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I’m not saying the bull run is over, but just in case…

Like everyone else who watches the news, we too have heard about the yield curve inverting, raising the question, “Is this finally the end of a ten year expansion?” Also like everyone, we don’t know. What we do know is that there is a greater level of risk to the economy than there was 6 … Continue reading I’m not saying the bull run is over, but just in case…

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Like everyone else who watches the news, we too have heard about the yield curve inverting, raising the question, “Is this finally the end of a ten year expansion?” Also like everyone, we don’t know. What we do know is that there is a greater level of risk to the economy than there was 6 months, 12 months or 18 months ago.

What has changed? Ignoring politics (really), tariffs and tighter immigration threaten to stifle two major engines of continued growth domestically – namely consumption and talent availability. Meanwhile, the global economy is slowing due to normal late cycle dynamics, the arrival of emerging economies to a highly “developed” state, as well as greater systemic drag from the budding of protectionist policies and rogue nations. In the tech economy, some (not entirely unexpected) cracks are appearing with WeWork struggling to IPO and Uber and Lyft on long stock price declines following their IPOs. Changing investor expectations resulting from these events befalling tech’s favorite children will no doubt trickle down into mid-stage and early-stage investing.

We’ve thought much about what this could mean for our portfolio companies and how we help prepare them to weather any dip. Our approach is to look at increasing macro risk through three lenses: Customers, Capital and Acquirers.

Customers: Our companies are not immune to belt tightening among their own (mostly B2B) customers, domestically or globally. Many of our portfolio companies serve large global enterprises, so even slowdowns in non-U.S. regions can have an impact on their metrics such as a higher cost of customer acquisition (CAC) – fewer customers in the market with budget to buy, so it’s harder and costlier to find them; and lower lifetime value (LTV) – customers are more likely to cut or reduce spending. Of course, this “LTV to CAC ratio” is a key software-as-a-service indicator. Under circumstances where there is pressure on the top and inflation on the bottom, we advise our companies to focus heavily on customer success and retention and to be less aggressive on sales team hiring and burn to maintain efficient growth.

Capital: The common retort to a potential economic downturn’s effect on startup fundraising is, “Hey, VC funds have so much money. They have to invest it.” While it’s true that venture capital funds raised more than $130B in 2018, surpassing the 2000 dot-com peak, that same comparison reminds us not to take levels of “dry powder” for granted. As we saw in the dot-com collapse, in a downward market, dry powder can stay on the sidelines or focus inward on existing portfolios, reducing the number and levels of new company financings. We certainly expect our best companies to maintain access to capital, but the bar will go up for those in the middle. Given this, we are advising our companies to raise capital (within reason) while the getting is good. Indeed, our best companies all have very strong balance sheets that could last several years or more if needed.

Acquirers: Just like investor capital can stay on the sidelines, corporate and PE acquirer money can too, despite the abundance of both. In a downward environment, exit horizons are likely to extend – all the more reason to encourage companies to bolster their balance sheets and prepare for hyper-efficient growth if needed.

Especially in a changing environment, startups serve themselves well by understanding the investors from whom they are trying to raise capital. How an venture investors look at a possible downturn will depend on their own fundraising cycle. Investors at the tail end of an investing period will pull back quickly, reserving more capital for existing investments and worrying about their own fundraising plans. Investors with fresh powder will have a heightened preference for efficient growth and will likely take their time in deployment to time-average the possible effects of falling entry prices and because their own fundraising cycles will extend as well. Things will simply go slower.

We are neither sounding the alarm nor plugging our ears, just staying attuned to our markets and prepared to adjust if necessary.

Source: https://vcwithme.co/2019/09/11/im-not-saying-the-bull-run-is-over-but-just-in-case/

Private Equity

Alternative Investments: Accelerate’s Alt ETFs Now On RBC Dominion Securities A+ Platform

Accelerate Financial Technologies Inc announced this week that its alternative ETFs have been added to the RBC Dominion Securities A+ platform. RBC Dominion Securities describes the A+ as the next level of wealth management.

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Alternative Investments: Accelerate’s Alt ETFs Now On RBC Dominion Securities A+ Platform

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The A+ is for you if “you require serious investment management for your serious money.”

Accelerate Financial Technologies Inc announced this week that its alternative ETFs have been added to the RBC Dominion Securities A+ platform.

RBC Dominion Securities describes the A+ as the next level of wealth management.

For select clients with serious money, the platform provides greater convenience, customization, RBC’s Unified Managed Account technology, access to elite money managers worldwide, and tax efficiency.

Accelerate’s Alt ETFs on RBC A+

The range of alternative ETFs from Accelerate allows investors to diversify beyond stocks and bonds by including alternative asset classes in their portfolios.

The firm is known as a pioneer in institutional caliber alternative ETFs including hedge fund and private equity ETFs. It claims it is “disrupting the asset management industry by offering performance-oriented alternative investment strategies previously reserved for wealthy investors at a fee significantly lower than competitors.”

“We are pleased to be chosen by RBC Dominion Securities, a global leader in wealth management, as one of the select group of high-quality investment managers on the exclusive A+ platform for RBC Dominion Securities advisors and their clients,” said Accelerate CEO Julian Klymochko. “In an era of rock-bottom interest rates and record-high stock market volatility, we are pleased to provide investors with diversification, alternative yield, and alpha generation solutions through alternative investment strategies including absolute return, arbitrage, enhanced equity, and private equity replication.”

Selected ETFs

The alternative ETFs on the RBC Dominion Securities A+ platform include:

  • Accelerate Absolute Return Hedge Fund (TSX: HDGE) – a diversified, liquid, and performance-oriented long-short equity hedge fund
  • Accelerate Arbitrage Fund (TSX: ARB) – provides exposure to SPAC arbitrage and merger arbitrage investment strategies
  • Accelerate Enhanced Canadian Benchmark Alternative Fund (TSX: ATSX) – combines exposure to the S&P/TSX 60 plus a long-short Canadian equity overlay
  • Accelerate Private Equity Alpha Fund (TSX: ALFA) – designed to provide investors with private equity-like investment returns

Related Story:  Liquid Alt ETF Provider Accelerate Offers Ready-Made Alternative Investment Strategy                                                

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Source: https://dailyalts.com/accelerates-alt-etfs-now-on-rbc-dominion-securities-a-platform/

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Private Equity

Venture Capital: AgTech Startup Benson Hill Lands $150M

Benson Hill, an agtech startup based in St. Louis, announced Thursday its close of a $150 million Series D round led by Wheatsheaf and GV (formerly Google Ventures). It uses biotechnology and data science to enhance the nutritional qualities and sustainability of crops.

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Venture Capital: AgTech Startup Benson Hill Lands $150M

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Benson Hill uses biotechnology and data science to enhance the nutritional qualities and sustainability of crops.

Benson Hill, an agtech startup based in St. Louis, announced Thursday its close of a $150 million Series D round led by Wheatsheaf and GV (formerly Google Ventures).

The company said other strategic and ESG focused investors also participated. These included Argonautic Ventures, Caisse de dépôt et placement du Québec (CDPQ), Emart, GS Group, Louis Dreyfus Company, iSelect Fund, Fall Line Capital, Mercury Fund, Prelude Ventures, Prolog Ventures, S2G Ventures, and additional strategic and family office investors.  (FOOD navigator-USA.com)

Benson Hill technology

Benson Hill uses biotechnology, data science, and AI to enhance the nutritional qualities, flavor, and sustainability of crops and vegetables.

The firm’s “Cloud Biology” is the fusion of data, machine learning, and AI techniques with biology. Its “CropOS” is a proprietary platform that facilitates the accessibility and actionability of Cloud Biology.

The CropOs platform uses plant phenotyping, predictive breeding, and environmental modeling algorithms to better control the plant breeding process and realize these advantages:

  • Produces plants that are highly productive, highly nutritious, and better tasting
  • Better texture
  • Reduce the number of processing steps
  • Reduce the need for additives
  • Grow plants that “do more with less,” thus boosting sustainability

The company’s work so far has been concentrated around soybeans.

Its new, ultra-high-protein (UHP) soy products spiked the interest of investors. They come from a highly productive non-GMO soybean that is rich in oleic oil content.

Use of funds

Benson Hill plans the commercial launch of the first Ultra-High Protein soybean varieties in 2021, among other product launches.

It also plans to expand its team by adding top talent and continue the development of Cloud Biology and CropOS.

“As a society, we’re at a crossroads made more evident as the pandemic has revealed strengths and vulnerabilities in our food system,” said Matt Crisp, Benson Hill CEO. “Food choices that create enjoyment, make us stronger, and help preserve our environment need to be accessible to everyone, and the power of plant diversity and technology innovation can help fuel that evolution.

Related Story:   Smart Farm Technology To Take The Drudge Out of Plant Breeding

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Source: https://dailyalts.com/agtech-startup-benson-hill-lands-150m/

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Private Equity

FinTech: Alliance Data Buys BNPL Fintech Bread For $450M

Alliance Data Systems (NYSE: ADS) said Thursday that it will acquire Bread and its digital platform for $450 million of which $100 will be paid through Alliance stock. The transaction would expand Alliance Data’s own digital offerings by including buy-now-pay-later (BNPL) products.

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FinTech: Alliance Data Buys BNPL Fintech Bread For $450M

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Alliance Data will pay in cash and stock for the acquisition.

Alliance Data Systems (NYSE: ADS) said Thursday that it will acquire Bread and its digital buy-now-pay-later (BNPL) platform for $450 million of which $100 will be paid through Alliance stock.

The transaction would expand Alliance Data’s own digital offerings by including BNPL products. BNPL is a major trend now that consumers have embraced the interest-free, zero-fee facility to pay in installments. Alliance is a provider of data-driven marketing, loyalty, and payment solutions. (Alliance)

Digital BNPL is particularly popular with millennials and the younger set. They prefer not to run up credit card debt and like the speed and convenience. The technology and products acquired from Bread will address this segment of the population.

Bread already has tie-ups with merchants such as online jewelry seller Noémie, the luxury watch seller Hublot and Newton Baby, the crib mattress provider.

BNPL customer experience

“Bread’s flexible, easily-integrated payment solutions, coupled with Alliance Data’s Enhanced Digital Suite, will improve the digital customer experience and support increased acquisition and checkout rates, offering the best payment product to the right consumer at pivotal moments in the customer’s online shopping journey,” Alliance said in a statement.

Alliance intends to leverage Bread’s solutions along with its own existing private label, general-purpose and commercial products.

COVID-19

Its brand partners will therefore get another advantage in the eCommerce channel, with online businesses already getting a boost from COVID-19.

“With the timing of the holiday season upon us, the COVID-19 pandemic has accelerated the adoption of digital technologies, and perhaps nowhere as significantly as in financial services and payments,” said Val Greer, chief commercial officer, Alliance Data.

BNPL is now crowded with cash-rich players

Payments giant PayPal (NASDAQ: PYPL) announced in August that it would begin offering BNPL services, recognizing that COVID-19 had triggered a dramatic increase in their popularity.

Other players in the BNPL field include Klarna, Affirm, Afterpay, and Quadpay.

In a recent study, Tech Crunch found that PayPal had the highest retailer coverage with a presence of 65% retailers. Afterpay was a distant second at 10%, then Affirm 6%, Klarna 5%, and QuadPay 2%.

The study concluded that PayPal was primed to dominate the BNPL wars.

Related Story:   PayPal Challenges Klarna In U.K. BNPL Tussle                                                

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Source: https://dailyalts.com/alliance-data-buys-bnpl-fintech-bread-for-450m/

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