taylor Brownstein: Companies want to stay private as long as they can. But there are factors. Liquidity for employees is a big driver. Ability to raise capital in the public market is another. The tide is lifting all boats. When Aurora does well, others do well. Every company would love to go public with full commercialization but the reality is private capital is only getting people so far. That’s where people are starting to say, can the public markets bridge that gap to commercialization?

Infrastructure and Market Outlook

Grayson Brulte: What happens when a company files to go public and then they pull the listing? Is that a reflection of the company or market conditions?

Taylor Brownstein: It’s a reflection of the company. SPACs are still getting done. We took Merlin Labs public via SPAC last summer. Investor sentiment has become more disciplined. That’s forcing companies to look at dual use cases. SPACs and pipes are still getting done.

Grayson Brulte: Are you seeing any traditional infrastructure investors looking at hard physical assets and investing in those and owning them?

Taylor Brownstein: We’re seeing interest in it on the charging and charge management side. Your traditional infra funds aren’t looking at tech software businesses that do autonomy. But there are ancillary areas. Autonomous vehicle depot management is an area where as you grow fleets that is going to grow.

Grayson Brulte: What do we need to look for until we have you back on?

Taylor Brownstein: Ability to raise capital is first and foremost on investors’ minds. Deliver on your commercialization and unit economics. We’re still in sort of the deployment of the technology. In three to five years you’re going to have multiple companies with multiple trucks running without drivers. That’s when you get into cost curve and unit economics. The battle today is getting your technology on the road without a driver.

Grayson Brulte: Watch for the milestones and health of the business. If the company is raising capital and growing their business followed by more funding rounds, you know that company is heading potentially towards the public markets. The future is bright. Taylor, thank you so much for coming on.

Taylor Brownstein: Grayson, thanks for the conversation and looking forward to coming back.