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23 Oct 2017
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.
Lovingly put together by @twehmeier & @stephen2206
2
● Will a significant decline in public market equity valuations lead to a
follow-on impact on private market valuations?
● What changes will we see to the overall investment and exit
landscape if we see a shift from a bull to a bear market?
● What impact will a bear market have on corporate activity in the
private technology world? Will we see reduced CVC or M&A activity?
● Goldman argues bear markets are triggered in three ways: cyclical
(interest rates/recessions/falls in profit), event-driven (negative
one-off economic shocks e.g. war/crisis) and structural (from
imbalances and financial bubbles)
● GS says the major factor holding back a bear market currently is low
inflation, which is forcing interest rates to be kept low by central
banks.
● Any serious decline in public market equities can be expected to play
out in private market equities too. One obvious sign that VC is
impacted by the macroeconomic environment is the impact that
historically-low interest rates have had in terms of capital allocation
into private markets in the hunt for greater yield
3
What do you need to know?
Why does it matter?
Key questions
● Goldman published a deep dive research note exploring the
possibility of equities entering a bear market. According to GS,
equities have been on the second largest and longest bull run in
history.
● According to its proprietary risk indicator, it believes there is a high
risk (50%+ frequency) of being in a bear market in the next 12-24m
GS examines risk of bear market in next 12-24 months
Source: Goldman Sachs, Business Insider
2nd largest & longest bull run in history, per GS
88% chance of entering bear market in next 24m
4
Source: Goldman Sachs
GS Bear Market Indicator is at 67%... ...if a bear market arrives, it will be with a ‘bounce’
● What should regions experiencing a negative outflow of founders be
doing to create more attractive conditions to retain them?
● The study confirms what it terms the ‘hypermobility of founders in
Europe’, with 24% of EU founders moving location in order to seek
out better startup conditions
● Access to talent is the number one factor that dictates location
choice, significantly ahead of access to capital. This is likely a
reflection of the fact that its easier to convince capital to cross border
than it is to convince people to cross borders to be an employee
● While Europe has diversified geographically with the emergence of
hubs throughout the region, there’s still clearly a large gap between
the attractiveness of different hubs/sub-regions that is driving talent
migration, principally from CEE & southern Europe into the UK,
Germany, France and the Nordics
5
What do you need to know?
Why does it matter?
Key questions
● The European Startup Initiative published a second iteration of The
Startup Heatmap Europe based on a representative sample of 300+
founders reflecting the regional and industry distribution of European
startups
● The study is designed to examine where startup founders come from
and where they are going to, examining trends in terms of the
geographical flows of founders and the factors that influence their
origin and destination
● London came out as the #1 destination, surpassing Berlin which
ranked top in 2016. These two hubs outscore others by 2x+
Study finds founders pick London as #1 place to start up
Source: http://www.startupheatmap.com/
Founder migration flows within Europe, by sub-region
6
Source: http://www.startupheatmap.com/
● Dealroom.co conducted a study to look at VC fundraising in Europe.
Their study took a different methodology to take into account funds
that may have been excluded by previous studies. According to
Dealroom, 2,484 unique investors have participated in a round in
Europe in 2017, up 3.3x from 758 in 2012
● According to the analysis, Europe is on track for €12B in funds
raised in 2017, a ca 3x increase in the past 3-4 years.
● The number of funds grew at a similar pace, hitting ~100 new funds
per year in 2017, with an average fund size of around €110M
● The UK has been the historical top hub for VC fundraising, but its
role is being diluted as fundraising across Europe has surged. The
UK, France & Germany account for 64% of capital raised in Europe
● What impact will a growth in available capital have on overall
competitive dynamics and startup valuations in the region?
● A deep investment pool is clearly an important foundation for the
European ecosystem. Particularly of note is the fact that markets
such as Netherlands, Spain and Sweden have all seen strong
growth in local fundraising
● The data provides further fuel to the fire that France is emerging as a
top European startup hub with an increasingly deep and
well-capitalised pool of investors to capitalise on the growing
momentum in terms of tech entrepreneurship
● The numbers exclude significant sums raised by corporate and
government funds that are also focusing on Europe
7
What do you need to know?
Why does it matter?
Key questions
Europe on course for ~€12B in VC funds raised in 2017
Source: Dealroom.co
8
Source: Dealroom.co
● When we see other crypto use cases come out of the sandbox and
into the mainstream?
● Will we see the warchests that have been built through token
holdings being put to use through M&A?
● Beyond the use case of storing value, there are few cryptocurrency
coins or tokens that can claim to have found utility through a ‘real
world’ use case. Ripple makes the case that it is one of the few that
has ‘moved out of the sandbox’ into real world use with real
customers
● Ripple’s decision to implement its own coin - XRP - means the
company is sitting on huge theoretical firepower. Ripple claims to
have $15B in ‘cryptocurrency reserves’ that it could use to acquire or
partner with rivals to consolidate its position
9
What do you need to know?
Why does it matter?
Key questions
● Ripple now claims to have 100+ customers of its cross-border B2B
payments service that is seeking to disrupt the Swift network by
providing faster and cheaper transfers (seconds vs 3 days on Swift)
● Customers include Credit Agricole, Bexs Banco, dLocal. SEK, the
Swedish bank, has been using Ripple to make $’0M international
transfers
● The value of XRP - Ripple’s own cryptocurrency - has increased 25x
since early 2017, reaching a total market cap of $10.5B, making it
the third most valuable coin after BTC and ETH. This is short of its
ATH of $16B from May 2017
M&A driven by huge valuations attached to crypto assets?
Source: https://www.ft.com/content/8dcd3fa4-adbb-11e7-beba-5521c713abf4
“Ripple owns about $15bn of XRP and we will
use that to ensure that we continue to advance”
Ripple (XRP) market cap at $10.5B
General News In Brief
10
Footnotes
Companies What happened?
Facebook
Facebook has officially launched an ‘Order Food’ feature in the US. This allows FB users to order food directly from its app,
both through partnership with food delivery players (DoorDash, Delivery.com, etc), as well as through direct relationships with
food chains, such as Five Guys, Papa John’s, TGI Friday, Chipotle, etc
GSK/J&J
Big pharma is the latest traditional industry to now be recruiting from big tech companies at increasing pace and scale in order
to fill out technical positions, typically in data analytics.
Woodford Investment
Jupiter Asset Management has pulled hundreds of millions of funding from Woodford’s flagship Equity Income Fund, likely due
to poor performance (down 0.3% over the past 12 months). Jupiter has backed Woodford for ‘multiple decades’
Google Hardware/AI
Google announced a new set of hardware products infused with AI as it continues to execute against its strategy to push its
AI capabilities into as many places as possible that allow for a wider range of user interactions
Alibaba
Alibaba says it will invest $15B over three years in a global R&D initiative; known as the DAMO Academy, the program will
operate labs in Singapore, Beijing, and five other locations around the world; researchers will focus on an array of
technologies including quantum computing, IoT, fintech, and more
Tencent / Ola
India-based ride-hailing firm Ola raises $1.1B led by Tencent with participation from SoftBank and others; Ola also confirmed
it’s in talks with unnamed investors to add an additional $1B to the round; the firm has raised more than $4B to date
HelloFresh
Berlin-based meal kit company HelloFresh files for IPO on the Frankfurt Stock Exchange; aims to raise $353M for a $1.8B
valuation; HelloFresh offers subscription plans through which customers receive portioned ingredients and recipes; raised
$365M
Tujia
China-based Airbnb rival Tujia raises $300M on a $1.5B valuation led by Ctrip.com and All-Stars Investment; the vacation
rental platform offers more than 650k listings around the world; raised over $750M to date
ZhongAn
ZhongAn is a Chinese internet only insurance co, billed as first Insurtech IPO. Backed by Ali, Tencent, PingAn. $1.5bn raised
val at $11bn valn
Airbnb
Airbnb is going full-stack by teaming up with a property developer to build dedicated apartment blocks in Florida for exclusive
use for Airbnb users
Acquiror Target Target desc. Amt Comments
Ikea TaskRabbit On demand odd job marketplace n/a First tech acquisition for Ikea and one that makes a lot of sense
SAP Gigya Identity management $350M Europe’s $100B+ tech giant continuing to bolt on acquisitions to round its offering
Alberton’s Plated Online meal delivery $200M Owner of Safeway supermarket chain. More blurring of offline/online boundaries
Nexon Korbit Crypto exchange $150M Large Asian Internet companies becoming active in crypto market. $80M stake aq’d
Navient Earnet Online lender for students $155M Earnest was once at $375M. Company has raised >$300M.
J&J Sightbox Online contact lens subscription n/a Johnson & Johnson going direct to consumer (a la Unilever/DSC)
Daimler Flinc Ridehsaring service n/a Daimler continuing to be an active acquirer in the mobility services space
Wal-Mart Parcel Last-mile delivery platform n/a Wal-Mart adding more capabilities as it seeks to build its multichannel commerce offer
Boeing Aurora Electric VTOL manufacturer n/a Boeing acquired Aurora to take its electric/VTOL/autonomous tech in-house
M&A wrap up
11

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Atomico Need-to-Know 23 October 2017

  • 1. 23 Oct 2017 1 Atomico Need-to-Know
  • 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. ● Will a significant decline in public market equity valuations lead to a follow-on impact on private market valuations? ● What changes will we see to the overall investment and exit landscape if we see a shift from a bull to a bear market? ● What impact will a bear market have on corporate activity in the private technology world? Will we see reduced CVC or M&A activity? ● Goldman argues bear markets are triggered in three ways: cyclical (interest rates/recessions/falls in profit), event-driven (negative one-off economic shocks e.g. war/crisis) and structural (from imbalances and financial bubbles) ● GS says the major factor holding back a bear market currently is low inflation, which is forcing interest rates to be kept low by central banks. ● Any serious decline in public market equities can be expected to play out in private market equities too. One obvious sign that VC is impacted by the macroeconomic environment is the impact that historically-low interest rates have had in terms of capital allocation into private markets in the hunt for greater yield 3 What do you need to know? Why does it matter? Key questions ● Goldman published a deep dive research note exploring the possibility of equities entering a bear market. According to GS, equities have been on the second largest and longest bull run in history. ● According to its proprietary risk indicator, it believes there is a high risk (50%+ frequency) of being in a bear market in the next 12-24m GS examines risk of bear market in next 12-24 months Source: Goldman Sachs, Business Insider 2nd largest & longest bull run in history, per GS 88% chance of entering bear market in next 24m
  • 4. 4 Source: Goldman Sachs GS Bear Market Indicator is at 67%... ...if a bear market arrives, it will be with a ‘bounce’
  • 5. ● What should regions experiencing a negative outflow of founders be doing to create more attractive conditions to retain them? ● The study confirms what it terms the ‘hypermobility of founders in Europe’, with 24% of EU founders moving location in order to seek out better startup conditions ● Access to talent is the number one factor that dictates location choice, significantly ahead of access to capital. This is likely a reflection of the fact that its easier to convince capital to cross border than it is to convince people to cross borders to be an employee ● While Europe has diversified geographically with the emergence of hubs throughout the region, there’s still clearly a large gap between the attractiveness of different hubs/sub-regions that is driving talent migration, principally from CEE & southern Europe into the UK, Germany, France and the Nordics 5 What do you need to know? Why does it matter? Key questions ● The European Startup Initiative published a second iteration of The Startup Heatmap Europe based on a representative sample of 300+ founders reflecting the regional and industry distribution of European startups ● The study is designed to examine where startup founders come from and where they are going to, examining trends in terms of the geographical flows of founders and the factors that influence their origin and destination ● London came out as the #1 destination, surpassing Berlin which ranked top in 2016. These two hubs outscore others by 2x+ Study finds founders pick London as #1 place to start up Source: http://www.startupheatmap.com/
  • 6. Founder migration flows within Europe, by sub-region 6 Source: http://www.startupheatmap.com/
  • 7. ● Dealroom.co conducted a study to look at VC fundraising in Europe. Their study took a different methodology to take into account funds that may have been excluded by previous studies. According to Dealroom, 2,484 unique investors have participated in a round in Europe in 2017, up 3.3x from 758 in 2012 ● According to the analysis, Europe is on track for €12B in funds raised in 2017, a ca 3x increase in the past 3-4 years. ● The number of funds grew at a similar pace, hitting ~100 new funds per year in 2017, with an average fund size of around €110M ● The UK has been the historical top hub for VC fundraising, but its role is being diluted as fundraising across Europe has surged. The UK, France & Germany account for 64% of capital raised in Europe ● What impact will a growth in available capital have on overall competitive dynamics and startup valuations in the region? ● A deep investment pool is clearly an important foundation for the European ecosystem. Particularly of note is the fact that markets such as Netherlands, Spain and Sweden have all seen strong growth in local fundraising ● The data provides further fuel to the fire that France is emerging as a top European startup hub with an increasingly deep and well-capitalised pool of investors to capitalise on the growing momentum in terms of tech entrepreneurship ● The numbers exclude significant sums raised by corporate and government funds that are also focusing on Europe 7 What do you need to know? Why does it matter? Key questions Europe on course for ~€12B in VC funds raised in 2017 Source: Dealroom.co
  • 9. ● When we see other crypto use cases come out of the sandbox and into the mainstream? ● Will we see the warchests that have been built through token holdings being put to use through M&A? ● Beyond the use case of storing value, there are few cryptocurrency coins or tokens that can claim to have found utility through a ‘real world’ use case. Ripple makes the case that it is one of the few that has ‘moved out of the sandbox’ into real world use with real customers ● Ripple’s decision to implement its own coin - XRP - means the company is sitting on huge theoretical firepower. Ripple claims to have $15B in ‘cryptocurrency reserves’ that it could use to acquire or partner with rivals to consolidate its position 9 What do you need to know? Why does it matter? Key questions ● Ripple now claims to have 100+ customers of its cross-border B2B payments service that is seeking to disrupt the Swift network by providing faster and cheaper transfers (seconds vs 3 days on Swift) ● Customers include Credit Agricole, Bexs Banco, dLocal. SEK, the Swedish bank, has been using Ripple to make $’0M international transfers ● The value of XRP - Ripple’s own cryptocurrency - has increased 25x since early 2017, reaching a total market cap of $10.5B, making it the third most valuable coin after BTC and ETH. This is short of its ATH of $16B from May 2017 M&A driven by huge valuations attached to crypto assets? Source: https://www.ft.com/content/8dcd3fa4-adbb-11e7-beba-5521c713abf4 “Ripple owns about $15bn of XRP and we will use that to ensure that we continue to advance” Ripple (XRP) market cap at $10.5B
  • 10. General News In Brief 10 Footnotes Companies What happened? Facebook Facebook has officially launched an ‘Order Food’ feature in the US. This allows FB users to order food directly from its app, both through partnership with food delivery players (DoorDash, Delivery.com, etc), as well as through direct relationships with food chains, such as Five Guys, Papa John’s, TGI Friday, Chipotle, etc GSK/J&J Big pharma is the latest traditional industry to now be recruiting from big tech companies at increasing pace and scale in order to fill out technical positions, typically in data analytics. Woodford Investment Jupiter Asset Management has pulled hundreds of millions of funding from Woodford’s flagship Equity Income Fund, likely due to poor performance (down 0.3% over the past 12 months). Jupiter has backed Woodford for ‘multiple decades’ Google Hardware/AI Google announced a new set of hardware products infused with AI as it continues to execute against its strategy to push its AI capabilities into as many places as possible that allow for a wider range of user interactions Alibaba Alibaba says it will invest $15B over three years in a global R&D initiative; known as the DAMO Academy, the program will operate labs in Singapore, Beijing, and five other locations around the world; researchers will focus on an array of technologies including quantum computing, IoT, fintech, and more Tencent / Ola India-based ride-hailing firm Ola raises $1.1B led by Tencent with participation from SoftBank and others; Ola also confirmed it’s in talks with unnamed investors to add an additional $1B to the round; the firm has raised more than $4B to date HelloFresh Berlin-based meal kit company HelloFresh files for IPO on the Frankfurt Stock Exchange; aims to raise $353M for a $1.8B valuation; HelloFresh offers subscription plans through which customers receive portioned ingredients and recipes; raised $365M Tujia China-based Airbnb rival Tujia raises $300M on a $1.5B valuation led by Ctrip.com and All-Stars Investment; the vacation rental platform offers more than 650k listings around the world; raised over $750M to date ZhongAn ZhongAn is a Chinese internet only insurance co, billed as first Insurtech IPO. Backed by Ali, Tencent, PingAn. $1.5bn raised val at $11bn valn Airbnb Airbnb is going full-stack by teaming up with a property developer to build dedicated apartment blocks in Florida for exclusive use for Airbnb users
  • 11. Acquiror Target Target desc. Amt Comments Ikea TaskRabbit On demand odd job marketplace n/a First tech acquisition for Ikea and one that makes a lot of sense SAP Gigya Identity management $350M Europe’s $100B+ tech giant continuing to bolt on acquisitions to round its offering Alberton’s Plated Online meal delivery $200M Owner of Safeway supermarket chain. More blurring of offline/online boundaries Nexon Korbit Crypto exchange $150M Large Asian Internet companies becoming active in crypto market. $80M stake aq’d Navient Earnet Online lender for students $155M Earnest was once at $375M. Company has raised >$300M. J&J Sightbox Online contact lens subscription n/a Johnson & Johnson going direct to consumer (a la Unilever/DSC) Daimler Flinc Ridehsaring service n/a Daimler continuing to be an active acquirer in the mobility services space Wal-Mart Parcel Last-mile delivery platform n/a Wal-Mart adding more capabilities as it seeks to build its multichannel commerce offer Boeing Aurora Electric VTOL manufacturer n/a Boeing acquired Aurora to take its electric/VTOL/autonomous tech in-house M&A wrap up 11