Aurora CEO weighs spin-off, layoffs vs big tech sale - TechCrunch

The CEO Autonomous vehicle developer Aurora Innovation has laid out a range of options to cut costs and generate cash on its board, ranging from a hiring freeze and divestment to a small capital raise, going private and even selling to high-profile tech company Apple and Microsoft.

The ideas, all aimed at strengthening its cash position and extending its runway amid tough market conditions, were laid out in an internal memo first reported by Bloomberg and also viewed by TechCrunch. The internal memo, which was intended for the board ahead of its Aug. 3 meeting, was mistakenly sent to all Aurora employees, which today number about 1,600.

After the Bloomberg report, Aurora shares jumped as much as 27%. Shares closed up 15.17% at $2.43.

Aurora has a “cash runway” that will allow it to continue operating until mid-2024, according to second quarter letter to shareholders and noted in the note. However, Aurora is still a pre-revenue company. And the memo, written by co-founder and CEO Chris Urmson, acknowledged a dual problem: a challenging financial market that makes it difficult to raise additional capital and a shift in timelines from OEM partners that slows down revenue.

Aurora, which has prioritized the commercialization of self-driving trucks, has pilot partnerships with FedEx, Paccar, Schneider, Werner and Xpress.

Aurora held a board meeting after the email was shared. An Aurora spokesman declined to comment on what was discussed during the meeting. The company provided a statement via email stating,“Given the current macro conditions, every company needs to go through the exercise of assessing its capabilities and long-term strategy. We think that considering such things is a positive sign and mark of good governance.”

Urmson noted that market conditions make it unlikely that the company will be able to raise $1 billion. Instead, he laid out a long list of options — each noting the pros and cons, as well as his biggest concern for maintaining employee morale — and said there was value in finding “a way to raise $300 million over the next year to add about six months to our track.”

Extending the runway

Urmson’s internal memo looks more like a financial and strategic exercise than an action plan. The lengthy memo, which was sent ahead of the Aug. 3 board meeting, lays out nearly every option the company could take to expand its cash position.

The memo’s more attractive ideas include a sale to major tech companies like Apple or Microsoft, or to a Tier 1 supplier. However, the memo gave no hint that discussions with either company have even begun.

There are a number of other options that fall within the cash savings and cash generation measures set out in the note. Money-saving methods run the gamut, including hiring freezes and even job cuts, though Urmson cautioned against the latter.

“I believe a RIF (reduction in force) will hurt morale,” Urmson wrote, noting that teams are feeling understaffed. “While the board (and I) may believe that the team will be more effective if it is smaller, we expect that the negative impact on morale and the consequent increase in the drain on valuable talent will be a challenge. Unless the layoffs are significant, we should think of this primarily as an efficiency improvement tactic rather than a significant increase in runway once we factor in benefits costs.”

As for the workforce, Urmson recommended two options: “aggressive performance management of underperformers” and “more intensive deduplication and prioritization.” Breaking down the jargon, this can mean firing poor performers and eliminating duplicate positions, or simply not filling those positions once they are released.

These measures, Urmson wrote, may not have the operational simplicity of a RIF or hiring freeze, but would result in significant efficiency improvements and cost savings. He estimated the savings at $7.5 million.

Other cash-cutting measures, such as eliminating the CEO grant, cutting software licenses by 20%, suspending annual bonuses and suspending meal service, were also included in the memo.

Urmson also threw out various cash-generating options that ranged from selling its test track and building to bigger moves like spinning off or selling its lidar or simulation assets, acquiring other AV companies that trade at or near the money in their balance sheet is “in the range of $150 million to $300 million” as Aurora goes private or is sold to a larger technology company or tier-1 supplier.

Acquiring another AV company would eliminate another competitor, reduce funding dilution in the market and allow Aurora to “aggressively reducing layoffs,” the note said. Aurora does not list any potential companies on this acquisition list. However, there are a few like Embark, which has a market cap of $204 million, that may qualify.

Aurora hired Allen & Co to analyze the acquisition path, according to the memo.

Of all the options, Urmson seemed most interested in exploring whether there was a viable path to spinning off technology, pursuing an acquisition and investigating a small capital raise.

Urmson said in the note that he is reluctant to sell the company at this time unless there is a strong offer from a “very compelling strategic buyer.”

Buzzy SPAC startup

Aurora went from a vibrant startup to a publicly traded company through a SPAC over a four-year period. The company was founded in 2017 by Sterling Anderson, Drew Bagnell and Urmson, all of whom have a history of working in automated vehicle technology.

The three co-founders, who came out of Google’s autonomous driving project, Uber ATG and Tesla, helped attract high-profile investors and a bunch of capital.

Aurora’s co-founders doubled in December 2020 when they reached an agreement with Uber to purchase the self-driving unit of the transportation company. The complex deal, which at the time valued the combined company at $10 billion, helped Aurora doubled the size of its workforce.

Under the terms of this acquisition, Aurora did not pay cash for Uber ATG. Instead, Uber surrendered its stake in ATG and invested $400 million in Aurora. Uber received a 26 percent stake in the combined company, according to a filing with the U.S. Securities and Exchange Commission.

Aurora has made at least one other acquisition since the Uber deal. In February 2021, Aurora bought OURS Technology, the second lidar startup it had acquired in less than two years. Aurora acquired BlackmoreMontana-based lidar startup, in May 2019.

Against this backdrop, dozens of startups across industries looking to unlock more capital turned to mergers with special purpose acquisition companies. These SPAC mergers offered a faster, but often more expensive, path to the public market.

Aurora hopped on the SPAC train, announcing in July 2021 that it will become public through a merger with Reinvent Technology Partners Y, a special purpose acquisition company launched by LinkedIn co-founder and investor Reid Hoffman, Zynga founder Mark Pincus and managing partner Michael Thompson.

A year later, the promises of what a high-flying public market could offer have come crashing back down, forcing frontier tech companies like Aurora to find ways to stretch their capital runways long enough to reach commercialization.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *