We are in a perverse moment in the global venture capital industry: VCs are fast coming to resemble private hedge funds, and the more money they are able to raise, the worse-off startups are becoming. Capital is flowing into funds of all types, yet the rate of investment is shrinking rapidly.
The recent bankruptcy of online auction house Auctionata Paddle8 and the very public failure of the UK’s ‘challenger’ Tandem Bank to close its Chinese-investor round share one trait: both were affected by Chinese investors who failed to fund at the last minute.
Power management should be viewed as one of the largest single segments in the global IT industry, and a major source of future ‘unicorns’ (companies worth $1B+). We see the power sector being broken into two categories: those addressing the mobile device/network segment, and general power technologies for other applications.
Will tightening H-1B US Visas and $1.2Tn of offshore cash drive international tech talent acquisitions?
A few days the US CIS tightened the qualifications for international tech talent seeking the H-1B ‘genius visa’ into the US. The visa program added 13,000 programmers to the US tech workforce in 2016, at an average salary of $72,000 according to Bloomberg.
Taking a successful tech company public on a London stock market has always been harder than onto NASDAQ. The market is much smaller, and the level of tech knowledge amongst bankers and analysts far less deep than US peers.
AI M&A, Funding Reach New Highs But The Peak Is Yet To Come. We believe AI will shortly cease to exist as a segment, shifting M&A activity from current ‘capability buys’ to much higher value ‘platform buys’
Europe has created an unprecedented number of tech companies these last ten years. Early stage money, once so hard to come by, is now 25% of US levels, an astonishing statistic given how young the European tech industry is.
Technology breakthroughs often focus on new operating systems or major semiconductor developments. But one of the most significant yet under-reported trends is for technology companies to try to 'leapfrog' each other with 'over-the-top' technologies.
Europe is much further behind the US in late stage tech investing than it appears. Late stage tech funding is far behind the US, and surprisingly over ⅓ of funding rounds in Europe target non-tech e-commerce or marketplace businesses.
Europe’s start-up ecosystem has grown by leaps and bounds in the last decade. Yet it risks being stalled by the lack of later stage financing for Europe’s tech industry, which has hardly budged in five years.
European tech can benefit hugely from Asian investors refocusing away from the US. We think 2017 will be a watershed year for Asian investment into European tech.
Perversely we think the most active ‘European’ destination will be the UK.
European technology has come of age in 2016, according to M&A advisory firm Magister Advisors’ annual review of the European technology M&A and investment landscape. Total M&A deal value has more than doubled in Europe in the last 12 months to $127.2BN.
Surprisingly, Payment Service Providers. It must be the hardest job in tech to raise money for a new social network. Facebook and Google together now command 2/3 of all new mobile ad spend, the life blood of any social network, leaving little room for anyone else.
The European technology industry has come of age in 2016, according to a recent Magister analysis. Unprecedented M&A interest from Asian buyers, together with a strong IPO market for the best European tech businesses, has driven a surge in “blockbuster” deals (greater than $5B+ in value).
Because China’s premier Xi Jinping loves football (soccer) local billionaires are falling over themselves buying European clubs. He must also love technology, judging by Chinese behaviour towards European technology companies.
A Magister Advisors poll of the fastest-growing UK tech companies suggests half the key talent on average is British, 30% EU and 20% further afield. So Brexit’s uncertainty now demands half the UK’s best tech talent to rethink if they want to, or can, stay and perform.
European Tech Financings Slowing Down Even Before Brexit Effect, While M&A Activity Remains Unusually Strong
More entrepreneurs than ever are choosing to compete from Europe. 10 years ago most founders building international tech businesses would automatically move to the US.
AI Teams Being Acquired For Over $2m / Employee; Employee Value Often Far Greater Than Business Value
Twitter just paid $150m for 14-person Magic Pony, a UK-based AI visual search company barely anyone had heard of before the deal. At $10m+ per employee it marks a high water mark in AI for what is essentially a team acquisition.
We believe the just announced Microsoft/LinkedIn marriage can work, even if there are likely some very tough times ahead as both companies combine awkwardly.
Ad-tech or market-tech; call it what you will; the programmatic advertising and targeting industry has become a hugely complicated morass of 4,000 products, many with overlapping functionality and unclear benefits for end customers.
Venture capital investors across the US and Europe are failing to take full advantage of high-value “exit windows,” according to Magister’s 15-year analysis of VC and private equity (PE) exit activity. Our analysis suggests VCs are significantly better at investing than exiting.
GM just paid $1B+ to acquire 40-person self-driving technology vendor Cruise Automation; last year Continental AG paid $700m for Elektrobit’s automotive software business unit (full disclosure: Magister has advised Elektrobit). For comparison GM’s entire market value, with 250,000 employees, was only $7B less than 10 years ago.
After 5 years, 18 successful deals and $2B+ of value generated, Magister is evolving into two separate entities.
Statement on Virtual Currencies to the European Parliament’s ECON Committee
2016’s quieter funding and IPO markets will drive more tech private mergers than ever before. These mergers can support successful growth companies through a volatile funding environment, and accelerate creation of a future group of enduring unicorns.
As Bitcoin and Blockchain investment fast approaches $1bn, we have spent the last three months speaking with over 30 of the leading Bitcoin and Blockchain companies globally (with c. $500m of total investment), plus industry groups, financial institutions and investors, to gain detailed insight and understanding of the development of the market and the direction these fascinating technologies will take in 2016.
The S&P 500 is ending 2015 where it started. Yet all is not stable in tech. 2015’s extremism is setting the stage for a turbulent, and unstable, 2016.
Software as a Service (SaaS) has matured. Its elder statesman, Salesforce, is worth over $50B and nearly every private software company is now SaaS. The reasons are clear. SaaS businesses have much more certain future revenue than older “perpetual license” businesses, and can therefore grow more reliably. Also, SaaS companies have regularly received very high investment valuations, generally 5-10x revenue, and SaaS is the only model many software investors will invest in.
Cries of “shock wave” and “bursting bubble” greeted Square’s recent IPO pricing. It’s understandable when the IPO is $2B lower than Square’s last round only months ago, in a stock market that has remained stable throughout the year.
Wealth management is a $30 trillion industry in which the vast majority of “experts” charge 1-2% in fees annually. Despite this charge, on average they perform worse than the overall market.
$1 billion of funding has gone into e-procurement companies since 2011. 2015 could see another $1 billion of funding, 4 times all of 2014’s investment level and by far the most intensive rate of new investment the space has ever seen.
As Twitter dips below its IPO price, the business needs to execute a strategy urgently that utility platform to a real product business. At $25 a share, Twitter would be worth materially more to a larger business that can accelerate its product and feature innovation. An acquisition, in the absence of that innovation, would appear far more likely today than six months ago.
Fifteen years after the dotcom collapse we see another tech crash approaching. ‘Bubble’ and ‘unicorn’ are entering the mainstream vernacular. We are becoming comfortably numb with tech company overvaluations.
Look closely at this Brueghel ‘Instagram’ from the 1500s; at the bottom right corner of this holiday snap is a figure that has just crashed into the sea. The painting: The Fall of Icarus.
Travel technology leaders making opposite bets as industry seeks to transform: Magister Advisors advises Mobile Travel Technologies Ltd on its sale to Travelport.
The rise of next generation Fin Tech companies will trigger a wholesale restructuring of the banking sector. But banks can survive, maybe even prosper, by proactively focusing on becoming world-class ‘NetCo’s,’ standing behind and supporting thousands of ‘ServCo’ startups fighting for customers’ wallet-share across a wide range of financial transactions.
The payments market is changing more rapidly now than ever before. Both corporate and individual customers no longer tolerate paying large fees for what are essentially commodity services, transferring money securely.
A lot has been written about Uber’s latest financing round (mostly, about the reported of $50bn+ valuation), in the context of the current ‘herd’ of unicorns (apparently, 10 new horns sprouted in the last month).
Late stage growth companies often reveal far too much ‘dirty laundry’ in monthly packs prepared for their board meetings. In normal practice this is fine to stimulate debate and ensure transparency. But when that company is being sold in a high value M&A deal, these packs can give buyers cause to worry about things they might never have thought to ask. Worst case, they can lead to a major price reduction late in due diligence, and we know they have even killed a few deals.
One of the major themes we have pursued at Magister is big data infrastructure and analytics. Needless to say, despite the number of companies positioned as ‘big data’, actual leaders in the space are few and far between, all the more so in Europe.
Technology breakthroughs often focus on new operating systems, devices, or major semiconductor developments. But one of the most significant, yet under-reported, trends is for technology companies to ‘leapfrog’ each other with ‘over-the-top’ (OTT) technologies. It is this trend that often defines the battle for supremacy in the technology industry.
We’ve dealt with hundreds of tech buyers over 25 years. Apple and Oracle are head and shoulders above the rest, for the thorough, discreet, structured, and efficient way they execute a large number of deals each year.
We break our tradition of not publicizing our client work to congratulate the leadership of both Boku and mopay AG on today combining to create the world leader; Magister advised mopay on the transaction. We don’t often get to work on a deal which creates a real world market leader, reaching 5 billion mobile users in 80+ countries.
How can a fast-growth tech company get sold for $1 billion+ before their 100th employee, or even their first $ of profit?
RocketFuel’s announced acquisition of
[x+1] is the first major combination of two significant, independent AdTech companies in the current M&A wave, combining a leading DSP and DMP to create a more holistic (and more SaaS-like) platform.
$2bn of AdTech M&A Since February, with Enterprise Buyers In the Middle of the Froth.
Most founders contemplating a large €20m+ investment round immediately calculate their percentage ownership ‘post-dilution’ (meaning what they owned immediately before the funding round, versus what they own the second after it closes).
Let’s imagine Liverpool’s sale of Luis Suarez for £75m to Barcelona as an M&A deal that needs careful structuring. Without knowing the real deal terms, here’s how we think it should have been structured.
US venture investors are not coming to Europe, they are already here, in VERY large numbers. They’re such a big factor in the European funding scene that the whole concept of “US VCs” and ”European VCs” is a thing of the past.