Cyngn Stock: Investing in Industrial Autonomous Vehicles
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Our last article to delve into self-driving technology analyzed autonomous vehicle delivery for Walmart. While we may all someday own a robotic car in the future – and Elon Musk would argue that Tesla owners already do – the most likely scenario is that most self-driving vehicles will be used for commercial purposes in the near term. This includes not just having crap delivered from Walmart or Amazon, but also moving cargo with self-driving trucks or people with self-driving taxis and buses.
Unless you’re lucky enough to live in one of the handful of cities where companies are actively testing these technologies, it’s unlikely a robotic Prius will deliver your microgreens from Whole Foods anytime soon. Full-scale deployment on the open road is realistically still years away, as there are still plenty of challenges to solve, from programming for every possible eventuality to perfecting sensor technology to building the necessary infrastructure to accommodate autonomous vehicles.
That’s why automating a constrained environment like warehouses with mobile robots is an easier feat, because there are fewer variables and there’s always workers comp for the occasional mishap. A company called Cyngn (CYN) – a name that makes it sound like a potential candidate to create Skynet and destroy humanity in the machine wars – is developing self-driving software for industrial autonomous vehicles that operate in constrained environments such as warehouses or construction sites.
About Cyngn Stock
It’s likely that most of you have never heard of Cyngn, but how about Cyanogen? No, it’s not a company developing a biotechnology weapon that will destroy humanity, but a one-time serious contender in the smartphone world. Technically founded in 2009 and officially founded in 2013, Cyanogen was a Silicon Valley startup that had raised $115 million from a fairly impressive list of investors, including marquee venture capital firms like Andreessen Horowitz, Chinese tech giant Tencent, Qualcomm, and the Foxy Rupert Murdoch. The company was reportedly valued at close to $1 billion after an $85 million Series C in March 2015.
Forbes published a glowing origin story around the same time. There was the genius programmer, Steve Kondik, who began tinkering with the open-source Android operating system (OS). There was the iconoclast business guy, Kirt McMaster, whose vision helped turn an open-source OS project, CyanogenMod, into a company, Cyanogen, that was wheeling and dealing with the likes of Microsoft. Allegedly, as many as 50 million users were running the CyanogenMod OS on their phones by 2015. Yet by the end of 2016, Cyanogen pulled the plug on its mobile OS product. Rumors said that maybe it was more like three million users. Both McMaster and Kondik left the company at some point.
You probably guessed by now that Cyanogen became Cyngn, pivoting from mobile to mobility, with an open-source self-driving software suite. The company went public last month, opening at $7.50 a share with a market cap near $200 million, pocketing about $26 million from people who actually thought it was a good idea to invest their money in a company with, shall we say (upon advice of our legal counsel), a colorful history and zero revenues.
The Technology
Let’s step back and look at what’s under the hood of Cyngn, before we kick the tires too hard. The company has apparently spent the last five years developing what it calls the Enterprise Autonomy Suite (EAS), which “leverages advanced in-vehicle autonomous driving technology and incorporates leading supporting technologies like data analytics, fleet management, cloud, and connectivity.” The main piece of its industrial autonomous vehicle software is called DriveMod (or CyanogenMod or whatever), which is a “modular software product that is compatible with various sensor and computer hardware components that are widely used throughout the autonomous vehicle industry.”
In this case, the software is somehow optimized to work with multiple vehicle types, especially industrial machines like forklifts and bulldozers, which obviously operate in less dynamic environments than a car trying to cross Los Angeles in the middle of the day. For instance, DriveMod is capable of perceiving more than 100 dynamic objects per second to navigate autonomously, while the industrial settings of its target market rarely encounter 100 objects per minute. To date, the technology has been tested on nine different types of industrial vehicles, from stockchasers and stand-on floor scrubbers to 14-seat shuttles and 15-foot-long cargo vehicles. Vehicles running Cyngn’s software can switch between manual, remote-controlled, and fully autonomous driving modes.
The software suite also includes Cyngn Insight, the interface for monitoring and managing fleets of industrial autonomous vehicles. Analytics dashboards surface data about the system’s status, vehicle telemetry, and performance metrics. The data also feed the machine-learning algorithms that make up Cyngn Evolve, the tool that continuously improves the self-driving OS.
The Business Model
Cyngn is all about autonomous driving software, so it partners with various companies that manufacture industrial vehicle platforms and hardware that are interested in integrating its autonomous software. For example, last month Cyngn announced a partnership with Columbia Vehicle Group, which makes small electric industrial vehicles for warehouse environments. The business strategy mainly consists of “acquiring new customers who are either (a) looking to embed our technology into their vehicle products or (b) upsell their existing clients with our vehicle retrofits.” In other words, much of Cyngn’s success hinges on its partner network.
The company expects to generate revenue two ways: deployment and EAS subscriptions. Deployments require Cyngn and its partners to work with a new client to map the job site, gather data, and install the industrial autonomous vehicle tech within their fleet and site. It then offers EAS on a software as a subscription (SaaS) model, and then the money just starts rolling in.
The Market Opportunity
How much money? Who knows. Cyngn has yet to make a dime on its autonomous driving solution, aside from $166,000 that it collected on a one-time, proof-of-concept deployment. EAS is currently in beta mode, and the company doesn’t expect full commercialization until 2024, which it estimates will cost up to $23 million in additional R&D. That just happens to be about how much Cyngn pocketed in last month’s IPO.
The company is initially going after the market of industrial vehicles for manufacturing and distribution, which it says is worth $119 billion. That’s based on the number of such vehicles shipped by the top 10 manufacturers each year (883,000) X hours of operation per non-autonomous vehicle annually (4,174) X average hourly labor wage ($32.42). That’s math that even an MBA can understand.
Should You Buy Cyngn Stock?
Of course, that same MBA is probably laughing his ass off right about now. There are so many red flags here that we risk being trampled to death by bulls. Cyngn is a public company with zero customers (partners are not the same thing), zero revenue, and a product that sounds like it is far from being commercially viable. While the pivot from smartphones to smart forklifts isn’t exactly an Intrexon move, the apple doesn’t fall far from the tree.
And it’s not as if Cyngn is entering a virgin market. We’ve been writing about companies building and deploying robotic construction equipment since at least 2017. One such startup, Built Machines, is already turning excavators into trenching robots. Others are automating mining trucks and tractors. Commercial floor cleaning robots? Check. And let’s not forget about big boys like Caterpillar (CAT), which has more than 275 autonomous trucks in operation.
Conclusion
One thing Cyngn should be commended for is choosing a traditional path to an initial public offering as opposed to that special purpose acquisition company (SPAC) nonsense that never provides enough color. Cyngn has provided enough color, and it’s a big avoid from us because they don’t meet our market cap threshold of $1 billion. And even if they did, we don’t invest in pre-revenue companies. Meaningful revenues are critically important to prove product-market fit, especially for disruptive technologies like autonomous driving.
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