By Eric Hal Schwartz dcinno.streetwise.co/
Self-driving cars are a still-evolving technology that has yet to take a final or ubiquitous form. It’s fitting then, that it’s a startup devoted to that technology has become the first equity-crowdfunded unicorn with General Motors purchasing Cruise Automation for more than $1 billion in cash and stock according to a report in Fortune. It could prove to be the kind of validation that the technology, and the method by which it raised its first funding rounds, needs in order to accelerate.
The SEC’s new rules for equity crowdfunding that kicked in earlier this year have spawned a lot of excitement. Offering millions more people the chance to invest in young startups than has been allowed before potentially offers the lifeline that young startups need. Locally connected companies like OneVest and Trustify have already made good use of the new rules, and big names like Indiegogo and Kickstarter are experimenting with ways to turn their crowdfunders into potential investors.
Cruise, which has developed some very advanced automated driving tech, had already raised $18 million in VC funding before the acquisition. But while big name investors like Y Combinator and Spark Capital came in later on, the early Series A and Series B funding had $100,000 crowdfunded from invite-only AngelList syndicates. That’s not quite the same as some of the more open systems, but it is in the same mold of smaller investors contributing bits and pieces of a funding round, helping promising startups get past those early, rocky days.
“Without a doubt, we are experiencing a unique moment in time as now companies can raise different rounds of financing online from anyone in America,” startup investment platform Onevest co-founder Alejandro Cremades told DC Inno in an interview at the time the new rules came out.
The thing about unicorns is that they are rare by their nature. If GM buying Cruise is like Google buying YouTube or Facebook buying Instagram then this might be just a one-time blip on the equity crowdfunding screen. But, the World Bank has suggested that equity crowdfunding will be worth $93 billion in the next decade. Who knows how many startups that just need a little more time will be rescued so they can prove it. This unicorn could be just the start of a stampede.