Equity Crowdfunding’s Biggest Success Story
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What does GM acquisition of Cruise Automation mean for equity crowdfunding?
As news came in last month of General Motors’ (GM) acquisition of tech start-up Cruise Automation, details were scarce on the exact structure of the deal.
Fast forward to today and the scale of the deal has become far clearer, as have the implications for the equity crowdfunding sector. GM paid $1b in cash and stock to acquire the self-driving technology firm in what many see as an aggressive move towards mass produced automation in the private transport industry.
Launched in 2013 by Twitch founder Kyle Vogt, the company has developed a unique software and hardware suite called Cruise RP-1 which it initially tested on Audi A4 and S4 models. The integrated system helps pilot regular cars, effectively turning them into self-driving vehicles at the touch of a button.
Following GM’s strategic partnership with ride sharing firm Lyft (GM invested $500m in the San Francisco based company), news of the acquisition has shown how seriously the car maker is banking on automation becoming the future of driving. Tesla and Google will be watching with great interest, fully automated, driverless cars being a publically stated goal for both firms.
In the process of being acquired by GM however, Cruise Automation has however quietly reached another, less obvious, milestone and is now the first billion dollar exit for a crowdfunded company (Cruise Automation had previously raised via equity fundraising platform Angel List).
In doing so it has dramatically blown apart the myth that good companies don’t use investment platforms and will usher in a more mainstream acceptance that a growing number of angels and HNIs are turning to crowdfunding platforms as a way to get greater returns.
The tech firm had previously raised more than $18 million from investors including Spark Capital, Maven Ventures, Founder Collective, and Y Combinator and its exit will raise eyebrows throughout the industry.
How will news of such a big success story affect the crowdfunding sector? While Cruise Automation remains for now something of an outlier, it does show the immense potential for both businesses and investors in choosing the crowdfunding route.
With a partnership with GM under its belt and the inside lane on industry knowledge as well as the practical expertise that a company as established as GM brings, plus significant funds from the acquisition, Cruise Automation is now in a strong position to challenge the likes of Google and Tesla in the race to effectively mass produce safe, autonomous cars.
If anything the company’s success shows just how beneficial equity crowdfunding can be for startups looking to launch innovative products, accelerate growth and disrupt established industries.
For investors the news has equally positive implications and shows how rapidly companies can grow given sufficient funding and support, which in turn means higher potential for delivering exceptional returns. Crowdfunding has advantages over traditional investment avenues, often highlighting outstanding or particularly ingenious opportunities which offer significant value.
As with all forms of investing, due diligence and research are required before backing any startup and the golden rule of portfolio diversification holds true. The example of Cruise Automation will be a boon for investors looking for a UK based equivalent as well as for the equity crowdfunding sector as a whole.
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