The capital discipline of comma.ai
Last week’s “open thread question” on The Diff was a request for examples of unusually capital-efficient companies. Self-driving startup comma.ai was my selection:
Comma AI is an incredible example of capital discipline. With ~15 engineers and $8.1 million raised capital, it's managed to win first-place in Consumer Reports' rankings of autonomous driving systems. This is partly due to their superior end-to-end learned architecture, yet also due to their superior business model. And these two things are deeply interconnected. The traditional autonomous vehicle is a Rube Goldberg machine of interconnected hardware, software, and ML subsystems; it requires tons of engineers and scientists ($$$) to develop, and cannot generate revenue until everything finally works. By restricting himself to not raising vast amounts of money, George Hotz forced himself to focus on figuring out the “sine qua non” of autonomy: an intelligent agent that (like the human brain) doesn't require perfect maps and perfect vision to drive safely.
George Hotz laid it all out in two blog posts:
https://blog.comma.ai/a-100x-investment-part-1/
https://blog.comma.ai/a-100x-investment-part-2/
One thing not mentioned in the above posts, but explained elsewhere, is the capital and labor efficiency enabled by Comma AI's development of OpenPilot as open-source software. Interestingly, before he got distracted and became a Tweep this past week, Hotz was working on a new startup (The Tiny Corp) applying these lessons to AI hardware accelerators: https://tinygrad.org/ . The first generation of AI hardware startups were probably doomed by their failure to understand the interplay between economics and Amdahl's Law. You can't beat Nvidia by 10x accelerating one type of computing operation, unless you also invest as much as Nvidia in all the other operations so that you're ~ as fast as Nvidia on those operations too. Open-source might fix this problem, as Jim Keller recently explained at TSMC's 2022 Forum: https://youtu.be/o70yKYWgtVI?t=693
My sense is that they have built a level 2 or level 3 system.
Their first product (essentially complete) controlled the accelerator / brake, their second product (in progress) also controls the steering wheel, and their future plan is to handle navigation to a destination. Because of this product roadmap, it doesn't really make sense to think of their technology in terms of autonomy levels. And this was a fundamental insight — because working on “level 2” as such allowed companies to waste time on non-end-to-end systems that could never scale to “level 5.”
They have also done this in a way in which there is no reporting as to the system's usage and successes or failures.
Capital and labor efficiency (keeping the target on your back as small as possible) is a form of regulatory arbitrage.
I also took Hotz leaving comma.ai as a sign that comma.ai is done.
No, he explained that he didn't feel like a good fit for the CEO role as the company continues to expand: https://geohot.github.io//blog/jekyll/update/2022/10/29/the-heroes-journey.html ”It’s well within comma’s reach to become a 100M+ revenue consumer electronics company (without raising again!), but I don’t think I’m capable of running a company like that. I’ve always heard it takes different people at different company sizes.”
Bonus example of capital discipline:
I recently found out that SpotHero had 217 employees pre-pandemic, ~100 employees mid-pandemic, and 205 employees as of February 2022. This is quite impressive, compared to Uber with ~30k employees in 2021 and Doordash with ~8600 employees in 2021. A recent article described how it’s bouncing back from the pandemic:
SpotHero's bookings dropped 90% in April 2020 compared to February 2020, just before the pandemic started. … Its revenue in 2021 approximately doubled compared in 2020, with reservations increasing 72% year-over-year. The company hired almost 90 employees last year, bringing its headcount to 205, just a dozen employees short of its pre-pandemic total. … SpotHero, founded in 2011 with $120 million in total venture funding, says it's approaching $1 billion in parking sold this year. It's helped park more than 40 million cars to date.