SoftBank just invested $500 million in a Cambridge company
Scarcely a day goes by in Boston’s technology sector without a promising company raising what in most businesses would be a monumental sum. Tens and sometimes hundreds of millions fly around with scarcely an eyebrow raised.
But the announcement Wednesday that eight-year-old Cambridge Mobile Telematics had taken in a half-billion dollars in venture investment shows that there are still some cash infusions big enough to astonish.
The 70-person firm, which uses data from smartphones and other electronics to measure how drivers behave, had reported raising just $2.5 million since its founders spun their research out of MIT in 2010.
The SoftBank Vision Fund plunked down $500 million for a minority stake in the firm, betting that the company’s technology can help remake the insurance industry by providing more accurate data about how people operate their vehicles, and encouraging safer driving.
The deal, subject to regulatory approval, is one of the largest venture investments in Boston’s history. It’s life-changing money, and it immediately raises the low-profile firm into the upper echelon of tech startups nationwide.
But don’t expect any gloating from cofounder Hari Balakrishnan.
“We’re just getting started,” he repeated, in near-Belichickian fashion, in an interview. It’s a slogan that the company printed on T-shirts to distribute to its staff.
“We’ve always believed in it. It’s really nice to have other people back us, but we have a significant responsibility,” said Balakrishnan, who along with his role as CMT’s chairman and chief technology officer is a professor at MIT.
The company has so far focused on helping insurance companies gather data from drivers’ mobile devices to measure their risk of accidents. Insurers can share this data with drivers, and offer incentives to encourage safer driving habits. The company says it has millions of users through partnerships with companies such as State Farm and Liberty Mutual, and it runs several programs to help companies collect more detailed driving data for deals on insurance.
The firm drew some local attention in 2016, when it partnered with the city to find the safest driver in Boston. The initiative also penalized players for speeding and handling their phones while driving, and offered more than $9,000 in prizes.
The massive new investment indicates that the company will soon be much better known. Venture rounds of this size are rare.
The largest in Boston history was a $600 million investment in the drugmaker Intarcia Therapeutics last year. But venture investments in technology companies tend to be smaller, according to the data provider PitchBook.
The biggest investments outside the drug and biotech sectors were a 2012 round in GreatPoint Energy for $420 million and a $300 million infusion for the daily fantasy sports company DraftKings in 2015, according to a September analysis by PitchBook.
That kind of money is no big deal for SoftBank, a Japanese conglomerate. The company’s Vision Fund, composed of money from sovereign wealth funds of nations, including Saudi Arabia, has an unprecedented $100 billion to spread around, a sum that dwarfs other firms’ investment funds. The largest venture funds in Boston tend to be just over $1 billion.
Michael Greeley, general partner at Flare Capital Partners in Boston, said the scale of the fund gives SoftBank the ability to annoint winners in a field in a way that few other players could.
“When they make a bet in a certain subsector, they completely freeze out all of the other emerging startups,” he said. Greeley said companies with Vision Fund resources have an advantage for hiring top talent, and attracting new business.
“It’s pretty daunting to go compete against that,” he said.
But the opportunities in the telematics arena are huge. Insurers still have relatively few details about individuals to make good decisions about whom to cover and how much to charge.
Ginnie Gardiner, a lecturer in finance at the University of Massachusetts Amherst, said real-time, specific data will make it easier for companies to get an accurate picture for how likely a driver is to cost them money.
The question, she said, is whether drivers will be willing to give up details about their travel and driving at a large enough scale to provide helpful data.
“I sense from the younger generation that they don’t care. In some ways privacy does not matter as much as it used to,” she said. “It may be that they’re already acculturated to having all of this data out there. It’s going to be interesting to see.”
Balakrishnan said the company does not sell data to advertisers.
In coming years, he said, CMT hopes to help insurers figure out how to write policies for self-driving cars. The sensors used to power those vehicles can also work with the company’s platforms, he said.
But for now, he said, his main goal is the same as it was when he started in 2004 on the work that would lead to the formation of the company: To help prevent accidents.
“It was fairly clear before iPhones and Androids that people were using their phones while driving,” he said. “Right now what drives us is this idea that you can actually use the phones to make people safer drivers.”