SPACInsider contributor Eric Weidemann this week compiled his three favorite potential SPAC targets among location-based services software and technology companies. We look at why they are compelling and why each could be a fit for a blank-check merger.
We are now well past our first generation of location-based service players like Uber gaining unicorn status and changing market-wide expectations. But, with the increase in connected devices and complexity of networks with 5G on the way there is no shortage of opportunities to expand these new models or introduce entirely new ones to the market.
SPACs have already wet their beaks in the latest generation of location-based technology players this year. Software II (NASDAQ:SAII) announced a combination with vehicle data analysis firm Otonomo February 1, Osprey (NYSE:SFTW) announced a deal with satellite-observation company Black Sky two weeks later and NavSight (NYSE:NSH) kicked off March with its announced merger with space-based data tracker Spire Global.
The first generation of big apps to use location relied primarily on Google Maps and Mapbox aims to take its place.
The San Francisco-based company was founded in 2010 and initially served governments and non-profits primarily. But, last month it took $150 million from SoftBank and named a new CEO with the goal of capturing market share among automakers’ built-in navigation systems. This funding round valued the company at over $1 billion and the company expects to generate over $100 million in revenue in 2021, according to Bloomberg.
Mapbox has already been contracted to develop BMW’s (DE:BMW) next generation in-car navigational suite. This work comes at a particularly valuable point as automakers begin integrating autonomous capabilities to vehicles and Mapbox aims to win contracts with about a dozen more automakers this year.
It won over BMW with the customizability of its map aesthetics and potential for unique vehicle integrations. Before its pivot to the dashboard, Mapbox’s largest clients included Instacart, Snapchat (NYSE:SNAP), the Weather Channel, and Facebook (NASDAQ:FB).
All of this puts Mapbox right at the confluence of many hot sectors – autotech, locational marketing and ecommerce delivery services. The company even launched a joint venture with Softbank in May to track and map the coronavirus spread in Japan, giving it some experience in digital health applications.
While Mapbox’s piece of the cars of future may be more familiar and somewhat less exciting than lidar, it has the potential to provide more recurring revenue than lidar as it is primarily a software rather than hardware product.
Mapbox could fit the focuses of a large number of SPACs, but three teams currently searching have specified automotive or mobility technology as their hunting ground – Live Oak Mobility (NYSE:LOKM), Atlantic Coastal (NASDAQ:ACAHU) and Kensington II (NYSE:KCAC.U). Two of these produced a pair of 2020’s most successful SPAC deals: Live Oak’s last target Danimer Scientific (NYSE:DNMR) closed yesterday at $37.75, while Kensington’s target Quantumscape entered the long weekend at $44.75.
DeepMap meanwhile is working to form the important connective tissue between a digital map and an autonomous vehicle by doing more intensive vehicle-guided mapping work to give cars a more detailed expectation of exact conditions.
The global demand for this level of HD maps for autonomous vehicles is expected to grow by a CAGR of 34.3% through 2028. These maps are also of critical value as autonomous vehicle technology companies attempt to scale because each has so far limited testing operations to closed areas of known roads.
For its part, DeepMap has racked up a bevy of awards in these efforts as one of Gartner’s top 5 autonomous vehicle system vendors in 2020 and one of Forbes Top 50 AI companies the same year. Part of what companies like DeepMap also do are to crowdsource regional differences in traffic rules, which are numerous.
Right turn on red, the “Pittsburgh left” and differing definitions of right-of-way are not systems a robot-car is likely to pick up or adapt to on its own. Even a cogent layout of street and highway lanes are not always available via models developed from aerial imaging.
For all of that promise the company has not yet raised mountains of outside cash for its development efforts. It has taken in just $92 million according to Crunchbase, gaining a valuation of $450 million in a 2018 raise according to TechCrunch.
But three years is a long time in the tech world. If DeepMap had paused its fundraising plans due to investor sentiment pre-2020, its connection with the autonomous vehicle world gives it a very different climate of options now.
While Mapbox tracks the exterior world and DeepMap traces its lanes, NextNav has concentrated on mapping the interiors of buildings for public safety and commercial applications.
First responders need more information than the outer contours of a building in order to conduct rescue missions. In 2019, the FCC required wireless carriers to be able to provide the vertical position of their devices so rescue workers can better determine where victims in distress might be.
NextNav is helping carriers meet this requirement and is already partnering with Motorola for such situations, claiming that 3D geolocation views of crisis locations reduces search times by over 85%. It has also licensed its technology to 3AM which produces wearable technology for first responders themselves and helps their squads to keep accurate locations on one another. Seventy percent of first responders have reported using inadequate maps and 80% of 911 callers today use their cell phones for such calls.
But, the capabilities of NextNav extends beyond public safety and into gaming. The company has partnered with Unity (NYSE:U) with a plug-in that will allow developers to build 3D gaming experiences both up and down while most AR experiences are limited to a horizontal plane. About 84% of the US population lives in urban, multi-story buildings and AR game developers have been seeking to find a way to better integrate those environments.
Crucially, NextNav has systems that do not require GPS, which is prone to failures in urban areas and few location-based services have backups to it.
Goldman Sachs (NYSE:GS) has invested in NextNav’s last two rounds, including at $120 million Series E in January 2020, and the company has raised about $278 million in outside funding overall. As a tech company initially launched in 2008, it likely has a fair amount of early investors ready for a liquidity event and its Goldman Sachs connections could easily link it up with the SPAC market.