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Missing Quantative Easing for unicorns will change private investment markets

Some months ago I was arguing the end of the unicorn era — meaning startup companies driven to +1bn…

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Some months ago I was arguing the end of the unicorn era — meaning startup companies driven to +1bn valuations by a funding strategy to benefit private investors and fund at least 10 years of unprofitable business cases. There is nothing bad in this strategy as we have seen in Amazon which turned very profitable in recent months and even Rocket Internet did this with Zalando this year. However, this strategy is coming to an end when the only exit path for this model — public markets — are drying out and only a few good companies like Twilio are reaching its planed goal. The risk for private investors following this strategy over a long period of time is becoming to risk and the ratio for reward turns into a not preferred asset class for the deep pocket capital owners recently. This makes it harder for unicorns to close additional funding round at higher valuations leading to apre-IPO Dip in their valuations before even trying to go public. What we see next is growth debt investments to bridge the time to a potential IPO with strong terms from those debt providers has been reported in Spotify or even Uber during this year.

Now with the IPO window closing for most of this unicorns and a usual time frame of a debt financing of 12–18 months the pressure to seek exits via trade sale is rising in the group of unicorns. Obviously the dip in valuations need to be done similar to the Pre-IPO Dip let most of the unicorns shy away from those exits for the moment. If a corporation is considering to acquire an asset at +1bn valuation, the board needs to be convinced of a return of investment for this project. Unlike in private market investments, the key metric is not revenue multiples and growth rate but synergy effects and EBIT costs. To put it in simple words: “Money spend on an acquisition paid in cash or stocks need to be earned back in past and future.”

In Venture Capital there is a saying “do not grab a falling knife” — or literally speaking: Don’t in a devaluating asset. That means investors and buyers are very careful to invest in a company which valuation has decreased in the past and even more careful when the valuation has been decreased several times. There are buyers but those buyers will wait for the purchase price is coming down even further. It is the Angst which drives the ECB in Euro Zone to Quantative Easing to raise inflation to 2% in average while currently the inflation is 0%. Transferring this view to private markets, it means valuations of startup companies is an inflation ratio: if it increases over time it will triggers demand from investors — if it increases fast in a given timeframe it drives demand even further. Investors fear to missing out and need to buy at a even higher share price. So a declining valuation puts investors on hold waiting for a better bargain.

The catch 22 in private markets is the missing ECB and Quantative Easing for startups to fight deflation. Until end of 2015 private markets considered pension funds, investment banks, private equity funds and corporations as their FED. Convincing those capital providers, markets are save for investments drove unicorn rounds in Silicon Valley and other regions. Unfortunately, those cash sources are now focused and learned their lesson. They are drying out day by day with each unicorn not being acquired or going public. As those funds are driven by returns the current investment mood cannot be changed by a few, successful IPOs and get even harmed by acquisitions of new unicorns, which are not fed over time by some billions. Investors realize that they bed on the wrong unicorns — not the old ones return profits but the young ones. The young unicorns which are seeking exits while their valuations are still rising as CBInsights shows very good in their recent analysis.

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Like a reverse domino effect the funding stops from the back of the valuation chain. The bigger, older unicorns stop receive funding first, investors will shy away from the mid aged ones and continues to harm even younger ones.

As I blogged earlier here this will drive M&A activities in the unicorn space. We will see these activities in both segments of unicorn ages. The older ones are looking to prepare for an IPO (e.g. Spotify) and the younger ones, not able to go public, will push for trade sales (e.g. Soundcloud). Get prepared for more Yahoo / Verizon like deals. Take a big check rather than life a long death of decreasing valuation with no Quantative Easing to rescue your company. With a run rate of 12 months’ companies will start those processes and some will realize it is not enough time. This will trigger other unicorns to start earlier those exit processes or seeking more debt financing to prolong the run rate. Another interesting view on what happens on a timeline can be found at CBInsights blogpost based on their data:

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Now, when this outlook is known by all parties in the private and public markets there is no room for hiding anywhere. The process of devaluating, restrain of cash sources, push in M&A activities will accelerate the markets momentum. Nobody wants to be the last man standing in this kind of an environment. But as we know from public markets you can make money in bull and bear markets. Bear markets seem to be more difficult to spot the opportunities. Though markets will find a way to get to profitable exits and most of the companies will exist in the future in a partnership with corporates or being acquired by them. Some models and deal structures may look new to the investors and founders but those are still good deals. Daimler and Mytaxi did a very good move in taking over London based Hailo in an all share deal leaving private investors as shareholder in a corporate dominated company. It has built the opportunity for even further consolidation in the taxi e-hailing market to create a strong European leader — a leader the likes of Didi and Uber cannot ignore in the future.

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While stock markets show the global leaders today are pure tech players — it is not a surprise hence we are living in a digital world. Like oil and gas was dominating the industrial era today the owners of big data, the fuel providers of today’s world, are leading the markets.

What is new in today’s markets it’s the ability of those corporations to own the investment and innovation space for the coming decades. Those companies are starting to create their own startup ecosystems in which it will be hard to invest for private investors. Cash loaded digital market leaders have no need for outside money. Those market leaders own their closed private markets and investors will have a hard time to compete or enter those markets. Maybe we will see grey markets for outside investors in this deals or we see certain stock classed traded publicly with higher risk/return rewards when indirectly investing in the projects of facebook, Amazon, Apple and Google.

Source: https://thomasgr.tumblr.com/post/148251047325

Private Equity

Ordermark Funded $120M to Expand its Virtual Business

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Ordermark is based in Los Angeles, CA, one of the leading online ordering management solutions for restaurants and virtual restaurant concepts.

Ordermark was funded $120 million series C round funding. The funding was led by prominent technology investor SoftBank Vision Fund and joined by returning investor Act One Ventures. The grant will use to help more restaurants transition to online ordering during the pandemic and beyond.

The company’s software consolidates incoming orders from multiple platforms and sends them to a single printer. Ordermark also operates a company

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The post Ordermark Funded $120M to Expand its Virtual Business appeared first on Funded.com.

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Ordermark is based in Los Angeles, CA, one of the leading online ordering management solutions for restaurants and virtual restaurant concepts.

Ordermark was funded $120 million series C round funding. The funding was led by prominent technology investor SoftBank Vision Fund and joined by returning investor Act One Ventures. The grant will use to help more restaurants transition to online ordering during the pandemic and beyond.

The company’s software consolidates incoming orders from multiple platforms and sends them to a single printer. Ordermark also operates a company called Nextbite, a portfolio of 15 readymade virtual brands such as CraveBurger, Firebelly Wings, and HotBox by Wiz, a collaboration with rapper Wiz Khalifa. Restaurants can offer these delivery-only brands out of existing kitchens, opening up additional revenue streams.

Jeff Housenbold, the Managing Partner at SoftBank Investment Advisers, said. They believe Ordermark is a leading technology platform and innovative virtual restaurant concepts transform the restaurant industry. And they are excited to support their mission to help independent restaurants optimize online ordering and generate incremental revenue from under-utilized kitchens.

The rise of ghost kitchens and virtual restaurants, often referred to as the 3rd wave of food delivery, have paved the way for a broader addressable market for online food delivery.

The statement of Alex Canter, the chief executive officer behind Ordermark 2020, has been a tough year for restaurants. That’s why they are focus on providing products and services to help keep their doors open. This funding allows them to offer more restaurants with innovative ways to reach more consumers.

By: K. Tagura

Author statement:

Funded.com is the leading platform for accredited investors network worldwide. We monitor and provide updates on important funding events. Angel Investors and Venture Funding can be a key growth for a startup or existing business. Whether it is a first, second or third round financing having a strategic alliance with an Angel Investor or Venture Capital financing can propel a business to the next level and give the competitive edge.

Source: https://www.funded.com/blog/2020/10/ordermark-funded-120m-to-expand-its-virtual-business/

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Private Equity

Alternative Investments/ESG: Amundi Launches Sustainable ETF With Exposure To Japanese Stocks

The Amundi Index MSCI Japan SRI UCITS ETF offers exposure to large and mid-cap companies with outstanding Environmental, Social, and Governance (ESG) ratings in the Japanese market. The new ETF is an extension of Amundi’s range of sustainable ETFs.

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Alternative Investments/ESG: Amundi Launches Sustainable ETF With Exposure To Japanese Stocks

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Amundi’s new ESG ETF invests in large and mid-cap Japanese stocks.

The Amundi Index MSCI Japan SRI UCITS ETF offers exposure to large and mid-cap companies with outstanding Environmental, Social, and Governance (ESG) ratings in the Japanese market.

The new ETF is an extension of Amundi’s range of sustainable ETFs. (ETF Stream)

Amundi Index MSCI Japan SRI UCITS ETF

The ETF tracks the performance of the MSCI Japan SRI Filtered ex Fossil Fuels Index, which in turn is an equity index based on the MSCI Japan Index (the parent index). The index is representative of the large and midcap stocks of the Japanese market.

It excludes issuers involved in Nuclear, Tobacco, Thermal Coal, Alcohol, Gambling, Controversial Weapons, Conventional Weapons, Civilian Firearms, Oil & Gas, Fossil Fuels, Genetically Modified Organisms (GMO), and Adult Entertainment.

Its total expense ratio is 0.18%. No performance fees apply.

It is an accumulation fund and will be managed by Amundi Luxembourg SA, an entity that is part of the Amundi group.

The ETF is market-cap weighted and includes a 5% capping on issuer weights. It comprises 68 stocks, compared to 320 names in its parent index.

The fund’s largest holding is Nintendo with 5.6% weighting ahead of Daikin Industries with 5% and Sony with 4.7%.

It is listed on the Deutsche Boerse and Euronext Paris.

ESG ETFs continue record run

European ESG ETFs continued their strong trend and set a record for assets gathered in a month (€3.9 billion), according to the latest Money Monitor report from Lyxor ETF for September.

Related Story:  Amundi Expands ESG Range With Two New ETFs

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Source: https://dailyalts.com/alternative-investments-esg-amundi-launches-sustainable-etf-with-exposure-to-japanese-stocks/

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Private Equity

Artificial Intelligence: Intel First To Deploy AI “On Edge” In Space

Intel (NASDAQ: INTC) has the distinction of launching the first onboard AI processing chip into space. Earlier this month, the European Space Agency and Intel announced the successful deployment in space of PhiSat-1, the first-ever satellite with onboard AI-processing capabilities. Launched from a rocket dispenser on September 2, the PhiSat-1 is positioned about 530 km above our heads, moving at a speed of 27,500 km per hour in a sun-synchronous orbit.

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Artificial Intelligence: Intel First To Deploy AI “On Edge” In Space

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A satellite the size of a cereal box, carrying a camera and an AI chip, is now in orbit.

Intel (NASDAQ: INTC) has the distinction of launching the first onboard AI processing chip into space. Earlier this month, the European Space Agency and Intel announced the successful deployment in space of PhiSat-1, the first-ever satellite with onboard AI-processing capabilities. (Business Insider)

Launched from a rocket dispenser on September 2, the PhiSat-1 is positioned about 530 km above our heads. It is moving at a speed of 27,500 km per hour in a sun-synchronous orbit.

PhiSat-1

The satellite’s objective is to monitor polar ice and soil moisture, as well as to test inter-satellite communication systems.

The satellite carries a hyperspectral-thermal camera and an Intel Movidius™ Myriad™ 2 Vision Processing Unit (VPU). The latter is responsible for the AI heavy lifting operations onboard the spacecraft.

Myriad’s immediate function is to curate the huge mass of data captured by the camera.

AI at the ultimate edge – space

The big problem facing the scientists was the sheer volume of data generated by the hi-fidelity camera onboard the PhiSat-1. The camera unfortunately does not know how to differentiate between a cloudy and clear environment.

It, therefore, takes a large number of photographs that are useless because, at any given time, clouds envelop two-thirds of the earth’s surface.

The junk photos consume precious internet bandwidth to send down to earth. After all that, scientists would likely delete the unclear photos.

The scientists decided to use onboard AI (also known as “on edge” processing) to curate the photos. Myriad-2 would examine the images, trash the useless ones, and send only the good ones to earth.

By discarding the cloudy images at the source, they saved nearly 30% of bandwidth.

“Artificial intelligence at the edge came to rescue us, the cavalry in the Western movie,” says Gianluca Furano, data systems and onboard computing lead at the European Space Agency.

“Space is the ultimate edge,” says Aubrey Dunne, chief technology officer of Ubotica, the Irish startup that built and tested PhiSat-1’s AI technology. “The Myriad was absolutely designed from the ground up to have an impressive compute capability but in a very low power envelope, and that really suits space applications.”

Ubotica worked with cosine, the maker of the camera, in addition to the University of Pisa and Sinergise.

After three weeks of testing, the team could establish that Intel’s Myriad AI onboard the PhiSat-1 was working fine.

ESA then announced “the first-ever hardware-accelerated AI inference of Earth observation images on an in-orbit satellite.”

Satellite-as-a-service!

Scientists can now visualize multiple applications of AI on satellites.

For example, the satellite, during one orbit, could switch from spotting wildfires on land to rogue ships or environmental accidents at sea such as oil spills.

It could measure crops and soil moisture over farms and forests, and assess the ill effect of climate change on melting ice caps.

Related Story:   Satellites and AI Could Together Predict Wildfires Accurately

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Source: https://dailyalts.com/intel-first-to-deploy-ai-on-edge-in-space/

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