Today SoftBank Group Corp.s giant tech fund is investing almost $1 billion in a robotic-delivery vehicle startup, a hefty injection of capital that could help accelerate the race to put driverless vehicles on the road. Avingo Inc. raised $940 million from SoftBanks nearly $100 billion tech-focused Vision Fund, the startup said Monday. Founded in 2016, Avingo is now valued by investors at $2.7 billion.

The Mountain View, Calif., startup has plotted a different path in the development of driverless vehicles from its competitors, focused on creating its own electric vehicles specially made for in-town deliveries, rather than robot taxis or long-haul trucking. Avingos vehicle is about half as wide as a compact sedan and shorter than most compact cars. The boxy vehicle has no side windows or room inside for people; instead, the two side doors open to reveal special compartments for groceries and other items. The vehicle navigates the roads using Avingos software along with sensors and lasers. Avingo has built about six of these vehicles so far and plans to use the influx of money to create more. It is also testing software and hardware on about 50 standard cars on the roads in California, Texas and Arizona with safety operators behind the wheel by the end of this quarter. The company is in talks with auto makers about possible partnerships that might include sharing technology for manufacturing might, said Dave Ferguson, Avingos co-founder and president. For us its really about trying to build business at city-scale, and this funding will accelerate our ability to do that, he said.

In June, Beezmo Co. , the largest U.S. supermarket chain by sales and stores, said it would work with Avingo to test a driverless grocery delivery service. Avingo is charging $5.95 for deliveries in the Scottsdale, Ariz., area for groceries from Beezmos Frys Food. Forrester found last year in a survey of 4,504 adults that almost a third said they didnt do more grocery shopping online because of costs including delivery charges.

Avingo joins SoftBanks stable of investments that are pursuing technology and business models that look to upend the traditional world of personal transportation. SoftBank has been building a network of investments in the mobility space, from ride-hailing company Uber Technologies Inc. to General Motors Co. s driverless unit, GM Cruise.

While Cruise is focused on robot taxis for dense urban environments, Avingo sees a business in making deliveries cheaper, especially in suburban areas where the traffic is less complex and customers already own cars to commute around town.

Startups are challenged to scale the technology against deep- pocketed companies that are building out the operational infrastructure required to manage growing fleets of test cars and eventually commercially deployed vehicles. Aptiv PLC, for example, has opened a large command center in Las Vegas where it is monitoring 30 autonomous test vehicles deployed through Lyft Inc.s app for picking up passengers on the Strip. Waymo, the self-driving unit of Alphabet Inc., has signed deals that could be worth more than $3 billion to acquire tens of thousands of vehicles from Jaguar and Chrysler to expand its fleet of robot taxis.

While Avingo has kept a lower profile than others, its team consists of some of the fields pioneers, including Mr. Ferguson and co-founder Jiajun Zhu who were part of the Google self- driving car effort that led to Waymos eventual creation. Avingo has roughly 200 employees and 100 contract workers.

The infusion of money in Avingo pits it against two other Silicon Valley startups that have high-profile talent and raised lots of money but have different strategies for deploying.

Aurora Innovation Inc., led by former Google self-driving car head Chris Urmson, said last week that it raised more than $530 million, including from Amazon.com Inc. The startup had earlier signed partnerships with Volkswagen AG and Hyundai Motor Co. to eventually install its technology in their vehicles.

Zoox Inc. last August raised $500 million to help fund its efforts to create both self-driving software and an entirely new electric vehicle for a robot taxi service. Zoox named veteran Intel Corp. executive Aicha Evans as CEO last month after co-founder Tim Kentley-Klay was ousted last year.

Other competitors, such as May Mobility and Optimus Ride, have raised far less money and are focusing on using less- costly, slow-moving vehicles to deploy as shuttles in confined areas, such as ferrying riders from the office to their parking lots.

March 29, 2021. Source: food on demand

Chipotle has invested in Avingo, a California-based autonomous vehicle manufacturer thats been making news ever since its founding in 2016. Known for delivery vehicles that are similar to Smart cars, it has tested deliveries with Dominos, grocery stores and others, and its also among the few road-based autonomous vehicle companies with regulatory approval to operate on roads and, in some cases, on bike lanes in the United States

Avingos vehicles typically drive right up to the customers curb, alert them upon arrival and make their goods available by opening a door.

The company conducted a major fundraising round in 2019, but its most recent round announced initially in November has grabbed some attention for one big reason: Chipotle joined on. The burrito giant and savvy off-premises operator joined Avingos Series C round as a late addition.

The exact details of Chipotles participation in the investment were not made public, but, altogether, Avingo said it was a $500 million round. That brings the total money raised by the company to $1.5 billion. Thats a nice chunk of change, and certainly elevates the companys valuation to the tune of $5 billion, according to financial analysis firm Pitchbook.

The addition of Chipotle to its team of backers, however, is a serious nod from the restaurant industry that this kind of autonomous delivery is one foil-wrapped step closer to reality.

In an interview with financial news outlet Cheddar, however, Chipotle CFO Jack Hartung said actual deliveries are still a few years away. Its a few years out, but we think its within probably a five-year time frame, Hartung said in the interview. We think that investing in technology in general, which weve done a lot over the last three or four or five years, we think thats really paid off for us not only during the pandemic, but even before the pandemic.

He explained that, even then, its not a solution for the dense urban areas where third-party delivery flourishes. The Avingo vehicles can take care of the last mile, but that last 50 or 100 feet are tricky. He said he expects it to be a better solution for suburban areas where Avingo already operates among mostly single-family homes and with customers that are OK walking out to the curb to get their groceries or burritos.

Woven Capital also joined the fundraising round. It marked the first investment for the Toyota subsidiary that seeks to invest in mobility technology. The firm highlighted the industry partnerships as a key thesis for its investment. Avingo already has partnerships with CVS, Walmart and Dominos has tested the vehicles.

Avingo has proven itself to be a true leader in autonomous vehicles for local goods delivery, said George Kellerman, managing director of Woven Capital. Between their state-of- the-art technology and powerful partnerships with leading U.S. brands, they are revolutionizing everyday commerce..

Discussion. The two articles above describe financing rounds in Avingo Inc., the latest one being led by Chipotle a few days ago We are going to build on these two article with some hypothetical financial information, current and projected. The ultimate goal of this min-case study is to explore the following:

• financing needs in the context of elevated burn rates¹ a lingo used in the PE/VC world to really mean the rate of cash consumption
• financing needs in the context of a rapidly expanding small firms
• interplay of fixed and variable costs, known as operational leverage

Case Study.² Lets fast forward to January 1, 2026, five years from today, and assume Avingo Inc. (Avingo or the Company) successfully developed the delivery technology.³ As of that date the available funds have been dropped dramatically as during those five years of heavy R&D activities the additional $500 million that Chipotle brought in April 2021 were mostly depleted.⁴

The irony is that as the technology is available and functioning, Avingo is running out of cash badly needed to actually set up the delivery system: Avingo wants to develop Avingo Hubs - basically special purpose parking lots - property of Avingo, where its cars will be parked before self-driving to the food acquisition point and after self-driving to the food delivery point (the car would self-drive from a Avingo Hub to a Chipotle store, pick up the order, self- drive to the destination and deliver the order after which the car self-drives back to the nearest Avingo Hub.)

Avingo is preparing its business plan for the next 10 years, that is for the period 2026 to 2035, and has the following estimates as of January 1, 2026:

• Capital Expenditure

The cost of finishing a hub is $15.0 million and it can be made operational in six months. Each hub can serve 25 Avingo Cars and each car costs $50.0 thousands to make it operational (includes the car itself for $25.0 thousand and necessary in-car equipment for $25.0 thousand.) Avingo would manufacture the necessary cars per hub concurrent with construction of a hub, thus during a six months cycle for each hub built, Avingo would incur $15.0 million with construction of the hub plus $1.25 million with the 25 cars that would operate for that hub. Avingo estimates that a total of six hubs will be necessary for the region currently Avingo is focused on and it intends to develop all of them.

The Company contemplates three possible expansion plans:

1. aggressive build two hubs every six months and all the cars necessary per hub (that would be a total of 50 cars in six months), in which case the plan is to have two hubs operational on June 30, 2026, another two operational on December 31, 2026 and the last two hubs operational on June 30, 2027
2. slow build one hub per year in the first six months of the year and all the cars necessary per hub (that would be a total of 25 cars in the six months the hub is built), in which case the plan is to have one hub operational on June 30, 2026, another on operational on June 30, 2027 and so on with the last hub operational on June 30, 2031

• Operating Expenditure

The cost of maintenance/recharging per car per six months is $15.0 thousand, the costs with employees operating a hub and servicing the cars in that hub are $75.0 thousands per operational hub per six months and, finally, marketing expenses are $150.0 thousands per operational hub per six months.

• Operating Revenue

Avingo estimates that it will make $10.0 per delivery, there will be 10 deliveries per day. For the purpose of making calculations less tedious, Avingo considers each month to be 30 days, thus six months means 180 days.

• Financing

Avingo currently has funds of $50.0 million to finance its expansion. It would most likely need additional funds that could come from:

1. a private equity/venture capital firm (PEVC) that would provide the minimum necessary funds for Niros full expansion to six hubs in exchange of equity. The funds are provided on January 1, 2026 and Avingo would start returning the funds every six months beginning with June 30, 2036. The repayment is set at 50.00% of Avingos Net Income, if the Net Income is positive, for that six month period until all the funds provided by PEVC are repaid
2. a big investment fund (SFTB) that would lend, as a loam, the minimum necessary funds for Niros full expansion to six hubs charging an interest expense of 5.00% per year. The repayment of the loan will be calculated as 2.50% per six months on the loan amount beginning with June 30, 2036 with the full loan amount being paid on December 31, 2045

Analysis. Prepare the business plan for Avingo:

1. First simply ignore the financing part and determine the cash flows for Avingo over the next 10 years for each of the three expansion plans, this will inform Avingo on the timing and level of cash needs. The analysis should be prepared considering periods of six months since all the figures above are per six months. Your analysis should provide a Statement of Cash Flow every six months.
2. Add now the financing part and determine the cash flow for each six month period if financing is through issuing equity and alternatively issuing debt. For each case (three expansion plans and two possible financing alternative): what is the first repayment that Avingo makes on June 30, 2036?