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13th April 2018
1
Atomico Need-to-Know
This is a regularly-updated collection of things we
(@atomico) found interesting and important in tech and VC
land, but that didn’t necessarily get the attention they
deserve. We think of them as our hidden little gems. We’ll
add to the collection over time, so bookmark the page and
keep coming back for updates or to dig into the archive.
2
Top 3 Key Points
● While many declared that smartphones would “kill boredom”, it seems they
have actually created a new type of boredom: “phone bored”. Today’s
teens report that they’ll sometimes open and close up to 20-30 apps,
hoping that something will catch their attention. The boredom stems from
what are being seen as repetitive and non-meaningful interactions online
● Start ups are using technology to create ways to make set up the
interactions online but interact offline - based around location data,
common interests, travel etc. Two start ups in the most recent YC batch
are addressing this growing demand
● Wing It: Wing It is a Facebook Messenger bot that tries to get you out of
the house on a weekend trip. It recommends AirBNBs, local hikes, and
other activities based on your preferences. Playbook: Playbook is a social
network that lets you see what people around you are doing so you can
join them offline. Playbook today is a community of students from over 220
universities using the platform in over 125 countries.
3
Gen Z says they are “bored by the internet”: using technology to
create social experiences offline
Source: https://www.thedailybeast.com/generation-z-is-already-bored-by-the-internet?ref=scroll
https://techcrunch.com/2018/03/18/wing-it-is-a-facebook-messenger-bot-meant-to-get-you-out-of-the-house/
https://techcrunch.com/2018/03/09/yc-backed-playbook-wants-students-to-make-plans-online-hang-out-offline/
The Takeaway
Gen Z has had unprecedented access to the internet and have grown
up with iPhones, iPads, Facebook etc. As this generation is now
growing up, they are reporting unprecedented levels of boredom. A
number of start ups are addressing a growing opportunity to use
technology to create new offline social experiences
Points of Debate
● Will these models be monetized on the B2B side by getting
people out of the house and into that business?
● Will this trend go hand-in-hand with the decline of ad-based
social network models (ie, since value will not be tied to how
long you spend on the platform itself)?
Top 3 Key Points
● PE buyouts as % of VC-backed exits have doubled: Private equity
buyouts represented 18.5% of all venture-backed exits in the U.S. and
Europe in 2017, up from 13.8% the previous year, according to PitchBook.
That percentage has roughly doubled from levels seen a decade ago.
● Deeper & more sophisticated PE market: 123 tech-focused buyout funds
raised more than $267 billion over the past five years (Source: PitchBook)
versus 45 funds that raised $57B in the previous five years. These funds
have development greater expertise & confidence to pull trigger
● Competition changing target profiles: The impact of greater competition
is helping to a) drive up prices but b) leading to greater diversity in the
types of businesses targeted, whether in P&L profile, scale, geo or
sub-segment. Funds are also now prepared to pay up on revenue
multiples, not just EBITDA, typically paying up to 4-7x ARR, depending on
growth
4
Private equity and its changing role in VC exit landscape
Source: https://www.wsj.com/articles/as-exits-get-tougher-more-p-e-firms-come-to-the-rescue-1520854255
The Takeaway
Tech-focused private equity is now deeper and more sophisticated
than ever, as a result there have been record levels of PE-sponsored
M&A of VC-backed companies, accounting for 19% of US exits (a
doubling). Competition from a larger PE field is driving up pricing, but
also changing the profile of companies being acquired
Points of Debate / Next Steps
● Who are key players to know and what are their sweetspots?
● How is this evolving in Europe versus US?
New highs in PE acquisitions of VC-backed companies
PE is getting very comfortable with tech
“Private-equity firms tended to want a big discount, while corporate
buyers were paying a premium for technology startups. As we’ve
developed greater and greater expertise [in several technology
subsectors], our confidence in being able to underwrite the trends
becomes greater and greater” -
Harold Chen, Head of TMT Americas Investing, KKR
Selected recent milestones from interesting startups
focused on building out mobile AR tech stack
The Takeaway
ARKit with iOS11 enables mobile AR for 100Ms of users, but still little
active use today. Enduring tech limitations mean that compelling
experiences with clear use case have largely not materialed yet. As
engineering efforts & investment flow into developing key tech
building blocks, more promising use cases are emerging
Top 3 Key Points
● Smartphone AR is far from fulfilling potential: Smartphone AR is
available on 100Ms of devices (all iOS11 devices that are 6S & beyond)),
but there are few active users. The disconnect between installed base &
active use is a function of a lack of compelling use cases and technical
limitations in truly bridging digital & physical environments
● Better experiences will require improvement on key building blocks:
Startups (e.g. Ubiquity6, 8th Wall, 6D.ai), as well as larger players in the
space (Niantic, Apple) focused on key tech enablers, such as
understanding physical space (understand the geometric structure of any
indoor and outdoor space), persistence (objects having fixed space & time
dimensions), multi-user shared experiences, intelligence (allow objects to
semantically understand what’s around them) and browsing (putting it all
together, in a way that works for anyone, anywhere, in AR, VR, MR or in a
browser). Other key focus areas are developer tools, e.g. 8th Wall has
raised $8M A round in Feb from Shasta/Norwest. $3B invested in AR/VR in
2017, of which 40% in core tech (led by Improbable/Unity)
● Traction still limited, but more promising AR apps on horizon: 2,000+
ARKit-compatible apps on App Store. Dedicated ARKit apps had 13M DLs
in 6 months, of which ~50% games. Starting to see increasingly impressive
apps come to market building on mobile AR capabilities, whether
Ubiquity6’s own apps, Directive Games’ ‘The Machines’ (AR MOBA game),
PlaySide’s AR Dragon (virtual pet simulator).
5
Improving mobile AR stack laying foundations for better UXs
Source: https://medium.com/ubiquity6/edit-reality-together-f20c5804ec00/
https://sensortower.com/blog/arkit-six-months/
https://techcrunch.com/2018/02/01/niantic-buy-escher-reality-ar-startup/
Points of Debate / Next Steps
● Which parts of the tech stack are most valuable?
● Beyond tech, what are some of the key behavioural hurdles?
Tech stack critical to fulfil bold ambitions
“Simply put, we believe augmented reality is going to change the way
we use technology forever. We’re already seeing things that will
transform the way you work, play, connect and learn” - Tim Cook,
Apple CEO
“If you think about in the future, as AR becomes a bigger movement,
as the next computing platform, it will need a backend to support a lot
of the networking, it will need a lot of the tools that we’re building —
in order to build compelling AR experiences” - Ross Finman, CEO,
Escher Reality (acquired by Niantic Labs
The Story
Showcase of simple use
case of Ubiquity6 technology
Source: Ubiquity6
Company Milestone
Escher Reality Acquired by Niantic Labs
Ubiquity6 $10.5M Series A (Index, KPCB)
Mapbox AR toolkit launched
6D.ai Seed from Gen Catalyst, OSI
Blue Vision Labs $14.5M Series A from GV (AR cloud SDK)
8th Wall $8M Series A (Shasta/Norwest)
Directive Games The Machines tops Apple mobile AR app ranks
Arrow Latest YC cohort. Paris company. Insta for AR
Top 3 Key Points
● The CPG-as-moat is essentially dated: Per Django Davison, “The mental
model that worked well in the post-WWII era is unlikely to produce similar
results in the coming decades . . . a little guy can buy a part of it. The
barriers to entry in advertising — the ‘moat’ — have collapsed. Big Brand
Inc is in some ways ‘dumb’, with very little idea of what a customer buys,
when it is bought and in what quantity.
● Outsized outcomes still limited, but well-funded at-scale companies
are proliferating: Dollar Shave Club ($1B+ M&A exit to Unilever) remains
the primary outsized outcome for this thesis, but across CPG categories
there are now numerous at-scale, well-funded players (Warby Parker,
Casper, Honest, Bonobos, etc)
● Large categories yet to be transformed. Horizontal plays emerging:
There are multiple large categories that are still ‘undisrupted’, e.g.
anti-aging products, contraception, hair care, women’s hygiene, baby, etc,
as well as product sub-sectors within food/drink etc, Factors to assess
when looking at ‘category attractiveness’ include purchase frequency,
AOV, product repeat rate/retention, gross margin, market size/growth,
manufacturing complexity. Additional horizontal plays are emerging now
(NuOrder, Happy Returns)
6
D2C startups continue to attack “CPG big brand bubble”
Source: https://twitter.com/ryan_caldbeck/status/974045873377239040?lang=en
https://www.ft.com/content/d3216594-f48d-11e7-88f7-5465a6ce1a00
http://www.hoskingpartners.com/Hosking_Post_Collection.pdf
The Takeaway
Dollar Shave Club’s $1B exit remains the flagship example of
‘success’ in companies attacking big brand with D2C play, but many
categories now have well-funded at-scale players. There is still white
space, as well as potentially-interesting horizontal ways to play the
trend, although
The Killer Stat or Quote
“The simple conceit of ‘The Brand as King’,
particularly with reference to consumer packaged goods, appears
consensual in Mrs Thatcher’s definition of the term. Technology is
changing everything. Many brands – as represented by Big Brand
Inc, the large Consumer Packaged Goods (CPG) company – are
struggling to keep pace with the digital revolution” - FT
Points of Debate / Next Steps
● Which vertical or horizontal ways categories, if any, are most
attractive plays?
● Is this a regional play? If so, will Europe catch-up with US?
The Story
Top 3 Key Points
● Women are turned off STEM careers from an early age: 32% of middle
school girls said they think jobs involving coding would be a good fit for
them, but by the time women have graduated high school, only 27% say
the same thing.
● Misconceptions & stereotypes are a major part of the problem:
Deterrence often comes from misconceptions and stereotypes about STEM
that make girls feel those careers just aren’t “for” them. 72% of girls say it’s
important for them to have a job that directly helps the world and 91%
describe themselves as creative — but just 37% said they thought STEM
jobs could be creative or help the world
● Challenging stereotypes, matching girls with role models & STEM
clubs all help: Girls who know a woman in STEM were far more likely to
say they understand the relevance of STEM, know how to pursue a STEM
career and feel powerful in pursuing a STEM career. A similar bump was
seen among girls whose parents and/or teachers talk to them about STEM
and encourage them to pursue interests in those fields
7
Concrete actions to help address STEM gender imbalance
Source: https://www.geekwire.com/2018/misconceptions-stereotypes-may-discourage-girls-studying-stem-study-finds/amp/
https://app.powerbi.com/view?r=eyJrIjoiNmUwM2E2ODEtNWJjNC00ODdlLTlkZGQtZmY3ZmZjNWFiODI1IiwidCI6Ijk0MjYwZjAzLTA3OTMtNDg0YS05MWNmLWJlYmU1ODQz
MTliYyIsImMiOjEwfQ%3D%3D
Points of Debate / Next Steps
● How best to double down to showcase tech’s positive impact?
● How best to double down & match young women/role models?
The Takeaway
Strong & persistent misconceptions/stereotyping about what a STEM
career entails, a lack of access to women role models & lack of
engagement from teachers and/or parents, are all factors that turn
women off STEM careers from an early age, helping to point to
practical ways to help address the gender imbalance in STEM
The Killer Stat or Quote
“I didn’t have a computer science degree, and you don’t have to have
a computer science degree to work in STEM or to work in tech. What
you need to be able to do is to solve problems. You really, really
need to have a passion for problem-solving and to do that with
technology. You need to have a passion for creativity. You need to
be able to think outside of the box. And, you need to love to
collaborate. STEM is not about doing something on your own. It is
about how you really harness all the diverse talent that is around you
to solve a problem and to change the world”
Microsoft study of 11,500 girls/women to understand
their engagement (or lack of) with STEM-related
careers
Top 3 Key Points
● Mobike & Ele.me swallowed in multi-$B+ M&A: Alibaba spent $5B
acquiring the outstanding shares of Ele.me for a TEV of ~$9.5B.
Meituan-Dianping (Groupon+Yelp+Deliveroo+Uber) acquired Mobike for an
EV of $3.4B (inc. $700M debt).
● All roads lead to Tencent & Alibaba: Among all of China’s 124 unicorns,
over 50% are controlled or backed by one of the BAT. Commentators now
draw comparisons to the conglomerates of Japan (keiretsu) or Korea
(chaebol) with fears of future implications if their dominance strengthens.
Drone manufacturer DJI and smartphone and electronics maker Xiaomi are
among the handful of Chinese companies valued at more than US$10
billion that have remained independent from the tech giants
● Is it possible to remain independent as a tech start-up in China?: “If a
[huge] company like Ele.me can’t even exist individually then what others
companies can?” “Mobike had insisted on an independent path, however
little fish cannot eat big fish. In China, start-ups cannot stay away from the
giants forever.” - Davis Wang, Mobike Co-Founder & CEO
8
Source: http://www.scmp.com/tech/start-ups/article/2140446/chinese-tech-executives-mull-independence-start-ups-wake-mobike
The Takeaway
The rivalry between Tencent ($500B market cap) & Alibaba ($436B)
continues to intensify with both having emerged as critical sources of
fundings in the China tech landscape. Their influence is now starting
to see people question the ability for new generation companies to
stay independent
Is it possible to stay independent in China?
“It’s impossible to be independent. Alibaba or Tencent would either
copycat your technology or business model or they’ll invest in your
competitor. They basically have a gun to your head and you have to
choose which of the two companies you want to work with” -
Shaun Rein, MD, China Market Research Group
Tencent & Alibaba has invested prolifically into tech
companies China & abroad
“In China, start-ups cannot stay away from giants forever”
Points of Debate / Next Steps
● When should we expect this rivalry to play out in Europe too?
● At what point does their scale become a hindrance to greater
success?
Snapshot of current public comps by sub-sector
9
SaaS = 51 companies
Social = 11 companies
Transactional marketplaces = 14 companies
Games = 75 companies
Median for comp set TEV / LTM revenue TEV / NTM revenue
Today 1 year ago 5 years ago Today 1 year ago 5 years ago
SaaS comp set 8.0x 7.1x 7.6x 6.5x 5.5x 5.9x
Social comp set 5.4x 5.8x 5.0x 4.6x 4.8x 4.2x
Marketplaces comp set 7.4x 7.1x 4.0x 6.0x 6.7x 4.2x
Games comp set (ex-Tencent) 4.2x 3.7x 3.0x 2.7x 2.6x 1.8x
In case you missed it
10
Footnotes
Companies What happened?
Mulesoft/Salesforce
Salesforce acquired Mulesoft for $6.5B (36% premium to unaffected share price & 164% versus IPO price from
a year ago). Deal was done at a multiple of 21x trailing 12-month revenue of $300M, a near record for a
strategic acquisition
Cryptokitties
USV led a $12M Series A round into CryptoKitties. The company is the pioneer in the ‘digital collectibles’
category, having started with a game based around collectible digital cats. A16Z, Caffeinated Capital, DCG
were the other institutional investors. Many high profile crypto angel investors also participated.
Spotify
Spotify completed its direct listing. Closed first day at $26.5B. Saw first-day trading volume of about $4.5B. Now
trading at 5.1x TEV/LTM revenue (versus Netflix at 11x, Pandora at 1x).
Lightning Labs
Raised $2.5M Seed from Jack Dorsey, Charlie Lee (Litecoin founder), David Sacks (ex-PayPal). More
importantly, launched official beta of its software (LND), marking the first tested version of Lightning Network
technology to go live. Lightning Network is seen as a key scaling technology for Bitcoin (& Litecoin) blockchains
to enable payments without the need to settle on the main blockchain. In theory, it is a step forward to enabling
faster and cheaper transactions with greater capacity. Others working on similar approaches for Lightning are
Blockstream and ACINQ.
Google/Tenor
Google acquired GIF platform Tenor for an undisclosed sum. Tenor is main competitor to Giphy. Most recently,
Tenor had announced a $17M Series B led by Tenaya in March 2018. Had raised $32M total.
Mercari Japanese C2C marketplace. Raised $47M at $2.4B. Funding to commit again to US. Investors undisclosed.
Lyft
Rolling out a subscription plan in 30 US cities. “Eventually, the majority of miles traveled in the United States
will be on a network like Lyft, You’ll be subscribing to a Lyft transportation plan similar to how you have a music
program, maybe Spotify, or a minutes plan like you have on AT&T or Verizon.” - John Zimmer, Lyft
Coinbase
Announced it is launching a $15M CVC, Coinbase Ventures, that will invest off its balance sheet. It will invest
only in companies, not cryptoassets.
11

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Atomico Need-to-Know 13 April 2018

  • 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. 2
  • 3. Top 3 Key Points ● While many declared that smartphones would “kill boredom”, it seems they have actually created a new type of boredom: “phone bored”. Today’s teens report that they’ll sometimes open and close up to 20-30 apps, hoping that something will catch their attention. The boredom stems from what are being seen as repetitive and non-meaningful interactions online ● Start ups are using technology to create ways to make set up the interactions online but interact offline - based around location data, common interests, travel etc. Two start ups in the most recent YC batch are addressing this growing demand ● Wing It: Wing It is a Facebook Messenger bot that tries to get you out of the house on a weekend trip. It recommends AirBNBs, local hikes, and other activities based on your preferences. Playbook: Playbook is a social network that lets you see what people around you are doing so you can join them offline. Playbook today is a community of students from over 220 universities using the platform in over 125 countries. 3 Gen Z says they are “bored by the internet”: using technology to create social experiences offline Source: https://www.thedailybeast.com/generation-z-is-already-bored-by-the-internet?ref=scroll https://techcrunch.com/2018/03/18/wing-it-is-a-facebook-messenger-bot-meant-to-get-you-out-of-the-house/ https://techcrunch.com/2018/03/09/yc-backed-playbook-wants-students-to-make-plans-online-hang-out-offline/ The Takeaway Gen Z has had unprecedented access to the internet and have grown up with iPhones, iPads, Facebook etc. As this generation is now growing up, they are reporting unprecedented levels of boredom. A number of start ups are addressing a growing opportunity to use technology to create new offline social experiences Points of Debate ● Will these models be monetized on the B2B side by getting people out of the house and into that business? ● Will this trend go hand-in-hand with the decline of ad-based social network models (ie, since value will not be tied to how long you spend on the platform itself)?
  • 4. Top 3 Key Points ● PE buyouts as % of VC-backed exits have doubled: Private equity buyouts represented 18.5% of all venture-backed exits in the U.S. and Europe in 2017, up from 13.8% the previous year, according to PitchBook. That percentage has roughly doubled from levels seen a decade ago. ● Deeper & more sophisticated PE market: 123 tech-focused buyout funds raised more than $267 billion over the past five years (Source: PitchBook) versus 45 funds that raised $57B in the previous five years. These funds have development greater expertise & confidence to pull trigger ● Competition changing target profiles: The impact of greater competition is helping to a) drive up prices but b) leading to greater diversity in the types of businesses targeted, whether in P&L profile, scale, geo or sub-segment. Funds are also now prepared to pay up on revenue multiples, not just EBITDA, typically paying up to 4-7x ARR, depending on growth 4 Private equity and its changing role in VC exit landscape Source: https://www.wsj.com/articles/as-exits-get-tougher-more-p-e-firms-come-to-the-rescue-1520854255 The Takeaway Tech-focused private equity is now deeper and more sophisticated than ever, as a result there have been record levels of PE-sponsored M&A of VC-backed companies, accounting for 19% of US exits (a doubling). Competition from a larger PE field is driving up pricing, but also changing the profile of companies being acquired Points of Debate / Next Steps ● Who are key players to know and what are their sweetspots? ● How is this evolving in Europe versus US? New highs in PE acquisitions of VC-backed companies PE is getting very comfortable with tech “Private-equity firms tended to want a big discount, while corporate buyers were paying a premium for technology startups. As we’ve developed greater and greater expertise [in several technology subsectors], our confidence in being able to underwrite the trends becomes greater and greater” - Harold Chen, Head of TMT Americas Investing, KKR
  • 5. Selected recent milestones from interesting startups focused on building out mobile AR tech stack The Takeaway ARKit with iOS11 enables mobile AR for 100Ms of users, but still little active use today. Enduring tech limitations mean that compelling experiences with clear use case have largely not materialed yet. As engineering efforts & investment flow into developing key tech building blocks, more promising use cases are emerging Top 3 Key Points ● Smartphone AR is far from fulfilling potential: Smartphone AR is available on 100Ms of devices (all iOS11 devices that are 6S & beyond)), but there are few active users. The disconnect between installed base & active use is a function of a lack of compelling use cases and technical limitations in truly bridging digital & physical environments ● Better experiences will require improvement on key building blocks: Startups (e.g. Ubiquity6, 8th Wall, 6D.ai), as well as larger players in the space (Niantic, Apple) focused on key tech enablers, such as understanding physical space (understand the geometric structure of any indoor and outdoor space), persistence (objects having fixed space & time dimensions), multi-user shared experiences, intelligence (allow objects to semantically understand what’s around them) and browsing (putting it all together, in a way that works for anyone, anywhere, in AR, VR, MR or in a browser). Other key focus areas are developer tools, e.g. 8th Wall has raised $8M A round in Feb from Shasta/Norwest. $3B invested in AR/VR in 2017, of which 40% in core tech (led by Improbable/Unity) ● Traction still limited, but more promising AR apps on horizon: 2,000+ ARKit-compatible apps on App Store. Dedicated ARKit apps had 13M DLs in 6 months, of which ~50% games. Starting to see increasingly impressive apps come to market building on mobile AR capabilities, whether Ubiquity6’s own apps, Directive Games’ ‘The Machines’ (AR MOBA game), PlaySide’s AR Dragon (virtual pet simulator). 5 Improving mobile AR stack laying foundations for better UXs Source: https://medium.com/ubiquity6/edit-reality-together-f20c5804ec00/ https://sensortower.com/blog/arkit-six-months/ https://techcrunch.com/2018/02/01/niantic-buy-escher-reality-ar-startup/ Points of Debate / Next Steps ● Which parts of the tech stack are most valuable? ● Beyond tech, what are some of the key behavioural hurdles? Tech stack critical to fulfil bold ambitions “Simply put, we believe augmented reality is going to change the way we use technology forever. We’re already seeing things that will transform the way you work, play, connect and learn” - Tim Cook, Apple CEO “If you think about in the future, as AR becomes a bigger movement, as the next computing platform, it will need a backend to support a lot of the networking, it will need a lot of the tools that we’re building — in order to build compelling AR experiences” - Ross Finman, CEO, Escher Reality (acquired by Niantic Labs The Story Showcase of simple use case of Ubiquity6 technology Source: Ubiquity6 Company Milestone Escher Reality Acquired by Niantic Labs Ubiquity6 $10.5M Series A (Index, KPCB) Mapbox AR toolkit launched 6D.ai Seed from Gen Catalyst, OSI Blue Vision Labs $14.5M Series A from GV (AR cloud SDK) 8th Wall $8M Series A (Shasta/Norwest) Directive Games The Machines tops Apple mobile AR app ranks Arrow Latest YC cohort. Paris company. Insta for AR
  • 6. Top 3 Key Points ● The CPG-as-moat is essentially dated: Per Django Davison, “The mental model that worked well in the post-WWII era is unlikely to produce similar results in the coming decades . . . a little guy can buy a part of it. The barriers to entry in advertising — the ‘moat’ — have collapsed. Big Brand Inc is in some ways ‘dumb’, with very little idea of what a customer buys, when it is bought and in what quantity. ● Outsized outcomes still limited, but well-funded at-scale companies are proliferating: Dollar Shave Club ($1B+ M&A exit to Unilever) remains the primary outsized outcome for this thesis, but across CPG categories there are now numerous at-scale, well-funded players (Warby Parker, Casper, Honest, Bonobos, etc) ● Large categories yet to be transformed. Horizontal plays emerging: There are multiple large categories that are still ‘undisrupted’, e.g. anti-aging products, contraception, hair care, women’s hygiene, baby, etc, as well as product sub-sectors within food/drink etc, Factors to assess when looking at ‘category attractiveness’ include purchase frequency, AOV, product repeat rate/retention, gross margin, market size/growth, manufacturing complexity. Additional horizontal plays are emerging now (NuOrder, Happy Returns) 6 D2C startups continue to attack “CPG big brand bubble” Source: https://twitter.com/ryan_caldbeck/status/974045873377239040?lang=en https://www.ft.com/content/d3216594-f48d-11e7-88f7-5465a6ce1a00 http://www.hoskingpartners.com/Hosking_Post_Collection.pdf The Takeaway Dollar Shave Club’s $1B exit remains the flagship example of ‘success’ in companies attacking big brand with D2C play, but many categories now have well-funded at-scale players. There is still white space, as well as potentially-interesting horizontal ways to play the trend, although The Killer Stat or Quote “The simple conceit of ‘The Brand as King’, particularly with reference to consumer packaged goods, appears consensual in Mrs Thatcher’s definition of the term. Technology is changing everything. Many brands – as represented by Big Brand Inc, the large Consumer Packaged Goods (CPG) company – are struggling to keep pace with the digital revolution” - FT Points of Debate / Next Steps ● Which vertical or horizontal ways categories, if any, are most attractive plays? ● Is this a regional play? If so, will Europe catch-up with US? The Story
  • 7. Top 3 Key Points ● Women are turned off STEM careers from an early age: 32% of middle school girls said they think jobs involving coding would be a good fit for them, but by the time women have graduated high school, only 27% say the same thing. ● Misconceptions & stereotypes are a major part of the problem: Deterrence often comes from misconceptions and stereotypes about STEM that make girls feel those careers just aren’t “for” them. 72% of girls say it’s important for them to have a job that directly helps the world and 91% describe themselves as creative — but just 37% said they thought STEM jobs could be creative or help the world ● Challenging stereotypes, matching girls with role models & STEM clubs all help: Girls who know a woman in STEM were far more likely to say they understand the relevance of STEM, know how to pursue a STEM career and feel powerful in pursuing a STEM career. A similar bump was seen among girls whose parents and/or teachers talk to them about STEM and encourage them to pursue interests in those fields 7 Concrete actions to help address STEM gender imbalance Source: https://www.geekwire.com/2018/misconceptions-stereotypes-may-discourage-girls-studying-stem-study-finds/amp/ https://app.powerbi.com/view?r=eyJrIjoiNmUwM2E2ODEtNWJjNC00ODdlLTlkZGQtZmY3ZmZjNWFiODI1IiwidCI6Ijk0MjYwZjAzLTA3OTMtNDg0YS05MWNmLWJlYmU1ODQz MTliYyIsImMiOjEwfQ%3D%3D Points of Debate / Next Steps ● How best to double down to showcase tech’s positive impact? ● How best to double down & match young women/role models? The Takeaway Strong & persistent misconceptions/stereotyping about what a STEM career entails, a lack of access to women role models & lack of engagement from teachers and/or parents, are all factors that turn women off STEM careers from an early age, helping to point to practical ways to help address the gender imbalance in STEM The Killer Stat or Quote “I didn’t have a computer science degree, and you don’t have to have a computer science degree to work in STEM or to work in tech. What you need to be able to do is to solve problems. You really, really need to have a passion for problem-solving and to do that with technology. You need to have a passion for creativity. You need to be able to think outside of the box. And, you need to love to collaborate. STEM is not about doing something on your own. It is about how you really harness all the diverse talent that is around you to solve a problem and to change the world” Microsoft study of 11,500 girls/women to understand their engagement (or lack of) with STEM-related careers
  • 8. Top 3 Key Points ● Mobike & Ele.me swallowed in multi-$B+ M&A: Alibaba spent $5B acquiring the outstanding shares of Ele.me for a TEV of ~$9.5B. Meituan-Dianping (Groupon+Yelp+Deliveroo+Uber) acquired Mobike for an EV of $3.4B (inc. $700M debt). ● All roads lead to Tencent & Alibaba: Among all of China’s 124 unicorns, over 50% are controlled or backed by one of the BAT. Commentators now draw comparisons to the conglomerates of Japan (keiretsu) or Korea (chaebol) with fears of future implications if their dominance strengthens. Drone manufacturer DJI and smartphone and electronics maker Xiaomi are among the handful of Chinese companies valued at more than US$10 billion that have remained independent from the tech giants ● Is it possible to remain independent as a tech start-up in China?: “If a [huge] company like Ele.me can’t even exist individually then what others companies can?” “Mobike had insisted on an independent path, however little fish cannot eat big fish. In China, start-ups cannot stay away from the giants forever.” - Davis Wang, Mobike Co-Founder & CEO 8 Source: http://www.scmp.com/tech/start-ups/article/2140446/chinese-tech-executives-mull-independence-start-ups-wake-mobike The Takeaway The rivalry between Tencent ($500B market cap) & Alibaba ($436B) continues to intensify with both having emerged as critical sources of fundings in the China tech landscape. Their influence is now starting to see people question the ability for new generation companies to stay independent Is it possible to stay independent in China? “It’s impossible to be independent. Alibaba or Tencent would either copycat your technology or business model or they’ll invest in your competitor. They basically have a gun to your head and you have to choose which of the two companies you want to work with” - Shaun Rein, MD, China Market Research Group Tencent & Alibaba has invested prolifically into tech companies China & abroad “In China, start-ups cannot stay away from giants forever” Points of Debate / Next Steps ● When should we expect this rivalry to play out in Europe too? ● At what point does their scale become a hindrance to greater success?
  • 9. Snapshot of current public comps by sub-sector 9 SaaS = 51 companies Social = 11 companies Transactional marketplaces = 14 companies Games = 75 companies Median for comp set TEV / LTM revenue TEV / NTM revenue Today 1 year ago 5 years ago Today 1 year ago 5 years ago SaaS comp set 8.0x 7.1x 7.6x 6.5x 5.5x 5.9x Social comp set 5.4x 5.8x 5.0x 4.6x 4.8x 4.2x Marketplaces comp set 7.4x 7.1x 4.0x 6.0x 6.7x 4.2x Games comp set (ex-Tencent) 4.2x 3.7x 3.0x 2.7x 2.6x 1.8x
  • 10. In case you missed it 10 Footnotes Companies What happened? Mulesoft/Salesforce Salesforce acquired Mulesoft for $6.5B (36% premium to unaffected share price & 164% versus IPO price from a year ago). Deal was done at a multiple of 21x trailing 12-month revenue of $300M, a near record for a strategic acquisition Cryptokitties USV led a $12M Series A round into CryptoKitties. The company is the pioneer in the ‘digital collectibles’ category, having started with a game based around collectible digital cats. A16Z, Caffeinated Capital, DCG were the other institutional investors. Many high profile crypto angel investors also participated. Spotify Spotify completed its direct listing. Closed first day at $26.5B. Saw first-day trading volume of about $4.5B. Now trading at 5.1x TEV/LTM revenue (versus Netflix at 11x, Pandora at 1x). Lightning Labs Raised $2.5M Seed from Jack Dorsey, Charlie Lee (Litecoin founder), David Sacks (ex-PayPal). More importantly, launched official beta of its software (LND), marking the first tested version of Lightning Network technology to go live. Lightning Network is seen as a key scaling technology for Bitcoin (& Litecoin) blockchains to enable payments without the need to settle on the main blockchain. In theory, it is a step forward to enabling faster and cheaper transactions with greater capacity. Others working on similar approaches for Lightning are Blockstream and ACINQ. Google/Tenor Google acquired GIF platform Tenor for an undisclosed sum. Tenor is main competitor to Giphy. Most recently, Tenor had announced a $17M Series B led by Tenaya in March 2018. Had raised $32M total. Mercari Japanese C2C marketplace. Raised $47M at $2.4B. Funding to commit again to US. Investors undisclosed. Lyft Rolling out a subscription plan in 30 US cities. “Eventually, the majority of miles traveled in the United States will be on a network like Lyft, You’ll be subscribing to a Lyft transportation plan similar to how you have a music program, maybe Spotify, or a minutes plan like you have on AT&T or Verizon.” - John Zimmer, Lyft Coinbase Announced it is launching a $15M CVC, Coinbase Ventures, that will invest off its balance sheet. It will invest only in companies, not cryptoassets.
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