Tech firm Velodyne moves from audio to self-driving cars

A company founded in 1984 to produce high-end audio systems is now  on the vanguard of the self-driving vehicle frontier with key financial backing from Ford and Baidu, China's largest search engine provider.

Velodyne, a Morgan Hill, Calif.-based company, just received $150 million from Ford and Baidu  to continue development and production of Lidar, or the 3D light-powered radar that helps self-driving cars see where they are going.

With a presence on three continents, Velodyne is  now regularly mentioned in research reports that cite  leading companies in the niche field of lidar.

Lidar emits short pulses of laser light so that software in the self-driving vehicle can create a real-time, high-definition 3D image of what’s around it.

In addition to cars, the systems also have growing potential for agricultural equipment, mining vehicles and military vehicles.

"We've used their Lidar exclusively in our development vehicles," said Raj Nair, Ford's executive vice president of product development. "And they are the only supplier in the market that can help us achieve our goal of delivering a high-volume autonomous vehicle."

Research and Markets, a Dublin, Ireland-based market research company, estimates sales of Lidar systems will grow 34% annually over the next five years. Boston-based Mordor Intelligence estimates the global Lidar market will grow from $1.3 billion in 2015 to $2.42 billion by 2020. It named Velodyne as one of about a dozen leading developers.

With just 210 employees, Velodyne is a relatively small company and was in need of capital to keep up with growing demand for its products.

Mike Jellen, the company's president, said the investment will help expand development and manufacturing operations and also speed the advancement of Lidar technology.

"We ship Lidar today, we have thousands of them in the field, but what automakers are really looking for are longer-range sensors and higher-resolution sensors at a lower cost," Jellen said.

Until recently, Velodyne's Lidar systems cost about $8,000 — too high  to be cost effective for an automaker selling to individual customers or even for fleet sales. Later this year, Velodyne will begin producing a system that could cost as little as $500 for each unit, if a high enough volume is ordered.

Ford said it decided to invest in Velodyne after working with the company for years. Ford's investment was announced along with investments and acquisitions of three other companies earlier this month. Ford also announced its intent that same day to develop a fully autonomous vehicle by 2021.

Ford CEO Mark Fields said those companies, along with the automaker's new employees in Silicon Valley, have an opportunity to work on technology that has the potential of "changing the world."

"This is a transformational moment in our industry and it is a transformational moment in our company," he said.

Velodyne was founded by David Hall, who built his first amplifier at age 4, according to the company's website.  In the 1980s, Hall obtained a patent for a subwoofer, and Velodyne was a leader in high-end speaker systems.

Jellen said the company began selling Lidar systems about a decade ago but is growing faster now than ever.

The company currently supplies   Lidar systems to about 25 automakers and tech companies and has added 150 employees in the past year.

Velodyne also has become well-known in China, which helps explain Baidu's decision to invest $75 million in the company. With a market capitalization of $66 billion, Baidu is China's answer to Google. Like Google, Baidu has its own autonomous car program and has already started testing driverless cars on public roads in China.

All of this puts Velodyne in the middle of one of the hottest areas of emerging technology.

"I've heard people say they missed the mobile (phone) revolution but they are not going to miss the autonomous vehicle revolution," Jellen said. "It's viewed as the next great technology wave."

Jellen said the frenetic pace of change is even more exciting because self-driving cars offer the promise of helping to reduce fatal accidents and giving those who cannot drive, such as the elderly, the ability to remain mobile.

"It's frankly a lot of fun. I have spent the last 25 years in industrial automation, and none of my prior experiences have been like this," Jellen said. "I think everyone sees the promise that autonomous vehicles can deliver. It's a great business opportunity, it’s a great lifesaving opportunity and it's great technology."