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Bronze Level Contributor
pedrosala | iStock | Getty Images
 
KEY POINTS
  • European investment firms are targeting renewable energy projects in the U.S.
  • Greencoat Capital, a global renewable energy firm with $8 billion in assets under management, announced its first U.S. transaction, with the firm taking a minority stake in four onshore wind farms in Texas.
  • “I think Biden coming in is a massive boost. It will significantly increase the available investment opportunities over the next five to 10 years,” said Greencoat Capital partner Laurence Fumagalli.

President-elect Joe Biden’s ascension to the presidency will encourage more renewable energy projects in the U.S. International investors are taking note.

Greencoat Capital, a global renewables investment manager with $8 billion in assets under management, just announced its first U.S. investment after eight years operating across the U.K. and Europe. 

The firm is taking a 24% stake in four onshore wind farms located in coastal South Texas that together have a total installed capacity of 861 megawatts. That is roughly enough to power all of Houston for a year, according to the firm.

Greencoat Capital had been eyeing the U.S. for the last 18 months, said partner Laurence Fumagalli.

“It’s a great time, it’s an inflection point in the market,” he said. “I think Biden coming in is a massive boost. It will significantly increase the available investment opportunities over the next five to 10 years.”

Germany-based RWE was previously the sole owner of the Texas development. The company will retain a 25% stake in the project and will continue to operate the four wind farms. The other 51% stake is held by a subsidiary of Canada-based Algonquin Power & Utilities Corp., which was announced in December.

The Greencoat investment is valued at roughly $160 million, and RWE intends to use the influx of capital to finance further growth in its renewable energy business.

 

Fumagalli said this model, whereby a utility company sells a partial stake in its operating assets and then uses the money to fund new projects, is a common model in Europe and becoming more popular in the U.S.

Biden has outlined ambitious initiatives to aid the nation’s transition to clean energy — including a $2 trillion climate bill — and Fumagalli said this creates especially attractive conditions for investors.

“In any normal economy like Europe or the U.S., it’s the private sector that really mobilizes the large sums of capital involved in this energy transition,” said Fumagalli, who led Greencoat’s expansion into the U.S. “We are one of the early movers ... you might expect more to follow us.”

Half of Greencoat’s assets under management are publicly traded, while the other half is private money.

For this specific investment, the capital came from the British Aerospace pension scheme BAPFIM, as well as pension funds managed by the Willis Towers Watson Funds.

Overall, Greencoat seeks to provide investors with a steady and stable long-term income. “It’s typically on a buy and hold forever basis,” Fumagalli said of the firm’s investments.

Now that Greencoat has taken its first steps in the U.S., the fund will continue to look for compelling opportunities in the states. Ultimately, the firm is hoping to deploy about $1 billion per year across the nation.

“We’re looking to mobilize capital at scale for both wind and solar in the U.S., which is exactly what we’ve done in Europe ... there’s going to be a lot more of these new-build assets in the Biden era,” Fumagalli said.

The announcement comes as U.S. renewable energy projects attract foreign interest. Earlier in January, Norway’s Equinor won one of the largest renewable energy contracts on record in the U.S.

Originally published by
Pippa Stevens | January 20, 2021
CNBC

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Silver Level Contributor

David Stockley | EyeEm | Getty Images

  • Silicon Valley’s share of total VC count in the U.S. will fall below 20% for the first time in history, while other cities around the country grab larger amounts of equity capital for their home-grown innovators, according to PitchBook.
  • The pandemic and the rise of remote work has fueled the trend as investors and entrepreneurs move to lower-cost cities.

The pandemic has upended the U.S. economy and it has also had a far-reaching effect on Silicon Valley, the venture capital industry and the entrepreneurial ecosystem in America.

According to PitchBook’s 2021 US Venture Capital Outlook report that was released late last month, the Bay area’s share of total VC count in the U.S. will fall below 20% for the first time in history, while other cities around the country grab larger amounts of equity capital for their home-grown innovators.

In 2020, $156.2 billion of venture capital was raised in the U.S., PitchBook reports. Of the total, 22.7% of the dealmaking occurred in the Bay Area, and 39.4% of deal value was invested in Bay area-headquartered companies.

“The Covid-19 pandemic and subsequent exodus from San Francisco will only exacerbate this trend,” said PitchBook’s analyst Kyle Stanford. He notes that Silicon Valley’s share of venture capital deal count in the U.S. has fallen every year since 2006. The forces driving the continued shift: the rise of remote work during the pandemic, the high cost of living in the Valley, and the fact it’s become more expensive to finance start-ups in the Bay area.

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Another factor is the fact that many investors have left — either temporarily working from home or relocating all together. For example, 8VC has made 70% of its investments in California-headquartered companies, yet it moved its own headquarters from San Francisco to Austin in November.

Second is the shift to secondary tech hubs. Big investors are moving to other cities such as Miami, Salt Lake City and Chicago, where great disruptive ideas are bubbling up. “Remote work makes it easier for talent to live outside of Silicon Valley and capital is following the trend,” Cameron Stanfill, a senior analyst at PitchBook points out. “You no longer need to be down the street from your investor if you are an entrepreneur.”

A PitchBook analysis revealed the hotspots attracting VC activity beyond the Valley. They are: Austin; Atlanta; Los Angeles-Long Beach; Boston corridor; New York metro area; Seattle-Tacoma; Washington D.C./Baltimore/Arlington area; San Antonio, Texas; Denver-Aurora area, Chicago and Philadelphia.

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One company exemplifying the trend is Sana Biotechnology, a heavily funded start-up in Seattle that raised $435 million this summer in one of the largest venture financing deals in the life sciences industry and one of the biggest rounds on record in Seattle. The company’s valuation is now $2.77 billion. Investors include traditional VC funds such as ARCH Venture Partners, Flagship Pioneering and F-Prime Capital, as well as Canada Pension Plan Investment Board, Baillie Gifford, Alaska Permanent Fund, the Public Sector Pension Investment Board, Bezos Expeditions, GV, Omega Funds, Altitude Life Science Ventures, and multiple unnamed institutional investors.  

Founded in 2019, the 250-person company has an ambitious goal of both repairing cells in the body (gene therapy), and replacing damaged cells (cell therapy).  Sana is also aiming to innovate how gene and cell therapies are produced and distributed at scale. It’s led by several former executives from Juno Therapeutics, another Seattle biotech company that went public in 2014 and sold to Celgene for $9 billion in 2018.

Sana Biotechnology has been one of the beneficiaries of the boom in biotech and pharma venture capital investing. Last year, the sector attracted an all-time high of $27.4 billion in venture funding across 998 deals. The average deal size rose to $29.8 million; and the average valuation increased to $134.2 million.

On Wednesday, Sana filed paperwork for an IPO without a single drug in clinical trial. “This is significant because we have been seeing VC-backed biotechs going public earlier and earlier in the drug development cycle,” said Josuha Chao a venture capital analyst at PitchBook.

In 2021, it is expected deal activity in this sector will exceed $20 billion for the second consecutive year, according to Pitchbook. In 2020, $27.4 billion of venture capital was raised by pharma/biotech start-ups in the U.S., PitchBook reports.

That’s in part from “ever-growing capital commitments from limited partners looking to break into the biopharma space, along with the recycling of profits and liquidity from the 2020 IPO market,” Pitchbook noted in its report.

Hot sectors VCs are chasing

“Many start-ups in a wide range of fields – from drug discovery, immunotherapy, gene therapy, oncology, vaccine development and biomatics – are attracting a lot of interest,” said Chao. “The pandemic has changed the purview of venture investors in this sector. They realize the importance of vaccines and infectious diseases and they are shifting some money to these areas as well.”

Of the biotech and pharma deals that closed last year five were unicorns with valuations of more than $1 billion. Now market observers are waiting to see if more follow-on financing in 2021 will continue to fuel their astronomical growth. They are: Sana Biotechnology; Ginko BioWorks, a synthetic biology company that garnered a $70 million Series E round in May to push its valuation to $4.78 billion; Lyell, a cellular therapy company that raised $493 million in a series C round giving it a $2 billion valuation; Orca Bio, a medical therapy platform for many diseases that now has a $1 billion valuation after raising $192 million in a series D financing in June; and Zymergen, a biofacturer that raised $350 million in a series D round pushing its valuation to $1.75 billion.

PitchBook predicts that other hot sectors VCs will target in 2021 are: agtech; artificial intelligence and machine learning; cloudtech; enterprise health and wellness; fintech; foodtech; information security; insurtech; internet of things; mobility tech; retail health and wellness and supply chain technology.

These fields represent long-term megatrends that offer significant opportunity for investors as the pandemic has transformed the economy, how we work, shop and take care of our health.

According to Dharmesh Thakker, Battery Ventures’ general partner, a firm that has $8.9 billion of assets under management, “technology that is helping us accelerate into a digital economy is what many investors are looking at now. What is exciting is that entrepreneurs are innovating at a much faster rate than ever before. In the last decade we use to innovate every two years, today some innovation has been pushed to less than three months.“

Looking ahead, Thakker thinks start-ups will be riding on the multi-cloud trend building businesses on top of the cloud which has huge market potential. He is targeting this technology as well as data and software analytics, enterprise software and cybersecurity.

He is bullish on data analytics. “The data ecosystem is so massive it should result in blockbuster IPOs this year,” the venture capitalist said.

With offices on the famous Sand Hill Road in Menlo Park at the heart of Silicon Valley, Thakker can see firsthand the challenges the area faces now. “We see a significant exodus of people leaving the state of California and maintaining a talent pool is a significant issue for Silicon Valley. Many companies are hiring people around the world remotely to get around this issue.” 

Correction: This article has been corrected to reflect that in 2020 $156.2 billion of venture capital was raised in the U.S., PitchBook reports.

Originally published by
Lori Ioannau | January 14, 2021 (updated January 15, 2021)
CNBC

Read more…
Gold Level Contributor

Image: Unsplash - Marian Beck

The payments company has secured a fresh $450m and has hinted at an IPO

Online payments firm Checkout.com has become Europe’s top privately-held tech company.

The London company has secured a $15bn valuation at its Series C round, bringing in a fresh $450m fundraise from investors, which includes Tiger Global Management — also an investor in Checkout.com’s rival Stripe.

Checkout.com has nearly tripled its valuation since June, when it raised $150m at a $5.5bn valuation. Just two years ago Checkout.com was worth less than $1bn, first rising to prominence in May 2019 with a record breaking Series A round.

The fintech’s dramatic rise over the past year is partly a result of the boom in online payments triggered by the coronavirus lockdown, when Checkout.com said its transaction volumes increased by 250% year-on-year, with small businesses rapidly moving online.

The company has made a name for itself powering online commerce for thousands of merchants like Deliveroo, and is already profitable.

Checkout’s new crown as Europe’s most highly valued startup is also a testament to its global ambitions. The company is already making inroads in the Middle East and Asia, with 50% of its transactions now occurring outside the EU and the UK.

The next big focus is likely to be the US, where the startup has already opened small offices in Boston and San Francisco; taking on competitors like Stripe on their home turf. Checkout.com is also rumoured to be considering an IPO.

Any IPO would see it follow in the footsteps of Dutch competitor Adyen, which now has a market value of over $65bn. “We’re the next Adyen,” Checkout.com chief executive Guillaume Pousaz told the Financial Times in 2018.

Checkout.com is now the fourth most valuable fintech startup globally, leaping ahead of fellow payments firm Klarna, which was last valued at $11bn.

Meanwhile, also on Tuesday, London-based fintech Curve said it had raised $95m in a funding round led by IDC Ventures, Fuel Venture Capital and Vulcan Capital.

Checkout.com fact sheet

  • Checkout.com was bootstrapped for its first seven years by Pousaz, who is Swiss but is based in the UAE
  • Checkout.com is unusual in that none of its main investors are European, having opted instead to seek international backers — often associated with higher valuations. For instance, its Series B funding was led by US hedge fund Coatue, while other big investors include Singapore’s Sovereign Wealth Fund GIC
  • The company has now raised $830m in just under two years
  • It has also begun investing in other fintech via a venture division, as first reported by Sifted

Originally published by
Isabel Woodford | January 11, 2021
Sifted

Read more…
Gold Level Contributor

This time last year, Sifted compiled at least some pretty accurate predictions for 2020. Our columnist Nicolas Colin said it was going to be the year of remote working, which he was definitely right about (albeit it not exactly for the reasons he said). Philippe Collombel, general partner at Partech, said it was going to be the “year of economic crisis” which hit the nail on the head.

Admittedly, not everyone was spot on. Jean de La Rochebrochard, partner at Kima Ventures, said it was going to be the year when travel tech beat fintech (the pandemic put a stop to that). Gabriela Hersham, cofounder and chief executive of coworking space Huckletree, said it was going to be the “year of community coworking”.

So after that mixed bag, and an uncertain 12 months ahead, what predictions can we make for 2021? Well, here is our effort from the Sifted team of reporters.

European startups will raise a record $50bn

Back in 2016 European tech startups raised just $16bn in funding from global venture capital firms. Last year European startups, in the midst of a global pandemic, raised a record $41bn. This is an annual growth rate of 30% over 5 years and confirms what we already know: the European startup ecosystem is booming in a way that has never been seen before.

So it’s not unreasonable to think that startup funding will hit $50bn next year for a few reasons. Firstly, global monetary policy remains super-lax and so there is heaps of money sloshing around, particularly from the US where startup valuations are much higher and investors are coming to Europe looking for a deal. Secondly, there is dry powder from 2020 waiting to be unleashed once the economy starts to recover.

Thirdly, and probably most importantly, the flywheel of European tech and startups is really spinning. More than ever, people young and old want to found or work in tech startups in a significant mindset shift from a decade ago. More than ever, early employees from one successful startup are leaving to do their own projects, taking money and expertise with them.

Michael Stothard

Europe will mint 25 more startup unicorns

In 2020 Europe created 18 new privately held startup “unicorns” worth more than $1bn, bringing the total number to nearly 60 (depending on how you count it).

I predict that this will increase to 25 tech companies raising money at a $1bn+ valuation for the first time in 2021 as momentum continues to build.

Why? Well, the fact is that Europe is now producing unicorn companies at the same rate as the US, with seed-funded companies in both regions having around a 1 in 100 chance of scaling to a $1bn+ valuation. That should lead to 25 easy.

Michael Stothard

90% of capital will go to all-male founding teams

Last year only 90.8% of VC money invested into European startups went to all-male teams, according to Atomico’s State of European Tech report. This was pretty much the same as in previous years, with little sign of improvement.

“The data is unbelievably grim from a gender perspective,” said Tom Wehmeier, the author of the report.

While there is some sign of more money being raised by female-led companies at the early stages, it is not much to cling to. And at the later stages, the data is very bad. Not one deal over $50M was closed by a women-only team in 2020.

I hope that this will start to shift in a meaningful way this year, but I fear that it will be the same kind of numbers all over again in 2021.

Michael Stothard

Klarna will claim to be the new Amazon

Remember when the cofounder of the fintech startup Klarna, Sebastian Siemiatkowski thanked CNBC “for making it official: Klarna is now the global innovation leader and Paypal the follower.”

At the time, many of us smiled at the somewhat attention-seeking tweet from the Swedish entrepreneur. Dragos Novac did a great analysis about it.

But perhaps Siemiatkowski has a point.

The Klarna app has moved away from being a payment app (you can still manage your payments there) to something bigger and shinier. It is now actually luring us to shop through the app.

Being eight months pregnant there is no point in me looking at sequin dresses, but still, I find myself browsing with an urge to spend money.

In comparison, Amazon, which I visited the other week, has the opposite effect on me.

Klarna just hired a fashion director as well. In terms of logistics and warehousing, it obviously has some way to go, but Amazon wasn’t built overnight either.

I’m not the first to think this, but I am pretty sure I am the first to bet a sequin dress that Siemiatkowski will tweet that Klarna has taken the first step becoming the 2020’s no 1 super-platform by the end of 2021. Amazon is so 90s.

Mimi Billing

The rise of the European SPAC — and the slump of the IPO

In Europe, SPACs is still a little known piece of jargon, but 2021 will change that.

SPACs (special-purpose acquisition companies) give startups an alternative to listing publicly. They are essentially public investment vehicles with a mandate to buy large stakes in startups.

Instead of listing on a public exchange then, startups can be bought by a SPAC — securing a large capital raise as well as allowing early shareholders to cash in.

The benefit of a SPAC exit is it avoids much of the regulation and red-tape that comes with going public normally. Meanwhile, SPACs often offer startups the same valuation they expected to get on the public market.

Moreover, SPACs are themselves publicly traded, so retail investors can still indirectly buy-in to the success of a startup.

SPACs are already all the rage in the US, and it’s only a matter of time before they begin to court large European startups — especially fintechs.

Indeed, the European startup ecosystem is maturing and expected to soon produce a wave of public exits.

Isabel Woodford

Climate tech will become the hottest investment topic

Greta Thunberg and her fellow environmental activists have done their thing. Governments are responding (albeit too slowly). Big companies are outbidding each other in their efforts to look green. VC investors are increasingly investing in climate tech startups in anticipation of big policy shifts.

In February, Bill Gates will publish a much-anticipated book on how to avoid a climate disaster, sparking a global conversation about what practical steps we all need to take. 2021 will be the year when green investment goes mainstream. European entrepreneurs have plenty of smart ideas about how to tackle climate change. Now they need to scale.

To date, climate tech investments have accounted for a relatively small, if very fast-growing, sliver of VC funds (about 6% of the total capital invested in 2019 according to Dealroom).

But they are ramping up quickly, increasing from $418m in 2013 to $16.3bn in 2019. Expect them to grow even faster in 2021 as citizens, consumers, employees, companies and investors all demand that more be done to respond to the climate emergency.

John Thornhill

Bosses will want us back in the office ASAP

Many of us feel ambivalent about the new normal of working from home. While answering emails from bed in pajamas might be fun from time to time, it’s easy to feel isolated, less active, and less connected to the world around us without the routine of going into the office.

As countries have oscillated between tougher and looser restrictions in response to infection rates, many companies have adopted hybrid models, with employees coming into the office for a few days a week. Many workers will be pushing for a similarly flexible model to become a long-term policy from their bosses.

But don’t expect all employers to give up without a fight.

Following the initial lockdown, we’ve already seen stories of workers being summoned back to the workplace against their will, and Facebook has been accused of “risking lives” by bringing employees back to the office prematurely.

Workers who’d rather have some flexibility certainly have a case to make, with research showing that remote work can increase productivity. However, rising unemployment in a post-pandemic economic slowdown could weaken workers’ negotiating hand, as we enter a “buyers’ market,” particularly at a junior level.

More senior employees will likely have more say over the terms of their work, and it will be down to them to secure a more flexible approach for others.

Tim Smith

Europe’s tech ecosystem will become more unequal as Covid begins to bite

The last global financial crash was not an easy time for southern European nations. Unemployment skyrocketed as fragile economies buckled, and many in the region fear we could be in for more of the same this time around.

Signs of a widening gap between northern and southern European startups are already showing. While Europe as a whole looks set this year to exceed funding levels compared to 2019, investment in Spanish startups has fallen by more than half.

Government support programmes for the tech sector also paint a worrying picture for the south. As countries like Germany and France rolled out €2bn and €4bn support schemes respectively, the tech sector in Portugal was treated to €25m in aid measures.

There is hope that the European Recovery Fund will go some way to prevent the gap widening further. Back in August, the EU agreed to a €750bn relief package that will disproportionately benefit smaller European economies, but veterans of the last financial crash believe it will be inadequate to create a truly integrated Europe.

The gathering storm of recession and unemployment will hit Europe hard when furlough schemes come to an end. When it does, the continent’s smaller economies will be far less equipped to weather it.

Tim Smith

Your dog will eat insects

Possibly Rover is already hoovering up the occasional spider or beetle in the garden, but we mean eating insects on a more regular basis as insect-based protein becomes a more mainstream pet food option.

Insect protein much more eco-friendly than meat, as producing a kilo of insect-protein takes just 2% of the land area 4% of the water that producing a kilo of beef produces. With pets estimated to be consuming 20% of the world’s meat, many owners are becoming concerned about the carbon pawprint. Insect protein may also be healthier for pets — a surprisingly high percentage of dogs, for example, have an allergy to beef.

Ynsect, the French mealworm farming company which raised an eye-popping $372m funding round this autumn, already sells its insect protein to makers of hypoallergenic doga and cat food, but now says it is in talks with several large pet food brands too. Ynsect is building a huge production plant in Amiens that will allow it to produce 1,000 times more mealworm protein than it does today.

Signs of insect-based pet food’s popularity are around at the grassroots level too. Aardvark, the UK-based startup selling insect-based dry pet food, ended up raising some £300,000 in its recent crowdfunding campaign, six times more than the £50,000 it had initially sought. The Aardvark team planning to start selling direct to consumers in early 2021.

Maija Palmer

Cities will say yes to flying taxis

We’re not going to be riding in flying taxis yet in 2021 — the first services aren’t likely to begin until 2023 at the earliest. But cities will start to make preparations for networks of flying taxis.

Volocopter, the German flying taxi startup, will start test flights near Paris next year, and has said it would begin services in Singapore by 2023. Dubai is also carrying out tests with Volocopter and China’s EHang, and says it could begin services in 2022.

EHang is also working with the Austrian city of Linz on a pilot project.

Meanwhile, Lilium, the German flying taxi company, has announced a series of hubs this autumn. Germany it has deals with Cologne and Dusseldorf airports, and in the US it has a deal with Lake Nona, the futuristic smart city just outside Orlando, to operate flights from there. Expect a lot more announcements in 2021 for take-off and landing spots in other cities.

There are at least 50 cities worldwide evaluating the viability of urban air mobility, according to a report by Frost and Sullivan, the consultancy, mainly because they need to ease congestion and find cheaper alternatives to road- and rail-building.

Maija Palmer

We will figure out what to do with quantum computers

Quantum computers are the answer to everything — and nothing. The number of qubits in a quantum machine is still relatively low — 65 for an IBM machine — and so far it has been a little unclear just what we will be doing with quantum machines even when they do have a usable amount of qubit power.

Cambridge Quantum Computing are working out some ideas. A first project is to sell certifiably random numbers to companies that need them, which sounds a bit underwhelming unless you understand just how difficult it is to get true randomness. An idea with more wow-factor is revamping the way computers handle language — moving away from just pattern recognition around sets of words to machines that could understand grammar and the meaning of words. The first corporate customers can start buying these services next year.

Experts believe optimisation problems — the classic example is the traveling salesman trying to work out the shortest route that connects multiple cities —  could be one of the areas where there is a benefit to going quantum. Once you factor in a large number of cities, there are so many different variations that classical computers struggle to handle them. In finance, there are potential uses of quantum to optimise investment portfolios.

Return on investment still looks uncertain when it comes to quantum computing, but expect companies to start figuring it out next year.

Maija Palmer

TikTok will announce a fintech product of some sort

The boom in banking infrastructure means that today, ‘everyone can be a fintech.’

Users can now spend with Apple or Google, Uber operates mobile wallets for its drivers, and Facebook is helping build a cryptocurrency.

So it’s only a matter of time before TikTok — the most downloaded app of 2020 — follows suit.

TikTok allows millions of users worldwide to curate short-form videos. and is particularly popular among teenagers (Gen Z).

No surprise then that Chinese-based TikTok is already reportedly looking at securing a banking license, according to the Financial Times.

This is consistent with reports by the Wall Street Journal that TikTok’s parent company, ByteDance, wants to build out a franchise far beyond video-streaming.

TikTok’s financial play might take the form of peer-to-peer payments or even mobile wallets to allow users to buy products advertised immediately in the app curators.

Mobile wallets could also be utilised by influencers who partner with large brands on the app.

Gen Z has over $143 billion in spending power, making them a lucrative audience to onboard for financial services.

Isabel Woodford

Everything will get gamified

It’s likely to be a few months before vaccines make their way and the “new normal” gives way to parts of the “old normal” that we all miss: seeing colleagues, going for drinks and a nice meal with friends, or catching a concert or an art exhibit.

As we try to do those things while we’re still stuck at home, and sitting in front of a screen takes up an increasingly substantial part of our days, my bet is that our entire existence will become gamified in 2021.

By that, I mean that applications of all sorts are likely to borrow more and more from the world of video games — because if they’re going to keep us interested, they’re going to have to keep us active behind our screens.

One thing 2020 proved is that screen fatigue is very much a real thing, the worst of which tends to manifest itself during Zoom video calls. Keeping students interested has prompted school teachers to experiment with creative edtech, from the likes of Norway’s educational games app Kahoot!.

And games (small simple games, not Playstation blockbusters) are catching on as a social facilitator for after-school interactions too. European teen social app Yubo has wooed more than 40m users in 40 countries with online interactions that focus on just having a nice time with peers, including by playing small games like “would you rather” or “let them guess”.

As concert halls and opera houses stay forced shut in cities across Europe, they’re also exploring alternatives for what steps to take after launching classic streaming services. Rolling Stone magazine wrote recently about how animated concerts could well become the next craze, bringing music and video games together: full with virtual reality headsets, virtual avatars that interact — and digital “pills” that create the online equivalent of taking drugs.

Marie Mawad

European cities will solve the scooter littering problem

Whilst some European cities such as London have not yet approved the use of electric scooters on the streets others have more or less banned them already for being too messy.

The city council in Copenhagen decided earlier this year that electric scooters are allowed on the streets – they just need to be hired from a physical shop and then be returned to it as well. This obviously is not in line with the business model of Voi, Tier and Dott.

The move was akin to Copenhagen’s decision to ban Uber for a few years back – stating that they could do better themselves. They couldn’t but that doesn’t mean that they would budge under the pressure this time.

Many cities, like Lisbon, Paris, Berlin have introduced fines for electric scooters wrongly parked. In Sweden, there is now an app for angry pedestrians to send a note to the local government departments, tipping them off about wrongly parked scooters.

The problem of scooters lying across the pavements seems to continue though. Perhaps next year we will see a new way of dealing with the scooters without the drastic measures of Copenhagen.

Mimi Billing

Devices will train your brain

Managing your health has become a mantra for many. You are in control of your sleep, your vitamin deficiencies through blood tests and your weekly exercise, right?

If you have all those things in check, then you should check out the next bright thing – brain training. We aren’t speaking of sudoku or juggling but actually improving your brain through neurofeedback.

Neurofeedback is a therapeutic intervention that helps the brain to learn by giving it feedback. It works similarly to a computer game giving you points when you are winning. With a headband stuck on your head and your eyes locked on a screen, it actually assesses your brainwave activity.

Neurofeedback has been used to address problems of anxiety-depression, attention deficits, behavior disorders, sleep disorders, headaches and migraines, PMS and emotional disturbances. But who said it has to stop here?

Research has shown that people without known issues also can improve their brains by using the same technology. So, will the year of 2021 be the year we all become smarter, nicer and more focussed? No, but the trend of trying is definitely about to take off.

Mimi Billing

The year of Dr Data

If 2020 was the year when video consultations with doctors finally became a generalized reality, 2021 is gearing up to be the year of data sharing between patients and their doctors.

There’s increasing demand from practitioners and patients for ways to easily monitor their health at a distance in between appointments.

French startup Withings, which makes connected everythings from smart watches that measure your heart rate to blood pressure monitors, raised money recently to pursue just that.

The coronavirus has helped attract interest of course, but it’s not just that. In the US, regulatory changes are also acting as accelerators: insurance companies are subsidising doctors to do more patient tracking using connected devices from scales to blood pressure and sleep monitors.

Chronic diseases in particular, like diabetes, high blood pressure and sleep apnea, call for this kind of monitoring. They’re typically conditions that both patients and doctors need to keep an eye on, although booking frequent appointments just to check in if nothing is wrong doesn’t necessarily make sense.

Remote monitoring is the second category behind teleconsultations on CB Insights’ annual ranking of the 150 most promising digital health startups in the world.

Marie Mawad

The year big tech gets a big dressing down from governments

Public opinion around the big tech giants – Amazon, Facebook, Google, Apple – has been turning for some time, but recent events have coalesced to shine a more urgent spotlight on some of their more questionable practices.

Examples include Facebook’s Cambridge Analytica scandal, antitrust charges brought against Google, growing protests against workers’ rights in Amazon warehouses, and Apple’s obligation to pay out $113m for slowing down phones.

The European Union has released its own plans to regulate big tech, with threats to break up companies that don’t comply with new rules on data usage and competition. Meanwhile, the US government has said Facebook must sell Whatsapp and Instagram, claiming it has used illegal monopolies to choke off competition. Mark Zuckerberg has said that Facebook will fight this in court, but the ground is being paved to give smaller startups and competitors more of an even footing.

While some still view these companies as impressive and innovative organisations, policy makers are now responding to growing concerns over whether technology is really working for society’s benefit.

Tim Smith

Originally published by
Sifted Reporters | January 4, 2021

 

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I’ve had the song “It’s A Great Day To Be Alive” by country singer-songwriter Darrell Scott stuck in my head for weeks, and it seems fitting. Yes, there are still some very “hard times in the neighborhood,” but we’re also closing out 2020 with a very bright light at the end of the tunnel.

Speaking with venture investors and entrepreneurs, the outlook the reporters at Crunchbase News and I have heard for 2021 is also overwhelmingly optimistic. Perhaps it’s just Silicon Valley’s usual reality distortion field at work, but I think not. Millions of Americans will be vaccinated against COVID-19 even before the year is out, with tens or potentially hundreds of millions more set to receive shots in the first half of 2021. 

We can finally again envision a future that while never quite the same “normal” we knew before 2020, looks brighter. It’s a future that entails less uncertainty—politically, economically and socially. It’s one in which we can start to see—and hug—family and friends again, one in which going to the grocery store isn’t a carefully calculated risk, one in which small businesses and masses of unemployed Americans start to plot the road to economic recovery. 

Venture investment in hard-hit sectors like travel is already starting to tick up. The shift to remote work means many of us will have more flexible work arrangements and has also spurred renewed investment interest in cybersecurity and enterprise software. Digital health has seen record venture investment this year and is only expected to grow in 2021. Hiring in the tech sector took a hit this year but is expected to surge in 2021

I hope we’ll see the tech and venture industries continue to become more diverse next year, an issue that’s particularly important considering the industry has been one of the few economic bright spots this year. Diversity in the startup world means not only funding more women and underrepresented minority entrepreneurs, but also spreading Silicon Valley’s wealth around to more places. 

Noah Carr, a partner at Unusual Ventures, said he expects “to see more high-quality founding teams attract VC funding outside of core markets.” 

“Early-stage startups based outside of core tech hubs like the Bay Area, NYC and Israel will have a better chance at securing funding in 2021,” he said in predictions shared with Crunchbase News. “Traditionally, VCs and angel investors have preferred to invest in startups that are physically close to them given the preconceived notion that you need to be in the same room to collaborate effectively. That’s changing as investors have gotten more comfortable with handling prospective investment discussions and portfolio company interactions entirely through digital means, and as founders get more confident in starting up with distributed teams.”

At the same time, cities like San Francisco and New York that have become increasingly anti-tech in recent years may start to see some of that sentiment change. “Local hostility to tech startups will wane as the need to create jobs and tax revenue surpasses the political benefits of being anti-tech in cities like San Francisco, Seattle, and New York,” Tusk Venture Partners founder Bradley Tusk said in a recent 2021 predictions piece shared with us. “The effects of startups leaving major tech hubs like San Francisco for climates that are friendlier to business (lower taxes, less regulation, less hostility) will start to be felt.”

Tusk also told me in a recent chat that he expects the COVID-19 vaccines themselves to shift the narrative around tech to be more positive.

More than anything, I predict that 2021 will be a year in which venture investment in innovation continues to grow, driven by the remarkable success story of the COVID-19 vaccines. The Big Tech companies will probably continue to serve as a political punching bag for both Democrats and Republicans, but lawmakers and the public will have a greater appreciation for the benefits of an innovation ecosystem that has delivered life-saving vaccines in record time.

Vaccine-maker Moderna is essentially a startup, having been founded less than a decade ago. As Noubar Afeyan, Moderna’s co-founder and chairman, puts it, the company’s success is “a powerful reminder of what is possible when we journey forth, armed with propositions that may—in just a decade—go from outrageous, to obvious, to lifesaving.” 

Originally published by
Marlize van Romburgh   |  December 28, 2020
Crunchbase

Illustration: Dom Guzman

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Cybersecurity To Remain Hot In The New Year

Despite a pandemic that raged around the globe for the better part of the year, the cybersecurity market retained investor interest in 2020 and many in the sector expect next year to be no different.

“Security is a red hot sector with more and more money pouring into it,” said Andrew Atherton, managing director at Union Square Advisors.

Funding numbers remained strong this year, according to Crunchbase data. The cybersecurity sector saw more than $8.1 billion invested to date globally this year and nearly $6.3 billion in the U.S. That compares to $7.4 billion globally and $4.7 billion in the U.S. last year.

Large deals in 2020 include Santa Clara, California-based Netskope hauling in $340 million in February; Mountain View, California-based SentinelOne raising $267 million in November; Dallas-based StackPath closing a $216 million Series B in March; and Minnesota-based Arctic Wolf announcing a $200 million raise in October.

Merger and acquisition dealmaking in the cybersecurity sector did take a hit, with values dropping from $28.1 billion in 2019 to $13.8 billion at the end of the third quarter this year, according to San Francisco-based financial advisory firm Momentum Cyber.

Despite the drop in dealmaking, Atherton said he hears from corporate development teams of large companies that they get approached on a daily basis by startups and growing cybersecurity firms interested in strategic dealmaking and partnerships.

Atherton said he expects dealmaking to remain strong in 2021, after it picked up significantly in the second half of the year. More nontraditional buyers could help push the market, he said, pointing to Fastly acquiring Signal Sciences in August for $775 million as an example.

Where may investors and strategics look to in 2021 when analyzing the cybersecurity landscape? Following are subsectors that seem primed to have escalated interest in the new calendar year:

Analysing risk from the top

The recent SolarWinds hack—where Russian attackers penetrated several companies’ and government agencies’ systems through a piece of that company’s server software—is yet again another example of the imperfections of cybersecurity.

“It’s unfortunate,” said Dino Boukouris, founding director of Momentum Cyber. “It’s shocking, but not surprising, The reality is we are all fighting the same fight, but no one is impervious to attacks.”

Matt Kinsella, managing director at Maverick Ventures, said the SolarWinds hack may be an inflection point for the industry to look at how vendors share data.

“Vendors must exchange information so risk is clearer,” he said. “And that process should be streamlined.”

While some get excited about new network security tools and endpoint solutions, large third-party vendors provide the necessary infrastructure of organizations’ defenses. Once the full breath of the SolarWinds attack is understood, vendor risk management and companies that allow for that data exchange could see an uptick in interest.

Securing health

The pandemic caused many people to focus on health, and those in cybersecurity were no different.

“These ransomware attacks on hospitals are terrifying,” Kinsella said. “This area wasn’t even a focus a few years ago.”

Kinsella said that has slowly changed as attackers have learned to use medical devices themselves that are now connected to networks as virtual backdoors.

Recent years have seen increased interest from buyers looking for IoT security providers, which includes medical device security. Among them was Palo Alto Networks buying Zingbox for $75 million last year, and Armis being acquired by Insight Partners at a valuation of $1.1 billion.

Large tech companies like IBM also have grown their health care security divisions, said Kinsella, whose firm invested in New York-based medical device security provider Cylera in 2018.

Nevertheless, investment in the area lags behind other cybersecurity verticals, but a strong 2021 is a possibility.

“Right now it’s a decade behind,” Kinsella said, “but I can see interest picking up.”

Kubernetes and containers

The use of containers in building modern applications has grown through recent years, with open-source software platform Kubernetes becoming a popular way to deploy and manage those containers.

“Cloud infrastructure security is hot and Kubernetes and container security is just a natural extension,” Boukouris said.

That space already has seen significant dealmaking. Palo Alto Networks bought RedLock for $173 million in 2018 and followed that with its acquisition of Twistlock for $410 million and PureSec for an undisclosed amount last year. The cybersecurity giant used that trio to create its cloud security offering Prisma Cloud. Then in April, Rapid7 bought cloud security posture management company DivvyCloud for approximately $145 million.

Venture capital also has rolled in. In September, Mountain View, California-based StackRox raised a $26.5 million round, while in May, Israel-based startup Aqua Security raised $30 million, and Mountain View, California-based Lacework raised a $42 million Series C in the second half of last year.

“It’s a space that is still developing, but I think you will see heat come to that space because cloud infrastructure is so hot,” Boukouris said.

Security services

Regardless of what the next big thing is in cybersecurity, it’s guaranteed more tools and complexity will come into the space. That means security services—the unsexy subsector of managing security tools—also will remain interesting to investors.

“There is some great technology out there, but because there’s so much you need someone to manage it,” Boukouris said. “That’s why the space is red hot. There is interest from VC and private equity alike.”

Companies like Arctic Wolf and SentinelOne, as well as others such as deepwatch and eSentire, which help manage tools and offer security operation center services, continue to attract investor interest as offerings proliferate throughout the sector, Boukouris said.

“The more tools get complicated, the better services companies need to manage them,” he added.

Looking ahead

Atherton said he expects cybersecurity as a whole will see high single-digit to low double-digit growth in spend next year, with strategics and investors eyeing bigger slices of the pie.

“I don’t think you’ll see much of a slowdown in M&A or investment in the sector,” he said “It remains very hot.”

Originally published by
Chris Metinko | December 22, 2020
Crunchbase

Illustration: Dom Guzman

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Every year tens of thousands of entrepreneurs pitch investors with their tech startup ideas. We at Sifted asked ourselves: could a robot do any better?

So for a bit of fun we asked GPT-3, OpenAI’s powerful new language generator, to pitch us some ideas for transformative new tech companies in the fields of fintech, data, digital health and software.

Note: these pitches were not edited at all. All we did was give GPT-3 some example pitches and the AI did the rest with uncanny efficiency.

Below we have mixed GPT-3 pitches up with some real startups in the same sector, just to make it interesting for our readers. Can you tell the difference? And which ones would you invest in? Answers at the bottom.

GPT-3 or a real startup? Fintech

a) FinanceWise is changing the way people think about their finances. They are building the first ever financial health engine. This puts a complete picture of your finances at your fingertips. It also monitors your spending, and gives you a simple way to fix your finances.

b) Giftcoin aims to change the relationship between charities and donors, making giving more transparent and effective. By using blockchain technology, Giftcoin will give donors a better idea of where their money is going, and charities a better idea of where it is needed.

c) Golden Tickets is an online knowledge-sharing platform that helps consumers make better financial decisions. It works by providing people with the tools and knowledge to make informed financial decisions and become better savers.

d) Insurami is re-inventing the process for leasing office spaces, unlocking £200bn in the US, UK and Europe alone. Our proprietary risk model enables landlords to vet customers in seconds, and lower upfront deposit costs by 90%.

GPT-3 or a real startup? Data

a) Waste Labs runs a proprietary AI platform that enables waste collectors and cities to analyse and improve their collection system. By creating a digital twin of the system, the platform highlights inefficiencies, and suggests improvements, helping to reduce collection costs by 10% – 40%. The company already counts a global waste collector among their clients.

b) NeoWize’s AI platform tackles one of the biggest challenges in the industry: the lack of skilled inspectors that can analyse the quality of raw materials. The company’s AI model learns from experts and can be used to measure the quality of any material in a repeatable and scalable way.

c) Avva is building the most efficient global healthcare platform. With more data on doctors, hospitals and patients, Avva will increase efficiency of providers and services. It will help doctors gain more time with their patients, and help hospitals get better paid. Avva’s AI steering can help providers decide when to refer a patient to a different hospital to get the best price for that service.

d) Hound provides a digital assistant to help you find the best home care for your loved ones. By combining the language recognition technology of Hound alongside our on-demand platform, we’ve helped parents find the best care, and nurses find opportunities to work from home.

GPT-3 or a real startup? Digital Health

a) Nanopore uses DNA sequencing to allow anyone to sequence their genome. Our founders are scientists who have devoted their lives to making DNA sequencing happen. We’ve changed the world by making DNA sequencing orders of magnitude cheaper and faster. We’ve sold the world’s first desktop DNA sequencer. We’ve sequenced the world’s most complete human genome by hand. We’ve launched the world’s first nanopore-powered lab. But we’re just getting started.

b) Peloton Therapeutics is harnessing the power of machine learning to bring new treatments to patients faster. We are developing a drug portfolio in partnership with one of the world’s largest pharma companies. Our ambition is to improve treatment outcomes for patients and bring new therapeutic advances to market faster.

c) myLevels uses data from Continuous Glucose Monitors and Bayesian Machine Learning to model the very personalised impact that food has on people’s bodies. We help you see and understand what foods are best for your unique metabolism. People using myLevels for weight loss have dropped >10kg.

d) InControl Medical has developed a platform for continuous, real-time control of medical devices for patients at home. We also offer a cloud-based solution with a user experience designed for patients and carers. The platform and cloud solution are designed for devices on the market today and future devices.

GPT-3 or a real startup? SaaS

a) Cloudreach’s team of technical experts enables enterprise organisations to architect, migrate and manage applications across public, private and hybrid cloud environments. Cloudreach’s unique offering enables businesses to realise the cloud’s full potential by providing a single point of contact and accountability for every application, regardless of where it is hosted. Today, they manage over 12,000 cloud applications and processes for thousands of customers across 100 countries.

b) Narus is an intelligent industry-wide knowledge management platform for lawyers. With our proprietary knowledge graph and by harnessing the power of machine learning, our solution can distinguish in daily communication what is legal know-how and what is not, and then automatically categorise and logically connect hundreds and thousands of knowledge nuggets. This turns a burdensome and dull process into a real breeze.

c) Metapop is a machine-learning platform to help publishers convert web visits into revenue. Metapop can also help advertisers to optimise campaigns on a real-time basis. In the future, MetaPop will provide targeted content based on the visitor’s preferences, and thus increase overall engagement.

d) Bowlie is a free, secure alternative to the WhatsApp “status” feature for mobile and browser. We’re challenging Facebook by creating a more transparent social platform. With Bowlie, everyone can create an open and verified identity, and communicate with anyone across the world.

The fintech pitches were all written by GPT-3 apart from Insurami. The data pitches were all written by GPT-3 apart from Waste Labs. The digital health pitches were all written by GPT-3 apart from myLevels. And the SaaS pitches were all written by GPT-3 apart from Narus.

Editors note

All text for the human-made entries were taken from the website of the company builder Entrepreneur First. We chose EF companies because they are European, early-stage and all presented on the website in a similar format.

We picked 5 EF companies for each category and fed them into Open AI’s GPT-3 system with the help of Sid Bharath, the CEO of Broca, an AI company that generates ad copy and other forms of marketing content (a hot new sector).

GPT-3 learned from the entries and the wider web and came up with its own names of startups and ideas in a similar style. Originally we put in 5 real companies and prompted GPT-3 to make us another 5. But the result was a bit long for readers to wade through. But if you want to see the full unedited set, you can see them in this doc here.

What amazed us was how plausible these startup ideas the GPT-3 came up with really were. Sure, no VC would invest in any of these with just a blurb. But for those who want an idea of a business to start, they could do worse than dropping GPT-3 a line.

Matt Cliffford, the cofounder of EF, said: “This is exactly the sort of task at which GPT-3 excels, so it’s not surprising that it’s very hard to tell which descriptions are real and which aren’t. Fortunately for founders, actually building a company is still a long way beyond any model’s capabilities… but I expect we’ll be funding a lot more NLP [Natural Language Processing startups] over the next couple of years"

Originally published by
Michael Stothard | December 16, 2020
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Feature photo of  Jannick Malling and Leif Abraham courtesy of Public.com

Public.com brought in its second round of capital infusion in 2020, this time $65 million in Series C funding.

The New York-based social investing network company enables users to buy any stock with any amount of money, and around that, can participate in social communities, Leif Abraham, co-CEO of Public.com, told Crunchbase News.

“There are two major reasons why people are not investing: Lack of financial education on how to invest, and the culture of the stock market, which is traditionally homogenous, very male dominated and not very welcoming,” Abraham said. “The perception seems scary, so we are building a social network and community from scratch to provide a more welcoming place for new investors that is diverse in backgrounds.”

Accel led the round–its third lead for Public.com–and was joined by Lakestar and previous investors Greycroft and Advancit Capital, as well as a group of individuals including professional skateboarder and entrepreneur Tony HawkDick Parsons and The Chainsmokers’ MANTIS VC.

The new investment comes eight months after the company raised a $15 million Series B, bringing Public.com’s total funding to $90 million since it was founded in 2018, according to Crunchbase data.

Public.com is operating in a market with incumbents, such as the publicly traded E*TRADE and Robinhood, and that has generated investor attention. One recent example is San Francisco-based social investment platform CommonStock, which announced $9.7 million in seed funding in August.

With the additional funding, the company will invest in development of the social network and hiring across the board, Jannick Malling, co-founder and co-CEO, said in an interview.

“We’ve just scratched the surface of the social network,” Malling said. “When you make a trade, you can share it, talk within chat groups, send DMs and create a public portfolio that will show what company stocks you own. The product gets better the more people that are on it.”

Although Abraham did not disclose the number of community investors, he did say it grew 10 times since its launch in September 2019, and its makeup includes approximately 40 percent women.

Abraham and Malling said its social-first approach is why investors, like Hawk, came on board.

“The stock market has historically been an intimidating place reserved for a lucky few,” said Hawk in a written statement. “As technology continues to disrupt barriers, Public.com is creating a platform that makes investing accessible to everyone, while providing a place where they can share ideas and build their confidence as they build their portfolios.”

Originally published by
Christine Hall | December 15, 2020
Crunchbase

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Spot the robot dog   Boston Dynamics

 

Sources say SoftBank is selling its robotics company  Hyundai Motor Co. (Hyundai Motor) has agreed to acquire the robotics company from SoftBank Group for approximately $921 million (₩1 trillion). 

The acquisition finalizing the process is taking place today, December 10, said sources in the know. The Korea Economic Daily was the first to report on the sale. 

This exchange will further push Hyundai Motor in the robotics direction it's been seeking to move into. This adds to the company's electric vehicles and hydrogen fuel cell car business. 

Talks of selling Boston Dynamics to Hyundai Motor circulated a month ago, and it's now looking like it's going ahead full steam. 

According to The Korea Economic Daily, Hyundai Motor will pay for half of the acquisition, and its affiliates will pay the remainder, including Hyundai Mobis Co. 

Boston Dynamics is probably best known for its robotic dog, Spot. Making headlines since its unveiling in 2015, the four-legged robot has already been bought by a number of people and companies, and used for different needs.

The robotics company has already seen a number of owners in its time. Originally an MIT spin-off brought to life in 1992, it was then bought by Google's parent company Alphabet in 2014, before being sold to SoftBank Group in 2017. Hyundai Motor is soon to be its new owner. 

The South Korean company has shown more and more focus and interest in automated vehicle technology and robotics, and this acquisition is proof of that. 

No official statement has yet been released from either company, so confirmation still has to come through, but if The Korea Economic Daily's sources are anything to go by, a big purchase is imminent.

Originally published by
Fabienne Lang | December 10, 2020
Interesting Engineering

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Silver Level Contributor

Illustration: Dom Guzman - Crunchbase

With Airbnb’s initial public offering expected tomorrow and the first doses of COVID-19 vaccine being distributed in the United Kingdom, investment in startups in the travel and hospitality space is expected to pick back up in 2021, according to investors.

“I think the No. 1 question we get right now is ‘Are you investing? Are you investing back in travel?’ A lot of travel startups think people aren’t investing in travel and hospitality, and I think that’s a wrong misconception,” said Kristi Choi, an investor at Plug and Play who focuses on travel and hospitality. “We definitely are still investing in travel. We’re looking for great opportunities.”

Crunchbase data shows the travel sector has seen a dip in venture investment over the past year as COVID-19 restrictions have limited movement, especially internationally. But depending on people’s views of the vaccine and how quickly they begin traveling again, investment in travel could rebound in 2021. That could bring more VC funding to smaller, early-stage startups, which have been hardest hit by the impacts of the pandemic.

Investment in the travel space looked “really good” until about February, according to Raj Singh, managing director at JetBlue Technology Ventures, the corporate VC arm of JetBlue Airways that invests in early-stage travel and hospitality startups. But from March onward, things were bleak.

Crunchbase data also backs that up: Both the number of funding rounds and the average dollar amounts raised by venture-backed travel startups have been on the decline this year. 

Keep in mind, outsized funding rounds like Airbnb’s $1 billion private-equity round announced in April and U.K.-based Travelport International’s $500 million private equity round announced in June have skewed some of the monthly totals in terms of U.S.-based and global funding.

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The COVID-19 pandemic hit the early-stage travel and hospitality startups the hardest, according to Singh. With investors unsure of how long the pandemic would last, few wanted to place bets on smaller, earlier-stage companies that weren’t well-established in the market. 

“Those startups that were really small and early … when they started running out of money, there were very few people interested in investing,” Singh said.

It was a different story for late-stage travel startups like Airbnb. A major player in the short-term rental space, it had no problem quickly raising an emergency $1 billion in funding and $1 billion in debt financing in April.  

Early-stage investors like Plug and Play Ventures, on the other hand, largely took a step back. Early-stage startup investing is inherently more risky, and when the pandemic hit, the firm first prioritized making sure its portfolio companies were OK before looking for new deals, according to Choi. The firm plans to do “many more” investments in 2021, she said.

How much investment flows back into travel and hospitality startups next year will depend in large part on how much people trust and take the vaccine, according to Singh.

“I suspect that people will start investing in early-stage companies, figuring that by the end of 2021 things will be back to normal,” Singh said.

Recovery for travel in general and investment in the travel and hospitality sector could also differ for leisure and business travel. Singh suspects leisure travel will pick up before business travel because of the liabilities and duty of care associated with business travel. There’s also pent-up demand for leisure travel, he said. 

Some aspects of the travel industry, like vacation home rentals, have already picked up a bit. That’s because short-term rentals have been perceived as safer than hotels, Singh said. 

The travel sector could see renewed interest in concepts like health passports (proof of identity  and vaccination status), he said. He also anticipates another push into virtual reality and augmented reality for a hybrid version of virtual and physical travel.

Both Choi and Singh pointed to sustainability and hybrid events as emerging themes for travel investment in 2021. COVID-19 has changed peoples mindsets in a lot of ways, and conferences could be part-virtual/part-in person in the future. And technology to enable that will be necessary.

“I think the IPO of Airbnb will be very positive news and there will be others who look for similar types of outcomes, so I expect later-stage to be interesting,” Singh said. “But it is all kind of predicated on the vaccine.”

Up Next

For most travel startups, private financing has been the focus. But there’s also the option of the public markets.

The COVID-19 pandemic brought the tech IPO market to a halt early on, but things picked up and have been busy since, with Airbnb’s IPO tomorrow helping to cap off a robust year for offerings. While Airbnb has been a fixture in the travel and hospitality space and one of the most anticipated IPOs of 2020, it’s not the only late-stage travel company that could go public soon.

Among the travel companies research firm Renaissance Capital has been tracking for a potential IPO are Sun Country Airlines and SoHo House, according to Matt Kennedy, a senior strategist at the firm. Sun Country Airlines, which is owned by Apollo Global Management, was reportedly preparing for an IPO as soon as 2020 before the COVID-19 pandemic hit. Now, the company plans to restart its IPO preparation if demand for travel gains steam, Bloomberg reported in October.

Soho House reportedly looked into an IPO in 2018, but those plans are now believed to be on hold, Kennedy said. Other potential 2021 IPOs include IBS Software, which provides IT solutions for the travel industry, and vacation rental management company Vacasa.

“We’re out here ambitiously looking for opportunities and we’re ready to invest more,” Choi said.

Originally published by
Sophia Kunthara | December 9, 2020
Crunchbase

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Image: Unsplash - Chronis Yan

Despite the economic uncertainty, most venture capitalists expect their investments to outperform major equity indexes and are still funding new endeavors, says Paul Gompers.

The COVID-19 pandemic has battered industries around the world, but one sector's prospects aren’t so bleak: venture capital.

Startup backers—and private-equity managers in general—say that half of their portfolio companies haven’t been harmed by the coronavirus that stalled the economy in March, according to two new surveys by Paul A. Gompers, the Eugene Holman Professor of Business Administration at Harvard Business School. Only about 10 percent of companies in this often unpredictable industry have been severely affected.

Despite the economic uncertainty, 91 percent of venture capitalists expect their investments to outperform major equity indexes going forward, and they’re continuing to fund new endeavors.

“It’s sort of the opposite of doom and gloom,” Gompers says. “We were surprised by how relatively unaffected the venture industry was.”

In collaboration with the National Bureau of Economic Research, Gompers teamed with Will Gornall of the University of British Columbia, Steven N. Kaplan of the University of Chicago, and Stanford University’s Ilya A. Strebulaev to survey more than 1,000 venture capitalists at 900 firms from late June to mid-July.

“THE BULK OF VC INVESTORS ARE LOOKING TO DO NEW DEALS. THEY’RE JUST SITTING ON A TON OF MONEY.”

During that period, global daily deaths had topped 9,000 for a second time as infection rates were soaring across the Americas. Almost all of the world’s 10 largest economies were contracting.

Despite the widespread pain, venture capitalists surveyed—who collectively manage $340 billion in assets—said they expected their funds to prosper. However, two-thirds acknowledged that investing had slowed. During the first half of 2020, they invested at 71 percent of pre-pandemic levels, a rate that they expect to climb to 81 percent by the end of the year.

Venture funding in a socially distanced world

Discouraged entrepreneurs shouldn’t put away their pitch decks yet. For one thing, funding commitments are still outpacing those of past periods of economic distress, the researchers say. US-based venture capital firms also entered 2020 with strength after raising $46.3 billion in 2019, the industry’s second-best year of the past decade, according to the PitchBook-NVCA Venture Monitor.

“The bulk of VC investors are looking to do new deals,” Gompers says. “They’re just sitting on a ton of money.”

Perhaps reassuringly, a far more basic factor has been holding back investment: remote work. Lockdowns and rising COVID-19 cases prompted many venture capitalists to literally head for the hills, decamping to vacation homes in Wyoming and Idaho. Even with its close ties to Silicon Valley and emerging technology, the loss of in-person pitch meetings has stymied an industry used to schmoozing.

“Informal networking is so critical to deal flow,” Gompers says. “And of course, less time is being spent on networking because you’re not physically together.”

The pandemic might also delay initial public offerings, forcing venture funds to hold investments longer than planned. To ensure smooth exits, many venture capitalists have redirected their time from deal-making to shoring up portfolio companies.

Given these conditions, Gompers says that startup founders should expect:

    • Longer pitch and review processes. While venture capital firms will need to deploy near-record amounts of capital, the due diligence process will take significantly more time, Gompers says.
    • Potentially less favorable terms. As the pandemic grinds on and funding becomes potentially riskier, venture capitalists might assign lower values to startups and seek larger equity stakes.

“The valuations might not be as high as they would have expected, but there's still money there,” Gompers says. “There are still opportunities for those with really great companies or really great ideas.”

Private equity’s less rosy outlook

Venture capital’s resilience contrasts with the rest of the $4 trillion private equity industry. Even though COVID-19 has hurt a similar percentage of companies backed by private equity and venture capital, returns on traditional private equity portfolios will likely be worse this year, Gompers says.

Like venture capital, the US private equity industry entered 2020 on solid footing, with a record $2.5 trillion of capital to invest, according to Bain & Company. However, the need to triage vulnerable portfolio companies and ongoing uncertainty about the pandemic might hinder managers’ ability to find new deals, the researchers say.

“The private equity firms have truly had to roll up their sleeves and become very, very active in their portfolio companies,” Gompers says. “And there's only so much time to spend in a given day.”

Gompers, Kaplan, and Georgetown University’s Vladimir Mukharlyamov reached out to 200 private equity managers from firms overseeing more than $1.9 trillion in assets during July and early August. They found that 92 percent of private-equity managers were interacting with portfolio companies every week during the pandemic, compared with 26 percent among venture capitalists. Another 6.8 percent were working with companies daily versus 2 percent among venture capitalists.

Will the intense interaction make a difference for private equity? It’s hard to say, but the hands-off nature and low expectations of venture capital firms, which invest in less established companies, might serve them well during these turbulent times.

“In venture capital, a third of the companies you put money into are just going to go belly up,” Gompers says. “But maybe 10 or 15 percent of your companies will go on to make five or 10 times your money.”

Originally published by
Danielle Kost | November 30, 2020
Harvard Business School

About the author - Danielle Kost is the senior editor of Harvard Business School Working Knowledge.

 

 

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Silver Level Contributor
Close-up of sign for gig economy meal delivery app Doordash in a restaurant in Lafayette, California.
Smith Collection | Gado | Archive Photos | Getty Images
 
KEY POINTS
  • Food delivery app DoorDash is looking to raise up to $2.8 billion in its IPO, which would value the company at $32 billion on a fully diluted basis, the company revealed in a new filing Monday.
  • DoorDash plans to list 33 million shares at a price between $75 and $85.
  • The company will list its shares on the New York Stock Exchange under the symbol DASH.

Leading food delivery app DoorDash is looking to raise up to $2.8 billion in its IPO, giving it a valuation of up to $32 billion on a fully diluted basis, the company revealed in a new filing Monday. Its last private valuation was $16 billion as of June.

DoorDash plans to list 33 million shares at a price between $75 and $85 per share.

The company will list its shares on the New York Stock Exchange under the symbol DASH. DoorDash released its first filing to go public with the Securities and Exchange Commission about two weeks ago.

DoorDash will offer three classes of stock with different voting and conversion shares. Class A common stock will grant owners one vote per share. Class B shares will come with 20 votes per share, while Class C shares will have no voting rights.

DoorDash reported $1.9 billion in revenue for the nine months ended Sept. 30. That’s up from $587 million during the same period last year. As its revenue grew, DoorDash also narrowed its net loss to $149 million over the same period in 2020. In 2019, DoorDash had a net loss of $533 million over the nine-month period.

DoorDash is set to join competitors GrubHub and Uber on the public market. DoorDash has the lead in U.S. market share among them, with 49% of meal delivery sales in September compared with Uber’s 22% and GrubHub’s 20%, according to analytics firm Second Measure.

The company is expected to make its public debut among a handful of other widely anticipated companies. AirbnbRoblox and Wish are all expected to go public by the end of the year.

Originally published by
Jessica Bursztynsky | November 30, 2020
CNBC

-- CNBC’s Lauren Feiner contributed to this report.

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Platinum Level Contributor

“Look at it in five years, and it’s going to be a whole lot more," opined Novogratz.

With the price of Bitcoin continuing to test support around $19,000, Galaxy Digital founder and CEO Mike Novogratz recommends HODLing until 2025.

In a Yahoo Finance Live interview published on Wednesday, Novogratz said that the current Bitcoin (BTC) rally is being fueled by institutions and high-profile investors “slowly getting into the space.” He cited companies like PayPal and Square adopting crypto, as well as billionaire Stanley Druckenmiller recently suggesting the digital asset may pay out more than gold.

“Bitcoin has become a macro asset to hedge against the debasement of fiat currency both here in the U.S. and abroad,” said Novogratz. “Everyone should put 2% to 3% of their net worth in Bitcoin and look at it in five years, and it’s going to be a whole lot more.”

The CEO stated he believed that the crypto asset's volatility would remain, but found it unlikely that the price of Bitcoin would “get down below $12,000 again.” Last week, in a Twitter response to English actress Maisie Williams, he said Bitcoin would eventually hit $65,000 due to a combination of low supply and “tons of new buyers.”

In 2018, Novogratz founded Galaxy Digital, a major crypto venture capital firm. Today he is known as one of the biggest investors in crypto and blockchain. The CEO has often been bullish on the price of Bitcoin, predicting the asset would reach $20,000 by the end of the year.

At time of publication, Bitcoin is priced at $18,978, having risen more than 6% in the last week.

Originally Posted: TURNER WRIGHT November 25th 2020 CoinTelegraph

Link to Original Article Here

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Silver Level Contributor

Image: Unsplash - Melissa Walker Horn

Many startups went into 2020 with ambitious fundraising plans. Then, COVID-19 hit. Fast-forward several months and the amount of investment in startup funding in 2020 is expected to decrease by about $28 billion globally. What’s promising is that, with the right fundraising strategy, marketplace shake-ups can create new opportunities for early-stage businesses.

Startups will benefit from closely monitoring market trends for a better understanding of the environment. Deals are happening, but it’s about knowing where to look. Read on for takeaways that founders can leverage to reshape their fundraising approach in the current landscape.

Funding prospects vary by stage

 

Venture capitalists are still looking at early-stage deals, and they’re potentially looking at a partnership of seven or more years. However, these deals may be slower to execute, so founders should be prepared for a more competitive market.

Today’s timeline for funding Series A has extended to about six to nine months, though this timeline is shorter for seed-stage companies given the smaller scale of their funding rounds.

Making a multiyear commitment over a Zoom call may seem like an uphill battle, but we have found that startups have had the advantage of being able to secure more meetings with investors during the pandemic because people are more accessible—they are more often home rather than on a flight traveling. Given the nature of virtual meetings, it is important to tailor presentation and meeting materials to be more visual in nature and focus on developing rapport and authentic relationships with investors online.

Growth-stage startups are in a less challenging position when it comes to securing VC funding. VCs have already been following many of these startups’ progress for many years and are more comfortable making an investment during volatile times, having likely worked on deals with them pre-COVID. A number of VCs are increasingly holding the majority of their capital back for late-stage investments, so they can double down on current portfolio winners—but this doesn’t mean that earlier stage investments are off the table for promising companies.

Consider all options

 

While the current business landscape has been compared to past economic downturns, the capital environment is dramatically different due to the unique nature of the global pandemic. In fact, there is more liquidity in the market than prior to COVID-19. Funding options are still out there for startups—from angel investors to family offices, private equity to traditional credit and loans. Focus on finding the right fit with the company’s financial runway, vertical, and current growth stage. We’ve seen an increase in family offices investing in the innovation economy sector—particularly in areas like life sciences that have seen renewed interest due to COVID-19.

No matter the industry or funding type, securing funding will continue to be competitive throughout the pandemic. Demonstrating timely differentiators and showcasing a flexible strategy—designed to withstand current and future volatility—will be key to accessing capital.

Be flexible and have eyes on the prize

 

The impacts of COVID-19 will continue to have ripple effects for years, making it important for founders to remain nimble. According to JPMorgan Chase’s recent Business Leaders Outlook Pulse Survey, more than half of business leaders have shifted or plan to shift their operating models to be more online, in response to pandemic-related closures and shifting consumer demands. Startups that implement adaptable strategies will continue to see the most success.

Setting realistic targets is also essential to riding out the storm. In general, startups should revise their projections to plan for a reduction of 25 percent to 50 percent in top line growth. This number varies based on a startup’s industry and growth to-date during the pandemic, but creating goals based on the current environment will benefit the business in the long-term.

While 2020 disrupted many startups’ growth plans, there is still a wealth of opportunity on the horizon. By continuing to remain flexible and respond to changing market demands, startups can use this unique moment to take steps to successfully position themselves for years to come.

Originally written by
Alton McDowell, co-head of technology and disruptive commerce, middle market banking and specialized industries at J.P. Morgan | November 24, 2020
for Crunchbase

 

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Silver Level Contributor

Image: Unsplash - Markus Winkler

Debt often has been used by tech startups to pump up their balance sheets during late-stage financing, but now many are looking at it as a viable option much earlier.

“I think over the past years you can see that as a general trend,” said Graham Brown, a partner at Lerer Hippeau in New York. “I think in general, (entrepreneurs) are looking at more options.”

Just this month, edtech company Udacity announced it had raised $75 million in a debt facility from underwriter Hercules Capital, while on-demand electric car company Envoy raised $70 million in debt through the Macquarie Group. In September, another edtech company, Skillsoft, raised a $75 million credit facility from CIT Group.

Earlier this year there were even larger deals, such as corporate travel and expense management platform TripActions raising $125 million in a convertible-to-IPO financing, lodging marketplace Airbnb raising $2 billion in debt and equity from Silver Lake, andr Asana raising $200 million in debt in June before going public.

While exact numbers on deals and amount debt raised are difficult to determine, Blair Silverberg, CEO at Capital Technologies—a firm that helps companies secure venture debt—said there is rising interest in debt as founders and entrepreneurs look for ways to raise capital without diluting ownership.

Capital has seen a 250 percent increase in customer financings since March and believes that half of those can be directly attributed to COVID-19.   

“COVID affected all companies,” Silverberg said. “Regardless of how you were affected, companies want to look at all options.”

Silverberg said in just the last two weeks he has seen VC-backed SaaS companies interested in raising debt to make acquisitions, and a VC-backed consumer company looking at debt to carry inventory. 

The rise of debt

While venture capital is the form of financing most associated with tech startups, Silverberg said market dynamics started changing after the Great Recession—around 2012—when traditional asset managers like KKR and Blackstone started to lend at attractive multiples. Right around that time, the startup fintech industry—with the likes of AngelList and CircleUp—also started offering tech companies alternative financing methods.

Nevertheless, it has been a slow climb for debt as compared to the more traditional venture capital route, which is nearly 20 times bigger now than during the initial technology boom in the mid-1990s. While only about 2 percent of early-stage companies’ capital base is debt, nearly 30 percent of the capital base of companies on the S&P 500 come from debt, said Silverberg. 

Risk versus reward

Venture debt can have drawbacks, warns Lanham Napier, co-founder of venture capital firm BuildGroup in Austin. While the cost of the capital itself is significantly less with venture debt, there is risk associated with leveraging a company, especially in the case of a startup where repeatable business can be an unknown.

“The upside is amazing, but there can be a significant downside to leveraging your company,” Napier said.

Whether it’s a maturing tech market or COVID-19, it does seem more startups are beginning to eye debt as yet another way to unlock the wealth of capital currently in the market.

“I don’t think you have seen much of a change in companies accessing debt in the last six to eight months,” said Brown, adding that companies did draw down on credit facilities they already had access to when the pandemic started in March and April. “I do think that access to capital has never been better.”

Originally publshed by
Chris Metinko | November 18, 2020
Crunchbase

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Bronze Level Contributor

The Hopin platform, which enables event attendees to chat with one another, and watch the main stage or specific sessions, amongst other things

Hopin is already one of Europe's most valuable startups - and investors are getting very, very excited.

When Johnny Boufarhat heard that his startup has only raised the fourth largest European Series B round of 2020, he was not happy. 

“Who are the others?” he asked. And then added, quickly: “What’s their valuation?” 

His company, online event platform Hopin, has just raised a $125m Series B round, at a $2.1bn+ valuation. It only launched eight months ago, has now raised $170m in total — making it arguably the fastest-growing startup in Europe. 

Still, the fact that three companies have raised bigger Series B rounds this year (eight-year-old marketing company SendinBlue, $162m; eight-year-old payments startup Checkout.com, $150m; and 12-year-old biotech company Immunocore, $130m) has clearly miffed Boufarhat. 

“That’s why he is incredible and we backed him within 20 minutes of meeting him: Johnny is tireless in his quest to be the best!” says Tom Wilson, partner at VC firm Seedcamp, which led Hopin’s seed round in October last year and has also participated in this round.

“We wanted to be the fastest-growing company in the world — and we don’t want to ever stop doing that, at any stage,” says Boufarhat. 

Hold onto your hats, folks. 

Quite some hockey stick

It’s not just Boufarhat’s competitive streak which is making an impression on investors. Hopin’s growth this year, fuelled by the pandemic, has been astronomical. 

It already claims 3.5m users, has worked with 50,000 organisations — including the United Nations, NATO, the Atlantic, UCLA and Miro — and grown from a team of 23 people in April to 215 now. Its annual recurring revenue (ARR) is, according to Boufarhat, already $20m. 

“Hopin is the fastest-growing company we have seen at this stage.” — Jules Maltz, IVP

“Hopin is the fastest-growing company we have seen at this stage and meaningfully exceeded its plan since our last investment in June,” said Jules Maltz, general partner at US investment firm IVP, which has led this latest round. (Other investors include new backers Tiger Global, Coatue and DFJ Growth, and existing investors Accel, Northzone, Seedcamp and Salesforce Ventures.)

That’s no small claim: IVP has also backed the likes of Slack, Snap, Twitter, UiPath and TransferWise. “Hopin is one of those rare companies with a similar growth trajectory — they have built an extremely customer-centric organisation, with an ambitious innovative roadmap that they have the ability to scale quickly — a sure recipe for success.”

“[This is the] most insane deal ever in European VC,” one outside investor told Sifted. “I’m mind-boggled. From going to launch, to price today. The price… is mad.”

Scaling at super speed

Growing quite so fast has been made humanly possible by the fact that Hopin is a remote-first workplace, and has been from the beginning. 

It has added almost 200 people to its team in the past six months, and plans to hire 150 more before the year is out.

“Being remote allows you to do more things with more people; there’s a ton of talent across the world,” says Boufarhat, who is based in London. “If someone has a three month notice period, that’s a huge problem for us — that’s like they’ll join in three years from now. [Being remote] we can hire from the US, where sometimes people have no notice period, and a lot of the time people are hired as contractors. Remote is a huge advantage.” 

“I don’t think we’d have been able to grow this fast without remote.” 

Hopin can also avoid some of the logistical challenges fast-growing startups usually run into. “[If we had a physical workplace] I would’ve had to change offices four times, had to play musical chairs one million times,” adds Boufarhat. “Remote gets rid of all this complexity — you just add [new joiners] to Slack, Notion, GitHub to get them onboarded. It’s super simple; there’s no, ‘Oh my god, we have to move the kids and find them a school’.” 

“I don’t think we’d have been able to grow this fast without remote.” 

Still, it can’t be easy to have so many new people joining all the time. “Things do break — but our culture has been built for remote, so we can go faster,” says Boufarhat. “The number one thing we look for is for people to be proactive — and to have no ego. They need to pick up after other people, and be accepting of doing that, no ‘Look at me covering up your shit’.” 

In practice, Hopin has an “extensive” buddy system which pairs new joiners with someone working in a similar or relevant role to help them get stuck in. The team also carefully documents processes and resources: “We have a Notion that’s more like a 200-page booklet now of where to find things.”

It’s easier, in some ways, for new joiners to get the help they need, add Boufarhat. There’s no need to worry about who would be the right person to ask a question; there’s a Slack channel for that. “We have a super proactive Slack so you can ask any question you want and within seconds get a response.” 

Hopin economy

Also driving Hopin’s growth is, of course, the fact that the global events industry has been tipped upside down by lockdowns. 

Many organisers have turned to Hopin to run conferences, comedy shows, trade fairs and media events online — and many events producers and technicians have skilled up as freelance Hopin specialists. 

“If you search Hopin on LinkedIn, a tonne of people who don’t work for the company come up,” says Boufarhat. Freelancers are hawking their services as ‘Hopin Event Technical Support’ or ‘Hopin Virtual Event Consultant’; a mini-economy is springing up. “It’s amazing to see that. For us, it’s like, how do we get more and more people that want to do it.”

8152466081?profile=RESIZE_710x

A ‘Hopin economy’ has sprung up around the startup, with freelance event consultants and technicians positioning themselves as Hopin experts

Eventually however, some events will start taking place in real life again — particularly if the Pfizer/BioNTech vaccine announced on Monday works as well as people hope —  but Hopin says it is ready for that.

“The world’s moving hybrid,” says Boufarhat, who expects that events too will have a mixture of online and offline elements — and attendees — in the future. “The majority are going to be online, or online-focused, with a smaller part purely offline,” he predicts; as a result, Hopin’s looking at ways to connect online and offline attendees and enable them to share an experience.

It’s also launching a marketplace, ‘Explore’, for people to discover events. The idea is that it will be far more personalised than Eventbrite, because Hopin gathers data from ‘inside’ an event, rather than just from its listing. 

So, for example, someone who has attended a conference on Hopin — say SaaStock — and watched a session moderated by a Sifted journalist, would be recommended other events featuring that journalist, or on the topic they had discussed.

Also on the roadmap are app integrations and ways to customise and build on top of the platform.

“The valuation is just a number; what’s key is making customers happy and people enjoying the product.”

“We want to build products that feel good to use,” says Boufarhat. “The valuation is just a number; what’s key is making customers happy and people enjoying the product. That’s all we focus on.” 

That — and, presumably, raising the biggest Series C Europe has ever seen, sometime in the not too distant future.

Originally published by
Amy Lewin | November 10, 2020
sifted.eu

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Silver Level Contributor

Nuro lands $500M round at $5B valuation

(Courtesy of Nuro)

Nuro, a creator of autonomous delivery vehicles, has reached a $5 billion valuation after raising $500 million in Series C funding. The round was led by T. Rowe Price, with support from Fidelity Management and ResearchBaillie GiffordSoftBank and Greylock Partners.

The Bay Area-based company's worth has almost doubled since it raised $940 million at a $2.7 billion valuation in February 2019, according to PitchBook data.

Nuro has developed a small last-mile delivery vehicle that operates without human drivers. In February, the company received an autonomous vehicle exemption from the US Department of Transportation and is currently operating its vehicles in three states. Nuro has partnerships with brands including CVSWalmart and Domino's.

Global venture capital funding for autonomous vehicles has exceeded $5 billion so far in 2020, surpassing last year's record of $4.9 billion, according to PitchBook data. That capital reflects both the high cost of self-driving vehicles and the heightened need for autonomous services during the pandemic, said Asad Hussain, a mobility tech analyst at PitchBook.

Rival autonomous vehicle tech developer Pony.ai also crossed the $5 billion valuation threshold after raising $267 million last week in a round led by Ontario Teachers' Pension Plan. Earlier this year, Alphabet's Waymo raised $3 billion in its first round of outside capital.

Originally published by
PitchBook | November 10, 2020

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Bronze Level Contributor

Image: Unsplash - Razvan Chisu

Over the lifetime of a company, an approach will be made — sometimes quite obliquely — as to whether you’d like to be acquired.

I’m guessing that this might be at about the seven year mark. Of course, you may have considered it well before then but been concerned about how to go about testing the market without scaring your team, your board, your shareholders.

The moment a sale is contemplated is the most vulnerable moment for the relationship between founders and the other stakeholders. Until that point, there may have been perfect alignment of objectives and no conflicts of interest. Suddenly, the risks are no longer evenly distributed amongst the stakeholders. The decisions seem to be existential in nature to some — and a question of optimisation for others.

“The moment a sale is contemplated is the most vulnerable moment for the relationship between founders and the other stakeholders.”

Selling out too early?

The story of how and why Mark Zuckerberg turned down Yahoo’s $1bn offer for Facebook is worth re-reading. Zuck had a clear idea of where Facebook was going and knew that Yahoo was undervaluing it. We are, none of us, that certain and to most of us a seven or eight figure number can be life changing — let alone a 10 figure one!

When I first got going in the world of venture capital, I heard multiple times that the problem with European and Israeli entrepreneurs was that they sold out too early. Of course, I could identify with those founders because I myself had sold out too early on more than one occasion. Each time I felt I needed to — for a different reason. 

Perhaps I just didn’t have sufficient belief — either in myself or in the company I was building.

Now I sit on the other side of the fence, I can see that a potentially world-beating company selling out too soon is potentially damaging to our funds. After all, world-beating businesses don’t come along that often and VC returns rely critically on the outliers. We also know that it generally takes at least 10 years to build a large, sustainable business which requires determination and stamina — and contrary to uninformed popular opinions about venture capital, we are patient investors.

Making a realistic assessment of the potential for a company under its current leadership is difficult. Emotion and rational analysis are often in conflict.

“A potentially world-beating company selling out too soon is potentially damaging to our funds.”

You have three options

These are the options which founders should be thinking about:

  1. We still have big ambitions and are building towards a large sustainable business capable of IPO, independence or significant exit ($500m+) with appropriate resources OR
  2. We realise that we may not reach point one but can and will build a good sustainable business requiring very little, if any, further investment OR
  3. We’ve come to the conclusion that we simply won’t be able to build anything meaningful for ourselves or our investors over the coming five years — or don’t have the energy or the will to make it happen.

Unless you are in the first category, then planning for an exit and doing so in a strong position is far preferable to ‘waiting for something to happen’. The campaign can take anything from a year to 18 months — and should do.

Sharing these thoughts with your board/advisors/primary backers is the smart thing to do at this point. Whilst they may be disappointed, they should recognise your mutual interests, understand your motivations and be really helpful in planning and executing a successful outcome.

“Sharing these thoughts with your board/advisors/primary backers is the smart thing to do at this point.”

If the decision is marginal, then discussing a small secondary sale of say 10–15% of your holding may be the factor that lets you make the decision to keep at it and build that unicorn. Removing any personal financial pressures — like a mortgage — can provide that safety cushion enabling you to defer cashing out and can be just the boost needed to keep building value.

Enlightened VCs are increasingly helping to facilitate small, but meaningful, sales of founders shares in order to allow founders to achieve their company’s true potential.

Making the most of a sale

Having however, decided on a sale, get on with carefully planning for the optimum outcome.

Scope the larger landscape in which you operate — customers, suppliers, partners, competitors and get a sense for who the buyers of your company are likely to be. Assess what the most attractive elements of your business will be to each of the candidates. These may well differ from one buyer to another. One will covet your technology, others your customer base and partnerships, your geographic strength or your deep talent bench. In all circumstances, cultivating relationships with potential buyers is a smart thing to do. 

“Assess what the most attractive elements of your business will be to each of the candidates.”

Whether to use an intermediary is a whole other subject — one which I will leave to others to write. Most advisors will make a strong case for using them and it’s always worth hearing the pitch.

In all circumstances, cultivating relationships with potential buyers is a smart thing to do. 

It goes without saying that selling under any kind of pressure should be avoided at all costs. Therefore, planning well in advance is advisable. If you have strategic value to a large buyer, then the price is often determined by an auction amongst two or more buyers — rather than being based purely on metrics. So orchestrating an auction is the thing to do. Not easy and requiring a degree of finesse.

I’ve been involved in a few situations where companies have drifted into a position where their options have narrowed to the point where a sale is the only viable option. In these cases, often called ‘fire sales’ — or sometimes ‘acquihire’ (more on this another time) — the outcome is seldom satisfactory for all stakeholders. So planning ahead is by far the most sensible thing to do.

Selling your business, your baby, is not an easy thing to do but it is often a career-defining, future-proofing, freedom-giving thing to do.

Originally written by
Robert Klein | November 9, 2020
for sifted

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Gold Level Contributor

Illustration: Dom Guzman

A lot has been made about the cultural, geographic and demographic differences of Red and Blue states.

Another stat to add to the pile is this: So-called Blue or Democrat-leaning states take in the overwhelming majority of venture capital funding. Among Red, or Republican-leaning states, the only two that stand out as major startup investment hubs are Texas and Utah.

Those are the findings from an overview of venture-stage funding based on Crunchbase data for the past year. 

Overall, states in the Blue column for the 2020 election (plus Washington, D.C.)  pulled in $70.1 billion over the past year for the funding stages we tracked. Red states, meanwhile, drew just $5.68 billion.

(We did not include totals in either column for three states that have yet to confirm presidential election outcomes when making these calculations: Pennsylvania, Georgia and Nevada. However, none of those states will move the needle on the broad finding, which is that startup funding activity prevails in Democratic strongholds.)

It’s staggering to consider that “Blue States” rake in roughly 12 times the venture capital of Red States. If we look closer, however, the Democrat-leaning advantage is even more pronounced.

That’s because among Republican-leaning states that do receive venture capital, the vast majority goes to Democrat-leaning metropolitan areas.

Take Texas. Voters there have consistently favored Republican presidential candidates for four decades. But Austin, the metro area that commonly brings in a majority of the state’s venture funding, is known for its liberal-leaning politics.

North Carolina, a bit of a swing state that tilted Red in 2020, shows a similar pattern. The hub for startup and venture capital activity is the Research Triangle region, which leans left.

Utah is more mixed. Provo and Utah counties, both rich in funded startups and tech talent, are both right-leaning. The Salt Lake City metro area, meanwhile, leans slightly left.

We’ve broken down the state-by-state totals below, divided alphabetically into Red, Blue, yet-to-be-determined for the 2020 presidential election:

8131194862?profile=RESIZE_710x

What to make of it

Much of the divide over which areas get venture funding is an urban vs. rural matter. Startup funding tends to flow to regions with the following characteristics: Major research universities, a highly educated population, local venture investors, and an existing talent pool in tech and other industries favored by startups. Few rural areas, which tend to be Republican-leaning, fit that description.

That said, we do see startups thrive in deep-Red states and in areas without much local VC presence. Alabama-based grocery delivery startup Shipt, for instance, raised over $65 million in venture funding before selling to Target for $550 million a few years ago.

Indoor farm operator AppHarvest of Morehead, Kentucky, has raised more than $135 million in venture funding since last year and recently announced plans to go public. The company operates large-scale indoor farms in the Central Appalachian region, with its first produce, tomatoes, to be harvested early next year.

Perhaps as more venture funding flows to areas such as agtech–where more of the knowledge base is outside major metro areas–rural areas and smaller cities will see gains. After all, no one would pick Silicon Valley as the most cost-effective location for a giant tomato farm.

Personally, I’d like to see more venture capital going to these areas that haven’t historically been magnets for funding. Even though most newly minted startups won’t make it, those that do can be a major engine of job creation and economic growth for their local communities. It’d be nice to see more of those gains going to places that aren’t already awash in tech wealth.

Originally published by
Joanna Glasner  | November 5, 2020
Crunchbase

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Silver Level Contributor

Illustration: Dom Guzman

Despite the COVID-19 pandemic, U.S. companies have rushed to hit the market in the second half of this year, putting 2020 on track to be perhaps the strongest IPO year ever.

While taking a private company to the public markets is a big deal that comes with much fanfare at the stock exchanges and in the financial press, it also comes with a big price tag.

Beyond the one-time fees, there are a host of other costs that aren’t obvious, according to David Ethridge, PricewaterhouseCoopers’ deals managing director and U.S. IPO services leader.

PwC is typically involved with companies for one to two years prior to an IPO to help them determine what they need to do to be a public company. Being a public company has major implications for a company’s processes, systems and employees, such as the requirement to report financial information to shareholders every quarter.

“Normally that’s going to mean implementing systems and new processes that are going to make you effective as a public company, but would require you to do things that you would say ‘I don’t have to do that as a private company,’” Ethridge said.

For example, it could mean hiring an investor relations team and more people in tax areas. Those kinds of costs aren’t disclosed in filings or databases, as they’re more structural costs. Most companies currently use two accounting firms: an auditor and an advisory tax firm. While the auditor fees in context of the IPO will be disclosed, there’s often a second accounting firm that advises the company on aspects of the going-public process such as taxes, structuring, HR and compensation.

Underwriting fees also make up a good chunk of the costs associated with going public, and are often presented as one of the arguments in favor of direct listings, which offer an alternate route to the public markets.

The dollar value of an IPO is what will determine the bank fees: around 6.5 percent to 7 percent for a $100 million IPO. That percentage will get lower as the deal size increases, according to PwC, with deal sizes at $1 billion or larger having an average 3.5 percent underwriting fee. (PwC has an online calculator to help estimate some costs of an IPO).

An investment of time

One thing management teams often don’t anticipate is the time element of an IPO and how so many things are interconnected. Some elements of preparation for an IPO can be done while drafting an S-1 statement, but a lot needs to be done before sitting down with bankers because some elements can affect a company’s ability to deliver quarterly results, per Ethridge.

“I think sometimes the comprehensive nature of this is something some management teams are surprised by,” Ethridge said.

In the past, initial IPO conversations often took place three to six months before an IPO, according to Ran Ben-Tzur, a partner at law firm Fenwick & West, who advises on capital markets and public companies. Nowadays, however, the initial IPO conversations start about 18 months before a company’s public debut.

“Typically, the way I would think about it is once you’ve raised your mezzanine large financing … that typically starts the 18-month clock in terms of preparing for going public,” Ben-Tzur said.

Board composition requirements–such as California’s gender and diversity requirements–have increased the lead time to an IPO, he said, as companies are spending more time thinking about board recruitment, which can be a long and expensive process.

Toward the beginning of that 18-month time frame is when Fenwick advises companies about board composition, Ben-Tzur said. Law firms do the bulk of the work, like drafting registration statements, around three to five months before a company selects bankers for the IPO. According to Ben-Tzur, that’s when costs start to ramp up.

Law firm fees are somewhere around $1.7 million to $2 million for this type of transaction, and auditor fees are also around $2 million, Ben-Tzur added. Banks on a typical tech IPO charge a standard 7 percent commission on the proceeds raised.

Law firms and consultants also advise companies on compensation, communications, and on founder control, or helping founders figure out how they can potentially keep their long-term vision for a company following an IPO.

“I think it is important to note that it’s an expensive process. It’s a time-consuming process, but I think every company we’ve taken public, no one’s really regretted going through it,” Ben-Tzur said. “All of these processes and systems you’re putting into place to be a good public company are actually processes and systems you should put into place to be a good company.”

But companies should also weigh the pros and cons of going public, given how costly and time-consuming the process is, according to Stephen Curry, CEO of Endurance Advisory Partners.

“It’s important because at the end of the day you don’t want to go public and then not have the proper investor support to make sure your stock gets the attention it needs and to craft the story you need to be successful,” Curry said. “You don’t want to do it halfway and then run the risk of poor execution or a story that can’t be well-supported in the marketplace.”

Originally published by
Sophia Kunthara  | November 4, 2020
Crunchbase

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