Otonomo collects and sells a range of data from millions of passenger cars.
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Otonomo, an Israeli company that collects and sells a range of data from millions of passenger cars, on Monday announced plans to go public via a merger with Software Acquisition Group II, a special-purpose acquisition company, or SPAC.
Under terms of the deal, Otonomo’s existing holders will own 72% of the company after the deal, which it says will value the business at about $1.4 billion. Otonomo will receive about $172.5 million in cash from the SPAC (ticker: SAII).
Otonomo will also offer $172.5 million in stock via a PIPE (private investment in public equity) offering that will include $30 million in secondary shares. Investors in the PIPE include Fidelity, BNP Paribas, Senvest Management, and previous strategic investors Dell Technologies (DELL) and Hearst Ventures.
The deal is expected to close in the second quarter. The company had previously raised $89 million in venture capital, according to Crunchbase.
Founded in 2015 by current CEO Ben Volkow, Otonomo collects a range of data from cars and then repackages and sells it to insurers, financial services companies, fleet operators, emergency services providers, and various other constituencies. The company has relationships with 16 auto manufacturers including Mitsubishi, Nissan, Daimler, BMW, and Fiat Chrysler, among others. The company says it collects data from over 40 million connected cars. Volkow says the total should reach 80 million by the end of the year.
In an interview with Barron’s on Monday, Volkow notes that the company collects data from “every part of the car”–engine data, speed, location, tire pressure, seat belt status, outside temperature, cameras, and almost anything else. He says that the newer the car, the more data they can collect. The company then aggregates data from multiple providers to provide insights for a variety of applications.
He says, for instance, that some insurers will provide discounts to drivers who allow their driving to be tracked. Rental car companies can use data to remotely monitor gas consumption or to handle remote unlocking. He says data can provide information on road hazards to mapping software and emergency services. Volkow says that electric companies want the data to plan for additional new electric-vehicle charging stations. And he notes that the monitoring ability will be useful as more drivers adopt electric vehicles and states look to replace lost fuel tax revenue with mileage-based levies as California lawmakers have proposed.
While the company has identified many potential revenue streams, they are mostly to come. Volkow says Otonomo has only recently begun generating revenue.
On a recent conference call with investors, the company said 2020 revenues were only about $400,000, heading to $3 million in 2021. The company sees revenue of about $600 million by 2025.
While the business is promising, Otonomo stands as a sharp reminder of how SPAC mergers differ from a traditional initial public offering. In recent years, companies have often stayed in the private market for many years before making their stock market debut. Otonomo, while promising, is at such an early stage of financial development that a conventional initial offering might have been difficult to complete. A deal like this one gives the public a chance to get into the story earlier, providing potentially richer returns and higher risks.
The SPAC was founded by Jonathan Huberman and Mike Nikzad, the founders of a software company called Ooyala that was acquired by Telstra in 2014. Huberman and Nikzad also created a SPAC that recently merged with the documentary-focused streaming video service CuriosityStream (CURI).
On Monday, Software Acquisition Group II shares rose 6%, to $11.09.
Write to Eric J. Savitz at [email protected]
