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Despite Tesla’s success, VCs remain slow to invest into electric vehicle startups

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This post was originally published on NextMobility.co

As investors continue to become more interested in the future of mobility, electric vehicle startups are commanding significant investment money to disrupt the 120-year-old automotive market. But are Venture Capitalists forking over enough money to move the industry forward in a meaningful way? A new report by tech intelligence platform CB Insights reveals that EV tech startups received $2.2B in funding in 2016. While the amount may seem large, it pales in comparison to the ride-sharing industry, which fetched $10.8B in funding. So the real question is, why are investors still so hesitant to fund the emerging mobility industry?

An Industry Hurt by the Past

Justin Kan, from Y Combinator, on stage during the 2014 TechCrunch Disrupt Europe/London at The Old Billingsgate on October 20, 2014 in London, England. (Photo by Anthony Harvey)

To really understand why VCs are still hesitant to fund electric car startups, it’s important to hear from leaders in the VC space. I reached out to famed startup guru, Justin Kan, to understand why the industry is still hesitant. Kan was the founder of Twitch, sold to Amazon for nearly $1B in 2014, and the brother of Daniel Kan, who is the co-founder of Cruise Automation, which was sold to GM for $1B last year. Kan responded on his new video Q&A platform, Whale, that, “It’s super, super hard to build a car. I think lots of people think that Elon Musk is a unique individual, uniquely capable of building an electric car. But there are many examples of people who have tried and failed, for example, Fisker.”

Kan isn’t wrong; the industry was riddled with very public failures, of which CB Insights highlights in their report. The history of very costly failures could be scaring many investors away from the sector, but when will the public perception change?

Tesla Inc. is arguably the most successful EV startup to date, as the company has now grown to employ over 30,000 workers worldwide and become the most valuable US automaker. Tesla had several VC firms backing the company before they went public in 2010, including DFJ, Capricorn Investment Group, Daimler, Google, DFJ Growth. But most notably, the company saw tens of millions of capital injected by its founder Elon Musk while the company was starting up.

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While investors are still fighting to get their money in ride-sharing and autonomous vehicle technology companies, it has been clear that electric vehicles hold the best platform for the future of mobility companies. In the report from CB Insights, they highlight the synergies that electric vehicles and autonomous vehicles share. Electric vehicles have fewer components, enabling autonomous electric vehicles to travel nearly 18x more miles than internal-combustion engine vehicles without repairs or expensive operational costs.

Graphic from CB Insights Report

“What would happen if a whole city converted all at once to self-driving cars? … people will be like, ‘This is paradise.’ You just push a button and a car pop ups and takes you wherever you want to go. You have more pedestrian space, and the air smells better.” – Chris Dixon, Partner at Andreessen Horowitz

Investors are certainly taking another look at the industry as more EV startups emerge on the scene with highly qualified engineers, and serious product and production plans underway. Lucid Motors is a prime example of an electric car startup that is emerging as a leading contender within the premium electric vehicle space. The Silicon Valley-based startup is currently looking for funding on its initial factory construction, to the tune of $240M. The company has raised $131M to date, led by CTO Peter Rawlinson, who also led the development of Tesla’s Model S sedan.

Only time will tell if investors have forgotten about failed EV startups from the past, and willing to make bets on the industry. After all, VCs did invest $120M in Juicero, an in-home juicing machine, that turns out to be completely useless.

Read the CB Insights complete report here.

 

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Christian Prenzler is currently the VP of Business Development at Teslarati, leading strategic partnerships, content development, email newsletters, and subscription programs. Additionally, Christian thoroughly enjoys investigating pivotal moments in the emerging mobility sector and sharing these stories with Teslarati's readers. He has been closely following and writing on Tesla and disruptive technology for over seven years. You can contact Christian here: christian@teslarati.com

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Tesla Semi futuristic sci-fi acceleration sound will never get old

Videos that capture the Semi moving at speed are most notable due to their sheer cool factor.

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Credit: Tesla Owners Silicon Valley/X

The Tesla Semi is not yet in mass production, but the company has accumulated over 7.9 million miles across its test fleet. With Tesla using the Semi for its operations, it is no surprise that sightings of the Class 8 all-electric truck have been abounding. 

These sightings from Tesla enthusiasts vary, but those that capture the the Class 8 all-electric truck moving at speed are most notable, possibly due to their sheer cool factor.

Tesla Semi’s Roar

There is something that just stands out with the Semi, particularly on the road. While the Semi does not have the Cybertruck’s brutalist, angular design, it is still very striking because it’s such a massive machine that moves far too quietly for its size. This is, of course, one of the reasons why the vehicle also becomes extra noteworthy when it fires up its electric motors and accelerates.

Take this video from Tesla Owners Silicon Valley, for example, which shows the all-electric hauler accelerating while pulling what appears to be a full load. In these situations, the Tesla Semi actually becomes audible, but unlike traditional diesel-powered truck, the Class 8 all-electric truck “roars” with its own, unique futuristic, sci-fi sound. In such situations, one could feel the Semi’s raw power, which comes from its three independent motors on its rear axles.

Tesla Semi Ramp

Tesla has been promoting the Semi quite a bit as of late, and recent reports have suggested that the company is putting in a lot of effort to prepare the vehicle for its production in Nevada. Tesla’s Careers website has gone live with over 80 Semi-related job openings recently as well, and a recent report has suggested that Tesla has ramped the Semi’s factory workers in Nevada to over 1,000 employees.

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The company has even shared an update video of the Semi factory’s progress near Giga Nevada, as well as the design of the vehicle’s new logo. The Semi’s updated logo is quite interesting as it features elements from the Tesla Model 3’s first logo, which was unveiled way back in 2016.

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Elon Musk jokes he will join Mr Beast’s “100 Men vs 1 Gorilla” challenge

It’s a good sign, if any, that the overworked Musk is becoming a bit more lighthearted again.

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Credit: Elon Musk/X

Following the first quarter Tesla earnings call, CEO Elon Musk seems to have become a bit more relaxed—relaxed enough to joke about fighting a gorilla with 99 other people, at least.

It’s a good sign, if any, that the overworked Musk is becoming a bit more lighthearted again and not too busy picking fights with politicians on social media.

The Viral 100 Men vs 1 Gorilla Challenge

Over the weekend, a post on social media platform X went viral. The post itself was quite simple, with user @DreamChasnMike stating that he thinks 100 men could beat one gorilla. “Everybody just gotta be dedicated to the sh*t,” the X user joked. The post exploded on the platform, garnering 284 million impressions as of writing.

The silly question also triggered a massive debate about whether 100 men would really stand a chance against a literal gorilla. Some users even lamented that the premise was a sign of male hubris. Nevertheless, the question proved to be a fun topic on X, with some more dedicated users even posting simulated videos of what the “100 Men vs 1 Gorilla Challenge” could look like. 

Mr. Beast and Elon Musk Join In

The premise is quite similar to other viral videos from noted YouTube creator Mr. Beast, so it was no surprise that edited images of Mr. Beast YouTube thumbnails with “100 Men vs a Gorilla” also started spreading on the social media platform. Mr. Beast, who tends to be game to such silly ideas, actually reposted the edited image, joking “Need 100 men to test this, any volunteers?”

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In true Elon Musk fashion, the Tesla and SpaceX CEO noted that he would join the challenge. “Sure, what’s the worst that could happen” Musk wrote in his post on X. Musk’s reply triggered quite a few laughs on X, with some stating that the world probably still needs the CEO.

While silly, Musk’s comment and his recent, more frequent posts about his companies’ products like Starlink and Grok have been received well by his supporters. Over the past months, after all, Musk has been very political and quite confrontational on social media. With Musk soon taking a step back from the Department of Government Efficiency’s (DOGE) daily operations, however, it seems like X will soon get a more tempered and lighthearted Elon Musk once more.

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Possible first glimpse of Tesla “Model 2” affordable car in Fremont Factory

The models that Tesla will release in the coming months will resemble the company’s current lineup.

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Image Credit: @metgodinwilderness7130/YouTube

During the Q1 earnings call, Tesla VP of Vehicle Engineering Lars Moravy set expectations on the design of the affordable models that the company is expected to launch this 2025. As per the Tesla executive, the models that Tesla will release in the coming months will resemble the company’s current lineup.

Drone footage from the Fremont Factory earlier this month might have provided the EV community its first potential glimpse at Tesla’s affordable cars–fondly dubbed by EV fans and analysts as the “Model 2” or even “Model Q”–or at least their components and overall shape.

The Sighting

Tesla watcher and drone operator Met God in Wilderness, who has been posting aerial videos of the Fremont Factory for years now, recently shared some footage from his drone flyovers this month. While the Fremont Factory was abuzz with activity as usual, a couple of rather strange vehicles were quickly spotted by EV watchers on social media.

During the drone operator’s flyover on the 17th, for example, an unfinished vehicle could be seen parked next to what appeared to be fully-built Model S and Model Y units. What was especially interesting was the vehicle’s roof, which seemed to be slightly narrower than the Model Ys around it. Based on the video, at least, the vehicle seemed to be shaped like a crossover as well.

Footage from the 24th of April also proved quite interesting, with the drone operator capturing footage of another cryptic vehicle. Unlike the mysterious, unfinished, crossover-esque car spotted on the 17th, this particular unit seemed to have a more sloping rear, at least based on the shape of its covering.

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What Lars Moravy Said

In Tesla’s Q1 2025 Update Letter, Tesla noted that “plans for new vehicles, including more affordable models, remain on track for start of production in the first half of 2025.” Tesla also noted that the new vehicles will utilize aspects of its next generation and its current platforms. They will also be produced on the same manufacturing lines as its present vehicle lineup, likely the Model Y and Model 3. 

During the earnings call itself, Moravy specifically stated that the new models that would come out in the next months would resemble the company’s current vehicles. They will, however, be affordable. “Models that come out in next months will be built on our lines and will resemble, in form and shape, the cars we currently make. And the key is that they’ll be affordable, and you’ll be able to buy one,” Moravy stated.

Watch the drone operator’s footage from April 17 below.

The drone operator’s footage from April 24 can be viewed below.

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