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Canada Pension Plan Investment Board is one of the lead investors in a new US$2.25-billion round of funding for Waymo LLC, the company that represents Alphabet Inc.'s entry in the driverless-car race.

It’s the first external investment in Waymo after more than a decade of funding by Alphabet, the parent company of Google. Waymo isn’t disclosing the amount each investor put in, nor how much of the company the investor group gets for its investment. The group also includes Abu Dhabi’s Mubadala Investment Co. as the third lead investor and Canada’s Magna International Inc., which has partnered with Waymo to manufacture autonomous vehicles, in a smaller role.

“We see a massive market opportunity for Waymo that will allow for significant growth of the investment over a long time horizon,” Ryan Selwood, CPPIB’s head of direct private equity, said Monday. “The addressable market for Waymo’s technology is enormous. It’s not just an economic opportunity, but also to enhance people’s quality of life and safety.”

Private-equity firm Silver Lake Partners brought CPPIB into the deal. Silver Lake is a long-time CPPIB partner, having brought the Canadians into an investment in Skype in 2009, when that technology was more cutting-edge. Silver Lake will get a Waymo board seat, while CPPIB will get “governance rights typical for a large minority investment," Mr. Selwood said.

Waymo is one of a number of expensive ventures at Alphabet that lose money in the near term to maintain a long-term opportunity. The company lumps them together in a division called “Other Bets” and says only a couple generate meaningful revenue. Waymo is not one of them. All told, the segment generated US$659-million in sales and lost US$4.82-billion in 2019.

Important trends like the wider adoption and application of artificial intelligence, ambient computing and the move to the cloud underline our investments across Google and our other Alphabet companies," CEO Sundar Pichai told investors when discussing the company’s year-end results. “Many of our Other Bets are getting to the stage where it now makes sense for them to partner closely with other players and investors in the industry," he said, citing Waymo as an example.

Waymo also may be poised to generate more meaningful levels of revenue. Alphabet says its cars have driven 20 million miles across more than 25 U.S. cities, and in a pilot in Phoenix, Waymo is matching passengers with driverless vehicles and charging for rides.

“Successful deployment of the Waymo driver will eventually be a highly disruptive force, which will reshape, we believe, several very large markets within very attractive unit economics for its shareholders,” Mr. Selwood said. “But this will take time, and we believe we have time, especially for a large value creation.”

CPPIB reported $420-billion in assets at Dec. 31.

While a handful of crashes of driverless cars have raised fears about safety, Mr. Selwood says CPPIB sees the autonomous vehicles as safer in the long run than human drivers, particularly older ones.

“More than 1.3 million people die each year globally from traffic-related incidents, which equals over 3,500 people every day, with many more injured or disabled," he said. "Public studies have found that over 90 per cent of fatal crashes are caused by human error. In terms of the senior population, we think the Waymo driver can improve seniors’ independence, given over 75 per cent of seniors age 65 or over live in car-dependent communities.”

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