In the VC world, a GP’s track record in selecting investments that yield high returns is crucial. So, it’s equally important to reflect on each investment’s exit and evaluate what went right and wrong. Having become a GP after the Embark Trucking investment, I had a question and answer session with Raed to learn about Embark Trucking’s exit, its impact on the fund and the lesson learned from that investment.
What is Embark Trucking – what was the big idea?
Nearly 50% of costs in the trucking industry are the drivers. They get sleepy or tired behind the wheel and have limited daily operating hours, 11 hours or so. The idea was that driving autonomously on the highway had fewer regulatory and technical hurdles than city driving. Initially, Embark Trucking wanted to build an autonomous trucking fleet, later offering the capability as a service and charging existing fleets per mile.
Why did you choose this founder?
We were initially introduced to Alex Rodrigues, a young Canadian founder through our friend Aneel Ranadive at SOMA Capital shortly after YC demo day. We found Alex to be thoughtful, rigorous and visionary, these are the qualities that define a great entrepreneur any VC would love to back and would back again.
What is the state of Embark Trucking today?
Embark Trucking sold to Applied Intuition for $71 million dollars.
Was it a successful sale?
The sale closed successfully, the returns vary depending on one’s entry point, early investors might’ve gotten most of their money back while later ones were not made whole.
What are the lessons learned?
Invest in building assets, not just a business. Investing in deep tech and R&D as opposed to investing in marketing, more often than not creates intellectual property (IP) assets that provide some downside protection, and in this case despite the Embak business not taking off as desired, the Embark assets still had acquireable value. Obviously entry point and other considerations such as liquidation preference make a difference for a private company, the latter going away in case of a company going public.
Risk & Reward must be commensurate. Though the firm went public at a high valuation ($5b), the risk profile was still that of a private venture company, the public market couldn’t wrap their minds around the real opportunity, and the company’s significant technical achievements. investing in the PIPE exposed our investment to public market dynamics while intrinsically maintaining private market risk. It didn’t matter the founders were exceptional, it didn’t matter they were leaps and bounds ahead of others technologically speaking, all would fall on deaf ears of the public market.
In conclusion, we would back this founder again in the future, and stick to our core competency of seed and early stage investments.