Zoox Venture Capital Investment Memo by Blackbird
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Tl;dr: Blackbird invested $500k of a $1.3M round in Zoox at the seed round in 2014. They shared this investment memorandum with their LPs. Read to understand how a venture capital investor thinks about investing in a company and how they communicate it to their partners and potentially their limited partners.
About the VC investment memo
In early 2014, Blackbird was introduced to Tim Kentley-Klay, a Melbourne based designer with a charismatic vision for how transportation might be dramatically reshaped. Tim moved to Silicon Valley shortly after where he met Jesse Levinson, a researcher leading Stanford’s driverless team. After the company was formed, we jumped at the chance to invest in Zoox’s very first round of financing.
Less than four years later, the company is announcing a $500M Series B round and invited the outside world to enjoy a peek into their progress.
For a trip down memory lane, below is the investment memorandum we sent to Blackbird’s LPs in 2014.
Prior to Zoox, we had only invested in software companies. We had raised our fund not mentioning autonomous vehicles once to our investors. The philosophical struggle internally in deciding upon the investment was enormous. And yet, in making the investment, a new atrium opened up in Blackbird’s heart.
Venture capital investing is at its best when we as investors are taught and our eyes are opened to a new future. Zoox is the epitome of that.
About STARTUP
Zoox is a California based robotics company founded by Tim Kentley-Klay and Dr. Jesse Levinson to create autonomous mobility. Operating at the intersection of design, computer science, and electro-mechanical engineering, Zoox is a multidisciplinary team working to imagine and build an advanced mobility experience that will support the future needs of urban mobility for both people and the environment.
Not sure if the seed round (or all make sense)
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| Oct 21, 2019 |
Convertible Note – Zoox
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— | $200M | — |
| Jul 8, 2018 |
Series B – Zoox
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2 | $465M | Grok Ventures |
| Nov 8, 2016 |
Series A – Zoox
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2 | $50M | — |
| Oct 4, 2016 |
Series A – Zoox
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9 | $250M | Blackbird Ventures, Lux Capital, Thomas Tull, Threshold |
| Mar 7, 2016 |
Private Equity Round – Zoox
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1 | — | — |
| Jul 3, 2015 |
Seed Round – Zoox
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2 | $40M | Lux Capital, Threshold |
About VC
Blackbird Ventures is a venture capital firm that invests in inherently global Internet businesses formed by Australians. We back world-class founders who are setting out to make a difference in the world. Blackbird Ventures itself is a collection of Australia’s most successful startup founders and Silicon Valley’s top investors who want to help you succeed on a global stage. Blackbird’s fund investors are the founders of some of Australia’s most successful technology companies like Atlassian, Campaign Monitor, Aconex and more. They’re not only investing their money but also their time to help you succeed. Because we are looking for companies who are striving to be the best in the world we can help with introductions to our Silicon Valley networks, providing access to further expertise and capital. We provide equity capital for all stages from seed, series A and later stage.
Usual caveats
No investment memo made voluntarily public will ever be 100% as it was. The pressure is just too high for VCs to look smarter, and not make founders uncomfortable, etc. I highly praise the VCs that share their thought leadership so we can all learn.
If you’re learning to make a VC investment memo, don’t assume the memos are what you exactly need to do. Information will be redacted. Assume anything “delicate” or sensitive is not in the memos.
The only memo that is 1 to 1 is the Youtube memo because it was in a lawsuit.
Zoox Venture Capital Investment Memo
New Investment: Zoox
November 2014
Summary
We’re investing $500k of a $1.3M round into Zoox, an Australian-founded, but now California-based autonomous vehicle company that intends to reinvent the notion of what a car is and eventually operate a taxi-like service in dense city environments. There is unfortunately no opportunity for co-investment due to high demand for the round.
Full Story
Zoox, more than any other company since our inception at Blackbird, forced us to examine what we believe in. On the face of it, we are investing in a months-old company at an astronomical valuation that is competing against Google, Tesla and the world’s largest automotive companies and relying on governments around the world to change or create laws so that the company’s only product is legal.
On the other hand, the company has one of the grandest ambitions we’ve seen, fascinating insights into how to bring that vision to reality and an extremely high quality team that have created some of the largest breakthroughs in autonomous vehicles in the past decade.
Zoox was founded by Tim Kentley-Klay, a Melbourne designer, and Jesse Levinson, a Stanford researcher. The company has an exclusive license to Stanford’s autonomous driving research and a non-exclusive license to image processing and tracking software that is essential to driverless cars. Jesse led the Stanford team and members of his team are joining Zoox.
In addition to the Stanford heritage, the company has also licensed a drive-by-wire software drivetrain from KTH University in Sweden, where some of the research team members have agreed to join the company as well.
The plan is to complete a fully functioning first prototype within two years so that Zoox can begin testing an Uber-like shuttle service, first on private road systems like university campuses and eventually in dense urban environments.
Tim, Jesse and the team have rebuilt every assumption of the ‘car’ from first principles. There are no manual, mechanical overrides like a steering wheel or brakes. The drivetrain is completely software based. The car is completely symmetrical, can drive in both directions and there is no concept of ‘front’ or back’. It has a system of communication with passengers and pedestrians.
Each zone will have a human teleoperator centre that can handle longtail exceptions that the real world inevitably throws up and allow human drivers to remotely take over. By introducing these two constraints the company has a higher chance of launching within a period of six years, versus potentially decades, with a completely software-based experience that has to take into account magnitudes higher amounts of complexity.
Long-term, Zoox intends to manufacture and operate a fleet of its own autonomous vehicles in as many cities around the world as it can. Two-thirds of the cost of a taxi are tied to the driver labour, offering huge opportunities for price savings but more than that, a completely different riding experience.
There are a number of driverless technologies being developed, so why haven’t we seen commercial driverless cars yet? Primarily the issue is one of cost. The main technical component, lidars (laser radars), have until recently cost $70k+ but now have rapidly fallen to around $7k. With that, cars can now be manufactured for $150–200k. The other is human acceptance of what is a very strange concept to grasp (robot cars). The Zoox team has a very clear roadmap for incrementally delivering as this perception changes.
The valuation is high by any measure and we tried everything to lower it. Due to the strength of the team, the founders had a handful of meetings and raised the remaining portion of the round in Silicon Valley in a week. In the end, the variable in venture capital that matters most is whether the company becomes something substantial or not and the team at Zoox are one of the most exciting teams we have seen since we have started. We firmly believe the calibre of the team, means that it has a chance of being one of the more important teams to come out of Australia during the duration of this fund.
The full vision of Zoox represents a very high risk investment and at 1/52nd of the fund is sized appropriately. While Zoox is high risk, they have the potential to produce a huge outcome on a global scale if they can realise their dream. We think a small number of these investments is prudent as a fraction of a diverse portfolio, which is not correlated as much to the rest of our portfolio.
We also note that even if the ultimate vision of a driverless taxi is not achieved, the team will still be building significant value in its IP which should be strategic to a very fast growing space, with lots of big players watching intently. This provides some risk mitigation to getting our capital back.
We have also taken into account the fact that this business will be more capital intensive than most of our other investments, and understand that we will not be able own as much of it as our core model. Starting investing at the seed stage is the only time we’ll really be able to buy a meaningful stake if things start to go well for the company.
The bread and butter of our investments is and will remain in business and marketplace software that is sold in a bottom up way (e.g. Canva, Safety Culture, Autopilot, Culture Amp, Skedulo), where we can see a core group of happy customers and can look at metrics to get a feel for customer conversion, monetisation and retention.
We have spent a lot of time getting to know Tim and Jesse over the past 6 months and feel that while it’s still the very beginning of a long journey there is something special here. In short, we’re very excited to be joining the journey of Zoox, so to speak, and helping to grow the business.
As always, please do reach out if you have any questions!
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