Startups in this niche create technologies for autonomous vehicles. These technologies can involve the vehicles themselves, traffic safety measures, or insurance processes. In this relatively new industry, there is tremendous potential for partnerships with and acquisitions by large tech companies and automakers working on autonomous vehicles.

Why it's hot: The development of self-driving cars took off in 2016 with Google's Waymo, Tesla, Uber, Toyota, and GM all announcing progress toward completely autonomous vehicles within the next four years. Many of these companies, especially traditional automakers, are looking to startups to develop the technology they need to keep up with the competition.

What's required: This tech-heavy industry requires a great deal of knowledge about what can be done to improve the transportation industry. Companies have sprung up hoping to disrupt nearly all aspects of transportation, so entering the sector could require skills ranging from app development to data analysis.

Barriers to entry: Entrepreneurs should have a high level of understanding of the technical aspects of autonomous vehicles as well as related systems, such as insurance and law enforcement.

The downside: Commercial availability of self-driving cars is still several years away. While companies hammer out exactly what's needed to make the vehicles work, startups might have to run solely on funding from investors.

Competition: Major automakers are already forming partnerships with startups to advance their autonomous car projects. For example, Ford partnered with vehicle rental startup Zoomcar, GPS mapping service Spatial, and safety notification platform HAAS Alert. BMW struck deals with carpooling app Scoop and camera maker Nauto.

Growth: In 2016, the number of U.S. startups related to autonomous vehicles that landed VC deals nearly doubled to 14, and the total dollar amount invested shot up to $459 million from just $59 million the previous year, according to Pitchbook data.

Published on: Mar 1, 2017