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Date: Sunday, 28 Sep 2014 18:53

Blackberry’s new Passport

The days of BlackBerry Messenger, roller balls, and physical keyboards seem a long time ago now.  The once revolutionary BlackBerry, a must-have utility tool for businesses and individuals alike, became eclipsed by competitors such as Samsung and Apple, who each have claimed substantial market share in the mobile world.

At simultaneous launch events in Toronto, Dubai, and London on Wednesday, September 24, BlackBerry took strides towards reclaiming relevancy in the mobile phone world with the unveiling of its BlackBerry Passport.  BlackBerry said its new phone was named this way not only for its unusual square shape, but also to represent a “universal symbol of mobility.” With its 4.5 inch square shaped display and a return to BlackBerry’s signature hardware keyboard, the phone is indeed distinguished from its competitors.

Once known as the ultimate enterprise tool, the new BlackBerry device is aimed in particular at the business world.  New feature BlackBerry Blend allows users to connect the Passport with non-BlackBerry devices, allowing them to conduct business on the go and follow up with the same project later on a PC or tablet.  BlackBerry has also taken steps to close the gap on its established competitors by forging a deal with Amazon that will give users access to 1000s of Android apps.  Features like voice assistant, BlackBerry Hub, and a far superior battery life (provides up to 30 hours of mixed use) also figure to aid in the company’s return to relevancy.

“The BlackBerry Passport was created to drive productivity and to break through the sea of rectangular-screen, all-touch devices, said John Chen, CEO and chairman of BlackBerry.

But while BlackBerry loyalists may relish the revamped device, Wall Street’s sentiments seem much more cautious, if not skeptical.  The amount of people who never successfully adapted to touch screen typing is sizeable, and investors admit the keyboard’s comeback could resonate with people.

Analysts from the likes of Citi and Deutsche Bank worry about issues like the compatibility of Android Apps on the unconventional square screen and the BlackBerry Passport’s competitiveness at a $599 price point without contract, a level just $50 cheaper than the newly released iPhone 6.

While BlackBerry stock has reversed its abysmal 2013 decline and risen by 37% in 2014, critics on and off Wall Street are not overly faithful that the Passport is BlackBerry’s claim back to fame.  However, with the promise of security in a vulnerable online world, a physical keyboard, and unparalleled battery life, the Passport could make some noise in the mobile sector.

The Bash bug threat

Vulnerable operating systems have been hot topics amongst not just the tech industry, but all business sectors this year.

The latest worry is a viral bug said to be even worse than Heartbleed, dubbed Shellshock.  The flaw was detected in Bash, a software component of many Linux systems and Apple’s Mac operating system.  According to security experts, Bash is the software used to control the command prompt on many Unix computers, allowing hackers to exploit the bug and take control of a targeted system.  The bug in the software has gone undetected for 22 years, meaning that Bash has been widely used in these operating systems and the Shellshock flaw in the software could end up affecting hundreds of millions of people and devices.

The bug has been given a top-rating of 10 on the vulnerability scale by Tod Beardsley, an engineering manager at cybersecurity firm Rapid7.  Compounding the problem is that the bug has been given a rating of “low” on the complexity scale, meaning that once hackers catch wind of the bug, it is easy for them to take capitalize on it and remotely control entire operating systems.  The U.S. National Institute of Standards and Technology (NIST) warned that Shellshock “allows unauthorized disclosure of information; allows unauthorized modification; allows disruption of services.”

The U.S. Computer Emergency Readiness Team (US-Cert) has been actively encouraging system administrators to implement security patches, while Linux provider Red Hat has also released a patch, despite it being incomplete.  Apple has yet to offer a patch or solution to mitigate the problem for Mac OS X.

Apple’s mishaps 

Yet another potential pitfall for Apple, christened “Bendgate,” came to light this past week with multiple complaints from owners of the week-old iPhone 6 Plus that the device t is susceptible to bending while in a pocket.

The public outcry via social media, particularly Twitter, is still in its early stages.  Testing by YouTube channel Unbox Therapy showed that the iPhone would bend with the application of significant force, proved with a video that has gone viral. Such claims contradict warranty provider SquareTrade’s reports that the phone is robust and passed all “breakability tests with flying colors.”  However, the insurance company’s experiments apparently did not include testing for “bendability.”

In a statement to the Wall Street Journal on Thursday, Apple responded by saying that only nine customers have reported a bent iPhone 6 Plus. Given the record 10 million iPhones Apple sold in the first weekend of the phone’s launch, nine would seem a number of little importance and might serve to discredit claims of the phone’s fragility.

Apple will hope this is the case, as it had other issues to address this week.  The tech giant has released an apology to users who experienced problems with the iOS 8.0.1 operating systems released with iPhone 6.  Some users were unable to make or receive telephone calls, while others said the fingerprint scanner feature also malfunctioned.

You may have missed…

Germany’s most active VCs

Berlin’s Inkitt aiming for 50 Shades of Green as digital publishing lifts off

Alibaba’s road to the largest tech IPO ever

This week in numbers

T-cell therapy company Adaptimmune raises $104m

Hootsuite secures $60m investment round

Radius raises $54.7m Series C round

 

The post Apple’s issues, BlackBerry Passport and the Bash bug appeared first on Red Herring.

Author: "Red Herring Editorial Team" Tags: "Enterprise, Mobile, Weekly Digest"
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Date: Friday, 26 Sep 2014 21:09

IPO

The online home furnishings company Wayfair hopes to raise over $300 million when it goes ahead with its IPO. The company’s intention to do so was made public last month, though the Boston-based firm had filed with the SEC under the JOBS Act before that. Wayfair has raised over $358 million from the private markets, from backers such as Spark Capital, Battery Ventures, and T. Rowe Price, and posted a $51.4 million loss in the first half of this fiscal year. Goldman Sachs, Bank of America, Citigroup, and Allen & Co. have been charged with leading the offering.

Yodlee, an Accel Partners-backed financial application services company with over 17 million individual users of its services, will offer 6.3 million shares in the $11-13 price range with the hopes of raising $75 million in its upcoming public offering. Bank of America, which will be leading the process alongside Goldman Sachs, Credit Suisse, and BofA Merrill Lynch, was responsible for 14% of Yodlee’s revenue in the first six months of this year. Yodlee was founded in 1999 and is based in Redwood City, Calif.

CyberArk Software, an IT security solutions provider with headquarters in both Israel and Newton, Mass., began trading on Wednesday at $16 per share, and reached as high as $23. The company ended up raising $98.6 million. Jerusalem Venture Partners owns 38% of shares, while Goldman Sachs owns 19%.

A Malaysian online payment company called MOL Global Inc. hopes to raise over $260 million by selling 19.5 million shares for between $12.50 and $14.50. It is planning on pricing the week of October 6. When it does, it will become the first Malaysian company to list on an American stock exchange in over ten years, according to Renaissance Capital.

Travelport, a travel booking platform acquired by Blackstone in 2006, went public on Thursday, selling 30 million shares at $16 each to raise $480 million at a $2 billion valuation. Travelport was a significant investment for Blackstone, which poured $800 million into the company and weathered the company’s contraction through the recession. According to Bloomberg, Blackstone’s remaining stake is $137.6 million based on the pre-IPO price.

Hubspot, a sales and marketing SaaS company based out of Boston, will sell 5 million shares for between $19 and $21. The company is backed by General Catalyst Partners (27.1% pre-IPO equity stake), Matrix Partners (17.1%), Sequoia Capital (10.3%), Scale Veture Partners (6.8%), and Charles River Ventures (5%).

M&A

Vista Equity Partners and Thoma Bravo are reportedly in talks to buy Tibco Software. Tibco has a current market cap of $3.1 billion. Tibco’s founder and CEO is Vivek Ranadive, who in 2013 bought the Sacramento Kings.

 

The post The Exit Report: Wayfair, Yodlee, Hubspot appeared first on Red Herring.

Author: "Red Herring Editorial Team" Tags: "Exit Report, Finance, Startups"
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Date: Friday, 26 Sep 2014 16:28

Series A

Adaptimmune, a biotech company focused on using T-cell therapy to treat cancer and infectious disease, has secured $104 million in Series A financing. New Enterprise Associates (NEA) led the round, and other new investors included OrbiMed Advisors LLC, Wellington Management Company, LLP, Fidelity Biosciences, Foresite Capital Management, Ridgeback Capital Management, Novo A/S, QVT, Rock Springs Capital, venBio Select and Merlin Nexus. The University of Oxford was among the existing investors which also participated. “We are delighted to secure this strong financial support from some of the most prestigious and highly regarded biotechnology investment groups in the US, led by NEA,” said Adaptimmune CEO James Noble. “Their commitment, and the perspective and experience of our new board members, will be invaluable as we build the company up and accelerate the development of our own pipeline of clinical programs.”

Sao Paulo-based financial services company Nubank has raised $14.3 million in a Series A round led by Sequoia Capital, according to the New York Times. Kaszek Ventures and Silicon Valley Bank also participated in the round, which was Sequoia’s first investment in a Brazilian company. Nubank also launched a Mastercard platinum credit card which can be managed through an Android or iOS app, allowing users to avoid fees and high interest rates.

Series B

Context Relevant, a big data analytics company that works in the finance sector, has completed a $13.5 million Series B-1 financing round, with participation from Goldman Sachs, Bank of America Merrill Lynch, Formation 8, New York Life, and Bloomberg Beta. The company previously raised a Series B round worth $21 million earlier in the year. “We have the right software, the right people and the right partners to make a difference in protecting and improving the global financial system, which is the number one job of our team,” said Stephen Purpura, CEO of Context Relevant. “Our technology is not just for data scientists, it is used throughout our clients’ workforce. The platform represents a disruptive quantum leap over existing analytics solutions used in financial services.”

Series D

Taulia, a supplier-financing company, has raised $13 million in additional Series D financing, bringing the round’s total to $40 million. The company received additional interest in investment after its $27 million initial round in July. The additional funds came from BBVA Ventures and EDBI, the corporate investment arm of Singapore’s Economic Development Board.  “We’re very pleased to see continued and growing interest in our solutions across the globe,” said Taulia CEO Bertram Meyer. “It’s exciting to see our significant market traction recognized by these leading international investors, BBVA and EDBI.”

 

The post T-cell therapy company Adaptimmune raises $104m appeared first on Red Herring.

Author: "Red Herring Editorial Team" Tags: "Finance, Investment Round Up, Startups"
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Date: Thursday, 25 Sep 2014 17:51

Series B

FiveStars, a digital loyalty rewards platform for small businesses, has reeled in $25 million in Series B financing from lead investor Menlo Ventures and return backers Lightspeed Venture Partners, DCM, and Rogers Communications. The company is a 2011 graduate of Y Combinator. Since then, it has raised $42.7 million and has grown its network of small businesses to 5000. “FiveStars’ mission is to help local businesses turn every transaction into a relationship. This new round of funding brings us one step closer to making that vision a reality,” said Victor Ho, CEO and co-founder of FiveStars.

Series C

Intel Capital, Romulus Capital, TriplePoint Capital, and Y Combinator president Sam Altman all participated in E la Carte’s $35 million Series C round. The company develops tablets for restaurants that serve as both menus and payment mechanisms for customers. E la Carte, which was founded in 2008 at MIT but now operates out of offices in Redwood City, Calif., has now raised $52.5 million.

Dollar Shave Club, a subscription-based personal grooming delivery service, has secured $50 million in Series C financing from Pritzker Group Venture Capital and Venrock. The company has over 500,000 customers and has gained popularity in part through a series of web videos describing the product that have gone viral. The company’s seed round, back in 2012, was backed by Andreessen Horowitz and Kleiner Perkins, among others.

Miaopai, a video app company based in China, has raised $50 million from Kleiner Perkins (officially KPCB Holdings), Redpoint Ventures, Ren Quan Ventures, StarVC, and Sina.

Series D

The social media management platform Hootsuite has secured a $60 million investment from a host of backers, including Accel Partners, Insight Venture Partners, OMERS Ventures, Silicon Valley Bank, and likely Fidelity. While it is not yet profitable, Hootsuite has over 10 million enterprise (mostly SME) and individual customers. The Vancouver-based company has raised $285 million to date. It also announced that it had acquired Zeetl, another social media ad platform for enterprise. “This financing will help us scale even faster on a global level and bring the most innovative products to market. The strong commitment from investors during this time of amazing growth marks an exciting milestone for Hootsuite,” Ryan Holmes, CEO of Hootsuite said in a press release.

 

The post Hootsuite secures $60m investment round appeared first on Red Herring.

Author: "Red Herring Editorial Team" Tags: "Finance, Investment Round Up, Startups"
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Date: Wednesday, 24 Sep 2014 19:33

Despite some high profile tech setbacks, such as those suffered by Uber and Google, the German technology sector is thriving. Despite slow national growth overall, small and medium companies comprise 99.7% of the economy, with the German IT market set to grow to over €65 billion ($83bn) by 2016. Berlin, the capital, has over 2,500 startups. Its digital economy contributes over 6% of the city’s output. German ventures are upping their game too: between January and June this year €2.79bn ($3.56bn) was put into almost 700 local firms, beating the same period last year by a third.

Rocket Internet has drawn praise for its incubation of over 100 successful companies – and ire for its alleged ‘copycat’ model, which aims to emulate existing ideas. But what cannot be ignored is the number of profitable and growing startups that have emerged from the country in recent years.

“It’s very exciting being part of what’s currently happening in Berlin,” says Niklas Ostberg, CEO of Delivery Hero, a European food delivery network with over $650 million in funding. “The tech scene is exploding and it’s great to be a part of it.”

These are the most active VCs in Germany since 2009, according to data from CB Insights.


Most Active VCs in Germany, since 2009

1. High-Tech Gruenderfonds

Preferred Stage: Early, Mid

Fund Size: €304 million

Founded: 2005

Location: Bonn

Recent Investments: Opentabs, eGym, Medineering

Notable Exits: Bayer AG (IPO in 2009, Acquired by Boston Scientific in 2014)

 

2. T-Venture (Venture Arm of Deutsche Telekom)

Preferred Stage: Mid

Fund Size: €280 million

Founded: 1997

Location: Bonn

Recent Investments: Lookout, Boxfish, Affirmed Networks

Notable Exits: BelAir Networks (Erricson, 2012), Ubiquisys (Cisco, 2013, $310M)

 

3.HV Holtzbrinck Ventures

Preferred Stage: Early, Mid

Fund Size: €177 million

Founded: 2000

Location: Munich

Recent Investments: Quandoo, HelloFresh, Delivery Hero, Zalando

Notable Exits: Citydeal.de (Groupon, 2010), brands4friends (eBay, 2010, $200M)

 

4.German Startups Group

Preferred Stage: Late

Fund Size: n/a

Founded: 2012

Location: Berlin

Recent Investments: SoundCloud, Solar Tower Technologies, Delivery Hero

Notable Exits: n/a

 

5. IBB Beteiligungsgesellschaft

Preferred Stage: Early (€200,000-2.5 million)

Fund Size: n/a

Founded: 1997

Location: Berlin

Recent Investments: Babbel, Zimory, sofatutor

Notable Exits: AUPEO! (Panasonic, 2013), gate5 (Nokia, 2005)


6. Bayern Kapital

Preferred Stage: Early (€250,000-600,000 investments)

Fund Size: n/a

Founded: 1995

Location: Landshut

Recent Investments: eGym, Crealytics, Altruja

Notable Exits: Corimmun (Johnson & Johnson, 2012), Art of Defence (Zeus, 2011)

 

7. Target Partners

Preferred Stage: Early, Mid

Fund Size: €230 million under management

Founded: 2000

Location: Munich

Recent Investments: Quobyte, Hetras, Finanzchef

Notable Exits: JouleX (Cisco, 2013), P21 (Heliocentris, 2012), Scoreloop (Blackberry, 2011)

 

8. e.ventures

Preferred Stage: Early

Fund Size: $100 million

Founded: 1998

Location: Hamburg and Berlin (San Francisco HQ)

Recent Investments: Deltamethod, Auctionata

Notable Exits: kaufDA (Axel Springer, 2011), CityDeal.de (Groupon, 2010

 

9. Wellington Partners

Preferred Stage: Early, Mid

Fund Size: €265 million

Founded: 1998

Location: Munich

Recent Investments: Festicket, Nosto, Opvizor

Notable Exits: Sapiens (Medtronic, $200M, 2014), Readmill (Dropbox, 2014), Seesmic (Hootsuite, 2012)

 

10. Seventure Partners

Preferred Stage: Early, Mid (€500k-20M)

Fund Size: €550 million under management

Founded: 1997

Location: Paris

Recent Investments: MinuteBuzz, Mint Solutions, Testbirds, Presta Shop

Notable Exits: Vistaprint (IPO, 2005), Mauna Kea Technologies (IPO, 2011)

 

The post Germany’s most active VCs appeared first on Red Herring.

Author: "Peter Ward" Tags: "Europe, Finance, Startups"
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Date: Wednesday, 24 Sep 2014 19:02

Series A

Invoice2go, the company behind a mobile app for small business owners to manage invoicing and expense tracking, has secured a $35 million investment from Ribbit Capital and Accel Partners. Founded in 2002, Invoice2go is used to manage billions of dollars in invoices each year. The company is based in Australia.

The peer-to-peer Chinese car rental service Uuzuche.com has raised $10 million from Lightspeed China Partners, China Renaissance K2 Partners, and Wang Gang, an angel investor. “Private car sharing platforms like uuzuche.com not only can help to optimize a city’s vehicle resources and help create a well-structured environment, but also can help with the remission of traffic and encouraging greener driving patterns,” said Han Yan, a partner at Lightspeed China Partners through a press release.

Jared Leto, Snoop Dogg, and Box CEO Aaron Levie are among the investors in the $13 million Series A round of Robinhood, a fee-free mobile app for trading stocks. The round was led by Index Ventures. “We’re making investing accessible to young people,” co-founder Vlad Tenev told TechCrunch. Robinhood’s seed round involved participation from Andreessen Horowitz.

Series B

Qualtrics, an online survey company based in Provo, UT, has raised a staggering $150 million in Series B funding from Insight Venture Partners and existing backers Sequoia Capital and Accel Partners. Qualtrics has 6,000 enterprise customers, including half of the Fortune 100 and 99 of America’s 100 leading business schools, who collect information from 2.1 million surveys per day on average. With the latest round of financing, Qualtrics joins SurveyMonkey as online survey companies with $1 billion valuations. “All a survey is…[is] a form with an analytics component,” Qualtrics co-founder and CEO Ryan Smith told Businessweek, before adding, “We have the best form.” Founded in 2002, Qualtrics waited ten years before first raising venture funding.

Series C

Udacity, the massively open online courses (MOOCs) platform created by GoogleX Lab founder Sebastian Thrun, has raised $35 million to expand its nanodegree program. Drive Capital, a Columbus, OH-based firm founded by two former Sequoia partners, led the round. It was joined by repeat backers Andreessen Horowitz, Charles River Ventures, Peter Levine, and George Zachary, with additional participation coming from media, HR, and investment firms from Germany, Japan, and Brazil respectively. The company announced its nanodegree program, which provides job-specific training crafted by employers for $400 a month, through a partnership with AT&T earlier this year. Udacity classes are taught by industry professionals and focus on computer programming skills in particular. Thrun and his company are targeting underemployed 24-34 year olds, but some fear that the model represents an attack on the traditional four-year American collegiate system.

 

The post Qualtrics raises $150 million Series B round appeared first on Red Herring.

Author: "Red Herring Editorial Team" Tags: "Finance, Investment Round Up, Startups"
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Date: Tuesday, 23 Sep 2014 17:18

Series A

The mobile ticketing app Gametime has raised $4 million from Accel Partners to grow its platform. Gametime is a mobile-only ticket aggregator that places a special emphasis on last minute tickets. The service currently supports sporting events in 18 American cities. Gametime joins SeatGeek as one of Accel’s mobile ticketing plays.

Series B

Jiff, a wearable technology firm that aims to align corporate health care plans with healthy workplace behavior, has raised $18.3 million from Venrock, Aberdare Ventures, and Aeris Capital. The company has now raised over $25 million since 2010. Jiff counts Qualcomm, Red Bull, and Uber as customers, and Welltok, Rally, and Keas as competitors.

Silvercar Inc. appears to be the latest company to be banking on a decline in car ownership among millennials, as it announced today that it had raised $14 million in Series B financing from Velos Partners, CrunchFund, and angel investors like Eduardo Saverin and Chris Dixon. Silvercar’s app allows travelers to rent Audi A4’s for $89 per weekday at the airport. The service currently operates in eight airports, while its CEO, Luke Schneider, was formerly CTO at Zipcar. “As automakers look to replace sales revenue with service revenue, companies like Silvercar become a more important part of the equation,” Schneider told The Wall Street Journal. Silvercar is based in Austin, TX.

Series C

Peter Thiel, John Mack, and actor Jared Leto are among those who participated in Radius’ $54.7 million Series C round. Radius, which provides a data analytics platform for B2B marketers while based in San Francisco, has now raised close to $80 million.

Teladoc, a Dallas, TX-based teleconferencing service for medical professionals, has secured  $50.3 million in new funding in a round led by Jafco Ventures. Jafco was joined by Cardinal Ventures and Kleiner Perkins, among others. Founded in 2002, Teladoc is the nation’s largest provider of healthcare teleconference solutions. The company’s 8 million members gain access to Teladoc through its contracts with major employers and insurance providers. The latest financing brings total venture funding to just under $75 million.

Agari, a cyber threat detection and prevention service with a focus on email, has secured $15 million in Series C financing to bring total funding to over $22 million. The round was led by Scale Venture Partners with additional participation coming from Alloy Ventures, Battery Ventures, and First Round Capital. The company was also named a Gartner “Cool Vendor” this year.

The post Radius raises $54.7m Series C round appeared first on Red Herring.

Author: "Red Herring Editorial Team" Tags: "Finance, Investment Round Up, Startups"
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Date: Monday, 22 Sep 2014 18:01

Venture

WPP, the London-based multinational advertising and PR agency, has upped its equity stake in New York’s real-time online ad bidding platform AppNexus from 1% to 15% through a $25 million investment. The deal comes as a part of AppNexus’ decision to buy Xaxis for Publishers, another ad-serving technology, from WPP. “We can’t build everything,” said WPP CEO Martin Sorrell, speaking to The Wall Street Journal, “We know data and relationships and how to reach our audiences in innovative ways. That’s what’s important to our clients.” AppNexus, which received a $1.2 billion valuation based on its latest round of funding, is considered one of the leading alternatives to Google when it comes to ad serving. It is backed by Venrock, Technology Crossover Ventures, and Ben Horowitz and Marc Andreessen, who invested as angels, among others.

Series A

A San Francisco-based event planning platform, HoneyBook, has raised a $10 million Series A from Aleph VC, Hillsven Calital, Ooga Labs, and Ev Williams, among others. Honeybooks aims to streamline users ability to transact payments, make logistical decisions and communicate with clients, according to a company release. “HoneyBook is modernizing the planning experience by giving creative businesses and their clients the ability to easily collaborate on producing and sharing memorable, flawless experiences. The most modern planning experience has arrived and it’s here to stay,” said Oz Alon, HoneyBook cofounder and CEO.

EdCast, a cloud-based educational platform built to facilitate collaboration among learners, schools, and employers, has raised a $6 million Series A. Investors include Menlo Ventures, SoftBank Capital, and the NewSchools Ventures Fund, among others. EdCast was incubated through Stanford’s StartX program.

Series B

DuoSecurity, a two-factor authentication security company based out of Ann Arbor, MI, has secured a $12 million Series B from Benchmark and returning backers Google Ventures, True Ventures, and Radar Partners. The company serves over 5,000 customers, and will use the new funding to grow its sales and engineering teams. It was founded in 2010, and has now raised $20 million.

 

The post Honeybook secures $10m Series A round appeared first on Red Herring.

Author: "Red Herring Editorial Team" Tags: "Finance, Investment Round Up, Startups"
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Date: Sunday, 21 Sep 2014 13:31

Thiel blasts Twitter

Twitter shares have fallen over 20% in 2014 as the company has failed to grow its user base at the same pace as its competitor, Facebook.  According to prominent venture capitalist and PayPal’s billionaire co-founder Peter Thiel, Twitter’s problems might stem from an issue of serious mismanagement…and pot smoking.

Theil, an early investor in Facebook, blasted Twitter on a Wednesday morning interview with CNBC, claiming that “it’s a horribly mismanaged company” and there is “probably a lot of pot-smoking going on there.”

Rumors suggest Twitter co-founders Jack Dorsey and Evan Williams never saw eye to eye. Neither still works for Twitter, but the inherent divisions in the company remain and could be having an effect on its growth prospects.  “It feels like it’s vastly underperforming its potential,” Thiel said.

Thiel did hedge himself by admitting that the company’s business model is so sound that it would probably succeed despite internal problems.  Perhaps that is why the CEO of Twitter, Dick Costolo, did not issue a public retort but instead responded with a playful Twitter jab at one of Thiel’s earlier investments.

While there is no evidence that Twitter’s senior management are pot users, Wall Street’s pricing of the media giant’s stock suggests that it may share the sentiment of Thiel. So far, Twitter has not lived up to its goal of growing in line with its fellow media incumbent.  Facebook, and has actually witnessed a slowdown in user acquisition.  Whether that is due to mismanagement, or another factor, the company has concerns that it must address heading into the last quarter of 2014.

Microsoft event on horizon

In the wake of Apple’s recent launch event for the iPhone 6 and the Apple Watch, Microsoft sent out official press invitations this week announcing an event September 30 in San Francisco at 1 p.m. ET.

The invitation reads “Join us to hear about what’s next for Windows and the enterprise.”  While the exact intent of the event is somewhat mysterious, most believe the tech giant will release the next major version of Windows.  Unofficially dubbed Windows 9, the new software will likely be aimed at appeasing the corporate world, with many enterprises feeling that Windows 8 and its touch screen orientation did not support the conventional mouse-keyboard-PC work environment.  This could be crucial for Microsoft, which registers around two-thirds of its profits from business-tech sales.

Details of the new Windows system have leaked over the past week, revealing features such as a new start menu, a virtual desktop feature, and a notification center. Either on or after the event, Microsoft is expected to deliver an official “Windows Technical Preview” to fully disclose the changes the company has made to its operating system.  Many changes are still in progress, putting a broad release date for the new Windows at sometime next year.

Perhaps a larger question for Microsoft is whether a new Windows platform is relevant in a phase where competitors like Apple seem to have gained more traction in the post-PC computing world.  As Microsoft strive to unite all devices under “one Windows” – unifying Windows, Windows Phone, and XBox in one converged operating system – this could be the last major release of a new version of Windows, with one click upgrades implemented instead.

iPhone 6 on shelves

Die-hard Apple enthusiasts finally got their hands on the iPhone 6, which became available in stores this week.  Customers camped outside stores around the world in anticipation of the largest iPhone to date.

Waiting in long lines at retail stores may have proved the better option than pre-ordering.  Apple said in a statement that demand for the phone far exceeded the pre-order supply, backing up orders to the point where some customers will only receive the phone in October.  Pre-orders reached a record 4 million units for the two models (iPhone 6 and iPhone 6 Plus) combined.  One camper outside a retail store in Perth, Australia made the right choice as he became one of the first people in the world to own the device…and then subsequently dropped it on live television.

The iPhone 6 launch is therefore not without its flaws.  Due to a strict Chinese bureaucracy, Apple’s plan for launch on the mainland has stalled, leaving one of the company’s largest markets untouched by the latest device.  In another issue, one of Apple’s new feature apps, the HealthKit, ironically experienced an unhealthy bug and has also been delayed.

Still, most of the early signs for Apple are positive.  The Samsung Galaxy Note 4, sequel to its largely successful predecessor, has also begun pre-sales but with much less publicity. Early research on supplies of the hybrid Samsung tablet/phone device suggest that its presales are just 60% of what was notched at the same stage in the Note 3’s launch, likely due to the market share that the iPhone 6 has carved.

Unphased by the iPhone 6’s $649 price tag without contract, and $200 with a major U.S. carrier, customers rushed to get their hands on the phones, on day one of Apple’s record launch.  “iPhone 6 and iPhone 6 Plus are better in every way, and we are thrilled customers love them as much as we do,” said delighted Apple CEO Tim Cook. The iPhone 6 and iPhone 6 Plus will be released in 20 additional countries on September 26.

You may have missed

Alibaba’s road to the largest technology IPO ever

How would Scottish independence affect the technology sector?

Berlin’s Inkitt aiming for 50 Shades of Green as digital publishing lifts off

The week in numbers

Ridesharing app Sidecar raises $15 million

JW Player secures $20 million investment

Ping Identity announces $35 million round

 

The post Thiel’s Twitter attack, Windows announcement and iPhone released appeared first on Red Herring.

Author: "Red Herring Editorial Team" Tags: "Social, Weekly Digest"
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Date: Friday, 19 Sep 2014 22:22

IPO

Alibaba’s stock popped 35% on Friday, the much anticipated first day of trading for the Chinese e-commerce company. The shares, which were priced at $68, reached as high as $99.70 but settled around $93.89 at close of trading on Friday. Furthermore, the banks that facilitated the deal are expected to pick up their options on the shares, which would allow the company to raise a record-breaking $25 billion. Buyers overwhelmed sellers to the point where initial trading was delayed two and a half hours. Its current market cap of more than $231 billion makes the company more valuable than IBM, GM, and Proctor and Gamble. Unlike the aforementioned, though, Alibaba is not expected to pay out dividends any time soon.

Rewalk, an exoskeleton designer and manufacturer based in Israel, has seen its share price soar since being priced at $12 last week. The stock was trading at $27.78 at the close on the Nasdaq and under the RWLK ticker symbol. The company had raised over $18 million in VC, mainly from Israeli investors, before collecting $36 million through its IPO.

Things are decidedly less celebratory as Hubspot, a Boston-based online marketing and sales SaaS company, prepares for its own debut on the New York Stock Exchange. The company is reportedly losing $3 million per month, and as of its June 30th S-1 filing, had only $7.3 million in cash. The company does, however, a sufficient credit line to keep cash levels high enough for the next 12 months.

M&A

While Alibaba stole the IPO spotlight, this week saw several significant M&A deals, including Microsoft’s purchase of the Minecraft game maker Mogang, and a number of moves by some of the biggest players in the enterprise software space.

Rumors began to circulate last week, but Microsoft officially confirmed that it would be buying Mojang, a Swedish company best know for creating the Minecraft video game  for $2.5 billion. Markus Persson, or Notch, the game’s creator, was not interested in running a company of Mojang’s size, and reportedly approached Microsoft about the sale. “There are only a handful of buyers to grow Minecraft on the scale that it deserves,” Mojang said through a blog post on its company website. “We’ve worked closely with Microsoft since 2012, and have been impressed by their continued dedication to our game and its development.” None of the company’s three founders will be joining Microsoft post-acquisition.

SAP has agreed to buy Concur Technologies, Inc., a publicly traded employee expense management platform, for $7.3 billion. The price represents a 20% premium over Concur’s September 17 share price.  Concur has over 23,000 clients and 25 million users, 1/3 of whom already run SAP. The acquisition marks SAP’s latest foray into web-based software.

Red Hat, the global leader in open source app development, will acquire FeedHenry, a mobile app development platform founded in Ireland and a recipient of a Red Herring Top 100 award. The deal was reportedly worth $82 million, and is expected to close in Red Hat’s Q3 for the 2015 financial year. FeedHenry had raised $9 million from investors including Kernel Capital Partners, Intel Capital, and VMWare.

Amidst news that founder Larry Ellison would be stepping down as CEO, Oracle acquired Front Porch Digital, a media storage management company with over 550 customers, including A&E, BBC, and Discovery. Terms of the deal we’re not disclosed. Front Porch was founded in 2008 and is based in Louisville, Colorado.

 

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Author: "Red Herring Editorial Team" Tags: "Finance, Startups, Weekly Digest"
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Date: Friday, 19 Sep 2014 19:24

Seed funding

SchoolMint, which provides mobile and online enrolment systems for schools, has raised $2.2 million in seed funding, in a round led by New School Ventures Fund, Runa Capital and Crosslink Capital. Kapor Capital, Imagine K12, Romulus Capital, Fresco Capital and EdMentor VC, as well as other angel investors, also participated. The company will use the funds to further expand its team and increase its reach across schools in the U.S. Since launching in 2013, SchoolMint has been adopted by hundreds of school in more than 21 cities, according to a company statement. “Once we went through the never-ending paper trail to enroll our own daughter in kindergarten, we realized all K-12 schools are in dire need of an automated system to handle their admission process. Schools are resource-strapped and administrators are clamoring for a technology tool that they can customize and implement seamlessly. Our platform enables schools to spend their time and financial resources on what really matters – educating children,” said Jinal Jhaveri, co-founder SchoolMint.

DroneDeploy, which aims to provide software that makes drones easy to deploy, has raised $2 million in seed funding, in a round led by SoftTech VC. The round also attracted from participation from DataCollective, Redpoint, DFJ and Angelpad, where the company was incubated. DroneDeploy also announced the launch of its 4G powered drone control product out of beta, meaning it is now available to commercial customers.

Series B

PrecisionHawk, which uses drones and cloud-based software for aerial data analytics, has closed a Series B financing round worth $10 million led by Millennium Technology Value Partners. Existing investors Bob Young, co-founder of RedHat, and the Innovate Indiana Fund also participated. PrecisionHawk will use the funds to support growth and expand its sales and marketing. “Our firm believes that substantial value is being created by the transformative effect of UAV technology,” said Samuel Schwerin, founder and Managing Partner of Millennium Technology Value Partners. “PrecisionHawk envisions a world, as we do, where businesses across a wide variety of industries can access aerial information and gain actionable insights in an affordable, turnkey manner. This investment is a way to accelerate the development of an open platform for many innovative applications to be built upon.”

Series C

KIN, a digital media company, has closed a $12 million Series C round of funding. Corus Entertainment led the round, with participation from Emil Capital and existing investors Mayfield Fund, General Catalyst Partners and Rustic Canyon Partners. KIN is the owner of KIN Community, a female-focused YouTube network. “This new round of funding will further accelerate our vision to be the global leader in lifestyle by empowering the best lifestyle creators,” said Michael Wayne, Co-Founder and CEO of KIN. “We’re thrilled that Corus recognizes the unique value KIN Community brings creators, brands and consumers as a lifestyle platform, and we are looking forward to working with them as a partner.”

 

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Author: "Red Herring Editorial Team" Tags: "Finance, Investment Round Up, Startups"
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Date: Thursday, 18 Sep 2014 18:23

Series B

Nanomech, a nano-manufacturing technology company, has secured $12 million in Series B funding from Meadow Lane Investments, Hendricks Investment Holdings, Advantage Capital Partners and Spring Creek Investments. The company will use the latest funds to grow its global reach and invest in sales and marketing resources. “The additional capital proceeds are for the purpose of accelerating awareness and demand for our industry transformative nGlide and TuffTek products and expanding our physical presence in the energy manufacturing and transportation markets. Our sweep over the last year of the major top national new product awards including the R&D 100 Award, the Edison Award, and the SBIR Tibbetts Award, provide ample validation of NanoMech’s prowess in inventing, productizing, and commercializing world class technology. During this timeframe, we also reached a critical milestone in having our core patents issued by the USPTO and several key international patent offices,” said NanoMech CEO Jim Phillips.

Funding

Ping Identity, an identity security company, has raised a new funding round worth $35 million, led by KRR. Existing investors Draper Fisher, Jurvetson General Catalyst Partners , SAP Ventures, W Capital Partners, Volition Capital, Triangle Peak Partners and Appian Ventures all participated.  “Identity security is hot, and it is a market in the midst of a massive technology shift that will reshape the entire industry,” said Andre Durand, founder and CEO of Ping Identity. “This funding is further recognition that Ping Identity has built the largest independent identity company, and we are positioned to extend that growth as an enduring, independent company. We’re excited to have the backing from KKR and our other incredible investors as we execute on Ping’s mission to secure and protect online identity.” Ping Identity was founded in 2002 and has raised $110 million to date.

Leeo, a connected device company still operating in stealth, has raised $37 million in funding from Formation 8, Max Levchin and Scott Banister. Strategic investors E.ON and Visionnaire Ventures also contributed to the funding round. The company was founded last year by the creators of Guitar Hero and Beats headphones, and will use the funds to prepare for launch.

India-based online classifieds company Quikr has raised $60 million in funding from Tiger Global Management and existing investors Kinnevik, Matrix Partners India, Nokia Growth Partners, Norwest Venture Partners, Omidyar Network, Warburg Pincus and eBay. Quikr will use the funds for growth, and already boasts more than 30 million monthly consumer and small business users. “The explosive growth in mobile internet is fundamentally reshaping the Indian classified internet market, and we are well-positioned to be at the forefront of growth,” Quikr founder and CEO Pranay Chulet said in a statement.

 

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Author: "Red Herring Editorial Team" Tags: "Finance, Investment Round Up, Startups"
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Date: Thursday, 18 Sep 2014 16:25

Over the past two weeks, institutional investors have piled into the Alibaba roadshow as if the company was handing out free money. The long awaited process started three years ago and the biggest tech IPO ever has the potential to pave the way for a tech rally not unlike the surge seen following the Netscape and Yahoo IPOs in the dotcom era.

But before its debut on the New York Stock Exchange on Friday, there are several things that retail investors should know about the the Chinese company which moves more e-commerce than Amazon and eBay combined.

Alibaba Group was founded in 1998 by a former English language teacher, Jack Ma, and grew out of his Hangzhou apartment. The eccentric, diminutive entrepreneur watched America’s love affair with the internet, and wanted to piggyback China’s export frenzy across the globe, knowing the idea would get the full support of the Chinese government. From the beginning the idea was that Alibaba, whose name comes from the “Arabian Nights” tale, would “open sesame” for China’s small and medium sized companies. Today, its role in transforming and empowering China’s middle class is akin to the effect Wal-Mart has had on rural America.

There were several initial iterations, including an online Yellow Pages-type service, and other blatant copycats of U.S. based internet startups, before the company initially settled on becoming a business to business platform for China’s exporters. In 2003, Alibaba unveiled Taobao, a consumer to consumer platform,  setting its sights on eBay, which had made its intentions to enter the Chinese market public. For the first three years of its operation, Taobao did not charge transaction fees. It was a decision that allowed the company to fend off eBay and earned Ma business visionary status.

But the most critical competitive advantage came out of Ma’s ability to strike a deal with English speaking shareholders while his counterparts remained intrinsically domestic. As early as 2000, Masayoshi Son, the maverick Japanese entrepreneur and CEO of Softbank met with Alibaba founders and together with Yahoo in California, invested in the Chinese website. The deal was inked by Tim Koogle, Yahoo’s CEO at the time but the company’s representative was Jerry Yang, the Chinese American founder. Together with Son on the board, they provided Alibaba the validation and the operational support that enabled Jack Ma to leap forward ahead of its peers. Had Ma not worked with these two international counterparts, the story could have turned out differently, according to most observers.

Alibaba’s hold on Chinese e-commerce

Today analysts typically agree that Alibaba controls around 80% of the Chinese e-commerce market, which McKinsey predicts will grow to $395 billion by the end of 2015. While Alibaba abides by a one segment revenue reporting structure, three sites, in addition to Alibaba.com, Taobao, Tmall.com, and Juhuasan, drive Alibaba’s $8.5 billion in annual revenue.

Approximately seven million users list over 800 million products for sale on Taobao on any given day. The service is free to use, but with so many listings, (including 7000 results for a “cosmetics” search), many of these web entrepreneurs pay Alibaba to boost the visibility of their items.

Where Alibaba.com is B2B, and Taobao is C2C, Tmall.com is the Alibaba Group’s businesS to consumer offering. Tmall is geared towards the middle class, particularly in China’s growing metropolises, where consumers spend 27% of their disposable income on online shopping, as opposed to 18% in the more established cities of Beijing and Shanghai, according to data from McKinsey. Unlike Taobao, Tmall charges each seller a deposit, an annual fee, and a commission fee for each listed item.

Juhuasuan is a daily deals site, best compared to Groupon in the U.S. It expanded into Taiwan and Hong Kong in 2013, at a time when the service was controlling an estimated 90% of the Chinese daily deals market. Alipay, a secure payments processing service, is used to facilitate purchases on all of Alibaba’s platforms, but was separated from the parent company in 2011. Alibaba also holds significant equity stakes in Sina Weibo, often described as Chinese Twitter, and Youko Tudou, a service similar to YouTube but again geared towards the Chinese market.

While Alibaba competes on a global scale with American companies like eBay and Amazon, it really faces its primary competition from companies in its native China. Two of these competitors, JD.com and Baidu, are traded publicly on the Nasdaq. Alibaba’s nemesis and fiercest challenger is Tencent, a social media giant listed on the Hong Kong Stock Exchange with a market capitalization of $147 billion. It has four flagship products, WeChat, QQ, QZone, and Tencent Weibo, which when combined boast over 1 billion unique users. While Alibaba has reached out to Western allies such as Yahoo and Softbank, Tencent has largely remained more China-centric. The company reported revenues of $9.91 billion in 2013, the vast majority of which came from Asia.

Alibaba pursues growth strategy

In the lead-up to the IPO, Alibaba has pursued an aggressive growth strategy by leaning heavily on M&A. The company has spent $4.6 billion so far this year to acquire everything from a film production studio to a professional soccer team. Investments in American companies such as Lyft and Tango, meanwhile, are cited as evidence that Alibaba is intent on expanding its footprint in the United States. The investment that should pay off the most, at least in the short-term, is the acquisition of UCWeb. UCWeb is a search engine and web browser especially popular on mobile and in India as well as China.

While the IPO WILL fetch upwards of $20 billion, Alibaba the company will likely allocate around $8 billion that can go towards operational improvements. The current trend of growing through acquisitions should continue post-IPO. In fact, on page 133 of the investor prospectus, Alibaba indicated that the company intends to use at least some of the cash it raises to pursue additional acquisitions. The ephemeral messaging service Snapchat, set-top streaming provider Roku, independent movie production house Lionsgate, and enterprise software solutions like Intuit, Akamai, and Red Hat are all rumored to be on the shopping list.

Alibaba is expected to sell 320.1 million in the $66-68 per share price range, a figure bumped up on Monday from the initial $60-66 interval due to high institutional investor demand. In fact, the company likely could have commanded even more. For example, Twitter ultimately priced its shares 30% above its original price range, while Facebook stock increased the number of shares it would sell but still sold them for nine percent more than the initial highest value. Instead, Alibaba has apparently pursued a more conservative approach, wary of replicating Facebook’s infamous first-day stock incidents on Nasdaq.

Still, the IPO will be record-breaking. The company should raise as much as $25 billion, depending on whether the underwriters (Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan Chase, Morgan Stanley, and Citigroup) claim their shares. The resultant market capitalization BEYOND $160 billion WILL make Alibaba the third most valuable Internet company in the world, behind only Google at $393 billion and Facebook at $198 billion. (See graph below).

Ma is no longer the CEO, but he maintains an 8.9% pre-IPO equity stake in the company. Other stakeholders include Joseph Tsai, Ma’s co-founder and Alibaba’s vice-chairman (3.6%), China’s sovereign wealth fund, China Investment Corp. (2.8%), the private equity firm Silver Lake (2.5%), Japanese telecommunications and internet giant Softbank (34%), and Yahoo (23%), which originally purchased a 40% stake in 2005 for $1 billion. Softbank, for its part, will not be relinquishing any equity through the offering, but Yahoo is expected to dilute its shares down to 16%. In addition five of the six investment banks handling the IPO, Citigroup, Deutsche Bank, JP Morgan Chase, and Morgan Stanley, extended a $3 billion loan to Alibaba in late August with the hope of reaping benefits from the company unrelated to underwriting fees.

Alibaba’s public market investors might not be as lucky as those who will cash out this week. The company is unlikely to pay dividends, while Ma has gone on record to say that the company will continue to treat “customers first, employees second, and shareholders third” even after going public.  But using Facebook, a comparable stock, as a reference, there could still be money to be made by investors jumping in now. The Mountain View-based company’s shares listed initially at $38 in May 2012, bottomed out at $18.06 in August that year, but has recovered to reach $76.43 as of yesterday’s market close.

As always, with the hype comes risk. In the case of Alibaba, most of the risk revolves around  both corporate and political governance and less the fundamentals of the business.

Last September, talks between Alibaba and the Hong Kong Stock Exchange AUTHORITIES broke down because of disagreements over the degree to which Alibaba insiders will have control of the new board of directors. Under the current arrangement, a pre-established Alibaba Partnership will have exclusive control over the majority of the seats on the board. This raises questions over the extent to which the interests of shareholders without prior affiliations to the Alibaba Group will be represented, especially because the Alibaba Partnership will represent only a fractional equity stake in the overall company.

Complicating matters further is the fact that Chinese stocks have historically been weak performers. There are several reasons why, but in many cases the issue can be tied back to governance. In the latest wave of Chinese tech IPOs, a series of accounting scandals tainted Western perceptions. One theory says that companies that are able to pass through the bureaucratic hoops necessary for being listed on foreign exchanges are able to do so because of their strong ties to government and the Communist Party. These ties, under other circumstances, could also protect the company from fraud investigations. Meanwhile, the Chinese government prevents the SEC from reviewing audits performed on Chinese companies by Chinese auditors.

Chinese law complicates IPO

There is also the issue of the Variable Interest Entity (VIE). Any Chinese company wishing to raise money from foreign investors must technically operate as two separate entities in order to comply with the Chinese law that requires all corporations to be fully owned by Chinese citizens. The main corporation is registered in China and has claim to the number of licenses and permits essential to doing business in the country.

This is then supplemented by a VIE, a legal concept developed to work around this law. The VIE is a foreign-held corporation that can raise investment from outside of China and hold most of the company’s assets. While a legal technicality for most intents and purposes, the VIE does pose risk to shareholders who don’t happen to be Chinese. Under the two-entity structure, the owners of the VIE are contractually bound to funnel money to the offshore corporation. If the VIE ever attempted to sever its ties to its China-based corporation, it isn’t entirely clear what the claims of shareholders in the foreign corporation to the outstanding assets are. The issue came up in 2011, when Ma and other Alibaba executives decided to divest Alipay from the Alibaba Group, without informing Yahoo or its other major shareholders.

Some players in this multi billion dollar game cannot lose. Yahoo is one, as are Softbank and Masayoshi Son. The Alibaba IPO will crown Son the most successful  technology investor of all time. The New York Stock Exchange will also emerge victorious, having attracted the world’s largest IPO, and tech’s hottest property.  A deluge of tech IPOs is sure to follow the mega-listing, as those in the sector wait to see how Alibaba is received. China will celebrate not only having one of the three largest companies in technology, but also the record for the biggest tech IPO ever, and Alibaba will finally say open sesame to the U.S. market.

 

 

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Author: "Red Herring Editorial Team" Tags: "Asia, Consumer, Enterprise, Finance"
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Date: Wednesday, 17 Sep 2014 19:04

Series A

Workpop, a free hourly wage job posting board, has raised $7 million from Trinity Ventures shortly after securing $900,000 in seed funding from a host of investors that included SV Angel, Evan Williams and Biz Stone’s Obvious Ventures, and Box CEO Aaron Levie. The company is based in Los Angeles.

ClassPass, a digital gym membership program that is portable across a number of participating gyms in New York, Boston, Chicago, San Francisco, and Los Angeles, has raised $12 million in Series A to bring overall funding to $14 million. Franz Lanman (Square seed investor) and Hank Vigil (Senior VP of Strategy at Microsoft) led the round. The service is $99/month and has facilitated 500,000 reservations since June. ClassPass is a 2012 graduate of the TechStars program.

Series B

LightSpeed, a Montreal-based provider of retail sales and inventory management software, has secured $35 million in Series B funding from iNovia Capital and existing backer Accel Partners. The company, which also offers tools for building branded iPad apps and e-commerce platforms, will use the new funds to build out a payment support platform that would allow retailers to sell goods directly through its platform. LightSpeed was founded in 2005 and helped its customers process over $7.5 billion in sales last year.

Series C

Online and mobile video platform JW Player has raised $20 million in Series C funding from Greenspring Associates, e.ventures, and existing investors Greycroft Growth and Cueball Capital. Videos played through the JW Player platform are viewed 900 million times each month, across 2 million websites, according to the company. Its customer list, meanwhile,  includes TripAdvisor, IMDB, The Guardian, and Electronic Arts. Speaking to TechCrunch, JW Player President Chris Mahl believes that his company has found a niche with publishers who are interested in “life after YouTube, or life beyond YouTube.” JW Player was founded in 2007 and is based in New York.

Funding

Jet.com, an e-commerce website led by Quidsi (parent company of Diapers.com, Soap.com, etc.) co-founder Marc Lore, has raised $20 million in debt financing from Western Technology Investment, plus an additional $5 million through an asset-backed loan from Silicon Valley Bank. Currently in stealth mode, the company had just announced in July that it raised $55 million from MentorTech Ventures, Bain Capital Ventures, Accel Partners, and New Enterprise Associates. The company is expected to launch some time in 2015, when it will offer “lower prices than any other online retailer,” according to a short description of the company on the NEA website.

 

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Author: "Red Herring Editorial Team" Tags: "Finance, Investment Round Up, Startups"
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Date: Wednesday, 17 Sep 2014 18:34

Tomorrow Scots go to the polls to decide whether they should become an independent nation, ending their 307-year place within the United Kingdom. Mud has been flung on both sides and the debate has been fierce and passionate. But will a ‘yes’ vote have a great impact on Scotland’s burgeoning technology industry?

Scotland, a country of 5.3 million people in northwestern Europe, has in recent years made a name for itself in the tech sector. Big firms such as Adobe, Microsoft and Motorola have been flooding in since the 1980s, moving to a hub of factories and offices dubbed the ‘Silicon Glen’. More recently, Scottish companies have made it alongside some of the industry’s biggest names. Price comparison site Skyscanner, rumored to be on the verge of a £1 billion ($1.6 billion) IPO, 4J Studios, which made Minecraft for the XBox and Rockstar North, maker of the Grand Theft Auto games series, are all Scots brands.

Glasgow, Dundee, Fife and other cities have all contributed to the boom. But capital city Edinburgh leads the way when it comes to harnessing Scotland’s growing number of talented tech professionals. Renowned startup incubators such as CodeBase and TechCube have fostered dozens of thriving firms. A spokesperson from CodeBase declined to offer an opinion to Red Herring, but added that “one way or another it’ll be positive for us.”

Startups worry of impact on exports

One budding startup is 1partCarbon, which builds product, software and mobile financial solutions. Its CEO, Euan MacKenzie, has founded seven startups across Europe, the U.S. and Japan over 25 years. He worries that a ‘yes’ vote will negatively impact exports. In a survey conducted by ScotlandIS, the trade body for Scotland’s ICT industry, 58% of local businesses reported that they currently export, with a further 17% indicating they intend to in the future.

“We have a product line in Poland, in the E.U.,” says MacKenzie. “All of a sudden I will be subject to E.U. tariff controls. Once we’re out of the E.U., which we’re certain to be, unless we’re immediately let into the European Economic Area (EEA), I will pay tariff controls to export to the E.U., which is my biggest market.”

Others disagree. Prism Technology’s David Cairns, speaking to British broadcaster Sky News, claims that companies simply have to price abroad to avoid harm. “Anybody that (sic) is selling outside of Scotland can easily avoid any issues to do with currency whatsoever by pricing in the currency of the buying customer,” he says. “It’s something of a non-issue in that respect.”

The E.U. membership of an independent Scotland has become a political hot potato ever since the referendum was announced, with all parties involved unsure of an outcome. The E.U. leadership, as well as heads of state in countries facing similar independence rows, such as Spain and Romania, however, have voiced concern over Scottish membership. A former E.U. commissioner told The Guardian today that a ‘yes’ vote would be “very messy”.

Some Scottish National Party (SNP) politicians who are pro-independence have mooted the idea of a currency union with the rest of the U.K. (England, Wales and Northern Ireland). But this idea has been trashed by opposition politicians. And MacKenzie claims that it will impinge on lending, and investment: “Yes, there’ll be money available, but it will be from places like the Middle East or China, and it will cost us a whole lot more that the money we’re getting at the moment.”

In the ScotlandIS survey 69% of businesses believed there will be no impact on their sales following the outcome of the referendum. 22% predicted a decrease in sales. 64% would not relocate, but 36% are sufficiently concerned to consider moving in the event of a ‘yes’ vote.

ScotlandIS chief executive Polly Purvis ensured Red Herring of the group’s apolitical stance. But she claims that the IT industry could actually benefit from a split from the rest of the  U.K. “As regards the business outlook, should Scotland vote for independence on Thursday in the short to medium term this is likely to create additional work for the IT sector, particularly amongst the bigger companies who will be involved in the development of stand alone systems e.g. for the equivalent of the DWP (Department for Work and Pensions), HMRC (Her Majesty’s Revenue and Customs), etc,” she says. “It is also likely to create more opportunities for smaller companies, as the Scottish Government is encouraging greater use of smaller suppliers.

“If the vote is ‘No’ this is unlikely to dampen an already buoyant market,” adds Purvis. “The IT industry in Scotland has reported year on year growth of 10%-plus over the last few years. There is an increasing focus on overseas markets, helping to fuel this growth.”

Financial services sector most concerned by yes vote

Players in the financial services sector appear set on moving wholesale upon independence, an industry which accounts for over 90,000 jobs in Scotland and represents almost 3% of its total working-age population of 3.7 million. Royal Bank of Scotland and Lloyds in particular have issued statements predicting a move south of the border, should it come into force.

Pro-yes campaigners argue that this will not have a negative effect on an independent Scotland’s economy, citing additional revenues from oil and gas and other industries. But MacKenzie believes that the tax gap left behind by fleeing finance high-earners will leave an economic hole difficult to plug. And, he adds, VCs may be put off by Scotland’s perceived isolation, which he feels would be a great shame: “I can’t speak for other tech startups but everyone thinks things are going reasonably well and we’re getting there.”

There is also the question of education. Scotland’s universities have an illustrious reputation, filling five spots of the world’s top 200 higher education facilities. This year Scotland was voted as the best place to get a higher education in the U.K., with overall satisfaction at a three-year-high of 87%. Technology has become a cornerstone of its strategy.

Scotland currently pays for the university tuition of its citizens, but students from the rest of the U.K. must pay thousands. E.U. citizens, on the other hand, are in the same category as Scots thanks to the enshrined E.U. policy of freedom of movement. Should Scotland gain independence, this could change.

“Why go to Durham or Newcastle (both in the northeast of England) and pay £9,000 ($14,700) a year when you could go to St Andrews or Edinburgh and pay nothing,” says Quintin McKellar, vice chancellor of the University of Hertfordshire, England. “Scottish universities would be swamped with highly qualified applicants from rUK (rest of the UK) reducing available places for Scottish students.”

Pro-independence groups, meanwhile, argue that the current situation can continue, citing examples from Germany and Ireland as exemptions from the rule due to ‘residence and participation’. “The biggest asset is the quality of the Scottish based workforce, supported by world class universities.  This is unlikely to change,” said Purvis.

Tomorrow’s vote will have a huge impact whatever its outcome. And there’s far more to it than tech. But whether the state goes it alone or sticks to the union, technology will be playing an increasingly vital role in the Scottish economy.

 

The post How would Scottish independence affect the tech sector? appeared first on Red Herring.

Author: "Red Herring Editorial Team" Tags: "Europe, Startups"
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Date: Tuesday, 16 Sep 2014 18:07

Series B

RJMetrics, an analytics platform for online businesses, has raised $16.5 million in Series B investment, from August Capital and existing investors Trinity Ventures and SoftTech. RJMetrics recently released a new version of its cloud-based platform and will use the latest funds to continue product growth. “Every year, our customers are becoming more and more sophisticated in their use of data, and we believe that this is just the beginning,” said Robert J. Moore, CEO and Co-Founder of RJMetrics. “This market is huge, it’s growing fast, and the use of RJMetrics is becoming a key to achieving competitive growth. We are here to build a category-defining product.”

Series C

Docker, a platform for building, shipping and running distributed applications, has raised $40 million in a Series C funding round led by Sequoia Capital. Existing investors Benchmark, Greylock Partners, Insight Ventures, Trinity Ventures, and Jerry Yang also participated. Docker previously raised a Series B round in January and the company says this latest round is three times the size of that one. Docker has raised $65 million to date and was launched in March 2013. “This new partnership provides Docker with an unrivaled venture team and the resources to drive our vision for distributed applications. It’s a testament to the community and ecosystem that have helped Docker reach this important milestone,” said Ben Golub, CEO of Docker.

Content delivery network Fastly has secured a Series C round worth $40 million led by August Capital. Existing investors Battery Ventures, O’Reilly AlphaTech Ventures, Amplify Partners, and new investor IDG Ventures all participated. Fastly plans to use the new funds to expand its team and develop partnerships with Fortune 500 companies. “Fastly is redefining the content delivery space,” says David Hornik, General Partner at August Capital. “The team has completely evolved the legacy CDN technology model to give companies unprecedented control over how they serve and monitor content online. We’re ecstatic about Fastly’s growth, and we’re incredibly excited to participate in this funding round.”

Funding

Ride-sharing company Sidecar has raised $15 million in new funding from Sir Richard Branson and existing investors Avalon Ventures and Union Square Ventures. Sidecar allows drivers to connect with passengers who can pay for a spare seat in their car. The company has raised over $35 million to date and will use the funds to expand its service.  “I like companies that are innovative, offer exciting customer experiences and make the world better. Transportation has been ripe for disruption for decades. An entrepreneurial company like Sidecar can take on the big guys with innovation and big ideas, not just big bank accounts,” Sir Richard Branson said in a Q&A on Sidecar’s blog.

 

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Author: "Red Herring Editorial Team" Tags: "Finance, Investment Round Up, Startups"
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Date: Monday, 15 Sep 2014 17:32

Tucked in a bar-laden, cobblestoned corner of Berlin, a two-person team is trying to change the way Europe reads and writes. Inkitt, founded in 2012, claims to offer writers a platform to share their work and to be ‘crowd-edited’ by fellow members. It also aims to discover the next generation of blockbuster books.

It’s no small task for any publishing house, let alone one founded as a side-project by CEO Ali Albazaz in 2012 while he was programming elsewhere. Back then, Inkitt began with a group of 30 writers eager to publish and edit. Today, as the site launches its private beta version, that figure is 300 and counting, who’ve contributed 44 million words, or 14,000 chapters.

Now, as then, the genre is fan fiction – Inkitt stories cite Harry Potter, Twilight and Naruto among their main afflatuses. But Albazaz is confident he has discovered a lucrative platform. And his own inspiration comes from two very different corners of the world.

Londoner EL James’ 50 Shades of Grey is one of the world’s best-ever selling books. Over 100 million copies have been sold so far, earning James over $32 million. Unlike most writers, James’ blockbuster, soon to become a Hollywood movie starring Jamie Dornan, began as a mammoth Twilight fan novel, posted online at fanfiction.net. Fellow readers critiqued chapters – of which James wrote 70 in just six months – helping her reach a point at which to take the book offline and perfect it for release.

“(James) unconsciously crowd-edited her own book,” says Albazaz. “She was building the whole story within the community. Don’t publish in two years when you’re finished. Publish as you go, get feedback from other writers and improve.”

Inkitt writers are peer-edited by other writers, who themselves are reviewed for usefulness: “People get up-voted for good reviews, so you can trust them. On the other hand if there’s a guy with loads of down-votes and he’s criticizing you, he’s just a troll.”

Albazaz claims this will help writers shunned by the traditional publishing industry, which often miss big titles. Twelve publishers told JK Rowling Harry Potter was bad. With Twilight that happened 14 times. Chicken Soup for the Soul, the number-one New York Times bestseller which made motivational writer Jack Canfield millions, was rejected by 140 publishing houses before finally being accepted in 1993. “Moby Dick was refused because it had ‘dick’ in the title,” adds Albazaz. “Publishing houses have a bias: they make decisions based on their gut feeling, which is often wrong. We want to make this decision based on data.”

Albazaz has developed an algorithm that, he says, can do this. It examines reading patterns of stories at the site to determine what will be popular on the shelves. His aim is not to take books online, he says, but to optimize the publishing experience for writers and publishers alike. “Our aim is to build the next step of publishing where we can measure how people read, and see very early how a story will become a best-seller, unbiased and objectively,” he says. The global book publishing industry is shrinking by 2.6% per year. But, according to IBISWorld, it is still worth $108 billion.

And with a team that has grown to include Linda Gavin, creator of the first Twitter logo, and an incoming backend developer and marketer, Albazaz is building a team in Germany that he hopes will emulate the success of his second inspiration: China’s Qidian.

Qidian, owned by Chinese publishing giant Shanda Literature, is a revelation. Founded in 2002 the company, like Inkitt, allows writers to be peer-edited and have their material read on a huge scale. Most stories can be read for free. But popular and well-reviewed ones go behind a paywall whose revenue is shared by Qidian and the writer. Zhang Wei, the site’s most popular author, made $5.37 million between 2007 and 2012, topping a list of China’s richest writers.

Qidian, meanwhile, has revenues of $120 million and investment from the likes of Goldman Sachs. Albazaz hopes that Inkitt can provide a similar success from the heart of Europe, whose nations still read more books than most parts of the world. China will become the biggest book market in 2017. Germany, which has a fixed book price agreement to promote lesser-known or -read writers, remains one of the world’s biggest markets. PricewaterhouseCoopers categorizes Germany as a ‘lower-growth, larger-scale market’ alongside Japan, France, Italy, the Netherlands, Spain and Russia. The U.S. is labeled as a ‘higher-growth, larger-scale market’ with more than 1% CAGR to 2018.

The only western firm providing a similar service to Inkitt is Toronto’s Wattpad, which has been posting impressive figures of late including 40 million stories and 25 million users. But, says Albazaz, Inkitt’s algorithmic best-seller prediction is unique. And Wattpad’s realm is firmly within teen romance. Inkitt is sticking to fan fiction for now. But Albazaz is confident his brainchild will grow to become Europe’s Qidian. Perhaps he’ll even help discover the next EL James.

 

The post Berlin’s Inkitt aiming for 50 Shades of Green as digital publishing lifts off appeared first on Red Herring.

Author: "Red Herring Editorial Team" Tags: "Europe, Social, Startups"
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Date: Monday, 15 Sep 2014 17:13

Series A

Kinnek, a marketplace for small businesses to find suppliers, has raised a $10 million Series A round led by Matrix Partners. Existing investors such as Sierra Ventures, Version One Ventures, CrunchFund, TriplePoint Ventures, Richard Chen, Naval Ravikant and Benjamin Ling all participated. The company will use the new funds to expand into new industries and grow its marketing and engineering capabilities. “Helping small businesses was the impetus for starting Kinnek,” said Karthik Sridharan, co-founder and CEO of Kinnek. “SMBs are stuck in a no-man’s land when it comes to purchasing – they can’t go to Amazon to find what they are looking for, and they also don’t have the resources of a Fortune 500 company with complex software systems and dedicated purchasing teams. Our goal is to build a marketplace that empowers small businesses to find suppliers as easily as their larger counterparts.”

Technology product rating app Product Hunt has raised $6 million in Series A funding, led by Andreessen Horowitz, according to Tech Crunch. SV Angel, Slow Ventures, Naval Ravikant and Ashton Kutcher previously participated in a seed round investment in the Y Combinator graduate. The company was founded in spring this year and aggregates reviews of technology that its users can share and discover.  TechCrunch also claimed that it was not worried about the threat Product Hunt poses to its own business.

Series D

Kateeva, an OLED technology production company, has raised $38 million in Series D financing. Samsung Venture Investment Corporation (SVIC) was joined by existing investors including Sigma Partners, Spark Capital, Madrone Capital Partners, DBL Investors, New Science Ventures and VEECO Instruments. Kateeva’s main product is the YIELDjet platform, which uses inkjet printing to mass produce large-sized OLED panels. The company has now raised more than $110 million since it was founded in 2008. “Kateeva is a technology leader and has built a significant business in the OLED space,” said Michael Pachos, Senior Investment Manager at SVIC. “The company has demonstrated both a technical and business vision in driving adoption of OLED displays and lighting, and we look forward to contributing to its progress.”

Funding

Payments company Square has completed a $100 million funding round which values the company at nearly $6 billion, according to reports. Rumors suggest the funding came mainly from the Government of Singapore Investment Corporation with participation from existing investors. Both Forbes and TechCrunch reported the investment was confirmed, after weeks of speculation. Square has raised nearly $450 million to date and will apparently use the funds for acquisitions and product development.

 

The post Kinnek secures $10 million funding round appeared first on Red Herring.

Author: "Red Herring Editorial Team" Tags: "Finance, Investment Round Up, Startups"
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Date: Sunday, 14 Sep 2014 14:01

The defense of net neutrality

The core principle behind the net neutrality movement is that all data should be treated equally. Internet service providers (ISPs) are challenging that viewpoint by proposing ‘fast lanes’ for certain content delivered on the internet, and charging more for anything utilizing these fast speeds. Technology firms have been left outraged by the plans, as they feel that the move would negatively affect startups and strangle the tech sector, especially as many new startups require speedy delivery of their services, and would not be able to afford to pay extra to secure a fast lane.

The new system would also allow the ISPs unprecedented control over what the consumer views, reads, watches and downloads, as they would have the power to throttle speeds as and when they choose.

The backlash against the cable service providers has been widespread and profound.  On September 10, 2014, a coalition of companies, websites, and all kinds of internet users implemented the Internet Slowdown.  The members of the resistance, including prominent sites like Netflix, Vimeo, Reddit, Mozilla, Foursquare, and many more, added an animated widget of the well known “loading” icon shown to users when a computer is moving slowly.  Anyone who visited one of the participating websites would first see this widget. The gesture is meant to symbolize what the internet might look like one day should net neutrality be compromised.

As an individual internet user, consumers were encouraged to visit the website www.battleforthenet.com to download the widget for their own sites, allowing the movement to grow and increase awareness rapidly.  During the day of the Internet Slowdown, over 10,000 websites participated in the resistance.  According to Fight for the Future, a public advocacy organization, nearly 2 million comments in total have been filed to the FCC regarding the proposals in the wake of the online movement to preserve “net neutrality.”  As it continues to grow, the online rebellion against ISPs and their attempt to control the internet could go down as the largest digital resistance in history.

Microsoft’s move for Minecraft

Microsoft  is in talks with Swedish gaming studio Mojang over acquiring the maker of the popular game Minecraft, in a deal potentially worth up to about $2bn, according to reports. Minecraft is the top selling PC game of all time and has stolen the hearts of gamers across the globe.  Should the deal go through, it would mark Microsoft CEO Satya Nadella’s first multibillion dollar deal since he took over the company.

Minecraft is an advanced and virtual version of lego that allows users to acquire raw materials such as dirt, rock, lava, etc and use these resources to build shelters, forge weapons to ward off enemies, and engage in a whole range of other creative endeavors.  With 33 million users since the game’s release in 2011, it seems that people, mainly 9-15 year old boys, have bought into this virtual reality.

While some gamers worry about the cultural implications for the game in the lead up to Microsoft’s alleged takeover, others have emphasized the game’s educational potential.  Certain tasks can be embedded into the game to introduce kids to skills like computer programming, prompting it to be used in some classrooms. Minecraft has been pegged to unite schoolchildren everywhere – according to Joel Levin, coordinator of Minecraftedu,” those computer skills become transferable into social capital.”

The deal would mark the second $2bn takeover of a video game company this year, following Facebook’s acquisition of the virtual reality headset company Oculus in March. Reports suggest the deal will be announced on Monday.

Home Depot confirms hack

Any customer that used a debit or credit card in one of Home Depot’s 2,200 stores across the U.S. and Canada since April, 2014 could potentially be affected by a mass breach of the retail giant’s payment system.

After being notified by banks of an increase in fraudulent ATM withdrawals, Home Depot discovered that hackers had acquired vast amounts of customer card information which has been sold online in cybercrime stores or in underground crime shops.  Reports suggest that similar BlackPOS malware, responsible for the recent Target retail store breach, was used in the attack.  In the Target incident, the personal information of up to 70 million customers was potentially exposed.

Home Depot continues to investigate the hack and plans to roll out EMV chip card technology to replace the traditional payment system of swiping the magnetic strip of a debit or credit card, a practice that is particularly common still in the U.S. and leaves retail stores vulnerable to information copying.

You may have missed…

Apple’s Europe tax investigation: the lowdown

The Exit Report: Rakuten, Rocket Internet, Mojang

Apple unveils iPhone 6, Apple Pay and the Apple Watch

This week in numbers

Ifbyphone, a voice-based marketing company, raised a Series E round of funding worth $30 million, led by NewSpring Capital.

Security company Veracode closed a $40m funding round

Pittsburgh-based 4moms, a robotics company which makes baby products, secured $41 million in new funding from Bain Capital Ventures and Castanea Partners.

 

The post The Internet slows down, Microsoft’s minecraft bid and Home Depot hacked appeared first on Red Herring.

Author: "Red Herring Editorial Team" Tags: "Consumer, Social, Weekly Digest"
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Date: Friday, 12 Sep 2014 22:01

IPO

CyberArk Software Ltd., an Israeli digital security solutions provider, will sell 5.36 million shares for between $13 and $15 per share.  A sale price within that range would give the company an overall market cap of over $400 million. The company has generated around $40 million in revenue in 2014, and is backed by Jerusalem Venture Partners, Goldman Sachs, Vertex Venture Capital, and Caberet Security. CyberArk will list on the Nasdaq and trade under the CYBR ticker symbol. JP Morgan will lead the underwriting.

Despite accounting for strong demand, Alibaba’s bankers will reportedly stop accepting orders earlier than expected. If shares end up being sold at the high end (which seems all the more likely), Alibaba would receive $21.1 billion and a $162.7 valuation. This equates with roughly 24 times projected 2015 earnings, a favorable ratio compared to the 35x Facebook was traded for when it launched its IPO in 2012.

Rocket Internet, a German technology firm sometimes derisively referred to as an imitator incubator, announced Wednesday its intention to raise €750 million through the Frankfurt Stock Exchange before the end of the year. Rocket Internet began in 1999, when it molded the eBay model to the German market under the name Alando; four months later, eBay purchased Alando for $53 million. Since then the company, which acts as an accelerator by providing the early assistance necessary for a company’s launch in exchange for equity, has exported ideas from Airbnb, Pinterest, and GrubHub and adapted them for local markets. Rocket Internet is led by three brothers, Oliver, Alexander, and Marc Samwer.

M&A

After seeing its ad display revenue shrink 7% last quarter, Yahoo has acquired Luminate, a Mountain View, Calif-based online image advertising platform. Luminate raised $28.5 million from a host of backers, including Google Ventures, Shasta Ventures, and Ron Conway (founder of SV Angel). Since taking over the role in July 2012, CEO Marissa Mayer has overseen 40 acquisitions of various sizes. Terms of the Luminate deal have not been disclosed. While Yahoo hopes this most recent acquisition pays off, another corporate investment certainly will, and soon; Yahoo expects to earn as much as $8 billion for its stake in the upcoming Alibaba IPO.

The Japanese Internet conglomerate Rakuten reached an agreement Tuesday to acquire Ebates, an American online rebates service, for $1 billion. Ebates is a San Francisco-based cash back program that currently works with retailers like Home Depot and Macy’s. Founded in 1998, Ebates generated $167 million in revenue last year. “The combination of Rakuten and Ebates is entirely unique and will revolutionize e-commerce,” said Rakuten co-founder and CEO Hiroshi Mikitani in a statement. This is Rakuten’s second substantial purchase of the year. In February, Rakuten bought the Internet messaging service Viber for $900 million. It also is an investor in Pinterest.

Microsoft is believed to be close to purchasing Mojang AB, the Swedish video game developer behind the popular Minecraft game. Speculation puts the price tag at $2 billion, but because the deal can be funded with cash from Microsoft’s overseas operations, it wouldn’t be subject to American repatriation taxes. Majong told The Wall Street Journal that it generated $360 million in revenue last year charging users for copies of the game. Acquiring Majong would ensure that Minecraft was compatible with Windows 8 (it currently is not). If the deal does happen, it will follow another big splash in the video game sector made by Microsoft’s neighbor in the Pacific Northwest, Amazon, which spent $1 billion to acquire Twitch two weeks ago.

HP has acquired Eucalyptus Systems, a provider of open source software to customers interested in building private clouds through Amazon Web Services. The Golena, Calif.-based company had raised over $55 million from a host of investors, including Benchmark, New Enterprise Associates, Institutional Venture Partners, and e.ventures. Terms of the deal were not disclosed.

BlackBerry has acquired Movirtu, a provider of virtual identity solutions for mobile and a former Red Herring Top 100 award winner. Movirtu’s main offering is the Virtual SIM platform, which allows employees of a company to switch between business and personal profiles on their smartphones. “BlackBerry is the best partner to help us carry forward our vision of redefining the mobile experience by introducing virtual identities,” said Carsten Brinkschulte, CEO, Movirtu. “We address the challenges of BYOD and COPE by providing our unique and innovative technology solution through BlackBerry’s existing relationships with mobile operators and customers around the world.”

The post The Exit Report: Rakuten, Rocket Internet, Mojang appeared first on Red Herring.

Author: "Red Herring Editorial Team" Tags: "Exit Report, Startups"
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