24 August 2017

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Atomico Need-to-Know

This is a regularly-updated collection of things we (@atomico) found interesting and important in tech and VC land, but that didn’t necessarily get the attention they deserve. We think of them as our hidden little gems. We’ll add to the collection over time, so bookmark the page and keep coming back for updates or to dig into the archive.

Lovingly put together by @twehmeier & @stephen2206

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● Will this “pro-scraping” ruling be upheld by higher US courts or will it be successfully appealed?

● What implications will this ruling have on the view of the ethics of scraping and robots.txt? What are the implications will potentially wider use of scraping have on search engine indexing / SEO?

● Poses a broader risk to companies that have publicly available content (profiles, listings, media, etc.) as they may no longer be able to control how and when that content is used

○ Potentially questions definition of sustainable competitive advantage for startups and if more companies will move towards being platforms than have data assets at their core

● Highlights the line between companies being protecting its users' data vs. representing users' interest for public disclosure

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What do you need to know?

Why does it matter?

Key questions

● This past week, a US federal judge ruled that LinkedIn cannot prevent hiQ Labs, a Mountain View-based startup, from scraping publicly available profile data

○ LinkedIn was order to remove both legal and technical barriers to accessing this data

○ Case is not completely over yet; LinkedIn plans to challenge the decision

LinkedIn loses scraping case

Source: https://www.reuters.com/article/us-microsoft-linkedin-ruling-idUSKCN1AU2BV https://news.greylock.com/web-scraping-vs-doing-the-work-2ef0f713da3f

● Will the positive listing environment hold through 2017?

● How should VCs engage with the region’s most sophisticated and active public market investors?

● At what point in their lifecycle should companies engage with understanding their path to the public markets?

● The state of the public equity markets is an important consideration for the overall health of tech ecosystems given the critical role in liquidity and capital raising

● The public markets in Europe are becoming increasingly sophisticated driven by deepening pool of institutional investors that have built large tech portfolios (DNB Nordic Tech, Carmignac Gestion, Henderson Global Investors, Baillie Gifford, etc)

● One important feature of Europe’s capital markets is that they offer a viable path for companies of all sizes to go public. Of the 25 IPOs in 2017, 18 had a market cap of <$100M, 2 were $1B+ and 5 of $100M-$1B. In stark contrast, in the US, 8/11 were $1B+ IPOs with the other 3 all >$100M+

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What do you need to know?

Why does it matter?

Key questions

● The environment for European tech IPOs has been positive so far in 2017; of total of 62 tech (Internet & Software) IPOs in 2017 YTD, of which 25 have been from Europe

● The Top 10 largest IPOs by capital raised include 5 from the US, 3 from Europe (Delivery Hero, Alfa, Boozt) and 1 each from Canada and Korea

● Looking at weighted post-IPO performance versus offer price, Europe’s IPOs are up 11% versus -2% for US IPOs

● Interestingly, if you strip out the largest IPO from each region (Delivery Hero and Snap), European IPOs are up 29% and US IPOs are up 30%

This is how tech IPOs have performed in Europe in 2017

Source: https://www.inc.com/zoe-henry/2017-european-tech-ipo-s-surging.html

● What’s your thesis around robotics and adjacent sectors?

● What are the implications of robotics on the global economy and ethical decisions for implementation?

● Will robotic technologies be concentrated in other manufacturing centered geographies or will regions focus on different use cases?

● Robotics technology is becoming more broadly applicable due to the standardized Hardware Robot Operating System (H-ROS) and AI integrations

● Increasing advances in robotics technologies poses potentially new opportunities and threats to startup business models (e.g. Scandit)

○ Considerations need to be made if instead of humans robots utilize technology with potential modifications

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What do you need to know?

Why does it matter?

Key questions

● Recent report based on data from International Federation for Robotics (IFR) analyzed trends in the installation of robots in U.S.

○ The study found that the highest concentration was in manufacturing hubs (i.e. the Upper Midwest)

● Scientists in Brussels and at Stanford have engineered soft robots that can use heat to heal their own wounds increasing the lifespan and applicability of commercial robots

● Robotic experts are urging the UN to ban weaponized robots, similar to upcoming formal discussion on banning autonomous weapons (i.e. drones)

Applications for robotics are rapidly expanding

Source: http://robohub.org/envisioning-the-future-of-robotics/ https://www.brookings.edu/blog/the-avenue/2017/08/14/where-the-robots-are/

Experts believe current technology is in the “intelligent robots” stage

Geographic Distribution of Industrial Robots

Evolution of Robotic Technology

● What’s the right thesis for this space? For example, do we have a view on what are the key pieces in the tech stack across base platform tech, middleware components, hardware and consumer applications and where is the white space for startups?

● Do we believe we’ll see venture-backable businesses that are built primarily on top of ARKit? Feature or a standalone product?

● The perennial question: how fast and how large can the market(s) for virtual and augmented reality grow?

● Global tech giants have committed human and financial capital to VR & AR at material scale, i.e. billions of dollars and/or thousands of employees. In part, this is because they are viewed as a new potential platform for consumers and enterprise engagement where many pieces of the supporting tech stack are up for grabs, including e.g. social networking, search & discovery, advertising, content, etc

● While it’s unclear how fast and how large VR & AR may ultimately grow, the battle to secure ownership and control of key pieces of the emerging tech stack is pitting these giants against interesting startups seeking to establish their own credentials

● Interestingly, Apple’s ARKit platform for building AR apps on top of the iPhone camera, is starting to see some very interesting potential applications, a signal that existing smart devices will see some of the most interesting innovation in AR

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What do you need to know?

Why does it matter?

Key questions

● Flow of oxygen to the VR & AR hype machines has slowed more recently, thanks to sluggish sales of consumer VR products, several deadpooled or struggling venture-backed companies (e.g. CastAR, Skully, AltSpaceVR), as well as a greater industry focus on AI and blockchain, but progress on developing the tech stack for VR & AR and in building applications on top continues, albeit more quietly

● Immersv, an ad tech company focused on AR/VR ads raised an $11M Series A. Separately, Google relaunched Google Glass with an enterprise focus with some impressive enterprise commitments (GE, DHL), while Apple’s ARKit is seeing more and interesting applications being built

VR/AR tech stack progress; ‘the age of useful apps is here’?

Source:

● Could regulations of this type limit exit options (and returns) for EU-based businesses as Chinese acquirers continue to gain prominence?

● In particular, how will this impact liquidity or investment options for companies in the AI field?

● EU is concerned that China may gain a technological edge by buying European know-how while heavily restricting the role it allows EU investors to play in China

● Currently just under half of the EU has formal systems for screening takeovers and investments to assess whether they threaten national security or public policy goals

● Scrutiny of investment on the grounds of market access could mean increased measures relative to the UK in post-Brexit Europe as well

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What do you need to know?

Why does it matter?

Key questions

● EU plans to increase level of screening of foreign takeovers of European businesses as it seeks to address concerns about a surge in Chinese investments in particular industries

● Australia and the US have taken similar measures with respect to Chinese investment

● EU receives significantly more investment than the US from China

● France, Germany, and the UK have already set a precedent for heavy screening of Chinese investments in the EU region, but have shown some opposition to an EU regulatory process

EU Regulations Increasing over Foreign (Chinese) Takeovers

Source:

Sources: https://www.ft.com/content/a7641d16-6c66-11e7-b9c7-15af748b60d0https://www.ft.com/content/04fa752c-7dda-11e7-ab01-a13271d1ee9c?mhq5j=e4&utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosprorata&stream=business

Companies What happened?

Despegar.com & MongoDB

Argentinian OTA Despegar.com, founded in 1999, has filed to IPO in the US on the NYSE. Tiger Global is the largest shareholder with a 57.3% holding, Expedia has 16.4% GA has 5.4%. Company did $411M in revenue and $18M net income in 2016 on $3.3B GMV, according to Skift. Separately, MongoDB has confidentially filed to IPO in the US. The company has raised $300M with its last round at $1.6B.

Cloudflare

Cloudflare’s CEO sparked a debate in tech circles about the role that critical pieces of Internet infrastructure should play in the difficult arena of web censorship. Citing the fact, that the decision was “arbitrary” and “dangerous” and a deviation from its strict neutrality, CloudFlare nonetheless decided to cut access to The Daily Stormer, a far-right-wing political site. The followed actions by domain registrars GoDaddy and Google to also refuse to serve the site.

Uber/Benchmark

Uber’s leadership and board issues escalated once again after Benchmark initiated a lawsuit against Travis Kalanick, alleging fraudulent actions at the time of a decision to expand Uber’s board from 8 to 11 seats. The company is seeking to protect its $27M investment, now said to be worth $8.4B (311x!). This was then followed by an open letter from Shervin Pishevar (underwritten by a group of Uber shareholders) calling for Benchmark to step down from the board. This then sparked a debate in the US over the so-called ‘death of founder friendly’ terms. Per Dan Primack “RIP Founder Friendly”. Fred Wilson picked up on the meme, summing his views succinctly: “I reject the notion that being led by its founder is always what is best for a Company. It is often so, but certainly not always so”

Coinbase

Coinbase, the SV-based cryptocurrency wallet/exchange, raised $100M in a Series D round at a $1.6 billion valuation to become the first equity-based billion-dollar company in the crypto economy. The company has exchanged $25B in currency with $15B of that coming in 1H17 alone (up 5x on 2016). It claims 9M customers across its two exchanges (Coinbase/GDAX). Company is easily runrating $100M+ in revenue based on those numbers.

EssentialEssential, the new smart device OEM started by Andy Rubin, announced it has raised $300M at a $900M-$1B valuation from backers including Amazon, Tencent and Foxconn. The company is a full-stacked s/w & h/w company that will build devices on its new Ambient OS. The company’s first device - Essential Phone - is now in ‘full mass production’.

Tokopedia In latest transaction signalling the extent to which Chinese giants are exerting influence outside of their domestic market in SE Asia, Alibaba led a $1.1B investment into marketplace, Tokopedia.

General News In Brief

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Footnotes

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M&A Wrap UpAcquiror Target Target desc. Amt Comments

Disney BAMTech

Part of MLBAM, the interactive media and Internet company of Major League Baseball focused on direct-to-consumer video solutions

$1.6bDisney had already purchased a 33% stake in BAMTech; in conjunction announced that ESPN multi-sport video-streaming service will be released in early 2018; Disney will also end its agreement with Netflix and start with its own direct-to-consumer offering

Dupont Granular FKA Solum, agriculture software and analytics company N/A

Granular’s co-founder and CEO will continue to lead Granular and will lead Digital Agriculture for DuPont; viewed as acceleration moved by DuPoint to help farmers operate more profitable businesses through providing more analytics tools

Descartes Systems Group MacroPoint Transportation Management System

software load status visibility tools $107mIndication is to combine MacroPoint software with with Descartes’ Global Logistics Network to build a real-time load visibility platform in order to help customers better plan, execute, and monitor multi-modal shipments globally

Turn/River Capital Huddle Enterprise content collaboration software $90m PE firm Turn/River Capital acquired UK-based Huddle for an estimated $90m; deal was

completed under “drag-along” clause with only a payout to preferred stakeholders

Google AIMatter Mobile-based AI-powered real-time image processing solutions N/A

Acquisition focused on bolstering Google’s computer vision technology; AIMatter’s Fabby app expected to continue; most of AIMatter’s employees are expected to join Google unclear due to geographic dispersion (Minsk, SF, and Zurich) where the team will relocate

Google Senosis Health

Health apps for asthma, detect newborns jaundice, and measuring hemoglobin

N/ASeen as a move by Google to build off Senosis’s tech “backbone” for additional wearable-free health monitoring app; deal terms were not disclosed and Senosis isn't joining Alphabet's Verily team but instead will remain in Seattle

Deposit Solutions Savedo Online marketplace for retail investment products N/A Seen as a move by Deposit Solutions to expand its B2C offerings; terms were not disclosed

Microsoft Cycle Computing

Data management and cloud orchestration software N/A

Microsoft acquired Cycle Computing, a twelve-year-old company, to improve Azure offerings; financial details of the deal were not disclosed; Cycle Computing offerings will continue to support customers on Google Cloud but only until next release

Netflix Milarworld Comic book publisher and entertainment company N/A Represents continuation of Netflix’s strategy to work closely with content creators with Netflix

planning to create films, TV shows and kids’ series based on Millarworld’s work

Qualcomm Scyger Industry vertical applications for AI and ML technologies N/A

Qualcomm acquired Amsterdam-based Scyger as an a partial acqui-hire to employee Dr. Max Welling, director of the Qualcomm Technologies-University of Amsterdam joint research lab, and strength it’s research into AI applications

ShapeShift KeepKey Hardware wallet for digital assets such as Bitcoin and Ethereum N/A Swiss digital asset exchange, ShapeShift, acquired Seattle-based KeepKey, to vertically

integrate solutions and offer users secure platform for holding and trading digital assets

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