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Moon Shots — the new trend in corporate venturing

While the world is discussing the impact of Unicorns and Internet giants on this century and which…

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While the world is discussing the impact of Unicorns and Internet giants on this century and which of those will prevail into the next decade the most interesting trend is happing in the back rooms of corporations. Still unicorns and Internet giants have, due to the size of funding available to them, could take part in this trend and most likely are doing it.

While most of funding in mature startups are invested in customer acquisition via marketing, promotions and margin cuts from an economic perspective there is no winner in this game. As we learned in the Didi / Uber deal last months this price war will be end in a draw with no winner and a ceasefire is declared from the government arm called regulator. If it was for the CEOs this war would have went on and on and fueled by more funding rounds and even higher valuations. But having a look at Uber it is known that the company is pushing more funds in their engineering to build real USPs to fight competition in the future. Uber acquired the IP assets of a mapping company Decarta some years ago.

With those assets Uber will become technology independent from Apple and Google for mapping services which is essential for them. On the other side it leave Didi, Lyft and other similar service stuck with those players or — in the future — will turn them into clients of their own mapping services. In the meantime Uber is focusing on autonomous driving and has to certain extend a head start even with the carmakers in their own field of expertise.

On the other side of the table the traditional corporations are taking the ridesharing business serious as well. Alphabet started its own carpooling services via their matured Waze application based on a large and healthy grown community with low customer acquisition costs. Daimler as the owner of European market leader in taxi apps myTaxi made a big bed on opening the shareholder structure to bringing in outside investors to their own business with the acquisition of Hailo in London in an all share deal. As part of this deal the founder of myTaxi Nic Mewes will become managing director of Daimler Mobility Services unit and chairman of the myTaxi board. This was the beginning of a process which was announced by Daimler CEO Zetsche this week to change the company into digitalization across all units. While carmarkers are busy in transforming into a world of e-mobility and car sharing from their historical roots in other industries are even more adventurous.

Deutsche Telekom enters market for charging infrastructure of e-cars in Germany and announced their activities at IFA in Berlin last week. A carrier using its legacy infrastructure to become a service provider of a different industry and competing with players which claim energy as their core business this shows a trend again. However we should not forget that Telco’s core business connectivity is challenged by Google (Google Fiber, Loom project, GoogleFI), facebook (Facebook satellite, Aquilla) and even Airbus. The world is changing and historic borderlines are blurring in-between industries.

All those initiatives have one focal point in common: Large investments in long term and risky innovation projects. Those so called “Moon Shots” becoming more and more common in the industries. Fortune 500 corporations understood that smaller investments in minority stakes are not sustainable for their innovation strategies. While it makes sense to learn from fast and innovative startups the investments in those companies have less synergies to offer today. Google Ventures investment of $450m in uber four years ago did not give them an advantage for their initiatives at Google and uber was dropping Google services more and more over time. At the end Google ended up to be a financial investor helping Uber’s valuation to rise up to $69bn making it unable to be acquired. While this might be fun for a lot of people inside Uber it doesn’t make sense for a corporate investor. So with no surprise Google’s board member quit the board of Uber and it parts way with its posterchild. Google maps integrated the biggest competitors of Uber into Google Maps long time before it started its own carpooling service.

With all this innovation driven projects inside larger corporations the money for those initiatives will be spend in-house for the coming years. Less funds are available for startups through corporate venture capital or fund in fund investments in independent VC funds. While this is rather early in the global funding cycle the impact of those missing founding sources will have an impact in five years and later. However, the impact is more serious then, when the startups of today will mature in late stage companies in need of growth investment rounds. Therefore we will see some good companies starving for growth funding in five years and they will be picked up in mergers and acquisitions by corporations for a reasonable price related to EBIT and revenue multiples.

There will be a lot of Yahoo / Microsoft offers which will be declined by the startups and a lot of the LinkedIn / Microsoft deals which are still very interesting for all involved parties but rather half of the price the investors were looking for in the beginning. But those financial transactions will not run in the news headlines. The successful moon shots of the traditional dinosaurs will be dominating the tech world over the next ten years.

Source: https://thomasgr.tumblr.com/post/150219167315

Private Equity

Boston startups expand region’s venture capital footprint

This year has shaken up venture capital, turning a hot early start to 2020 into a glacial period permeated with fear during the early days of COVID-19. That ice quickly melted as venture capitalists discovered that demand for software and other services that startups provide was accelerating, pushing many young tech companies back into growth […]

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This year has shaken up venture capital, turning a hot early start to 2020 into a glacial period permeated with fear during the early days of COVID-19. That ice quickly melted as venture capitalists discovered that demand for software and other services that startups provide was accelerating, pushing many young tech companies back into growth mode, and investors back into the check-writing arena.

Boston has been an exemplar of the trend, with early pandemic caution dissolving into rapid-fire dealmaking as summer rolled into fall.

We collated new data that underscores the trend, showing that Boston’s third quarter looks very solid compared to its peer groups, and leads greater New England’s share of American venture capital higher during the three-month period.

For our October look at Boston and its startup scene, let’s get into the data and then understand how a new cohort of founders is cropping up among the city’s educational network.

A strong Q3, a strong 2020

Boston’s third quarter was strong, effectively matching the capital raised in New York City during the three-month period. As we head into the fourth quarter, it appears that the silver medal in American startup ecosystems is up for grabs based on what happens in Q4.

Boston could start 2021 as the number-two place to raise venture capital in the country. Or New York City could pip it at the finish line. Let’s check the numbers.

According to PitchBook data shared with TechCrunch, the metro Boston area raised $4.34 billion in venture capital during the third quarter. New York City and its metro area managed $4.45 billion during the same time period, an effective tie. Los Angeles and its own metro area managed just $3.90 billion.

In 2020 the numbers tilt in Boston’s favor, with the city and surrounding area collecting $12.83 billion in venture capital. New York City came in second through Q3, with $12.30 billion in venture capital. Los Angeles was a distant third at $8.66 billion for the year through Q3.

Source: https://techcrunch.com/2020/10/23/boston-startups-expand-regions-venture-capital-footprint/

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Private Equity

Alternative Investments/Real Estate: Housing Market Demand Is “Insane”

Speaking to CNBC on Power Lunch, Glenn Kelman, CEO of real estate brokerage Redfin (NASDAQ: RDFN), said he expected the current boom conditions in the housing market to last well into next year. He attributed the high demand to affluent professionals looking for remote homes as well as low interest rates. Also, he thinks some sellers will put their properties on the market only after the presidential election.

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Alternative Investments/Real Estate: Housing Market Demand Is “Insane”

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Redfin CEO Glenn Kelman says the boom could last into next year.

Speaking to CNBC on Power Lunch, Glenn Kelman, CEO of real estate brokerage Redfin (NASDAQ: RDFN), said he expected the current boom conditions in the housing market to last well into next year. He attributed the high demand to affluent professionals looking for remote homes as well as low interest rates. Also, he thinks some sellers will put their properties on the market only after the presidential election. (CNBC)

Kelman: Too good to last forever

“This level of demand is absolutely insane. I would expect it to last into 2021, at least,” Kelman said.

Recent data from the National Association of Realtors shows up the strength in the housing market.

Existing home sales shot up 9.4% in September beating expectations. Even though the median purchase price of a home rose approximately 15% year over year, there is just a 2.7-month supply of for-sale homes, showing tight market inventory conditions.

The 30-year fixed-rate mortgage averaged 2.80% for the week ending Oct. 22, down from 2.81% in the previous week and 3.75% a year ago, according to the Freddie Mac Primary Mortgage Market Survey. Therefore, mortgage rates crept even lower in the latest week.

However, “there’s no way it can last forever,” Kelman warned of the bullish conditions.

Canada: Off the charts

Meanwhile, at the northern neighbor, home sales activity in September is described as “off-the-charts.”

Housing data released by the Canadian Real Estate Association (CREA) last week showed a nationwide year-over-year increase in sales of 45.6%.

This was a new all-time monthly record for the third month in a row.

“This is starting to sound like a broken record (about records being broken), but Canadian home sales and prices set records once again in September … as they did in July and August,” said Shaun Cathcart, senior economist at CREA, in a statement.

Real Estate ETFs in the U.S.

The year-to-date performance of some real estate ETFs is shown below:

iShares U.S. Home Construction ETF (ITB)              +24.61%

SPDR S&P Homebuilders ETF (XHB)                          +20.83%

Vanguard Real Estate Index Fund ETF                      -13.91%

It may be noted that despite the boom conditions in housing, real estate ETFs and stocks have declined in recent days.

According to Barron’s, this may be due to yields on the 10-year and 30-year Treasuries moving higher in recent weeks.

Other reasons could be fears of inflation ticking up in the future amidst an improving economic situation.

Nevertheless, the view is that interest rates are likely to remain low for longer. So demand may remain strong.

“Part of what is fueling this boom is that the economy has just split into two and rich people are able to access capital almost for free, so, of course, they’re going to use that money to buy homes,” said Redfin’s Kelman.

Related Story:   Mortgage Rates Set Another Record Low; Real Estate ETFs Could Benefit

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Source: https://dailyalts.com/alternative-investments-real-estate-housing-market-demand-is-insane/

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Private Equity

Asda’s new owner EG Group seeks new leadership ahead of IPO – report

EG Group is owned by the billionaire Issa brothers and the private equity firm TDR Capital, who teamed up for a £6.8 billion takeover of Asda last month

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UK grocer Asda Group’s new owner EG Group is looking for a new chairman and independent directors as it prepares for a £10bn initial public offering, The Timesreports.

EG Group is owned by the billionaire Issa brothers and the private equity firm TDR Capital, who teamed up for a £6.8 billion takeover of Asda last month.

The move comes after Deloitte resigned last week as the company’s auditor because of concerns over the group’s governance and lack of internal controls, according to the publication.

A decision on candidates will be taken before the end of this year, although roles haven’t been finalised yet as the company is in the process of deciding whether to float in the UK or the US, The Times reports.

Write to Barcelona editors at barcelonaeditors@dowjones.com

From Dow Jones Newswires

Source: https://www.penews.com/articles/asdas-new-owner-eg-group-seeks-new-leadership-ahead-of-ipo-reports-20201023

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