Details recently leaked about the terms of the purchase of self-driving car unicorn Zoox by Amazon
- As reported earlier, a $ 1.3B price, in cash (Down from $ 3.2B valuation last round.)
- A $ 30M bridge loan until closing (Zoox was on the cusp of running out of money)
- Besting a $ 1.05B offer from GM/Cruise
- Two key employee lists. Everybody on the first list must sign on, and 19 of the second list.
- Three more employee lists with around 90% of each group required to sign on.
- CTO/Founder Jesse Levinson gets a 3 year vesting schedule for 40% of his compenstation
- $ 3.4M bonus for CEO Aicha Evans
- Bonus pool for existing employees of $ 125M cash and $ 100M Amazon Restricted Stock Units. (Similar to option pool)
- Old common stock (for those who have left and those who don’t stay on) valued at around 70 cents/share. That means about $ 34M for Jesse Levinson and probably a similar amount for ousted founder Tim Kentley-Klay, and about $ 23M for all other employees who vested their options. Those who stay get more.
While all companies making an acquisition generally want most of the team to continue on, these are fairly strong terms, putting this at least partway into the realm of what is called an “acquihire” — an acquisition with a focus on gaining a team more than a business or product. With 900 employees, this would be $ 1.4M per employee. That’s rich but not at all outside the realm of acquihires, particularly in the self-driving car space. Indeed, the offer from Cruise would probably have been even more in acquihire territory. Cruise of course already has a product well under development and even if Zoox’s product were clearly superior, it is pretty unlikely Cruise would believe that and just dump the work of their team.
The price can be that astronomical because it’s a lot of work and time to build a talented team of this size in Silicon Valley or anywhere else in the world. (It is argued in fact that the only place it can be done at all is Silicon Valley, which is why investors pay the crazy prices to do it here.)
Now, since Amazon has no business in self-driving, with only a few minor projects publicly revealed such as their Scout delivery robot and an investment in Aurora, they clearly want to have a robotic transportation arm, so they are buying the product as well as the team. This is in no way a pure-acquihire, and probably not even mostly one. The terms reveal, however, that it is at least partly one. This leaves in the open the question of just what Amazon wants to do with the technology and team. They have said they wish to continue the Zoox custom robotaxi vision — and maybe they do, but they don’t have to.
In the current economy, teams are a bit harder to build due to the economic slowdown and layoffs. Zoox had already lost some key people who worried about whether it would continue as a going concern. Self-driving teams are still of high value, so the Zoox team would have found itself hired quickly enough at various companies. Amazon could probably have hired a large fraction of them on the open market, but many would have also gone to Cruise, Waymo or anybody else hiring. The unified team is definitely worth a lot more, but a billion more?
As noted, all about around $ 100M of the purchase price went to the investors, not the founders and employees. So it’s a lot of money to pay other people to get those employees.
For founder Tim Kentley-Klay, who was ousted from the board by surprise two years ago, his $ 35M payout is obviously better than a kick in the head, but far from what he dreamed about. Kentley-Klay ran a design firm in Australia, but dreamed of designing something big. He admired the way Steve Jobs had made Apple
One of the great risks of the Zoox “do it all at once” plan — doing self-driving, novel vehicle design and a ride-hailing company — was that it was expensive and complex. They needed to build Waymo, Something beyond Tesla
Will Amazon be as committed? One thing they certainly have is resources. Even so, they might fall to the temptation of building one component at a time, like everybody else. (Cruise is also building a custom self-driving taxi vehicle called the Origin, not too different in vision from Zoox, but Cruise, owned by GM, was already a car company.)
Or will Amazon keep its eye on its existing goal of owning retail, which now means owning delivery and logistics? The value there is a non-brainer. The value of robotaxi service is actually higher, but much more speculative.
For those interested in more views on this topic, I will be leading a live debate on Monday, July 20th to discuss these topics, as part of our “Driving the Debate” series where pundits and experts take on the top-self driving issues every 2-3 weeks online. Monday’s debate, at 2pm EDT via Zoom, is free. You can register at this web site to get the Zoom link.