Month: April 2018

500 Startups, the U.S.-headquartered VC firm hit by scandal last year after co-founder Dave McClure resigned following allegations of sexual misconduct, has announced an unconventional deal that sees Abu Dhabi Financial Group (ADFG) take a stake in its parent company.

It is normal for VC firms to work closely with big corporates as LPs that supply money for their funds — the Middle East has proven to be fertile hunting ground for the likes of 500, Uber and Softbank — but direct investment in parents is not common in VC-land. ADFG has been an LP with 500 for some time and Christine Tsai, who heads the VC firm up, said there is “strong alignment on vision and complementary strengths” between the two.

Founded in 2011, ADFG claims to have $6 billion in assets under management via offices in the UAE, UK and Eastern Europe. The firm covers public markets, private markets, real estate and debt investments.

500 isn’t saying what size ADFG’s investment other than it will lead to “substantial capital” being injected into the firm to “accelerate the growth of our key initiatives, expand into new markets, and anchor future 500 funds.”

ADFG will also get a board seat at 500, Tsai confirmed.

Unlike most U.S. VCs, 500 has offices, accelerator programs and micro-funds across the world including Europe and Asia. In the aftermath of McClure’s scandal last year, the firm shuttered its Canada-based fund while a maiden Australia-based program was axed by partner LaunchVic, a $60 million entrepreneurship scheme backed by the government of Victoria, before it even started.

from TechCrunch

Meituan Dianping, the fast-growing Chinese firm valued at $30 billion, is buying Mobike, a Chinese startup that helped pioneer bike-sharing services worldwide, in a major piece of consolidation.

The deal was heavy rumored yesterday and TechCrunch has today confirmed with a source that it has been concluded at a price of $2.7 billion.

TechCrunch understands that the deal will be officially announced today, but already key personnel have let the cat out of the bag on social media. Mobike President and co-founder Hu Weiwei posted a cryptic WeChat message about “a new beginning,” as our Chinese partner Technode noted, while SCMP reported that Meituan CEO Wang Xing said the company will “build a new future with Mobike.”

Representatives from Meituan Dianping and Mobike did not respond to requests for comment.

Meituan Dianping is best known for food deliveries via electric bike, but that is just one part of its platform which connects local retailers to consumers via a so-called offline to online, or O2O, platform. The company was formed through a multi-billion dollar merger between China’s largest group buying services in 2015 and it has since raised boat-loads of capital from investors, including $4 billion last October, to expand into new areas.

Transportation is a major focus for Meituan Dianping. The firm began offering ride-hailing services earlier this year and it has invested in Go-Jek in Southeast Asia, so adding Mobike to its stables makes perfect sense on that front, not to mention potential synergies with its core delivery business, too.

These new forays might lead to an IPO. A host of Chinese firms have jumped into the public markets lately, and Bloomberg recently reported that Meituan Dianping hopes to join them with a listing that could value it as high as $60 billion.

The deal will also be a major win for Tencent against its long-time foe Alibaba.

Tencent is an investor in Meituan Dianping and Mobike, and unifying the two could help Meituan Dianping battle Ele.me, the $9.6 billion delivery service that Alibaba just bought in full last week. Indeed, Caixin reports that Tencent CEO Pony Ma himself brokered the deal.

Mobike and Ofo pioneered bike-sharing in China and the rest of the world. Mobike raised nearly $1 billion from investors that, Tencent aside, include Temasek, Foxconn, Hillhouse Capital and Vertex Ventures.

Mobike has been an investment and acquisition target for many.

Last year, a deal to merge with close rival Ofo was widely speculated. Ultimately, reports suggest that it fell through out of fear that Didi Chuxing, the ride-hailing giant that invested in Ofo, would become too powerful if the two bike-sharing firms tied up. That theory seemed to have its merits after Didi rolled out a hostile bike-sharing platform that sits inside its hugely popular ride-hailing app and is aimed at extinguishing the threat of Ofo, Mobike and others by simply turning them into features rather than fully-fledged rivals.

from TechCrunch

Spotify is done with its long-awaited “direct listing” experiment. The music streaming company went public without the IPO.

After completing its first trade halfway through the day at $165.90, Spotify fell to $149.01, 10% beneath the open. It was a down day on the stock market, but at a $26.5 billion market cap, it’s up from the private market trading that happened in the months leading up to the IPO.

The top end of that range, $132, was used as a “reference point,” valuing the company at $23.5 billion. Since there was no IPO price, that demarcation is being used to say that Spotify traded up about 13% on its first day.

Yet while it achieved a desirable market cap, some on Wall Street are puzzled as to why Spotify would want to go public without raising money.

One myth that’s been floating around is that Spotify did this to avoid paying bankers. In fact, they worked with Morgan Stanley, Goldman Sachs and Allen & Co. in the lead up to the debut.

They did not eliminate the investment banks, but they did manage to avoid the dreaded “lock-up” expiration, which is when most employees and insiders are allowed to sell shares. This is usually about six months after an IPO and it often puts downward pressure on the stock, in anticipation of the event.

Some are wondering if Spotify’s debut will be replicated in the future.

“The direct listing is really interesting as a potential roadmap for future companies because the price that Spotify now trades it as a real price without any of the distortions which come from a lockup or a banker-managed process,” said Chi-Hua Chen, managing partner at Goodwater Capital. Chen invested in Spotify when he was at Kleiner Perkins. He believes that “the price is as real an expression of the value of the company as possible, which makes it an interesting case study for future companies moving into the public markets.”

Apart from the change in process, this debut also felt different from IPOs because there was no celebration. There was no bell-ringing ceremony and no Spotify employees were present to cheer from the floor.

Outside the New York Stock Exchange, there was a Spotify banner to commemorate the event. And next to it, there was a Swiss flag meant to honor them. The only problem is, Spotify is Swedish.

from TechCrunch

Spotify opened on the New York Stock Exchange at $165.90, giving the company a market value of $29.5 billion.

The first trade didn’t happen until 12:45pm Eastern. This is halfway through the trading day, and a record for the latest opening time for a public debut.

Spotify isn’t selling its shares on the stock market, meaning the company isn’t raising any money today. Instead, the event known as a “direct listing,” is a collection of transactions from existing shareholders (like employees and investors) selling shares directly to stock market investors. It took a while for the market makers to sort this out.

Spotify is basically trying to recreate the secondary market activity that happened before it went public.  The company says that in 2018, shares traded on the private markets between $90 and $132.50. Since Spotify didn’t do an IPO, it set a “reference price” of $132 per share, which would have given the company a valuation of $23.5 billion.

Unlike a traditional IPO where employees don’t sell shares for months, known as a “lock-up,” Spotify insiders are already allowed to sell.

If few people opt to sell, it will drive the share price up, because of limited supply. If a lot of insiders sell, the reverse could happen, if investor demand doesn’t match it. This process may lead to increased volatility in the first few days or weeks of trading.

In the long-run, Spotify’s performance in the stock market will largely depend on its business performance and outlook.

Some investors are concerned that Spotify will run the course of competitor Pandora, which has struggled as a public company, partly due to hefty artist fees. Others argue that Spotify could be viewed as a Netflix, which has been successful at its entertainment licensing agreements.

It’s certainly a big and growing business.

The company says it is present in 61 countries and its platform includes 159 million monthly active users and 71 million premium subscribers.

Spotify had 4.09 billion Euros in revenue last year (or close to $5 billion), compared to 2.95 billion Euros (about $3.6 billion) the year before. 2015 saw 1.94 billion Euros in revenue (about $2.38 billion).

Losses for last year were 1.2 billion Euros ($1.47 billion), which compares to 539 million Euros ($661 million) the year before.

Spotify previously raised about $2.7 billion in both debt and equity financing. Tencent, Tiger Global, Sony Music and Technology Crossover Ventures (TCV) are amongst its largest shareholders.

from TechCrunch