Japanese autonomous driving software company TIER IV open to capital injection

Breaking News 3 March

Japanese autonomous driving software company TIER IV open to capital injection

By Yuke Xie

Open to talking to investors in China, US, and Europe
On the lookout for JVs with Chinese companies

TIER IV, a Japanese startup that develops open-source autonomous driving (AD) software, is open to an additional capital injection from financial and strategic investors in Japan and abroad, Gordon Pan, the company’s Greater China head, told Mergermarket.

Pan said TIER IV is yet to kick-start an official fundraising process but could use the proceeds to fund research and development (R&D), additional headcount, and China market expansion.

While primarily backed by Japanese strategic investors, including KDDI [TYO: 9433], Yamaha Motor Co., Ltd. [TYO: 7272], Sony Innovation Fund, and SOMPO Holdings, the startup is interested in getting in touch with financial and strategic sponsors in its core overseas markets, including mainland China, Taiwan, North America, and Europe, Pan noted. An ideal sponsor should be an organization that can support TIER IV’s growth in the long run and identifies with the company’s open-source approach to developing AD software, he added.

Shinpei Kato, TIER IV’s founder and chief technology officer (CTO) told Bloomberg last December that the company could consider an initial public offering (IPO) “in a few years’ time.” Pan declined to provide further details on the fundraising timeline.

To date, TIER IV has raised a total of close to JPY 30bn (USD 222m), giving it a valuation of JPY 88bn (USD 654m), according to Startup DB, a corporate database.

Increasing presence in China

Founded in 2015, TIER IV is dedicated to developing AD software with the goal of commercializing intelligent vehicles. The company pioneered the world’s first full-stack autonomous driving software, Autoware, which is backed by the Autoware Foundation (AWF), a non-profit organization comprised of around 60 member organizations, including research institutions, government organizations, AD systems developers, and corporates, according to the company’s website.

“[The AD systems industry] has a high barrier to entry from a technology and cost perspective…but with the help of our open-source community, and our client-oriented development strategy, we are confident that our business model will become replicable across the industry,” Pan said.

As one of the company’s key target markets, China is playing an important role in TIER IV’s open-source ecosystem. Chinese institutions that are currently members of the AWF include light detection and ranging (LiDAR) manufacturers Hesaitech and RoboSense, AD systems developer AutoCore, chassis manufacturer U power, and members of academia, he noted.

TIER IV is planning on ramping up its presence in China by strengthening its connections with existing local partners in the Autoware ecosystem while developing new partnerships both upstream and downstream. Meanwhile, the company will continue to make its customizable solutions available to more clients in China, while keeping an open mind for joint venture (JV) opportunities with Chinese companies, Pan said.

In 2020, TIER IV and Yamaha Motor launched eve autonomy, a JV that combines Tier IV’s Autoware operating system and Yamaha’s vehicle-body development technologies to address labor shortages and growing needs for high-mix, low-volume production.

“China could definitely be one of our key potential markets [for future JVs],” Pan said.

Open-source and customizable systems

TIER IV’s main client segments include service operators, car manufacturers, suppliers, and technology providers, according to the website.

TIER IV offers three main products: Pilot.Auto, Web.Auto, and an autonomous driving kit (ADK) that features a high dynamic range (HDR) camera, according to Pan.

Pilot.Auto is a scalable platform with the basic functionalities and capabilities of AD systems upon which developers can build complete systems. Web.Auto is a cloud-native development operations (DevOps) platform that provides software tools and data pipelines in the form of web services to help developers reduce development costs and enhance efficiency, according to the company’s website.

Building on its main products, TIER IV provides customizable solutions for its clients that fall under five main categories: Autoware Scaling, Turnkey Solution, Vehicle Development Solution, DevOps solution, and AD solution, according to the Greater China head.

Autoware Scaling is a technology consulting and support service that provides proof-of-concept (PoC) pilot projects for customers who lack the understanding of how Autoware and other TIER IV products work.

The Turnkey Solution is geared towards customers who require AD technology that can be used immediately. For these customers, TIER IV provides a “ready-made” ADK, which combines hardware and software.

The Vehicle Development Solution serves customers who require an AD vehicle. The company does so by providing customers with a base vehicle or ADK-equipped vehicle that is adaptable for AD.

The DevOps Solution serves customers who want to leverage on TIER IV’s software platform for their end customer’s product development and/or operation. TIER IV provides its software platform as a white-label solution to help its customers reduce costs and time to market.

Lastly, the AD Solution is geared towards customers who want to leverage TIER IV’s software platform for their own product development and/or operation, Pan said.

TIER IV currently has a total of 300 employees, including 80% in R&D, according to Pan.

Pan identified several domestic and international AD technology companies, including Guangzhou-based WeRide, Guangzhou-based Pony.ai, Mountain View, California-based Waymo, and San Francisco-based Cruise, as comparable businesses. He also mentioned Apollo, Baidu’s open-source platform as a potential competitor, but noted that Apollo focuses more on the domestic market.

The global AD cars market in terms of revenue was estimated to be worth USD 20.3M in 2021 and is poised to reach USD 62.4m by 2027, growing at a compound annual growth rate (CAGR) of 13.3% from 2021 to 2023, according to research firm MarketsandMarkets.

Gordon Pan obtained his bachelor’s degree in Information and Measurement Technology from Shanghai Jiao Tong University and his master’s degree in Management of Technology (MOT) from Ritsumeikan University. Prior to joining TIER IV, he worked for Panasonic, Intel, and Sony, according to his LinkedIn profile.