Embark Trucks

What did it do?

Embark Trucks was a San Francisco-based autonomous driving company that developed software to let long-haul lorries drive themselves on motorways. It tested its manufacturer-agnostic system with freight carriers. In 2021 it went public on Nasdaq through a SPAC merger.

Why did it shut down?

When it went public the company generated no revenue at all, and its target valuation of USD 5.16 billion rested entirely on the future potential of the technology. When markets cooled, the shares lost more than 90 per cent of their value within a year. Slipping timelines at lorry manufacturers postponed commercial deployment at scale, and no new capital could be found. In March 2023 70 per cent of staff were laid off, and in May the company was sold to Applied Intuition for around USD 71 million in stock.

The story

Alex Rodrigues and Brandon Moak began working together on autonomous driving while studying mechatronics engineering at the University of Waterloo in Canada. When they founded Embark in 2016, Rodrigues was just 20; as Crunchbase News put it, neither was old enough to buy a beer in the US. The team entered Y Combinator's 2016 batch with an idea for driverless shuttles for campuses, but soon turned to a far bigger market: motorway driving for long-haul lorries.

Between 2016 and 2019 came a USD 2 million seed round led by Maven Ventures, a USD 15 million Series A led by DCVC, a USD 30 million Series B led by Sequoia Capital and a USD 70 million Series C led by Tiger Global. In 2018 Embark became the first autonomous trucking start-up to cross the US from coast to coast with an autonomous lorry carrying a safety driver.

The real money came with the SPAC wave. A merger with Northern Genesis Acquisition Corp. II promised around USD 614 million in funding; Embark began trading on Nasdaq on 11 November 2021 with a target market value of USD 5.16 billion. Yet the company had no revenue at all, and its entire valuation rested on the future potential of the technology. The shares lost more than half their value in January 2022, six months later they were more than 90 per cent below their initial price, and in August 2022 the company carried out a 1-for-20 reverse stock split.

In March 2023 Rodrigues wrote in an email to staff that capital markets had turned their backs on pre-revenue companies and that manufacturers' slipping timelines had postponed commercial deployment at scale. The company laid off around 230 people, 70 per cent of its workforce, and closed its Southern California and Houston offices; the remaining team was tasked with winding down operations. In May 2023 Applied Intuition, a developer of autonomous vehicle simulation software, agreed to buy Embark for around USD 71 million in stock, planning to fold the company's internal tools, data and software assets into its own products.

Embark is a striking example of how a deep-tech company that goes public without generating revenue has no concrete metrics to defend its valuation when the market mood changes. The road from USD 5 billion to liquidation in sixteen months is a reminder that timing can be as decisive as technology.

Lessons for founders

• Going public before you have revenue ties your valuation to the market's mood every single day; do not walk through that door before your first commercial contracts arrive.
• If your product depends on another industry's timeline, prepare an interim business model that can generate revenue when that timeline slips.
• Spend money raised in a period of abundant capital on the assumption that development will take twice as long as planned.

Sources

1. Embark Trucks lays off workers, explores liquidation of self-driving truck assets (TechCrunch, 2023-03-03)
2. Embark Trucks laying off 70% of employees, winding down business (FreightWaves, 2023-03-03)
3. Autonomous Trucking Upstart Embark Goes From $5B Valuation To Kaput In 16 Months (Crunchbase News, 2023-03-06)
4. Applied Intuition to buy autonomous trucking SPAC Embark for $71M (TechCrunch, 2023-05-25)

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