Cleantech Market Intelligence
Ford Makes $1 Billion Bet on Artificial Intelligence Startup as Recruiting Tool
Over the past 4 years, Ford has made a concerted effort to move from also-ran status to vying for the lead in the race to produce automated vehicles. The latest move by the company is a 5-year, $1 billion investment in Pittsburgh-based Argo AI. The artificial intelligence startup will operate semi-independently while developing the virtual driver platform for the automated vehicles that Ford has promised to start producing by 2021. However, the deal seems less about acquiring technology today than acquiring new talent in the coming months and years.
Argo AI was founded in late 2016 by Google self-driving car program veteran Brian Salesky and Peter Rander, who led Uber’s automated car program until September 2016. The total investment of $1 billion will be parceled out over the next 5 years to fund the operating expenses of the company and to provide equity incentives to new employees in order to help with recruiting.
Ford plans to retain control of all hardware product development and manufacturing internally, as that’s where the automaker’s expertise lies. The Argo team, which has plans to grow to a staff of 200 engineers by the end of 2017, will work on developing the so-called virtual driver software platform that will control the vehicle. The software team will be integrated into the product development process as it moves forward with trying to make the system robust enough to be able to fully operate without a human driver. Ford has been developing its automated driving platform over the past several years to get its software platform where it is today.
The fact that Ford has gotten this far down the development timeline with a committed production date only about 4 years away does raise some questions. An investment of this size into a startup at this stage implies that there may be issues with the automaker’s in-house software platform. However, Ford chief technology officer Raj Nair emphasized during a conference call to announce the deal that Argo’s expertise will be used to further enhance what Ford has already built.
The existing engineers working on Ford’s platform will move over to the Argo AI team to become core employees of that company. As such, they will be eligible for the stock compensation plan that Argo is putting in place, which is typical of Silicon Valley startups. Since Argo has only existed for a few months, it’s unlikely that the company has built a complete system that would replace what Ford already has. Instead, it appears that Ford saw an opportunity with Argo to put in place a corporate structure that would enable it to tackle one of the thorniest issues that the auto industry faces in the race to deploy advanced technology: recruiting.
Traditional companies have long had difficulty attracting some of the top talent away from Silicon Valley, where they see startups as a potential pathway to a huge payday with an initial public offering. Many of those companies with limited funds pay employees with stock options that can be worth millions if the company succeeds and the employee sticks around. That doesn’t happen with regular Ford employees.
Ford CEO Mark Fields acknowledged on the call that an Argo IPO at some stage is a possibility if the company succeeds. Investing in what is essentially a brand new company with some proven leaders in the form of Rander and Salesky is an interesting new approach to the talent acquisition problem.