Yet Another Value Podcast - Edwin Dorsey from Bear Cave on Otonomo $SAII

Episode Date: March 31, 2021

Edwin Dorsey from the Bear Cave (https://thebearcave.substack.com/​) returns to discuss a high conviction long idea, Otonomo. Otonomo is a "leading platform and marketplace for vehicle data" and is going public through a SPAC merger with SAII (will trade under ONTO post-deal). Edwin thinks the opportunity for the company is enormous, and if they successfully execute they could be a multi-bagger.Chapters0:00​ Intro4:00​ Otonomo overview6:15​ How can Otonomo make money selling car data?11:30​ How does OEM partnerships work?14:00​ Why will automotive data be a winner take all market?25:25​ How Otonomo could undercut Root and Metromile29:00​ Discussing the Otonomo management team33:50​ The SAII PIPE group: good or bad?35:50​ Edwin's take on the SAII SPAC group38:00​ How big is Otonomo's TAM?40:25​ How the current SPAC market could create opportunity43:00​ Warrants are risky; discussing SAII risk/reward49:30​ What pushback has Edwin gotten on the idea?

All right. Hello and welcome to the yet another value podcast. I'm your host, Andrew Walker. And with me today, I'm excited to have on for the second time, my friend, Edwin Dorsey from the Bear Cave. Edwin, how's it going? Andrew, I'm doing great. Thanks so much for having me. I'm really excited for our discussion today. Hey, I'm excited. We were doing some discussion pre-podcast. I'm really excited to talk about this one. I start every podcast by pitching my guest, but because you're so unique, I'm going to start this podcast with the disclaimer first. Nothing on here is investing advice. You know, the Bear Cave is a short-focused. newsletter, so we might discuss shorting at some point. I think we're probably going to talk about warrants. Warrants and shorting, super risky. Please, nothing on here investing advice. Everyone should remember that. That out the way, let me start this podcast the way I do every podcast by pitching you. People can listen to the first podcast for the original pitch, but you know, I love the Bear Cave, super unique product, really highlights and celebrates what I think is a important and misunderstood piece of the market, that short selling. I mean, since our first podcast, the Bear Cave has just exploded, mentions in institutional investor. Was there a New York Time shout

out? Do I remember that correct? I don't think so. I don't think so, but one day, Andrew. One day. But there was definitely institutional investor, shoutouts left and right. I was one of the first subscribers. Now there's thousands of us. It's just awful. It's just awful. But I really enjoy it. Great write-ups. Love highly the short selling. And you've broken some big stories on some pretty buzzy companies, too. We can go to the company we're going to talk about in a second, but any of the articles in the past couple months that you've done really jump out as like, this is something I'm really proud of? So the most red thing in my newsletter was when I wrote about Robert Smith early on because I think a lot of the media was focusing on the potential tax evasion stuff.

But it turns out he's got a lot of issues where at least his private equity firm may not have acted the most ethically. It seems like they use a lot of their portfolio companies to buy old portfolio companies. Some board members alleged at inflated valuations. You know, one of his friends was rated by the FBI and he'd invested in his friend's funds. There's a lot of kind of odd things with Robert Smith and Vista that I think traditional media was missing, but the Bear Cave Newsletter was able to talk about. You know what I think the Bear Cave is best at? Not that you're not best at everything, but I think what you're best at is very quickly

when something's got three or four red flags, the Bear Cave will come out with something that says, hey, here are these red flags, this is what I'm noticing. and maybe I haven't done all the work yet. And maybe I'm just throwing these red flags out for a reporter to go pull on these threads and see if there's anything there. But here are these red flags that I've used a FOIA request or, you know, I've noticed changes in the last 310Ks or something. Like here's some red flags you should be aware of.

That's where I think the Bear Cave like really excels and it's best at. I think back to like Triteris, it's a SPAC IPO that merged. And you came out and you said, look at all these red flags. And I think there was a lot of, I'm underselling how much work. you did there because there was a lot of other interesting stuff. But you pointed out five red flags and two bombs, I would say. And then two, three weeks later, there were four more short sellers that built off those red flags and turned them all into bombs. But that's really where I think the bear flag he sells that. And like the Robert Smith thing, you said, here's seven red flags. No one's noticing

pulling these threads. And I bet you'll probably find something. Andrew, that's exactly right. Like the goal isn't to give a comprehensive short idea with the valuation and earnings estimates and stuff like that. The goal is really to highlight, you know, a few big things that the market's missing about a company, usually negative things that the market's just missed. And then somebody could take that and run with it and already have the first three or four innings of research done and have like a great setup to now go research a company and see if it's actually going to be a good position for them. So that's exactly how I sell it. I'll highlight interesting red flags people are missing, but it's not going to be fully comprehensive to get you to want to short it.

And, as you know, recently I did my first long write-up. Hey, I love that you're doing my work for me because that's the perfect transition. We're going to talk about not your short idea as your first long write-up that you put out. Obviously, very high-conviction idea. I'll let you disclose your position and everything, but I know this is a big bet. The company is Autonomo. They're going public through a SPAC with software. It's a merger with Software Acquisition 2.

The ticker is currently S-A-I-I dot change on when the merger finishes in the next. next couple months. But I'll flip it over to you. Why don't you give an overview who they are why you're so attracted to them? So Autonomo is an Israeli connected car data company that's currently going public through a SPAC with the deal expected to close in early April. You know, full disclosure, just like you said, none of this is investment advice. It's my largest personal position. I own a lot of stock and warrants and a few units. So, you know, I might be biased here. I won't be selling it right after this interview, but, you know, take out everything I say with the grain of salt, not investment advice.

Autonomo is really car data company that's going public through a SPAC, and it's kind of a new industry where traditionally cars, like, generate a lot of data, but it's not stored. It's just like lost after it's generated, while new cars now that are being built can generate a ton of data, like the speed is driving, where it's driving, any maintenance issues going, going on with the car, stuff like that, but that that is stored and transferred to a cloud, which is either maintained by Autonomo or Autonomo's main competitor, Wejo. So right now, there's tens of millions of cars currently on the road that when they're being driven, the data from that car is being transferred to these third-party clouds.

And what's really cool is there's going to be a lot of uses, some of which aren't readily obvious for this data. And Autonomo is going to be a middleman, basically a marketplace for this data. Consumers will own it and they'll be able to sell it to people who want this data like insurance companies and a host of other players. And Autonomo will be a middleman basically taking a fee for like maintaining the data. Perfect. No, I think that's a great thing. So that's a great overview. And I think the first and most obvious pushback. So you know, this is startup company, right? They're trying to be the middleman for data, car. We'll talk about some of the other things, but obviously, you know, an insurance company

is going to want the data for how everyone's driving and stuff. But I think the first pushback here is, hey, Autonomo is the car company owns that data and then gives it or sells it to Autonomo, Ouija, whoever the competitor is. Why is the car, like, there aren't that many of them. Why are they going to sell it to Autonomo at a level that would like make, let Autonomo make money? Why wouldn't they keep that for themselves and then just go? and sell it directly to progressive. Like, I think that's just the first and most obvious pushback right there.

So I would say first, the driver will own the data. So if I'm driving the car, I actually own the data, not GM. You have full consent over the data. If you don't want your data shared, you won't be able to share it. But how it will probably work, and again, this is a new industry, is an insurance company will say, hey, we'll give you a $20 discount if you let us see your driving data. Or a leasing company will say, hey, let us sell your data, but you'll get $20 a month off. your lease. That's probably how it's going to play out, but Autonomo does not own the data. What

autonomous is doing that's really complex and the reason there's a need for a middleman like Autonomo is data regulation. In the U.S. and in Europe is becoming a huge thing and it's very complicated. In the U.S., depending on who's driving the car, there might be different regulations on how you need to treat the data and you need to manage it differently for different drivers. In the U.S. looks like every state is going to have different regulations. I don't how you can treat driver data. Can you monetize it? Can you not monetize it under what circumstances can you monetize it? How does it need to be stored? Does it need to be anonymized? There's going to be 50 different regulations for 50 different states and you need to start managing the data differently

as soon as a car crosses state lines. In Europe, there's GDPR, which is very restrictive. There's tons of regulations around data which make a lot of these car companies say, hey, we don't want to build our own cloud to store all this consumer data and then try to be a marketplace. We want to partner with the middleman like Autonomo who's going to worry about all the data compliance stuff for us. I think it's also difficult to normalize and anonymize the data between all these cars. So that's part of the reason there's a need for a middleman like Autonomo. And then on the customer side, if you're an insurance company like Progressive, if you're

a city planner who wants car data, it helps to have a middleman where you can go to make one deal to get all the data rather than going to 10 different individual car companies or 50 different individual consumer groups or something like that. It's really a place because of regulation on one side and centralization for the other that it makes sense to have one or two big middlemen playing in this market. Perfect. So let me dive a little bit more into making sure I understand autonomy because that's actually a little bit different than my understanding of it. So one of their partners is Ford, right? So when they partner with Ford, Ford's going to put, there's tons of sensors on your car and stuff that are collecting data. Ford's putting those sensors

in, right? That's not Autonomo sensors or anything. Yeah. And then for what they've done is Ford struck a deal with Autonomo, that Atonimo can collect and manage this data. But what has to, what also has to happen is when Ford or the Ford dealership or whatever sells your car, you have to consent to Atonimo releasing that data? Or does Autonomo just keep collecting it until you consent to someone else using that data. I'm not 100% sure. I believe Autonomo gets the consent to collect it and then they also need your consent to transfer it, let's say, to an insurance company who wants to use it to price things. But Autonomo does not own the data. They don't buy the data. They're just storing the data in the cloud with compliance with all these data regulations. But they're not buying and selling

data. I think it's more just a marketplace to host data and transfer. And one thing I would also add is, you know, it's not so much that there's tons of new sensors being added. Like, this data always existed. It was just kind of being disregarded. Like, one thing people don't know is, like, rearview cameras, apparently in cars are kind of running 24-7 or whatever the car is driving, not just when you're in reverse. And there can be a lot of value collected from rear-review cameras. It can show where, like, potholes are in a road. It can show if there's, like, anything blocking a road or, like, any accidents. So that's a kind of one example where, this data that had been disregarded, review camera feeds can actually be valuable in some use

cases. Go ahead. Go ahead. You know, and other things, it's just like, you know, the data being collected, I think they say they collect 150 different attributes, but the main thing is just how you drive. Where are you driving? What times are you driving? What speeds are you driving?

How fast are you braking? Are you an erratic drive? Are you safe drive? Are you turning like crazy? I think that's going to be a lot of the main data. and then there's kind of like two buckets of use cases. There's going to be like individual use cases where certain companies will want individual data on drivers to help offer products to that driver.

And then there's going to be kind of bulk use cases where you could imagine a government or city planner probably wants to know how 10,000 different cars in their area are driving for the purpose of city planning and stuff like that. So that's kind of how I think about it. Let's go to those use cases in a second because I want to get there. but I just want to button up. So Autonomo has 16 OEM partnerships right now that cover 80% of the market, right? And one thing you wonder, are they, you know, a partnership with Ford or BMW or something,

are these exclusive partnerships or are they locking these guys up and they're the only ones who kind of get access to all of this data or these non-exclusive partnerships? That's a great question, Andrew. I believe they're exclusive. I don't know how long they're exclusive for. I know the competitor, Wejo, has General Motors exclusives. for like seven years. I'm pretty sure it's an exclusive.

I don't know how long it's locked up for. I don't think it's terribly long, though. But that's a very good question. Just one of the things I think of like, you know, Sirius XM, which I had a history with, you know, one of the things with them is they're exclusive in the things and obviously they own the XM radio and stuff. And once they're put into the cars, you know,

you know a car company when they plan, they're planning the 2025 models today, right? So once you get put in, it's very sticky, but it's a long process. But since Ford's already collecting all this data and stuff, like I do wonder what the value of that partnership is because if it was all Autonomo sensors in there and stuff, you know, that would be incredibly sticky.

But if they're not exclusive partnerships, you can see the worry that Ford is going to say, oh yeah, anybody who wants to try to figure out how to mine this data can take this data off of us. That's true. You know, autonomous is better positioned than its competitors for a few reasons. One is you can't just say anyone can take this. data because there's tons of regulations around data. You want to make sure this person's established

and they're going to be big. You can't just partner with a random startup doing it. You need to make sure that they're following all the data compliance issues. Autonomo right now has the biggest lead. They have about 40 million connected cars. Their competitor, Wejo has about 10 million connected cars and like a fifth as many partnerships. So autonomous has kind of like come out of this running. And what the CEO, Ben Volka, says is this is probably going to be a winner. take most industry, like other industries, where just one person gets the scale, gets the size. And once a person has that size, then there's kind of this natural effect where, you know, all the customers would prefer to deal with one person in the middle rather than like 10 different

middlemen. No, that's great. You know, I'll jump ahead to another pushback because I know the quote you're saying. It was probably because I'm saying you're right up in when I was prepping. It stuck out to me. But I think his quote was, look, there's one Airbnb. There's one five, right? This is a winner-take-all marketplace. Whoever wins gets 80%, and the remaining 20% is divided among all the other competitors, right? So winner-take-all-market. And I get that.

But when I think of Airbnb, you know, I think of a thing where supply and demand are insanely fragmented, right? Those are the types of marketplaces where it's a winner-take-all marketplace. When I think of a place where supply and demand aren't quite as fragmented, you know, there can be room for more than one people. None are jumping off the top of my head, like Expedia, You know, there's only like 10 major hotel companies in U.S. So there's two major players there. I'm not quite sure, but I do see something where it's, hey, the supply here is the top 10 OEMs, right? That's almost all of the market for cars. And then the demand, I do think there's going to be a lot of

things that demand, but it's not unlimited demand, right? The demand is big government agencies, local city municipalities for planning, insurance companies, probably some more. But, you know, we're not talking hundreds of thousands of people who are demanding this data. We're probably talking dozens to hundreds. So I don't see a super fragmented marketplace that suggests like Airbnb type qualities. Does that make sense? On the demand side, I'm not sure I'd agree with you. I think there are going to be like hundreds and hundreds of people trying to get this data coming up with innovative use cases. And let's talk about the use cases soon. But on this, you know, you might be right. It's a very new industry and we'll see how it plays out. My guess,

And what Ben Volkow has also said, the CEO is like the auto industry is very slow moving. It can take two or three years just to get like a contract on. It took them years to convince somebody to sign with Autonomo. I'm not, you know, there's smart car in the U.S. that I think is trying to do something like this. I really think there's only three or four players right now. And my guess is most people won't want to go. My guess is if you do want to do something different, you're going to have somebody captive. kind of like how GM is like taking over Wejo and is trying to say Wejo is like going to be GM's platform.

You might see that with some of the other big automakers, but my guess is most just want a platform where they're just not going to need to worry about it that's going to give them and their consumers a good deal. That makes sense, though. I do, you know, I think Tesla keeps all of their data for themselves. And you do wonder, like, does everyone look to go with the Tesla and keep everything internal and almost monetize it there? But obviously, Autonomo already has the partnership. So it looks like, no. please continue absolutely so let's so what the coolest thing to me reading about this was the use cases yeah like how can you use all this data well what was what's actually going to be the use

cases for so the most obvious and you mentioned this is usage based insurance insurance companies want to know who's a good driver and who's a bad driver and like there's no better way to get that data than by like actually getting the car data itself so so now you can imagine you know an insurance company will say, hey, if you share your connected car data with us, on average, you'll get like a $15 lower rate. Autonomo gets some take for being the middleman in exchanging the data. Consumers say absolutely. And insurance companies get a perfect look onto how good of a driver you are over like a 30-day period or however long, and they can use that to set insurance rates really effectively. This might also hurt some other innovative insurance companies like Root

and Metro Mile that right now use an app. in your phone to try to track, like, where your phone goes and, in effect, how good of a driver you are. But the card data itself is going to be the best way to get this data on consumer driving habits. There's no fraud. You can't, like, you know, it's perfect. So that's one of the big use cases. And that's a huge industry. Another use case is for fleet management. So there's a lot of entities that have thousands of cars, most obviously rental car companies. You know, it's tough to keep tabs on how many miles are being driven on each car. Are there any potential maintenance issues on any car? Do any cars have like a close to flat tire? Any cars not running smoothly? Did one car

get driven excessively in like weird conditions recently? It's tough to keep tabs on all that for thousands and thousands of cars. You could imagine a fleet like an Avis, a rental car company coming in and saying, hey, autonomous, all our cars are going to be connected cars. We want you to help us like identify potential problems like with our fleet and avis is both an investor and a customer of autonomous right now which i think shows like this isn't just a potential use case this is actually happening right now those are the two obvious usage based insurance and fleet management if i if i could just jump in in something that strikes me as you say you know with the avis example avis buys from it's not just gem cars right they buy from tons of oEMs right when i go there's always like

15 different options. I'm sure they try to centralize a little bit to get bulk discounting, but with an Avis or another thing with an Uber, right? Like their fleets are massive and they're all different brands. And that does speak to what you're saying. Hey, Autonomo is the largest guys. They have 80% in the market. If you're a rental car company looking for fleet management, autonomous size and scale is a huge benefit when you work with them, right? Because they've got deals with the majority of the OEMs that they want to do. You can really only go to them or it sounds like We Joe's smaller and different, but, you know, I do think this is exactly your point. Their scale, their size means they can strike deals with rental agencies or an Uber is really

fascinating to me getting more data on how their drivers are driving and stuff. They can get that data. They can strike it because of their size. And in that way, winning begets winning. You win Hertz because you've got connections to all the OEMs. Then all the OEMs want to work with you because Hertz says, hey, you have to have connections with autonomous because we need that data for our rental management instead of great flywheel cycle. Great point. Great point, Andrew. And let's talk about even more of the use cases because I don't think it's always readily obvious to people how much you can do. So in leasing, you know, having a car's data will help determine the residual value. Because, you know, how many miles you drive is good, but are you driving under normal conditions? Are you driving under weird conditions? Are you driving on dirt roads a lot? That can you can get from vehicle data. Another thing that's kind of interesting that I hadn't thought of is apparently,

you know, in banking in the credit card industry, you know, there's a lot of times a low credit score person applies for a credit card and they're rejected, just because it's tough for banks and card companies to determine whether or not they should trust this person who is like in perfect credit, even though a lot of them like should be getting it if the banks had more perfect information. Some banks think you can get based on someone's driving habits, determine whether or not they're a credit worthy person. For example, is this person speeding a lot? Or are they like, responsible driver because you'd imagine responsible drivers are probably going to be more responsible from your credit or like what locations do they drive do they drive during normal hours

or do they go on 2 a.m. drives like this is a banking would be another area where if a bank was unsure on whether or not they should loan money to a customer share us your car data and we might be able to underrate more efficiently. Is that is that bankers like is that their gut how they lend or is their data that actually says like people who speed or worse credits? I think I think that that credit card companies in particular have been interested in this and have said, like, this is a thing. But again, it's such a new and, like, you know, industry, you don't know yet. So some more interesting things, like electric vehicles. Right now, there's more and more electric vehicles. Those electric vehicles need to be charged at home. How do you determine how much of

your energy bill, your electricity bill, is from charging your electric vehicle? Right now, there isn't like a great way to determine that, but, you know, using autonomous data, you can say, this is how much you spent on electricity at your home to charge your electric vehicle so you can get a tax rebate or get it written off for work or something like that. That's just like, you know, an interesting use case. Another use case is emergency services. Now when cars get in accidents, you know, cars can probably tell if they're in an accident, they're transferring their data to autonomous in real time.

I believe there's a third party company that's trying to build an app that'll dial 911 directly for any big accidents where like 911 would be needed. So when someone gets in an accident in a connected car, bam, the car knows something's wrong. They're transferring all this messed up data. This third party monitors the data. And they'll say, hey, this was a bad accident at four people in the car, this speed, this is what happened, and dial 911 directly, you know, in those 10 or 15 seconds can save lives.

Another case, so those are just some of like the cases where like individual car, on an individual scale can be really useful. And I think there's just dozens and dozens more. And if you listen to the CEO, Ben Volkow talk, he'll go on for hours about all the different use cases. And he's always like, I'm being surprised at all the different things that can be used. That's for individual level cars. And then at a bigger level, it can be super helpful for city planning to understand where people drive. Where is traffic usually? What are the bottlenecks? Um, uh, uh, uh, there was a point. I hate it when I blink on things. One more thing I go ahead.

For city planning and for real estate, right? Like I could imagine real estate developers want to go and buy this data and see where people are driving. And not only that, it could be really interesting. Like, hey, you know, people who drive Ferraris over index to driving down this road. You know, I'm sure they probably know most of the roads, but maybe there's a couple off things. And like, if you're building the new Louis Vuitton store or, you know, you could imagine how this would, be a really useful way to index who is driving where and to think about building real estate portfolios, different properties, all that type of stuff. Absolutely. Absolutely. The one thing I just

forgot was hedge funds might want this data, you know, as part of a broader plan to try to like track the movement of people and goods. You can imagine trying to get the connecting card out with trucks to see like where trucks are moving. There's going to be so, so, so many uses for it. You need to send that idea to Autonomo right now because that is a $10 billion idea. I could imagine every large prop trading shop is just paying these guys for granular data on where every car in America is to do the old parking lock thing at a much more granular level. So it's incredible. And then back to something we talked about earlier, these sensors on cars, both rearview sensors, like side cameras, all these things are generally running just whenever the car is running. Even if they're not displaying that to you in screen, so you could imagine if you have 20,000 connected cars in the city, those.

connected cars are just good at identifying potholes on the road. And somebody could make software just to say, oh, like, here's the 10 potholes every day that need, like, the most service because this is where cars are running over it. They look the most extreme. You know, one thing the CEO mentioned is like these cars with these cameras are good at, like, you can detect open park, like in a parking lot, they can figure out where all the open spaces are. So you can imagine in the future if there's enough connected cars, you always know where open parking spaces are because all the other camera data is being shared. It's really like,

it's going to be huge. It's going to be, there's so much there. Let me go back to something you said earlier because I think it's a little counterintuitive. You mentioned usage based car insurance is going to be really interested in this, which is not counterintuitive, right? Obviously, they love all the day they can to price out bad drivers and price good drivers, all that type of stuff. But you mentioned that this is going to be dangerous for Root and Metro Mile. Her are two, I'll call them startups that, you know, they use an app on your phone to track how you're driving, price you're driving and everything. And a lot of people think these are revolutionary growth companies that are going to price out Geico and Progressive and stuff, right? And I think people

who think that just, you know, you say, hey, we're going to get more data to these data and driven tech companies that are redefining insurance. I would say, oh, that's a great thing. But you said this is going to be off of them. So could you maybe expand on that a little bit? Absolutely. So just for anyone who doesn't know what roof insurance is, it's a new app-based insurance company. And what you do is you go to the app store, you download the route insurance app on your phone, and then the route insurance app will track your location 24-7 for two weeks. And the purpose of doing that is to determine whether or not you're a good driver. So in theory, they can tell when your iPhone's moving a certain way, whether or not you're in a car versus,

let's say, a bicycle, they can tell based on your phone's location, like whether you're in the passenger seat or driver's seat or backseat. So they can tell when you're the one driving the vehicle. And then based on the phone's movement, like GPS movement, they can tell, are you breaking that too fast? Are you speeding? Are you turning too aggressively? And, you know, it's imperfect. But in theory, you know, they're going to be able to get some sense on whether or not you're a good driver. And they've told investors like, hey, we've got this model. We've got this new technology. It allows us to underwrite insurance much better than the traditional companies. they've got about, I think, a $4 billion valuation.

So far, they've been losing a lot of money. They're heavily shorted. People are a little skeptical. But some investors think, hey, actually, this technology is going to work. And ultimately, they're going to become good underwriters because of this technology. Now, the thing no one talks about is this is going to be obsolete in five years because Autonomo and Wejo will get the data directly from the cars. So, you know, phone data as a proxy for cars might be okay.

but it's not going to be better than the car data itself. With phones, you can just turn your phone off. You can leave your phone at home. You might drive a little less during those two weeks. You might put your phone in somebody else's car. Your phone might die. The phone data itself might be perfect. The phone data might not be able to perfectly tell

whether or not you're in the driver's seat or passenger seat. There's like, oh, so the car data itself is going to be better than the phone data as a proxy for the car. And maybe this doesn't happen in the next two years, but it's going to happen. And no one's really answered me, like, how this isn't bad for Root and Metromile. The one thing some people might say is actually, you know, it's good for them because

Root and Metromile are going to be a customer of Autonomo. They're going to use the data to price insurance more effectively, which might be true, but it's going to be true for every other car company. It's not like, you know, so there's going to be this new technology, Autonomo, that allows insurance companies to get perfect car data on driving, and that's going to hurt the people who supposedly have an edge in this, like root. To me it seems clear, the logic seems clear. Like, no one's like, I think, corrected me on this yet.

But for whatever reason, root and metro mile shareholders just don't really talk about it and still live in this world where the out-based thing is going to be the best technology. And I really don't understand it. No, that's great. That's great. So I think revenue, 400,000 revenue in 2020, they're projecting three months. million, 2021. We can talk valuation a second, but, you know, I do think this is a venture capital type bet, right? Like they raised this series, it was series C in 2020. So this is basically

series D to get onto the public markets, right? So whenever you're making a venture capital bet, I think you've correctly identified, there is a big opportunity here. There is probably some winner take most flywheel effects, whatever you want to call it, all that type of stuff, but it's still young, it's still nascent. So I think when you're making a VC bet, management's huge here. So why don't we talk about management both on the SPAC sponsor side? We can talk about that second because I think that's secondary to the actual CEO founder, but I do have some stuff on the SPAC sponsor. So let's talk management founder here. So Ben Volkow is the founder CEO. I'd encourage everybody just go listen to his interviews. He had a really good six minute one with BCG. I love him.

I love the way he talks at his company. To me, he's very passionate about the company and he isn't trying to sell a stock. I don't think he's promotional. I think he's bad at being promotional, but he definitely just to me feels like an operator and tech guy who's really passionate about the space. That's what I get from him. He's a serial entrepreneur. He built and sold a system called traffic systems for like $140 million, I think, to $5.9 a few years ago. And then while working as an executive at 5'9, I believe, he started doing projects in the connected card out of space and was like, huh, this is really interesting. I'm going to use it to start my next company. I don't know too much about the other team members of Autonomo. I think they have roughly

150 engineers. I like, you know, because a company is ultimately about the people at this stage. I went on LinkedIn and I looked at, you know, just a bunch of the employees. And, you know, they just have a lot of real engineers. I think their main office is in Israel and they do have an office in San Francisco, I believe. But it seems like, you know, just got talented engineers working on this and you got a really great A plus CEO, in my opinion. Another thing that's kind of connected to management are like, who are the investors of this? If this has potential, you'd assume smart people are starting to get on board. Bessemer Venture Partners has invested in all the venture capital rounds for Autonomo, which I think is a little bit of your institutional stamp of approval.

Right now, along with the SPAC, they're doing a concurrent pipe. The pipe investors are Fidelity, Send Vest, Dell Technologies. So you got some, I think, big brand names there. One thing that's kind of interesting is I believe the wealthiest non-royal family in Saudi Arabia. They have this head, like acid manager, Midhawk Capital, that's been buying shares of Autonomo in the open market every day. And I believe, own like 25% of the SPAC float or something like that. So you got another smart money investor who's going in and buying a lot of this. And that's not the say smart people are wrong all the time, but it is to say, like, you know, they've probably done enough due diligence to say this is real and it's not a complete joke of a company, which

might be a fear just as someone looking on the outside. How do you know this isn't just a six-person company talking a big game? Yep, no, that's great. We'll talk investors a second. I just want to circle back to Ben. So he's a serial founder, I believe. Can you talk about some of his previous startups and how those went? I don't know much beyond traffic systems. I know he's He built that and sold that for a hundred four. Do you know, is this a rhetorical question? No, no, no, no. Traffic's the one.

I've got his crunch base page over here. Traffic's the one I see where he built it. He sold it for a good price and he stayed at, I think it was F5. He stayed there for a while. But I was just wondering, you know, it does seem like he's a winner. But if it's not somebody who's done like a $10 billion IPO or something, it's kind of tough to know. But he does seem like somebody who has successfully done startups and he seems like a good guy to bet on. I was just wondering if there was more.

It's true. I should know more. I don't. You know, one person on Twitter said, oh, he is a sketchy background. I didn't understand that or discover anything like that. You know, another thing that, you know, is a potential red flag, is smart car. I think the U.S. like kind of start up in this space, suit autonomous for copying some code like three years ago. But I don't think that went anywhere from his interviews.

I really, really, really like him. Okay. No, look, I haven't listened to as many as you. I have listened to several, though, in prep for the podcast. I agree. I think he's smart. I think his background looks great. You know, I think his background also speaks to someone who's like, you could look at it once. Say it looks really good. And then when you dial event, it looked fantastic. And I was just wondering if it was like, you know, fantastic or something. Let's talk investors here. So, you know, I guess I guess there's two pushbacks. There's an upside and downside. The upside could be, hey, this is a good group of investors, right? Like for Fidelity, Dell, B&P, Parab. There's a lot of people investing here. The pushback would be, hey, if this is this revolutionary of a company, why isn't the investor base? You know, why is it Dell? Why isn't it Google? Why is it fidelity? Why isn't it, you know, hot VC startup of the day, whoever you want to name? You know, they're merging with software acquisition two. Software acquisition one, which we'll talk about merge with curiosity stream. You know, I'm not saying this is bad. But, you know, it's not the Reed Hoffman SPAC, or it's not Chamath's new SPAC, which actually is MetroMile. But, you know, I do think it's a good group of investors. But if this was, I think the first pushback would be, if this is this top tier, why isn't it the super top tier VCs are the ones who are partnering this, raising, taking this public,

all that type of stuff? Absolutely. So I think Andresen Horowitz is in the U.S. competitor, smart car. I think there is a lot of VCs just, you know, picking, in the industry. not Bessemer is kind of the one aligned with Autonomo. I guess that most of these companies say, like, you can't be investing in us and our competitor. I don't know.

Yeah, I think it's based in Israel. It's this really new space. I think the valuation is pretty, pretty high, you know, for most people who say a company with basically negligible revenue. So that might all be stuff that's starting to turn people off a bit. Why else? I don't know. I can't, you know, I think part of it might be like, you know,

1.4 billion dollar valuation is like really, really high and much higher than, I think he's even said it's much higher than they were even trying to raise that just six months ago. But, you know, I don't know. That's great. And then I guess I just want to dive one more second here. This is Software Acquisition Corp 2, which is merging with them. Software Acquisition Corp 1 merged with CuriosityStream. I did a podcast on them in November with Zach Silver.

You know, I know that you are very skeptical. You publish a Bear Cave on CuriosityStream a couple months ago. So I was a little bit surprised, you know, like, again, this is a VC bet, and the SPAC is probably the biggest investor person sponsoring it. And it strikes me as a little interesting, right? Like their first deal, I don't think I'm exaggerating, say you hate it. And then their second deal, they come out and you're, you know, it's the most bullish thing you're seen. So how did you kind of think about that? So, yeah, the software, the first iteration of SPAC acquired a video streaming company, CuriosityStream.

I was more skeptical of the management and the representations being made by management. The management there seemed low quality and promotional and seemed to be misleading. investors. The actual company, I think, had some promise, but they were just like, to me, lying to investors about certain metrics that you just can't do. And look at how that spack traded. I think it went from 10 to 20. The warrants went from 1 to 10. And like, you know, if you were doing a warrant trade, you made 10 times your money. So, you know, it's just a little bit of a conflict within me, like, I didn't like their first SPAC, but I love their second SPAC. In the end, you just need to evaluate the company. And, you know, it wouldn't be the end

of the world if they trade like CuriosityStream and go to 20 and my warrants go to 10. But, you know, CuriosityStream is a real company. They do, it's not a complete fraud like, you know, maybe a Triterris would be. So it's odd. It's not optimal. But, you know, You know, nothing's perfect in this world. That's great. That's great. Okay, so let's talk. I think we've done a lot on the VC opportunity.

Well, before we talk valuation, which can be a quick stock, but we can just, anything else on the opportunity, whether it's, you know, going back to the business model, the main thing, anything else you want to highlight before we turn over its valuation? You know, it really is going to be huge. I think McKinsey said, you know, 10 years from now, this industry. is going to be a $300 billion industry or something. I don't really care much for figures like that. But it's just, it's going to be, and there's going to be more things that come on top of

the car data. It's going to be massive. And there's going to be more and more things you don't think of that come. And then once some things are built, you're going to be able to build things on top of it. It's going to be a really, really big space. How big did McKinsey say it was going to be in 10 years? I think McKinsey said the value of connected car data and they have a public, like, white paper on this could be like a $300 billion.

dollar industry. You know, the famous story is in the 80s, they said that the cell phone market was going to be $100 million in 2000 and they missed it by like a hundred times or something because it was, you know, they said 100 and it was like $10 billion or something. So if they say $300 billion and they're off by the same margin, we're actually talking $30 trillion. And that's some real money there. I just, it just makes so much sense. And one more thing I want to talk about on it is this back, you know, it's gone from 10 to 11 to about 10. No one's writing about it. No one's talking about it. I try to talk to the New York City tech hedge funds and I'm like, hey, have you heard of this? I probably emailed a call three or four smart guys. They're all like, nope, I haven't looked

at it yet. You know, I have a smart friend who might be talking about it, but I haven't looked at it yet. And I'm like, come on. So I really do think, you know, sometimes you think, oh, if it's trading at par, I might be, must be stupid. I must be missing something. I think in this case, it's really just, like, not been discovered by the market. And partly because, you know, they're not being too promotional, partly because it's in Israel. It's in this new industry. It's like has negligible revenues. It doesn't screen well. It's odd. You know, no way. It just, you can see like in my ideal world, this thing, no one's talking about it. No one knows about it. In the next two or three months after they hit a quarter or two after man's

gets on an earnings call after the SPAC closes and you get publicity from that, people will pay attention and say, hey, you know, this isn't an assure bet at all, but it has potential to be huge. I think it could go anywhere, but I do think you're right. Like, in the past month or so, SPACs, every SPAC has just been demolished. Every SPAC is trading at trust value, you know, and I've written about this some, but I do think there is the potential that there are some babies thrown out with that. bathwater. You know, like I've talked about the Toma Bravo spec several times. And I'm not saying I love the spec, but I'm just saying like Toma Bravo is the best private equity software investor

out there. They're bringing a market leading platform public. They're doing it at a rich valuation, but they're also doing something like forget the rule of 40. This thing's growing like 40% per year, 150% net revenue retention and they're doing 30% EBITDA margins despite the fact that they're, you know, growing massively and doing huge investments. And in a normal market, I think that would go public and people would be going crazy for it. But because the SPAC market is dead, that and I think some very other very interesting spas, nobody's looking at them because they're still in SPAC mode. They haven't delisted.

Everyone at Fidelity is saying, hey, we'll wait until this thing actually merges and then we'll do work on like the cleaned up company once we know everything. So I do think there is the potential for opportunity in what you're saying. Absolutely, Andrew. I fully agree that. And let's just talk, you know, again, this is much more on the VATTS. EC side, then value investor side, I would say. But let's talk valuation. You know, 400,000 revenue in 2020, 2021, 3 million in revenue with negative gross margin, but they say

they're going to get to 600 million in revenue by 2025. How the heck do I value this thing? How do you think about and trust those projections in everything? I know, those seem like spacked projections to me. I don't put much like faith in that. I just throw it all out. you know it's it's tough the the john burbank quote i loved that i put at the top of my article was you know you know new things in markets are the most mispriced because they've never happened before things that have never happened before are the most mispriced because you can't you can't like and in this case i think it's huge i think this totally has the potential to be a 50 billion

dollar company. You get lucky and a few things go well. That's just how I think about it. So it's, I can't give like a great answer other than to say, if they win this, is it going to be huge? Absolutely. And do they have a chance of winning this? Absolutely. So, you know, you take those two things together. You should, you should give it a rich valuation. I guess you're playing it through the warrants, which I'll remind everyone, warrants are extremely risky, but you're playing it through the warrants, which will have five years to expire post this deal is closed. So you're basically just getting a rocket ship bet, right? Like if you're right, and it seems like your bet here is, I think this market is going to be huge. I think there

are flywheel effects here. And I think this is the company most likely to capture the flywheel effects. And if I'm right, my warrant, this company goes way up. And my warrants are, who. And if I'm wrong, well, you know, maybe the company's zero. Maybe there's like some value in the data and the team and stuff. But the stock's way down and the warrants are. way down, but I'm getting a really asymmetrical bet on being right on the Amazon, the Amazon web services of car data is what I guess you can call them. Sure. And the thing that, the big risk, Andrew, that I've just not been able to wrap my head around is, is there any risk to this deal closing? Because let's say the deal fails for whatever reason it's in Israel.

That would be terrible for the warrants. I think the warrants have gone from like 40 pre-deal to like a $1.50 today, if the deal just didn't happen, I'd imagine the warrants would fall down to 40 cents or 50 cents. So I'd, you know, that would hurt. And I own both the warrants and the stock. So if you're worried about the deal closing, the SPAC stock, which currently trades a few pennies above 10, seems like the lower risk play there. You know, it could obviously go below 10, too. The interesting thing about autonomous, like you said, my understanding of SPAC warrants is that are exercisable at like a strike price of 1150 they're good for five years and if the stock consistently trades above 18 for like 20 of 30 consecutive trading days like they're callable

by the company back which I'm not sure what happened because autonomous has enough cash I believe for the next five years they've said because they've raised about 400 million dollars from their pipe and from their SPAC deal so they're going to have a lot of cash and the warrants seem interesting because this does seem like a company that over the next five years, it's either going to do really well or it's going to fail. Like, there's not, you know, it's not as binary as, let's say, a drug trial company in which the drug works or it doesn't. But it definitely does seem to have this binary aspect either the industry grows as like I hope it to go and execution goes as I hope it to go or it completely doesn't and it goes to zero. So that's why the SPAC warrants seem a little more interesting to me. The warrants are also pretty illiquid, like some days they trade $10,000, $20,000 worth.

Some days it's a little more. The warrants also seem a little uncouple, I think, is the word people use from the stock where the stock will be down 3%, the warrants will only be down 3%. The stock will be up 1%. The warrants will be up 20%. It makes like, no, it's just very, like, weird how the warrants will be down and the stock will be up, and I'll just be left scratching my head. Why?

So another way, like, it's interesting to think about it. Again, none of this is investment advice. Do your own research. Let's say the stock goes to 20. The stock doubles. The warrants that are at like $1.50 are probably going to go to $7.50. Five X your money. So you get five X your money on the warrants if the stock doubles. Does this thing have a one in five chance of doubling any time within the next five years? I think so. It could double in the first like two weeks. So, you know, smarter people are out there with formulas and options and decay and whatever, but I just like thinking, what happens with this doubles? You make roughly five times your money on the warrants and does it have a good chance of doubling? Yeah. I mean, just as someone who's looked at SPACs a lot, I will say, like, I think the, I think warrants on SPACs can get awfully, I think warrants options, everything on SPACs and

post-SPAC companies can get awfully mispriced and quirky. just because, A, you know, if the stock's trading at 10 and the warrants at 1150, a small change involved makes a huge difference on the price, right? And B, you know, a lot of the SPAC buyers in the IPO are hedge funds who are there for a risk-adjusted, very close to risk-free return. So throughout the life of the SPAC kind of until deal closed, I do think you have a lot of non-economic sellers of the warrants who are just like, hey, I got this thing for basically free.

Once I hit X price, I'm going to unload this amount of them or something. Another thing that's great, great, great, great, great, great point, Andrew. And another thing that might contribute to this is I have both Robin Hood and Schwab. Robin Hood doesn't let you buy warrants. And this has been a very popular topic of conversation among Warren Arbitrage players recently. Very popular. Honestly, they give more Robinhood let you buy warrants. These warrants would all explode, but they don't.

But the warrants still should have that value. So because it's kind of shut off from a lot of these retail people, but the SPACs themselves aren't, you get this like, and like what fun. So it's shut off from retail and they're somewhat illiquid so big funds don't want to play this game of buying the warrants. It's like for somebody managing like sub 10 million dollars, it seems like the, I don't know, it seems very attractive. But again, I'm going to look like an idiot if this thing goes to two and the warrants go to 20 cents. and, you know, so, hey, you know, it's all about risk-adjusted bets. And, you know, I do think, like, as you can discuss about, A, like, as I was researching this, I was getting a lot more bullish on the opportunity, and you've kind of convinced me on the flywheel,

but if you said, hey, buy a warrant five years for a dollar that pays off at 1150 or buy the stock at 10 on this startup venture capital company, I mean, every time the answer should be go by the warrants, because if this fails, the warrants and the stock both do poorly. but if this succeeds, the stock's going to be a rocket chip, but the warrants are going to be a rocket chip squared, quadruple, or whatever, you know? So if you believe it, I do, again, nothing's investing advice, but I do think warrants are the way to play this if you believe in it. Andrew, that's a great point that I haven't even fully thought of.

Like, if you view this as like a normal established company, maybe the warrants are rightly priced, but if you view this as like a total VC bet, it's either a 10x or a zero, then the warrants are probably very underpriced. And people just, it's a big public company so they don't think of it like that, but it is really still kind of like a V-stage stage bet. I, I, the thing that frustrates me is if someone's watching this and I'm an idiot and missing something big, email me and tell me what it's wrong. But I try talking to 20, 30 smart people about this. And, you know, I get a little pushback on the smart car lawsuit. a little pushback on, oh, the SPAC projections are a little too high.

I haven't really, like, felt that anyone's given some pushback that really changed my sentiment on the company. One thing that we didn't discuss about that's in the back of my head is how will autonomous vehicles impact this? Like, what happens if autonomous vehicles, you know, this is a play, autonomous is a play on the far future. What if, like, autonomous vehicles are the 10 years from now, like, will this data, insurance probably is going to be a lot different. This is going to have I'm not too worried about that. That's like no one in the next two years

is going to be like, oh, this is a worthless company because autonomous vehicles are coming so soon. One more final thing I forgot to mention is, you know, gas is going away. Everything is starting to go electric. Gas taxes are a huge source of revenue for governments and maintaining highways and that sort of thing.

I believe the way that, you know, governments are thinking of replacing that is no more gas tax because everything's electric based, but we're going to have a per mile tax. And Autonomo would have the data to really enforce a go. And Autonomo, the middleman is going to be that person who I think governments turn to to say, hey, and especially if it's going to be more complicated than per mile, is it going to be per mile but surcharges if you're in cities or drive during peak hours or stuff like that, then Autonomal is going to be like really that middleman. So by kind of, the one thing I would push back so hard on is if somebody believes there's

only going to be two or three or four use cases or a few companies or like the market for this is small, it's going to be massive and it's going to get bigger and bigger and bigger. And I'm very confident about that. Autonomo might not win. But, you know, even if you didn't like autonomous for whatever reason, like I'm really interested in this space, too. And it's just one that's not being talked about a lot right now. I love it. I love it. Well, hey, this has been a great discussion. You know, I've tried to lay some bearcase out, but look, to anyone who's listening, if you're interested in the company, send

Edwin a tweet, send me a tweet. Let us know, you know, what we missed, what do you think we're right on, all that type of stuff. I think you and I are the only people who are even talking about this. Mainly you, I'm talking about it because of you. But, you know, it'd be great to hear from other people if you're listening. Give us some feedback. Edwin, and you, and you, and you, Anything else you want to say on this before we rough this up? Andrew, I absolutely love this. Thanks so much for doing this. This was a lot of fun.

Hey, well, having a short seller come on and pitch their VC long idea is unique, but I really enjoyed it. I appreciate you coming on and looking forward to the next one, whether it's a long or short idea. But thanks again for coming on and we'll chat soon. Bye, bye, Andrew. Thank you.