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Atomico Need-to-Know 12 May 2017


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Atomico's Need-to-Know, 12 May 2017 - Essential Information for Founders and VCs

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Atomico Need-to-Know 12 May 2017

  1. 1. 12 May 2017 1 Atomico Need-to-Know
  2. 2. This is a regularly-updated collection of things we (@atomico) found interesting and important in tech and VC land, but that didn’t necessarily get the attention they deserve. We think of them as our hidden little gems. We’ll add to the collection over time, so bookmark the page and keep coming back for updates or to dig into the archive. Lovingly put together by @twehmeier & @stephen2206 2
  3. 3. ● How successful will Macron be in implementing his policy agenda, specifically those centred around improving the competitiveness of the French economy? ● What impact will Macron’s election have on the remarkable rise of Le French Tech? ● Macron’s campaign was a strong supporter of the importance of technology, and Macron had aligned himself closely to the local tech ecosystem ● Despite the incredible rise in France’s tech ecosystem, barriers to starting and scaling companies still remain, in particular in terms of the French labour market. Macron’s policy agenda has promised to tackle these issues head on - a proposal that was warmly welcomed by France’s tech base ● Outside of employment law, other key policies he has proposed include tax liberalisation and promoting angel investment 3 What do you need to know? Why does it matter? Key questions ● Emmanuel Macro won a landslide victory against Marine Le Pen, winning the vote in the second presidential run-off by 66%-34% ● Following a rejection of populist politics in Austria, the Netherlands and now France, these parallel movements have now been beaten into partial retreat in mainland Europe ● Macron enjoyed huge support in the French tech community thanks in part to the entrepreneurial spirit that he embodied as a relative newcomer who has now successfully “disrupted the French political landscape” Landslide Source: “Macron is recognised as a member of the entrepreneurial community so even if they don’t agree with him they feel he is one of them.” “With entrepreneurs there’s something of the alter-ego in Macron. We think of Macron as the guy who disrupted politics. And we like that.” Macron widely admired by French Tech - can he now deliver? “Macron has been a strong advocate for the French tech scene,” “Macron has a deep understanding of how digital transformation is profoundly changing the economy and society”
  4. 4. ● Will we see a more active market for trading data emerge in areas beyond adtech, which has a been a forerunner, as more sophistication emerges in valuing, pricing and enabling the trading of data? ● Will far will regulators be prepared to tread in creating a ‘functioning market’? ● Finding new ways to respond to the dominance of the data economy by a few is becoming a major focus. In Germany, for example, legislation is under discussion to allow the Federal Cartel Office to intervene in cases in which network effects and data assets play a role. Size, as measured by traditional means (revenue) is no longer a good enough determinant of dominance ● The role of the Government in promoting open alternatives to centralised piles of data is also gaining further support. Not just in sharing open data, but also in enabling access to more sensitive data that can be “open sourced”, but that be accessible to companies that are able to meet criteria around use of the data ● The idea of mandatory sharing of data is also gaining steam thanks in part to Ben Thompson, who has written eloquently and persuasively on the subject. This is an established practice in some industries (insurance), while new regulation (e.g. GDPR and upcoming automotive regulation) looks set to push this idea further 4 What do you need to know? Why does it matter? Key questions Confrontation in the new data economy ● The Economist published a strong leader and thoughtful analysis essentially calling for intervention by governments to “reboot antitrust” for the information age ● Back in 2011, the WEF described the potential for the emergence of “data as a new asset class”, i.e. a new market to allow for data to be traded. But such an open market has not developed, with reasons cited such as the value of keeping data in-house, lack of fungibility, a lack of sophistication in pricing methodology, privacy concerns and corporate concerns over ability to control use of data ● But “infonomics” (i.e. the market for trading data) is starting to emerge. When Caesars Entertainment filed for bankruptcy, its biggest asset was a customer dataset of 45M people valued at $1B. Similarly, data-driven M&A is also emerging in greater frequency, such as IBM’s purchase of The Weather Company. Bartering is also emerging (e.g. DeepMind/NHS) Source: “Conflicts over control of oil have scarred the world for decades. No one yet worries that wars will be fought over data. But the data economy has the same potential for confrontation.” “Rebooting antitrust for the information age will not be easy. It will entail new risks: more data sharing, for instance, could threaten privacy. But if governments don’t want a data economy dominated by a few giants, they will need to act soon.”
  5. 5. ● The use of data without clear communication can lead to public push back. As an example, the way the NHS has enabled access to patient data has been challenged due to a perceived lack of consent granted by individuals for certain use cases ● Machine learning PhDs are the top hires for big tech giants and any perceived monopoly should be understood ● Impact on jobs: risk that a lot of employees may be left behind, risking to generate asymmetric wealth and employment outcomes and increase inequalities (war for talent) ● Policymakers and regulators need to step up to be able to control machine learning technologists’ ambitions towards data ● Who stands to benefit economically from the liberalisation of, and free access to, public data? ● Is Machine Learning concentrating the power and wealth into the hands of a few powerful companies and individuals at the expenses of society? 5 What do you need to know? Why does it matter? Key questions ● The Royal Society (UK’s national academy of science) published a detailed report on AI, focusing specifically on how the UK Government can play a role in ensuring the most positive integration of machine learning into the UK economy and society ● Selected key points highlighted included a need for free and liberal access to publicly funded data, investing in new skills will be needed to be able to use machine learning in your everyday life but also at work (PhD, masters), as well as managing public opinion to address concerns for privacy and consent, depersonalisation and job losses. The teaching of AI ethics is seen as important Source: A new wave of debates that are emerging around machine learning... Royal Society study outlines role for UK Govt in ML Selected Royal Society recommendations: ● Increase accessibility to data for ML ● New open data standards to extend data lifecycle ● Ensure key concepts of ML are taught at all levels ● Teach ML in all related fields (e.g. health, law, etc) ● Ensure research funding is available for ML fields ● Ensure Industrial Strategy incorporates ML deeply ● Ensure the public is engaged in ML discussions ● Ensure societal implications are baked into ML work
  6. 6. ● What impact will the emergence of TMD have on the Chinese Internet landscape, in terms of talent flows, M&A, partnerships & collaborations, etc? ● Given TMD are showing international ambitions - just like BAT - how will they impact the global Internet landscape? 6 What do you need to know? ● Who are Toutiao, Meituan-Dianping & Didi Chuxing (TMD)? ● Toutiao: Founded in 2012 ○ News aggregation app with sophisticated ML tech ○ 700M users in China (68M DAU) ○ Acquired Flipagram (video app in the US.) ○ Valuation: $11B ○ Founder: Zhang Yiming ● Meituan–Dianping; Founded in 2010 ○ Formed by merger in October 2015 ○ US$ 25.84 billion in GMV, 150M MAU, 10M orders/day ○ Launch of their own online financial service ○ Jan 2016 closed $3.3 billion round at a valuation of $18 billion ○ Founder: Wang Xing ● Didi Chuxing: Founded in 2012 ○ Mobile transportation platform, acquired Uber China ○ Valued at $55B following most recent $5B funding round ○ Founder: Cheng Wei Why does it matter? Key questions In China, TMD emerging as challengers to BAT Source: ● China’s Internet landscape is evolving rapidly and as new consumer demands emerge, a new wave of hugely valuable companies is beginning to emerge. These companies have shown an ability to reach giant valuations in a very short space of time, even making the pace of scaling in Silicon Valley look slow ● Expectations in China are that two of the three TMD companies may choose to IPO in 2017. Irrespective of whether they do or not, the companies have large warchests and will increasingly be active in China (and internationally) on the investment & M&A front. ● China is challenging to be as important a player in the global tech world as the US China has a new group of Internet tycoons China’s new Internet tycoons hit ~$80B in aggregate value Latest Valuation Toutiao $11B Meituan-Dianping $18B Didi Chuxing $50B Total - TMD $79B Baidu $58B Alibaba $298B Tencent $294B Total - BAT $650B The founders of TMD: Toutiao: Zhang Yiming Meituan: Wang Xing Didi: Cheng Wei Despite reaching an aggregate valuation of ~$80B, the TMD still have a long way to reach the collective scale of China’s original Internet giants. Baidu, however, looks set to be caught by Didi soon, if Didi’s dramatic pace of scaling continues as it has done in the past two years
  7. 7. ● Is there sufficient dealflow to support highly-specialised funds, especially those focused on a narrow sector and a limited geography? ● Will collaboration between funds, especially across stages and geographies, deepen or will a ramp in competition push in the other direction? ● More choice in terms of pockets of capital to tap is great news for European entrepreneurs, particular is these new pools of money come with genuine value-add beyond pure capital, including sector expertise, operating experience or gateways to important customer groups ● Despite a growing diversity of funds at the earliest stages and a number of large funds able to write bigger cheques, there is still some way to go until the European VC landscape boasts as deep a bench of investors as Silicon Valley, where the degree of competition at every stage significantly exceeds that seen in Europe 7 What do you need to know? Why does it matter? Key questions ● Aside from the headline figures in terms of venture fundraising (€1.7B raised across 17 tech-focused VC funds in 1Q17, source: Yann Roux), 2017 has seen further evidence that Europe’s investor landscape is being built out in a number of interesting and important ways that suggest a growing level of maturity and sophistication ● A number of clear trends are emerging, including the arrival of sector specialist funds with a narrow but deep focus on specific tech categories (e.g. AI, SaaS, fintech), a growing number of founder-led funds started by former entrepreneurs, evidence of an awakening of corporate Europe with CVCs arising from multiple sectors, including finance, energy and automotive, as well as the arrival of interesting and innovative new models at the earliest stages of company formation Emerging trends in Europe’s investor landscape Source: Selected new funds & trends represented Regional Specialism Sector Specialism Founder-led Corporate Europe Vendep Finland SaaS Asgard Germany AI Samaipata Ventures S. Europe Marketplaces La Nevera Roja Digital + Partners Germany Industial, fintech D Borse VentureFriends Greece eFood/eShop Centrica Innovations EnergyTech, IoT Centrica Scania Growth AutoTech Scania Seraphim Space Tech New Space ● Greater regional diversification: New VC funds continue to emerge outside the historical strongholds of the UK & Germany, e.g. in Greece ● Deeper sector specialisation: In an increasingly competitive investor landscape, sector specialisation is emerging as a key form of differentiation ● More Founder-led funds: The path from successful entrepreneur to investor is now becoming increasingly well trodden ● An awakening of corporate Europe: the emergence of a new pool of Europe-focused corporate VC funds ● Innovative new models at earliest stages: EF has become a global innovator with its model. Wave Ventures is pioneering investing in students, Station F building amazing infrastructure for early-stage companies ● Emergence of sophisticated angel networks: Angel investors grouping together to form tight investment-focused networks, e.g. Nordic.Makers. Demis Hassabis also reported to be building a network Selected trends in European investor landscape Source: Yannick Roux,
  8. 8. ● Is the data collected from IoT devices actually more reliable than human beings, given the potential ability of users to modify/manipulate or erase their data? ● Should tech companies have to release the available data? What would be a reasonably strong argument to do so? ● There is a big shift toward a data-driven regime of “truth”. While these new sources of data can be hugely valuable to the authorities, there is a increasing tension between customer rights- privacy and law enforcement ● Each time a new source of potential data emerges, the continuing debate about whether the US should have a law forcing tech companies to build backdoors to their data (and if so, a danger to be exploited by other actors) and whether or not tech companies should be obliged to reveal customer data when asked by government authorities grows in volume 8 What do you need to know? Why does it matter? Key questions ● Fitbit, Amazon Echo, Jawbone devices have gained more and more interest from lawyers, the police and legal experts as a source of intelligence to be used to help solve crimes ● Data such as step count, sleep, location, heartbeat can be very valuable when it comes to solving a case and more and more of these datas are now bring actively used as evidence in courtrooms Say hello to your new courtroom witness Source: US law enforcement requests for user data
  9. 9. M&A wrap up Acquiror Target Target desc. Amt Comments Gett Juno On-demand taxi services $200M Gett has acquired Juno to build out its operations in NYC IAC Angie’s List Consumer recommendation site $500M+ IAC has acquired public company Angie’s List with the intention of merging it with its own HomeAdvisor unit to spin the new entity into a new public company Cisco Viptela Software-defined networks $610M Latest M&A deal for Cisco following AppDynamics purchase. Deal reportedly valued at approx. 30% discount to its last round valuation of $900M from 2016 Spotify MediaChain Blockchain-based music data mgmt n/a Spotify has now made at least 10 disclosed acquisitions, primarily in areas to build out its capabilities in terms of use of data/tech to improve its core service offering Whirlpool Yummly Recipe search engine n/a Had raised $23M & last valued at $100M. Whirlpol is largest home appliance manufacturer Sirius XM Automatic Labs Connected car company $100M Satellite radio company Sirius expanding into broader range of connected car services via the acquisition Thales Guavus Big data analytics company $210M Thales has acquired Guavus to build out its data analytics capabilities to serve its customers in key verticals, such as aerospace, transport and defence. Guavus had raised ~$140M. Ant Financial HelloPay Singapore-based mobile payments NA Ant Financial contineus to acquire internationally as it seeks to build its presence in the payments markets outside of China. HelloPay was the subsidiary of Lazada, which is majority-owned by Alibaba after a $1B transaction in 2016 9