cross pond high tech
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Why The Unicorn Financing Market Just Became Dangerous...For All Involved — On the Road to Recap by Bill Gurley

In February of last year, Fortune magazine writers Erin Griffith and Dan Primack declared 2015 “The Age of the Unicorns” noting — “Fortune counts more than 80 startups that have been valued at $1 billion or more by venture capitalists.” By January of 2016, that number had ballooned to 229. One key to this population growth has been the remarkable ease of the Unicorn fundraising process: Pick a new valuation well above your last one, put together a presentation deck, solicit offers, and watch the hundreds of million of dollars flow into your bank account. Twelve to eighteen months later, you hit the road and do it again — super simple.

While not obvious on the surface, there has been a fundamental sea-change in the investment community that has made the incremental Unicorn investment a substantially more dangerous and complicated practice. All Unicorn participants — founders, company employees, venture investors and their limited partners (LPs) — are seeing their fortunes put at risk from the very nature of the Unicorn phenomenon itself. The pressures of lofty paper valuations, massive burn rates (and the subsequent need for more cash), and unprecedented low levels of IPOs and M&A, have created a complex and unique circumstance that many Unicorn CEOs and investors are ill-prepared to navigate.

Many have noted that the aggregate shareholder value created by all of the Unicorns will vastly overshadow the losses from the inevitable failed unicorns. This likely truism is driven by the clear success of this generation’s transformational companies (AirBNB, Slack, Snapchat, Uber, etc). While this could provide some sense of comfort, most are not exposed to a Unicorn basket, and there is no index you can buy. Rather, most participants in the ecosystem have exposure to and responsibility for specific company performance, which is exactly why the changing landscape is important to understand.

Perhaps the seminal bubble-popping event was John Carreyrou’s October 16th investigative analysis of Theranos in the Wall Street Journal. John was the first to uncover that just because a company can raise money from a handful of investors at a very high price, it does not guarantee (i) everything is going well at the company, or (ii) those shares are permanently worth the last round valuation. Ironically, Carreyou is not a Silicon Valley-focused reporter, and the success of the piece served as a wake-up call for other journalists who may have been struck by Unicorn fever. Next came Rolfe Winkler’s deep dive “Highly Valued Startup Zenefits Runs Into Turbulence.” We should expect more of these in the future.

In late 2015, many public technology companies saw a significant retrenchment in their share prices primarily as a result of a reduction in valuation multiples. A high performing, high-growth SAAS company that may have been worth 10 or more times revenue was suddenly worth 4-7 times revenue. The same thing happened to many Internet stocks. These broad-based multiple contractions have an immediate impact on what investors are willing to pay for the more mature private companies.

Late 2015 also brought the arrival of “mutual fund markdowns.” Many Unicorns had taken private fundraising dollars from mutual funds. These mutual funds “mark-to-market” every day, and fund managers are compensated periodically on this performance. As a result, most firms have independent internal groups that periodically analyze valuations. With the public markets down, these groups began writing down Unicorn valuations. Once more, the fantasy began to come apart. The last round is not the permanent price, and being private does not mean you get a free pass on scrutiny.

Philippe J DEWOST's insight:

A must read article for anybody feeling sometimes we are playing Lego without the notice.

The conclusion below shall not relieve you from going through Bill Gurely's analysis of how this is different from the internet bubble :

"The reason we are all in this mess is because of the excessive amounts of capital that have poured into the VC-backed startup market.

This glut of capital has led to (1) record high burn rates, likely 5-10x those of the 1999 timeframe, (2) most companies operating far, far away from profitability, (3) excessively intense competition driven by access to said capital, (4) delayed or non-existent liquidity for employees and investors, and (5) the aforementioned solicitous fundraising practices. More money will not solve any of these problems — it will only contribute to them.

The healthiest thing that could possibly happen is a dramatic increase in the real cost of capital and a return to an appreciation for sound business execution."

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Google's Nest Is Buying Wi-Fi Camera Company Dropcam For $555 Million

Google's Nest Is Buying Wi-Fi Camera Company Dropcam For $555 Million | cross pond high tech | Scoop.it

The company's cameras are used primarily for home monitoring. Its two most popular cameras sell for $199 and $149.

In addition to its hardware business, Dropcam also sells cloud storage for its videos. Last year the company said 39% of its customers pay for the video storage service.

Dropcam will probably look to Nest's success in the "Internet of Things" space for guidance. It plans to move beyond video surveillance and hopes to incorporate movement sensors into its products, according to The Wall Street Journal.

Philippe J DEWOST's insight:

When a Data company buys another Data Pump through an IoT subsidiary. At Amazon Summit 2014 in Paris, the above chart was unveiled (courtesy Geoffrey Arduini) claiming that Dropcam is generating more video uploads than YouTube.

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Visualizing 15 Years Of Acquisitions By Apple, Google, Yahoo, Amazon, And Facebook

Visualizing 15 Years Of Acquisitions By Apple, Google, Yahoo, Amazon, And Facebook | cross pond high tech | Scoop.it

You grow old, you slow down, and you die. That is, unless you can inject some fresh blood. After watching the last generation of tech giants wither or..

Philippe J DEWOST's insight:

Proud to be somewhere in this GAFAY shopping spree. This chart would be even more interesting in % of market cap...

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Apple Is Only Spending A Few Million Dollars To Buy A Handful Of Color Employees

Apple Is Only Spending A Few Million Dollars To Buy A Handful Of Color Employees | cross pond high tech | Scoop.it
More mystery around the fate of Color, the ill-fated social-mobile-photo startup that became a laughingstock of Silicon Valley after raising $41 million to launch an app that proved to be a dud.

The Next Web had reported that the failed startup was getting bought outright by Apple for "double-digit millions."

Not so, says AllThingsD's Liz Gannes: Apple is paying Color a token amount, between $2 million and $5 million, to hire away 20 or so members of Color's engineering team.
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Stay In The Know On Your Network: Newsle Joins The LinkedIn Family

Stay In The Know On Your Network: Newsle Joins The LinkedIn Family | cross pond high tech | Scoop.it

For the last three years, Newsle has leveraged its disambiguation, natural language processing and machine learning algorithms to build an extremely compelling product that finds blogs and articles that mention you or anyone you care about – colleagues, bosses, industry thought leaders, etc. – and notifies you seconds after they’ve published. We’re excited to work with Newsle’s team to combine this technology with our core assets and build experiences that continue to make you and millions of other professionals more productive and successful.

Philippe J DEWOST's insight:

Hoping that the integrated experience will be consistent across the line of LinkedIn's User Interfaces (web / tablet / phone)...

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Orange étudie un rachat de Bouygues Telecom

Orange étudie un rachat de Bouygues Telecom | cross pond high tech | Scoop.it

Les actionnaires du groupe Bouygues monteraient au capital d’Orange. Le projet serait soumis à l’accord des autorités européennes de la concurrence.

.../...

L’Etat, actionnaire à 27 % d’Orange, a plusieurs préoccupations. D’abord, éteindre l’incendie sociale qui semble couver dans les télécoms, en raison d’une vive concurrence par les prix. Bouygues Telecom agite deux épouvantails  :  un plan de suppression d’emplois qui pourrait toucher 2000 personnes  sur un peu moins de 9.000 ; et une guerre des prix dans le fixe qui risque de se traduire elle aussi par des réductions d’effectifs chez tous les opérateurs.

Si Orange avalait Bouygues Telecom, le plan de 2.000 suppressions d’emplois n’aurait plus lieu d’être, explique Sébastien Crozier, à la CFE-CGC d’Orange : « 2.000 emplois, c’est quatre mois d’attrition naturelle chez nous. En gardant ces emplois on ne ferait que retarder de 4 mois le plan de départs d’Orange... et nous serions très contents de voir arriver ces salariés qui rajeuniraient notre pyramide des âges. »

Philippe J DEWOST's insight:

Intéressant...

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On Refait Le Mac Episode 115 : "Apple m'a racheter"

On Refait Le Mac Episode 115 : "Apple m'a racheter" | cross pond high tech | Scoop.it

l'histoire d'imsense et de son rachat par Apple racontée pour la première fois in extenso et en video dans "On refait le Mac" ...

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Larry's comment, October 20, 2012 4:52 PM
C'est passionnant mais que c'est longuet une video-émission par rapport au fond lui-même ...
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Softbank Buys 70% Of Sprint

Softbank Buys 70% Of Sprint | cross pond high tech | Scoop.it
A $20 billion deal....expected to be announced Monday morning and while certain details are still being worked out, the boards of both companies have signed off on a transaction under which Softbank will buy $8 billion worth of shares directly from Sprint [S 5.73 -0.03 (-0.52%) ] and tender for another $12 billion worth of the shares from existing holders.

The price of the tender offer is $7.30 a share, a large premium to Sprint's current price. Given the deal's structure, it will not require a shareholder vote.
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