Exclusive: Mass layoffs reported after Starsky Robotics fails to find buyer, investors

Autonomous trucking startup Starsky Robotics has laid off the majority of its engineers and office personnel after its fundraising efforts and attempts to find a buyer failed, a former executive says.

A skeleton crew remains at the company’s headquarters in San Francisco as Starsky co-founders Stefan Seltz-Axmacher, chief executive officer, and Kartik Tiwari, chief technology officer, continue to seek a buyer for the four-year startup.

Since 2017, Starsky had raised more than $20.3 million, including $16.5 million in Series A funding from Shasta Ventures in March 2018, according to Crunchbase. However, the startup failed to secure additional funding since the last round nearly two years ago.

Seltz-Axmacher and Tiwari did not respond to FreightWaves’ requests for comment regarding the mass layoffs at Starsky.

Approximately 85% of the company’s engineers have secured new jobs with its competitors in the self-driving space, including Waymo, Cruise and TuSimple, according to Paul Schlegel, former senior vice president of Starsky. His last day was Jan. 31.

Schlegel told FreightWaves that Starsky’s cash flow problems started in November 2019 after a key investor backed out of another round of funding at the last minute. He said the company’s co-founders scrambled to find new investors or a buyer, but failed to do so before its funds ran out in late January. 

However, he said Seltz-Axmacher is still actively seeking a buyer for the company.

“When we had an investor pull out at the last minute, we didn’t have a lot of time to recover and that really hurt us,” Schlegel told FreightWaves. 

The 34-year trucking industry veteran, whose background includes experience in all transportation modes, said he believes Starsky’s business model that uses experienced truck drivers as remote operators to handle first and last-mile operations is still the most viable solution in the varied autonomous trucking industry.

Schlegel said he “remains hopeful” that Starsky Robotics will find a last-minute buyer and he would welcome a new opportunity to work in the autonomous vehicle industry again.

“The autonomous vehicle [AV] market is very crowded right now and I think we had a clear strategy about bringing this technology to market, but it appears that venture capital investors pulled back for other reasons,” Schlegel told FreightWaves. “I know some investors are really looking for an idea and aren’t comfortable with a company having assets, but I think it’s important to find those that want to invest in something that’s more tangible than just an idea.”

Prior to the investor backing out of a new round of funding, the company was working with potential manufacturers to take the AV startup’s specs and have its proprietary technology installed on several more self-driving trucks, Schlegel said. 

Seltz-Axmacher took the news about the investor backing out particularly hard, according to Schlegel.

“This was devastating to Stefan when our funding fell through,” Schlegel said. “I can tell you that this hit him really hard, mainly because he’s a young guy and had all of these people he was responsible for and we were so close.”

The company was the first to complete a fully unmanned truck trip on a 9.4-mile stretch of public highway and claims to have set a speed record for an unmanned truck, reaching 55 mph, in June 2019.

Sitting 200 miles away in Jacksonville, Florida, a remote operator navigated the first- and last-mile segments of the trip – about two-tenths of a mile.

“Our approach is taking the drivers out of the truck and have them working remotely to make high-level decisions while the truck is on the highway,” Seltz-Axmacher told FreightWaves in May 2019. “To be honest, I don’t think that a super-computer can be built that is smarter than a truck driver.” 

Starsky also collaborated with digital freight brokerage Loadsmart to price, dispatch and deliver fully-autonomous loads in Texas in late July 2019.

Warning signs

An internal memo forwarded to FreightWaves in mid-December said the company was in financial trouble and only had money to last until the end of January.

At that time, Starsky Robotics informed employees it was in talks with potential buyers, including its rivals at Embark, Cruise, Waymo and TuSimple, after it failed to raise new funding to stay afloat.

A month earlier, Starsky quietly announced it was shuttering its over-the-road trucking fleet, initially formed to help fund Starsky’s self-driving efforts. 

Prior to its OTR division shutting down in late November, Schlegel said its fleet was up to around 50 drivers.

Starsky blamed a significant downturn in rates over the past few months as the reason for the fleet layoffs that caused the company “to operate at a loss,” according to an email forwarded to FreightWaves.

The company also blamed increasing insurance premiums, equipment repairs and lease expenses in its long-haul fleet as contributing to fourth-quarter losses in 2019.

“These depressed market conditions and financial pressures have forced us to re-evaluate the size of our over-the-road trucking operations to remain viable,” according to the email sent to truck drivers from Starsky’s operations team.

Starsky has won plaudits for its commitment to innovation. It recently was named No. 12 on the FreightWaves FreightTech 25 list. 

However, the company faced stiff competition from other self-driving startups like TuSimple, which has raised around $298 million in the last six rounds of funding. United Parcel Service (NYSE: UPS) has a minority stake in TuSimple’s autonomous trucking operation. Plus.ai has raised around $200 million in its last three rounds of funding, according to Crunchbase, and Ike has raised $52 million in Series A funding.

Read more articles by FreightWaves’ Clarissa Hawes