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Momenta: Sustained Success in the Artificial Intelligence Boom?

Case

Author: Stephen Ko Online Pub Date: January 15, 2020 | Original Pub. Date: 2020 Subject: Technology Management, International Business & Management Level: Intermediate | Type: Indirect case | Length: 2120 words Copyright: © Stephen Ko 2020 Organization: Momenta | Organization size: Medium Region: Eastern Asia | State: Industry: Information and communication| Transportation and storage Originally Published in: Publisher: SAGE Publications: SAGE Business Cases Originals DOI: http://dx.doi.org/10.4135/9781526496430 | Online ISBN: 9781526496430

© Stephen Ko 2020

This case was prepared for inclusion in SAGE Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes. 2020 SAGE Publications Ltd. All Rights Reserved.

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Page 2 of 6 Momenta: Sustained Success in the Artificial Intelligence Boom?

Abstract

Founded in September 2016, Momenta is an artificial intelligence and autonomous driving start- up based in Beijing, China. After its latest round of funding in October 2018, the company has become the first autonomous driving unicorn startup in China, at a valuation worth USD 1 bil- lion. While reviewing its achievements over the past two years, Xudong Cao, Chief Executive of Momenta, is looking to outline the company’s future as the “brains” for autonomous vehicles. To achieve this goal, the company is planning to collaborate with other businesses in the auto- motive industry, logistics, big data, and other related areas, while taking advantage of continued support from the Chinese government. The company is also exploring how to stand out from competitors in the global artificial intelligence race. This case provides readers with an oppor- tunity to understand the applications of artificial intelligence in the automotive industry and take them further to explore how Momenta could sustain its success in the artificial intelligence boom.

Case

Learning Outcomes

By the end of this case study, students should be able to:

• identify the forces that drive the artificial intelligence (AI) boom in China; • understand the applications of AI in the automotive industry; • describe the entrepreneurial competencies of a cofounder in a fast-growth venture; and • explore how a fast-growth business can sustain its success amidst the AI boom.

Momenta’s Goals Align With China’s AI Goals

The year 2018 marks a significant milestone in the company history of Momenta, which was established in September 2016. Having a solid business model from the very beginning, Momenta was quickly up and run- ning as an AI and autonomous driving startup based in Beijing, China. After its latest round of funding in Octo- ber 2018, the company has become the first autonomous driving unicorn startup in China, at a valuation worth USD 1 billion. While celebrating its big leap, Xudong Cao, Chief Executive of Momenta, is looking to outline the company’s future as the “brains” for autonomous vehicles. To underline his commitment to AI technology, Cao is considering working closely with strategic partners in the automotive industry, logistics, big data, and other related areas, and is exploring how to leverage the continued support from the Chinese government in AI initiatives. Cao knows that he and his cofounders still have a lot of work ahead in order to capitalize on this unprecedented AI boom.

In July 2017, China’s State Council laid out a Next Generation Artificial Intelligence Development Plan (“Plan”) to make China the world’s leading AI innovation center by 2030. To spearhead the industry development, the Chinese government is planning to invest substantially in AI. It would spend RMB 13.8 billion (USD 2.1 billion) to build a giant AI industrial park in Beijing. The park would house over 400 companies engaging in cloud computing, big data, deep learning, and biorecognition. The Plan further set the country’s AI goals to be met by 2020, 2025, and 2030 respectively. By 2020, the Plan aims to bring China’s AI up to global standards, with important achievements in AI applications and theory, as well as a core AI industry of at least RMB 150 billion (USD 22.8 billion). By 2025, it aims to establish a legal framework of AI laws and regulations, as well as a core AI industry of at least RMB 400 billion (USD 60.9 billion), including sectors such as intelligent manufac-

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turing, medicine, agriculture, and urban planning. By 2030, the Plan aims to make China the world’s leading AI developer, with AI deeply embedded in daily life and a core industry exceeding RMB 1 trillion (USD 152 billion).

Building on the State Council’s Plan, the Ministry of Industry and Information Technology released the “Three- Year Action Plan to Promote the Development of a New Generation of the Artificial Intelligence Industry (2018–2020)” (“Action Plan”) on December 13, 2017. The Action Plan encourages efforts in AI-related ar- eas, including autonomous vehicles, intelligent service robots, intelligent unmanned aerial vehicles, medical image diagnostic assistance systems, video and imaging identification systems, intelligent voice interactive systems, intelligent translation systems, and smart home products. It also calls on the government and the financial industry to support AI initiatives. As part of its efforts to accelerate the development of AI technology and gain an edge in building a smart city, in Shanghai, the government granted Momenta a license to test its autonomous vehicles on public roads. The Shanghai government also reserved two closed-course testing areas in the city that covered a wide range of traffic scenarios for autonomous driving tests.

In light of this supportive environment, Momenta’s chief executive Cao is determined to explore more AI-re- lated products and services. Driven by a boom in AI, it is estimated that between 2017 and 2022, original equipment manufacturers (OEMs) will require a suite of solution providers and data aggregators to deliver insightful data to consumers across industries, government agencies, and smart city implementers. In partic- ular, automotive OEMs are deploying personalization based on AI, virtual assistants, digital cockpit, and data monetization solutions to deliver richer Internet of Things (IoT) user experiences to an increasingly demand- ing customer base. Having unwavering belief in AI technology, Cao foresees that all these forces will prompt automotive manufacturers to partner with software vendors, which presents a promising impetus for the au- tonomous driving ecology.

History

Momenta’s cofounder and chief executive, Xudong Cao, graduated from Engineering Mechanics at Tsinghua University, China. Prior to Momenta, he worked for Microsoft Asia Research Institute as well as SenseTime, where he gained experience managing a research and development team of nearly 100 members. This is also where he met Gang Sun and Yan Xia, who specialized in AI technologies, including facial recognition, im- age recognition, text recognition, video image analysis, image and video editing, remote sensing, autonomous driving, medical image recognition, and AI computer chips. In September 2016, Cao, Sun, and Xia teamed up with Shaoqing Ren to embark on their entrepreneurial journey—founding Momenta. Ren is an added asset to Momenta. He graduated as a Doctor of Philosophy in computer vision at the University of Science and Tech- nology of China, and has brought computer vision solutions to Momenta and made self-driving automobiles become a reality. Having a good understanding of who the customers will be and what they need, the four cofounders of Momenta have underlined their commitment to building intelligent systems for autonomous dri- ving and to providing solutions for Tier 1 automotive suppliers and OEMs.

Since its inception, Momenta has undergone three phases of development. In Phase 1, the company estab- lished big data and computing platforms. In Phase 2, it developed deep-learning algorithms. In Phase 3, the company developed multi-level autonomous driving solutions for mass production for highways and urban scenarios. Momenta strives to achieve high performance in recognizing multiple lanes, signs, signals, and drivable areas under conditions of darkness, light glare, poor weather, and roads that lack clear lane markers or boundaries. Cars are designed to detect pedestrians and identify key body points to read their postures and possible intentions. To further ensure pedestrian safety, these cars measure the distance of every pedes- trian from the car and detect the orientation of cars by estimating their distance and direction. The company reconstructs three-dimensional positions of roads, traffic signs and signals, and surroundings by extracting semantic points of two-dimensional images taken from multiple cars.

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Based on its deep-learning algorithms, Momenta has developed multi-level autonomous driving solutions, and has gained significant traction from leading clients. One of its products, called AutoRing, is equipped with one camera facing the driver and the other facing the road, providing active safety functions and fleet management services. Based on low-cost sensors, such as cameras and radar sensors, and integration of high-definition maps, Momenta’s Mpilot aims to provide hands-free autonomous driving experiences on free- ways and urban expressways. Its Valet Parking solution is able to achieve centimeter-level mapping and lo- calization accuracy. Last, but not least, the company is developing autonomous driving for urban cities, which enables robo-taxi solutions. Since its creation, Momenta has developed a talent pool of more than 700, with developers making up more than 80% of a global team, most of whom graduated from renowned universities and research institutes worldwide such as Tsinghua University, Massachusetts Institute of Technology, and Microsoft Research Asia, as well as high-tech companies such as Alibaba Group, Baidu, Tencent, Huawei Technologies, and SenseTime.

Doing Everything or Developing Laser-Like Focus?

Cao immersed himself in the user base from the very beginning and spent time learning to empathize with the customers. In the setup of autonomous driving, the vehicle is considered the “body,” the onboard vehicle sensors represent the “eyes and ears,” and software that provides path-planning and control based on data aggregators constitutes the “brain.” Instead of doing everything, Cao knows that the importance of figuring out what makes the customers tick will help a startup develop a laser-like focus. He was finally determined to make a bold decision, and positioned his company as a Tier 2 software provider building the “brains” for autonomous vehicles on a national and global scale. Safety and reliability are his top priorities. Momenta has created and utilized a closed feedback loop of big data, AI, and solutions with data collected from its own crowd-sourcing channels. Momenta has also self-developed an entire set of deep-learning based software in perception, high-definition semantic mapping, and data-driven path planning, all of which enable the realiza- tion of its full autonomy in developing its AI-related products and services.

For Cao, being recognized as the first autonomous driving unicorn startup in China is confirmation that he picked the right path. While the founding team is consolidating the achievements of Momenta, Cao is looking to outline a road map to stand out in the global AI race and not disappoint his investors. Like other fast-growth ventures, Momenta has attracted institutional investors to place big bets on the company. On November 14, 2016, it was initially funded by a sum of USD 5 million led by Blue Lake Capital with participation from Sino- vation Ventures. In July 2017, Momenta further secured USD 46 million of series B funding led by NIO Capital and Cathay Capital. In October 2018, Momenta received an undisclosed sum of funding from strategic in- vestors and government funds. In this new round, existing investors NIO Capital and Pagoda Investment con- tinued to support Momenta, and strategic investors included Tencent, China Construction Bank International, and government funds from Shanghai and Suzhou with participation from China Merchants Group. Since its establishment, Momenta has attracted investment exceeding USD 200 million.

What’s the Next Move?

Looking forward, Cao believes that Tier 1 automotive suppliers and OEMs will be partnering with and investing in data aggregators, technology providers, data consumers, and data-driven analytics companies to generate new revenue streams using mobility services and IoT applications in response to market demand for higher value. This will result in connected car data and transaction volume increasing on a large scale, which means that data aggregators will likely shift from a subscription model to a customized revenue-sharing model. They may employ Platform-as-a-Service and Data-as-a-Service models to provide bundled services. Think- ing about how to connect all these relevant dots, Cao sits back for a moment to ponder his next move—how can Momenta capitalize on its strengths and take advantage of the AI boom?

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Discussion Questions

1. What are the critical issues faced by a fast-growth venture? 2. What are the forces that drive the AI boom in China? 3. What are the applications of AI in the automotive industry? 4. What are the entrepreneurial competencies of Xudong Cao, cofounder and chief execu-

tive of Momenta? 5. What recommendations would you make to Momenta to help the company stay competi-

tive in the AI boom?

Further Reading Cathay Capital. (2018, October 18). Autonomous driving company Momenta completes a new round of fi- nancing and reaches the Unicorn status. Cathay Capital News. Retrieved from http://www.cathay.fr/en/news/ autonomous-driving-company-momenta-completes-new-round-financing-reaches-unicorn-status/ Chang, Q. (2017, July 25). Why could this autonomous driving technology company which was founded less than a year but has raised three rounds of financing win the favor of capital companies? NIO Capital. Re- trieved from http://www.niocapital.com/en/the-reason-behind-momenta-success/ Frost & Sullivan. (2018, May 21). The rise of connected cars and AI prompt automotive manufacturers to part- ner with software vendors. Global Connected Car Market Outlook 2018. Retrieved from https://ww2.frost.com/ news/press-releases/rise-connected-cars-and-ai-prompt-automotive-manufacturers-partner-software-ven- dors/ Karch, T. J. (2018, March 25). China’s vision for the next generation of artificial intelligence. The National Law Review. Retrieved from https://www.natlawreview.com/article/china-s-vision-next-generation-artificial-in- telligence Momenta. (2018, October 17). Momenta, China’s leading autonomous driving company, receives a new round of funding at a valuation over $1 billion. Business Insider. Retrieved from https://markets.businessinsider.com/ news/stocks/momenta-china-s-leading-autonomous-driving-company-receives-a-new-round-of-funding-at-a- valuation-over-1-billion-1027626507 Tech Startups . (2018, October 17). Autonomous driving startup Momenta raises new round of funding at over $1 billion valuation. Tech Startups. Retrieved from https://techstartups.com/2018/10/17/autonomous-driving- startup-momenta-raises-new-round-funding-1-billion-valuation/ Zhang, Y. S. (2018, October 18). Tencent-backed Chinese autopilot firm Momenta enters unicorn club. Yicai Global. Retrieved from https://www.yicaiglobal.com/news/tencent-backed-chinese-autopilot-firm-momenta- enters-unicorn-club http://dx.doi.org/10.4135/9781526496430

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