What the “black box” is to airplanes, Paul Hightower wants to make for the autonomous vehicles that will one day travel the nation’s roads. Hightower is chief executive of Instrumentation Technology Systems, or ITS, a small Northridge company that currently makes data with video collection and testing equipment used at military bases and other government installations. In the quest to grow his business, Hightower has decided to pursue the incipient market of autonomous or driverless vehicles and is developing a “black box” for them. “It’s the same idea as what is in an airplane except we are going to collect video,” Hightower said. “Not even airplanes collect video.” Hightower envisions a “black box” on an autonomous vehicle serving two purposes – as an analysis tool to improve the performance of the AI engine and as a crash investigation tool as it would be a better eyewitness than the occupants inside the vehicle. Aaron Jacoby, managing partner in the Los Angeles office of law firm Arent Fox and chair of the firm’s automotive industry practice group, said having a “black box” on driverless vehicles would prove helpful to insurance companies when setting rates or in accidents. “Let’s say they (ITS) have built a better mousetrap then they’d be a competitive player in that industry, arguing that the only way to assess how well these cars are doing and any risk is to have a black box like airplanes do,” Jacoby said. Huge market Taking the company’s equipment from military and aerospace applications to autonomous vehicles is not a big jump for ITS. The equipment will perform much the same function and the technology is proven. It just needs to be done less expensively and fit in a smaller box, Hightower added. ITS, at 19360 Business Center Drive, employs nine people in engineering, marketing, accounting, manufacturing and quality control. The company does all the software for its video systems while outsourcing the making of printed circuit boards. Revenues exceed $2 million a year, Hightower said. Danny Piper, a principal at NewCap Partners Inc., a Los Angeles investment bank that raises capital and provides M&A services for mid-size businesses, has known Hightower for a year. Piper said ITS is doing all the right things for a small company lacking infinite resources. He said Hightower needs to make smart decisions and go after opportunities that are achievable, deliver revenue and bring applications to market in reasonable timeframes. “That is what Paul is attempting to do here,” he explained. “I think he has done a good job of it historically. I am impressed with him.” While autonomous vehicles are only in the development and testing phase and still a few years away from being commercially available. the market potential is huge. By 2025, the global market for fully autonomous vehicles is expected to be about $6 billion, according to online statistics company Statista Inc. Jacoby at Arent Fox said that driverless vehicles are evolving on three fronts – engineering, business development and laws and regulations. The engineers are way ahead of the legal and business models of the vehicles, with the regulations still being worked out. “Nobody has even determined if there is an actual market for them although everybody assumes there is,” Jacoby said. A few states are already crafting regulations as testing of autonomous vehicles takes place, including Pennsylvania and Michigan. California, however, has the most solid framework for regulations but even that can be categorized as an experiment, he added. Hightower said he is monitoring legislation and what state transportation departments are doing relating to the vehicles. Early this month, the California Department of Motor Vehicles published revised regulations covering testing and deployment of autonomous vehicles. A public comment period on these rules ended Oct. 25. An example of how California regulations are evolving is that in the initial rules a driver was required to be behind the wheel in the event of an emergency, Jacoby said. But safety experts and engineers claimed that having a human driver take over a computerized system would not be safe because of a slower reaction time and not having all the information that the car would have, he added. “To truly test what will be autonomous, you need to test without a human driver, which California evolved to,” Jacoby said. “That is an example of how the rules governing even test driving are evolving.” Many major car manufacturers are at work on driverless vehicles. Volvo Car Corp. and BMW AG have plans to introduce their autonomous cars in 2021. General Motors Co. is testing out driverless versions of the Chevrolet Bolt and said over the summer it was close to being able to mass-produce the vehicle. Waymo, a subsidiary of Alphabet Inc., the parent of Google, and rideshare company Uber Technologies Inc. are also investing in driverless vehicles. It is likely that these test vehicles are already using data collection devices like what ITS wants to produce, Jacoby said, although he was not aware of who might provide them or if the companies themselves were doing it. “This Northridge company may not be the winner of that contest but it is an idea that is out there and something that regulators are likely to consider,” Jacoby added. Hightower said he knows of only one company making data and video collection systems for vehicles, Racelogic Ltd., in Buckingham, U.K. CSUN consultants To determine what markets ITS should look at for growth opportunities, Hightower went to the Nazarian College of Business and Economics at California State University – Northridge. There the company was selected for a program in which students do market research. That research identified the autonomous vehicle market as one the company should explore. After some studying of his own Hightower found there was something to it. “The CSUN students did a great job for us,” Hightower said. “They got us pointed in a direction that is very interesting.” Hightower does not foresee ITS supplying “black boxes” for consumer vehicles but instead would have them installed in delivery vehicles, long-haul trucks and maybe even military vehicles. “For a company of this size those are huge marketplaces,” he added. For Piper, the investment banker at NewCap, ITS has the advantages of an established revenue base with well-known customers in a market the vets its suppliers. “The auto (industry) is going to be another one that is really hard,” Piper said. “But he has already cleared the bar on that.” NewCap does not represent ITS and Hightower right now but Piper said he would like to have him as a client down the road when he needs to raise capital or becomes an acquisition target by a company with the infrastructure and resources to get its systems into large fleets. “That is going to be a capital-intensive part of the business,” Piper added. Enhanced video Instrumentation Technology Systems was founded in 1967 under a different name and took its current moniker in 1978 after a reorganization. Hightower bought into the company in 2006 and became chief executive. Its test and video and data collection equipment is used at Naval Air Weapons Station China Lake, Edwards Air Force Base and NASA Armstrong Flight Research Center in the Antelope Valley and Moffat Field near San Francisco. Private companies use the company’s equipment too, including ViaSat Inc., a Carlsbad satellite broadband provider and Blue Origin, the Kent, Wash. aerospace company founded by Jeff Bezos of Amazon.com Inc. The company’s inserter products merge data and video together. It also makes a recorder that does the same functions as the inserters plus allows for video playback or with a data overlay. In decades past it had been a labor intensive post-production process to marry video and data to show both at the same time, Hightower said. “This is more automated because you are collecting it together in real time,” he added. An easy way to describe what ITS collection equipment does is to think of a drone being tracked with a camera. Data collected from GPS and other signals is combined with a video feed to determine where exactly it flew. Just about every new vehicle being made today comes with video cameras in them. Some also have sensors and radar to help with parking, blind spots or moving out of a lane. It will likely be no different for autonomous vehicles. The installed sensors, radar and cameras will feed into the ITS “black box.” “You do not want to contaminate the data with an independent eyeball,” Hightower said. “You want to say what did the eyeballs deliver to the (artificial intelligence) engine and did the engine make the right decision in a situation.”