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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.

 

The post The Exit Report: Alibaba, Mojang, FeedHenry appeared first on Red Herring.

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.”

 

The post PrecisionHawk completes $10m Series B funding round appeared first on Red Herring.

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.

 

The post Ping Identity closes $35 million round of funding appeared first on Red Herring.

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.

 

 

The post Alibaba’s road to the largest technology IPO ever appeared first on Red Herring.

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.

 

The post JW Player raises $20m Series C round appeared first on Red Herring.

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.

 

The post Ride-sharing app Sidecar secures $15m in funding appeared first on Red Herring.

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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Date: Friday, 12 Sep 2014 19:25

Seed funding

Food testing company 6SensorLabs has raised $4 million in seed funding, TechCrunch reports. Upfront Ventures led the round, with participation from SoftTech VC, Lemnos Labs, Mitch Kapor, SK Ventures and Xandex Investments. The company is building a device to alow users to test foods for allergens. 6SensorLabs will use the new funds to build out the mobile app used to view the results and to launch the device.

Series A

European personal finance app Tink has secured $4 million in Series A funding, in a round led by Sunstone Capital. Existing investors also participated. Tink will use the funds to expand internationally and expand its team. The app is available on both Android and Apple and has over 200,00 account holders since launching in September 2013., according to a company press release. “Personal finance doesn’t have to be boring or time consuming. We make something that in just seconds gives you valuable, fun and actionable information about your spending” said Tink CEO Daniel Kjellén. “The fact that Tink is fully automated and everything is presented in a feed format makes it useful even if you only have 2 minutes to spare. We think this is key to why the typical users is a 23 year old female, using Tink 2-3 times per week.”

Series C

Snowball, a social network for investors in China has raised a $40 million Series C round, led by Renren, with participation from Sequoia Capital and Morningside Capital, Sina Tech has reported. The platform allows users to track data across U.S and Chinese stock markets, and communicate with fellow traders. Users cannot yet use it to trade stocks.

Series E

Ifbyphone, a voice-based marketing company, has raised a Series E round of funding worth $30 million, led by NewSpring Capital. Apex Venture Partners, SSM Partners, Origin Ventures, River Cities Capital Funds, I2A Illinois Accelerator Fund and Spring Mill Venture Partners all participated. The company has now raised $60 million to date and will use the funds to develop its platform and to fund the acquisition of Mongoose Metrics, a call tracking, measuring and attribution company. “Thanks to smartphones, phone calls have become the most powerful vehicle for driving revenue in virtually every industry, andbusinesses and agencies that generate, measure and optimize these high-value calls now have a tremendous competitive advantage,” said Irv Shapiro, CEO of Ifbyphone.

Funding

Employee health management platform Keas has raised a funding round worth $7 million from Atlantic Ventures and Ignition Partners. The company’s platform encourages good health and wellness within employees by collating data from health apps and creating a social community. Keas, which was founded in 2008, will use the latest funds to expand.

 

The post Ifbyphone secures $30m in funding, acquires Mongoose Metrics appeared first on Red Herring.

Author: "Red Herring Editorial Team" Tags: "Finance, Investment Round Up, Startups"
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Date: Thursday, 11 Sep 2014 17:40

Seed funding

AltspaceVR, a social platform for virtual reality, has raised $5.2 million in seed funding. Investors included Dolby Family Ventures, Formation 8, Google Ventures, Lux Capital, Foundation Capital, Rothenberg Ventures, SV Angel, Haystack Fund, Tencent, Raine Ventures, Promus Ventures, Western Technology Investment, and others. The company will use the funds to build out its tram and continue developing a platform which lets users connect in virtual reality spaces. AltspaceVR was founded last year.

Series B

Liquid Light, which develops and licenses technology to produce low cost chemicals, has closed a $15 million Series B financing round. New investors included Sustainable Conversion Ventures, while existing investors VantagePoint Capital Partners, BP Ventures, Chrysalix Energy Venture Capital, and Osage University Partners also participated. The company emerged from stealth six months ago and uses carbon dioxide to make major chemicals, such as ethylene glycol, used to make PET-based plastic bottles. “This financing provides further validation of both the market need for our technology and our progress in developing an advantageous solution,” said Kyle Teamey, CEO of Liquid Light. “We’re focused on delivering great process technology to serve our industry partners.”’

Funding

Software security company Veracode has raised a $40 million funding round, led by Wellington Management. Existing investors such as .406 Ventures and Atlas Venture also participated. The company will use the funds to expand globally and will now consider other financing options such as an IPO. “This investment accelerates our ability to help the world’s leading organizations systematically reduce cyber risk enterprise-wide,” said Bob Brennan, CEO, Veracode. “Our goal is to speed the pace of business innovation with a more scalable, next-generation approach that industrializes application security controls across our customers’ web, mobile and third-party applications.” Veracode was founded in 2006 and has raised nearly $115 million to date.

FieldAware, which provides mobile-first productivity solutions for field service technicians, has raised a $24 million funding round led by Summit Bridge Capital. Silicon Valley Bank, OpenView Venture Partners, Atlantic Bridge Partners and Oyster Capital Partners also participated. FieldAware’s funding now reaches over $35 million and the company will use the latest round of investment to scale up the business. “We seek and back companies that are transforming industries, and FieldAware is one of those companies,” said David Lam, Managing Director at WestSummit. “Field service is a massive and extremely diverse multi-billion dollar market, and FieldAware’s product, with its made for mobile solution, was designed from the ground up for today’s mobile environment.

The post Security company Veracode raises $40m funding round appeared first on Red Herring.

Author: "Red Herring Editorial Team" Tags: "Finance, Investment Round Up, Startups"
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Date: Thursday, 11 Sep 2014 17:08

Apple launched its next line of products, the iPhone 6 and the Apple Watch in California this week, but a nagging question still hangs over the company in Europe. This summer, European Commission (EC) regulators launched inquiries into the tax affairs of Apple, along with Starbucks and Fiat, about deals they had reached with the governments of Ireland, The Netherlands and Luxembourg.

The E.C.’s competition chief, Joaquín Almunia warned the three companies must “pay their fair share” of tax on the continent. “Under the E.U.’s state aid rules, national authorities cannot take measures allowing certain companies to pay less tax than they should if the tax rules of the member state were applied in a fair and non-discriminatory way.” Also under fire, said Brussels, were so-called ‘patent boxes’ that allow companies to pay less tax on patented innovations.

But, says George Bull, senior tax partner at Baker Tilly, no-one has done anything criminal. Red Herring spoke to the London-based expert to get a lowdown of the laws, loopholes and outcomes that have been discussed across Europe – and which may have huge implications for Apple’s European future.

RH: Is Apple exposing a loophole in European tax law?

GB: Tax regimes for intellectual property are generally not loopholes. Instead they are consciously thought-about, carefully ­crafted tax incentives set up by the policy makers in sovereign nations in full knowledge of the facts. The U.K. has for years benefitted from the research and development tax credit. It does what it says on the can. And more recently, as part of a bid to become the most competitive tax regime in the G20, the U.K. government has, again entirely consciously, legislated to create the patent box with a preferential tax regime for IP created or held here.

RH: What effect are those methods having on tax rates?

GB: It is already having dramatic effects. If you look at the U.K.’s positioning on headline corporation tax rates, which come down to 20% next April, as compared with up to 39% in the U.S.. The U.K.’s big pharma industry has become very attractive to U.S. corporations who want to perform ‘tax inversions’. We saw an example earlier this year with Pfizer’s bid for Astra Zeneca. There’s talk of whether the conscious aim of the U.K. Treasury to attract multinational businesses to the U.K. will prejudice the interests of large UK corporations who find themselves being acquired by overseas competitors.

RH: What is the E.C. looking for here then?

GB: While public perception is that the problem is one of large corporations organizing their affairs to reduce their tax bill globally, that’s not the whole story. Sovereign nations are competing with each other to secure the biggest slice of the tax cake paid by those corporations. The E.U. is looking at this issue and other tax questions too ­ one of them being whether Luxembourg has entered into a favourable tax deal with Amazon, and whether that arrangement amounts to State Aid.

From an E.U. perspective, if a nation does something which amounts to anti-competitive financial support that can be called unfair state aid. So for example when the U.K. was introducing its patent box, the Treasury went to Brussels to ask for confirmation that the patent box wouldn’t be blocked as a form of state aid.

The E.U. is concerned to ensure that, in the competition for GDP or tax revenues between nations, individual countries aren’t using their financial clout to give financial preference to any particular organisation. Within the E.U., state aid provisions would be invoked. Outside the E.U., the World Trade Organisation anti­dumping rules are used to tackle unfair trading advantage.

RH: What is Apple accused of, specifically?

GB: I don’t think anyone is saying that Apple has acted illegally. It is just that collectively around the world, individuals ­ maybe some of Apple’s competitors, and maybe some governments too, don’t like the sound of a big corporation perhaps not paying much tax anywhere. Even if you love Apple’s products you’re still going to have this odd feeling that perhaps the company’s commercial pricing is supported by not paying much tax anywhere in particular.

That is the nub of it. If you go back a few months, when Ireland was challenged over the arrangements which Apple is using, the public statements from the Irish government seemed to indicate that they are blocking this loophole, and will not be allowing this structure to be used in the future. While tax authorities might challenge Apple using transfer pricing rules, there’s an argument that transfer pricing might not catch Apple while it controls all of its manufacture (unlike the PC market which is incredibly fragmented) and all of its sales.

But the big issue is what’s called base erosion, and profit shifting (BEPS). The OECD (Organization for Economic Cooperation and Development) in Paris is working on a BEPS project right now. The aim is to ensure that companies pay the right amount of tax in the right countries.

Companies like Apple will actively monitor two things hour­-by-­hour. One is its brand value, public profile and approval rating against all the issues it faces. That may include apps not working, kit failing, conditions in the factory, and public reactions to not paying much tax. Multinational corporations will have established a policy where there is a risk management element in respect to the chosen tax policy.

RH: What may Brussels eventually do about this situation?

GB: The E.U. might determine whether the earlier Irish support for this structure amounted to an indirect form of state aid. If Apple was shown to have specific beneficial tax agreements exclusive to itself in different jurisdictions, then Brussels would want a look at all the European ones, similar to its review of Amazon and Luxembourg. That doesn’t seem to be happening. If you looked at it through European consumer eyes, important concepts would include some sort of social justice, social contract, the idea that we all work hard when we work and pay taxes as part of a contract with our home nations, but if individuals fall on hard times then it’s legitimate to look to the state for some kind of support. That’s a basic idea of the European social contract, and that, by extension, applies to businesses that operate in Europe.

In the U.S. there is a completely different view. Taxes are almost universally frowned upon but conversely the U.S. has very high corporate taxes. Although there are many pressure groups in America, the general individual view is to expect less from the state, and therefore to push far more onto your own ability to sink or swim. And that again propagates through to the corporate environment.

RH: What would constitute a success for the E.U.?

GB: There would be two elements to what looks like success. One is proving beyond doubt that specific countries’ tax arrangements with multinational corporations don’t amount to state aid ­ and if they do, to do something about it. There is a convention that if a company has received a specific grant which is subsequently found to be state aid, then that has to be repaid. But if a tax treatment is found to have represented state aid, then the company doesn’t have to repay the tax benefit, but the arrangement has to be terminated by the country, which usually results in a change of law. That would be success number one for the E.U.: either prove it’s clean or change the law in that country.

Success number two, which is a little less direct, is to keep the whole issue on the agenda. If the OECD is going to be able to produce something that’s sustainable and workable on this issue of BEPS, then it needs time and an environment where public and corporate opinion are really aware of the issue.

 

The post Apple’s European tax investigation: the lowdown appeared first on Red Herring.

Author: "Red Herring Editorial Team" Tags: "Consumer, Europe, Finance"
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Date: Wednesday, 10 Sep 2014 16:49

Series A

FlightCar, a service which allows people parked in airports to rent out their cars to other travelers, has raised $13.5 million in Series A funding, led by GGV Capital. Previous investors SoftBank Capital, General Catalyst Partners and First Round Capital also participated. The service is currently only available in San Francisco, Boston and Los Angeles but the company will use the new funds to expand to more airports.

Series B

Jimubox, a peer-to-peer lending company, has raised a Series B funding round worth $37 million, led by Xiaomi and Shunwei Capital Partners. Matrix Partners China, Vertex Venture, Magic Stone Alternative and Ventech China also invested in the Beijing-based company. Jiumbox has raised $47 million to date, having been launched in August. The new funds will be used for expansion and to develop new technology.

Funding

Pittsburgh-based 4moms, a robotics company which makes baby products, has raised $41 million in new funding from Bain Capital Ventures and Castanea Partners. The company, founded in 2005, will use the new funds to accelerate growth with a focus on new product development. “4moms represents a great opportunity given our investment and operating experience in branded consumer products,” said Robert Smith, Managing Partner at Castanea Partners. “The company is a category leader with an innovative and differentiated approach in the baby products and gear space which is enthusiastically embraced by retailers and customers alike.”

E-commerce company Elastic Path Software has secured CDN$5.35 million ($4.8 million) in a funding round led by BDC Venture Captial IT Fund, with participation from Yaletown Venture Partners and individual investors. A study from Forrester Research suggests e-commerce sales in North America will stand at more than $370 billion by 2017. “The last few years have seen a real shift from ecommerce to experience-driven commerce,” said Harry Chemko, CEO of Elastic Path. “Brands have been caught off guard with the buying power of Millennials, how they shop and use technology, and how quickly they will switch to a competitor if they have a poor experience.”

Light Cyber, an Israeli cyber security company, has secured $10 million in a funding round led by Battery Ventures, the Wall Street Journal has reported. Existing investors Gilot Capital Partners and Marius Nacht also participated. Light Cyber aims to detect cyber threats very early on, and was founded by former members of the IDF technological division. This latest funding follows investment deals into fellow Israeli cyber security startups ThetaRay and Guardicore in the past few months.

 

The post Baby product robotics company 4moms raises $41m appeared first on Red Herring.

Author: "Red Herring Editorial Team" Tags: "Finance, Investment Round Up, Startups"
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Date: Tuesday, 09 Sep 2014 20:54

Apple has unveiled the iPhone 6, the Apple Watch and Apple Pay at the company’s biggest product launch event in years.

The iPhone 6 will be available from September 16, and comes in two sizes. The regular 4.7 inch display model is priced at $199 on contract for the 16GB version, and the larger 5.5 inch iPhone 6 Plus will cost $299 for the 16GB option. The Apple Watch will be launched in early 2015 and will cost $349. Apple’s NFC payment feature Apple Pay will be a key part of both of the device offerings. Here’s a rundown of Apple’s latest products.

The Apple Watch

The Apple Watch was unveiled by Apple CEO Tim Cook with the immortal line of his predecessor Steve Jobs, “One more thing…” That alone showed the significance that Apple put on this launch and there will be intense intrigue into how this piece of wearable technology performs. The watch comes in two sizes and six different straps. The watch cannot be used without an iPhone and is accurate within 50 milliseconds in perhaps its most basic function – telling the time.

The watch boasts a touchscreen that can tell the difference between a tap and a longer press, and a ‘digital crown’ on the side of the watch face enables zooming. Three sensors provide users with feedback and a soft vibration on the wrist alerts users to an incoming notification. Text input on the watch is only possible via dictation and emojis, and the wearable is capable of analyzing texts, and questions in messages in particular, to offer one word replies which users can select with one click.

The Apple Watch can be used for fitness and payments. The Apple Pay system is built in and can monitor daily health activities, such as how much time the user has spent standing and walking. The watch uses a wireless charger that uses a magnet to clip into the back of the device. Apple did not mention battery life during the presentation.

The iPhone 6 Plus

Apple enters into the phablet space with this 5.5 inch smartphone. The device, which is Apple’s largest ever phone, has a Retina HD Display with a resolution of 1920 x 1080 pixels. That is a 185% increase on the iPhone 5S. When put in landscape mode, the phone looks similar to an iPad, with a second pane for some of the apps. The phone is also thinner than the 5S, at just 7.1 millimeters. The engine also gets an upgrade – the new 64-bit chip powering the device is 13% smaller than its predecessor and gives the phone a significant graphics boost. The new phone’s battery life is said to be the same or slightly better than the 5S. The Plus phone’s camera boasts optical image stabilization, faster autofocus and slow motion video up to 240 frames per second.

The iPhone 6

The iPhone 6 features a 4.7 inch Retina HD display and an ion-strengthened screen.  This phone also features the A8 processor, which includes a barometer used mainly in fitness apps to calculate slopes. The camera on the iPhone 6 only has electronic image stabilization and is generally less powerful than the iPhone 6 Plus. However, the phone is boosted by better battery life and a slimmer 6.9 millimeter width.

Apple Pay

Apple’s new digital payments service, Apple Pay, will be tied to the new iPhone 6 phones and the Apple Watch. Near field communication (NFC) technology is built into the devices to allow users to use their phones or watches to pay for products instead of swiping a credit card. The TouchID fingerprint reader at the bottom of the iPhone 6 provides additional security. Apple announced partnerships with all the major banks in the U.S. and with Visa, MasterCard and American Express. Over 22,000 retailers also signed up to accept payments, ranging from McDonalds to Whole Foods to Bloomingdale’s.

The post Apple unveils iPhone 6, Apple Pay and the Apple Watch appeared first on Red Herring.

Author: "Red Herring Editorial Team" Tags: "Consumer, Mobile, North America"
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Date: Tuesday, 09 Sep 2014 19:14

Seed funding

Voice communication company Cord Project has closed a $1.8 million seed round, led by Metamorphic Ventures and Lerer Hippeau Ventures. Google Ventures and Greycroft also participated. Cord Project aims to bring back the power of voice on today’s devices.“We’ve never had more technology to communicate, but ironically we talk to each other less and less” said Thomas Gayno, Cord Project co-founder and CEO. “It’s incredible how much more information you get from hearing the voice of someone you love, instead of reading a text.” The company is building an app which allows users to send voice messages instead of text messages.

Series A

Conservis, a software provider for the farming industry, has raised a $10 million Series A round led by Cultivan Sandbox Ventures. Heartland Farms and Middleland Capital also participated. “There’s a dramatic change happening on every farm in the world,” said Patrick Christie, Conservis, founder and chief executive officer. “It’s the big data revolution and it’s absolutely bearing down on agriculture. The big questions are, ‘Who will control the data?’ and ‘How can producers harness this transformation?’ We start with the farmer, not the technology.” The company, founded in 2008, will use the new funds to expand geographically and for technological development.  Conservis currently operates in 26 U.S. states and in Canada, Australia and Russia.

Series B

Avogy, a power systems company, has secured $40 million in Series B funding in a round led by Intel Capital with participation from existing investor Khosla Ventures. Avogy will use the latest funds to continue developing its semiconductor and systems technology and to build out its market strategy. “Power systems have to evolve to meet the needs of an increasingly mobile workforce which utilizes multiple devices. We are radically changing the way these devices will be powered,” said Dinesh Ramanathan, President and CEO, Avogy. “Intel has opened up opportunities for Avogy products in the consumer marketplace. We expect to add new strategic partners to proliferate Avogy products in other market segments.”

BLiNQ Networks, a wireless service company, has raised $15.1 million in Series B funding in a round led by WIN Fund LP. Existing investors BDC Capital, New Venture Partners and Summerhill Venture Partners and new investor Kensington Global Private Equity Fund also participated in the round.“We have partnered with several large operators at various stages of qualification trials and the feedback has been very positive on the automated adaptive capability and performance of BLiNQ’s solution as well as the low total cost of ownership,” said Mickey Miller, Co-Founder and CEO at BLiNQ Networks. “This funding will help continue to support these efforts and enable us to scale our sales and support efforts worldwide.”

 

Author: "Red Herring Editorial Team" Tags: "Finance, Investment Round Up, Startups"
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Date: Monday, 08 Sep 2014 18:11

Series A

Lob, a cloud-based printing API provider has secured a Series A round worth $7 million, led by Polaris Partners. First Round Capital, Floodgate and other individual investors also participated. Log previously raised a seed funding round in November 2013 worth $2.4 million. “Lob is squarely focused on building the infrastructure that exists for email for physical mail,” said Co-Founder Leore Avidar. “Our API allows customers to focus on their core offerings and not have to deal with traditional mail houses and the outdated problems that exist with working with them. Companies that use our product can send mail as effortlessly as sending an email. We had a great deal of interest from a broad base of potential investors and are very excited about working with this syndicate led by Polaris, given the value these firms bring to the table.” Log was founded in 2013 and is a recent graduate of YCombinator.

Series B

Grocery delivery startup Good Eggs has raised a $21 million Series B round led by Index Ventures, according to TechCrunch. The company’s locally sourced, organic goods delivery service is currently available in San Francisco, Brooklyn and New Orleans and Good Eggs will use the new funds to expand to other cities and build out its technology.

Series C

GlobalTranz, a logistics and transportation management company, has completed a $40 million Series C funding round led by Providence Strategic Growth (PSG) and Susqehanna Growth Equity. “GlobalTranz is a perfect fit for PSG’s investment strategy of identifying companies that have the opportunity to disrupt large industry segments by applying new technology to solve industry problems. The company’s track record of consistent high growth makes it a compelling investment. We are looking forward to working with Andrew Leto and his team to help solidify GlobalTranz’s position as one of the dominant providers of technology enabled transportation services,” said Mark Hastings, Managing Director of Providence Strategic Growth.

Funding

Authy, an authentication provider for cloud-based services, has completed a round of financing worth $3 million. Two-factor authentication, which the company specializes in, has become a hot topic of late following the leak of celebrity photos onto Reddit. “Authy is leading the way for users to replace passwords for all types of online applications,” said Marc Boroditsky, the newly appointed President and COO of Authy. “Usage of their two factor authentication solution has increased an impressive 110% in the past six months. Daniel and his team have created a powerful yet simple solution and it’s no surprise that they have generated impressive traction with category-leading customers.”

 

Author: "Red Herring Editorial Team" Tags: "Finance, Investment Round Up, Startups"
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Date: Sunday, 07 Sep 2014 14:25

Tesla chooses NV for Gigafactory

After conducting a five state competition, Tesla announced Thursday that it would be building its Gigafactory in Nevada. The Silver State beat out California, Arizona, New Mexico, and Texas to land the lithium-ion battery production facility and the projected 6,500 jobs that should come with it. The batteries will be used to power the company’s Model-3, which it hopes to sell for $35,000. Although the details of the arrangement are not yet public, it was reported that Tesla was seeking up to $500 million in state tax incentives in exchange for building the facility. The Gigafactory is a joint venture between Tesla and Panasonic, which is slated to handle the actual manufacturing of the cylindrical lithium ion cells.

“I am grateful that Elon Musk and Tesla saw the promise in Nevada. These 21st century pioneers, fueled with innovation and desire, are emboldened by the promise of Nevada to change the world,” said Nevada Governor Brian Sandoval through a statement on the Tesla website.

Apple under fire over celebrity photo hack

Apple made headlines last weekend, and it wasn’t for the upcoming release of the iPhone 6. Instead, the company was blamed for allowing an unidentified hacker to leak the personal photos of a number of celebrities and then post them on Reddit. An internal investigation concluded that the photos were secured not through a bug within Apple’s Find my iPhone service, as was first believed, but by a “very targeted attack on user names, passwords, and security questions.” Apple will now send emails and push notifications to users when there is an attempt to restore iCloud data to a new device, and is likewise encouraging use of the two-factor authentication feature in the new iOS. The iPhone 6 is set to be released to the public on September 9.

Germany bans Uber

A Frankfurt court has ruled that Uber, specifically its UberPop service, lacks the necessary insurance-related paperwork to continue operations. Uber has appealed the decision, and despite warnings of a €250,000 fine for failing to comply with the ruling, has not discontinued any of its services in the country. The suit was brought by Taxi Deutschland, a German taxi trade group that has described Uber as an example of the “locust-share economy” and “anarchy capitalism.” Uber joins Amazon and Google as American technology companies to have faced legal obstacles in Germany.

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This week in numbers

Delivery Hero, a Berlin-based online and mobile food ordering service, raised approximately $350 million in funding.

MetricStream, a governance, risk, and compliance (GRC) solutions provider, secured $60 million in Series D funding led by Sageview Capital, with participation from Goldman Sachs and Kaiser Permanente Ventures.

IEX, a New York-based equity trading venue, has finalized a $75 million Series C funding round led by Spark Capital. Bain Capital Ventures, MassMutual Ventures, and Franklin Resources also participated.

 

Author: "Red Herring Editorial Team" Tags: "Mobile, Startups, Weekly Digest"
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Date: Sunday, 07 Sep 2014 13:31

IPO

Reports suggest Alibaba will price its shares in the $60-$66 range and begin its roadshow next Monday, with the IPO being tentatively set for September 18th. The high end of that range would raise over $24 billion, a world record. Alibaba has been deliberate about showing robust revenues and margins in the lead-up to the public offering. In an updated investor prospectus, the company reported that second quarter sales increased 46% to $2.54 billion, while profits of $1.99 billion were nearly three times higher than the year ago total.

At the same time, the run-up to the IPO has provided reasons for investor skepticism. Of concern is that board members will be chosen by the firm’s existing partners, meaning that new shareholders will have no control over the people who are supposed to be representing their interests. This insider control of the board was cited as one of the reasons why talks between Alibaba and the Hong Kong Stock Exchange broke down last September. A year later, the company remains firm in its stance. “The interests of the Alibaba Partnership might not coincide with your (the shareholder’s) interests,” read the updated prospectus.

Zalando, a European online fashion site, declared this week its intention to raise more than €500 for a 10% share of the company through a public offering on the Frankfurt Stock Exchange. The company serves customers in 15 countries but derives 60% of its sales from Germany, Austria, and Switzerland. Incubated by Rocket Internet, Zalando wasn’t the only e-commerce fashion company in its portfolio to draw attention this week. The five brands Rocket Internet helped develop specifically for emerging markets–Dafiti, Jabong, Lamoda, Namshi, and Zalora–will be brought under a single corporate structure, to be known as Global Fashion Group.

Upland Software Inc., an enterprise work management software company out of Austin, TX, hopes to raise $50 million on the NYSE after filing this week. Upland touts its over 1200 enterprise clients in more than 50 countries, and is backed by Activant Capital and Austin Ventures. William Blair and Raymond James will serve as lead underwriters.

M&A

The Dutch antivirus and online security firm AVG will buy Location Labs, a mobile security company with an app that has over 1 million paying customers. The deal could be worth as much as $220 million if certain performance benchmarks are met. Founded in Prague, AVG’s current mobile security offerings are confined to Android. This will change with the addition of Location Labs, which has relationships with all of the major US carriers. Location Labs had raised over $25 million from investors, including DFJ, BlueRun Ventures, and Intel Capital. It will continue to operate out of its Emeryville, CA headquarters post-acquisition.

 

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