Startups
Autonomous tech / Funding / layoffs / Startups

As Locomation’s future remains unclear, here’s a look at why funding can be a challenge for even the most promising tech companies

CEO Çetin Meriçli told a handful of news outlets that the autonomous trucking company isn't shutting down, but is still enacting layoffs. A national VC slowdown could be to blame.

The Pittsburgh skyline. (Photo by Flickr user namoscato, used via a Creative Commons license)
In the fast-moving startup world, a year of changes can happen in a week — or feel that way, at least.

That seems to be the case with Locomation. After initial reports (including from Technical.ly) that the Lawrenceville-based autonomous trucking company was shutting down due a lack of funding, CEO and cofounder Çetin Meriçli told multiple outlets over the weekend the company is not, in fact, dead. Yet, it is still laying off a significant amount of its staff.

“We are not shutting down,” Meriçli wrote to FreightWaves. “We did reduce most of our non-engineering headcount in the face of economic headwinds.”

The five-year-old, venture-backed company was born of Carnegie Mellon University’s National Robotics Engineering Center. Instead of trucks operating with full autonomy, Locomation’s signature tech instead had an autonomous truck following behind a human-operated one in a convoy. Though its technology wasn’t yet launched on public roadways, its customers have included the likes of Springfield, Missouri-based transportation provider Christenson Transportation.

Meriçli has not responded to Technical.ly’s multiple requests for comment clarifying the company’s current position. The initial reports of a full company shutdown were spurred by VP of Policy and Strategy Finch Fulton, who told the Pittsburgh Business Times the company’s struggles were due to an inability to raise more capital. Technical.ly will update this story if we hear back from the CEO.

As we heard in October when fellow Pittsburgh AV company Argo AI shut down, startups often fail, for a plethora of reasons. Joel Reed, executive director of the Pittsburgh Robotics Network, noted to Technical.ly this week that it’s a hard time for startups all around. Layoffs aren’t uncommon and funding is hard to come by.

“Startups are here to create momentum and move industries forward,” Reed said in an email. “At the same time, history has shown us, when we have inflection points in the economy, investment funding becomes harder to access. This era is no different.”

Funding challenges

Why would a company that raised tens of millions in venture capital, according to Crunchbase, possibly have cashflow troubles?

Speaking about VC-backed startups more generally, Erik Gordon, a professor of business at the University of Michigan specializing in technology commercialization, said it’s important to remember that a given company’s ability to raise significant capital in the beginning isn’t always an indicator of how much success it’ll have later. Investors can get reticent depending on the state of the economy and if your technology is still actively being developed, Gordon said, there are any number of reasons why times can get tough for a startup.

“It’s easy to raise another round of money, but what if the company doesn’t do what was expected of it? What if the company spends more money and takes more time, and even though it’s made progress, even though it has products and customers, it hasn’t done as well as was expected?” the academic said. “That can make a VC reluctant to put more money in. And other things can change, too.”

Gordon added that a company having fully developed products that are selling well might not even be the best indicator of longevity. He pointed to the closures of Bed Bath & Beyond stores and Sears as an example of how a company can make a profit, but still not make enough money to stay in business: “The fact that you’re a company that’s up and running and selling things doesn’t mean you’re going to survive,” he said. “You have to meet investor expectations.”

What’s his advice to company leaders who want to avoid a similar fate? In the business world, Gordon said, there’s nothing more normal than an investor reassessing the attractiveness of their investment. So when in doubt, plan for rainy days or even years.

“Think about raising money with a little cushion so that if the market changes, if the wind starts blowing in the wrong direction, you have enough money to maybe survive for another year,” he said. “And hope that market conditions turn around and you can raise money then.”

Supporting laid-off employees

An unspecified number of Locomation employees are set to be out of work soon, after a season of high-profile closures (see also: Argo AI, Fifth Season). As Matthew Johnson-Roberson, director of the Carnegie Mellon University Robotics Institute, told Technical.ly on Friday: For every success story, “there’s a long list of startups that tried something and it didn’t work out” — and those companies’ former employees need support.

“We’ve seen this sort of close [before] and you feel bad for everybody that poured a lot of time and energy to try and build something,” he said. “With startups, you have to take some risks to try to do something new and exciting. I just hope that everybody over there is going to be OK.”

Out of a desire to not see the laid-off employees leave the city entirely, Pittsburgh Technology Council is taking preemptive action by hosting a virtual job fair on March 2, on its virtual event platform. The goal is to help former Locomation and Phillips employees — also displaced due to downsizing — find new job opportunities with local employers.

“We see the need to both provide a soft landing to displaced workers and to fill the talent stream. We are committed to keeping quality talent in our region. This talent is essential to continue to move the innovation in our region in a forward direction,” Senior Director of Talent and Workforce Development Initiatives Marie Pelloni told Technical.ly in an email. “And not just by themselves, but teams of quality talent collaborating to find solutions, develop products, and add to our tech ecosystem.”

This is a developing story.

Atiya Irvin-Mitchell is a 2022-2024 corps member for Report for America, an initiative of The Groundtruth Project that pairs young journalists with local newsrooms. This position is supported by the Heinz Endowments.
Companies: Pittsburgh Technology Council / Locomation / Pittsburgh Robotics Network

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