Atomico's Need-to-Know, 4 April 2017 - Essential Information for Founders and VCs

1. 4 April 2017
1
Atomico Need-to-Know

2. This is a regularly-updated collection of things we
(@atomico) found interesting and important in tech and VC
land, but that didn’t necessarily get the attention they
deserve. We think of them as our hidden little gems. We’ll
add to the collection over time, so bookmark the page and
keep coming back for updates or to dig into the archive.
Lovingly put together by @twehmeier & @stephen2206
2

3. ● What impact will a tightening of Chinese capital controls have on
investment into, or acquisitions of, European tech companies from
China?
● If it’s a case of “not, ‘no’, but ‘not so fast’, which deals will be seen as
more acceptable for overseas investment? Will tech pass muster?
● China signalled its intention to tighten investment in overseas assets
by Chinese companies in December 2016, following a record level of
capital outflow in 2016 ($225B, per the New York Times)
● More recently, China increasingly questions the value of some of this
investment with its Commerce minister citing “blind & irrational
investment” that in some cases has “had a negative impact on our
national image”
3
What do you need to know?
Why does it matter?
Key questions
● House of Fraser has pulled the second tranche worth £29M of a
proposed £35M investment into the UK-based digital bank Tandem
● Having already invested a first tranche of £6M, House of Fraser,
which is owned by Chinese conglomerate Sanpower, cancelled the
remaining investment amount “due to uncertainty about whether
China’s State Administration of Foreign Exchange would approve the
transaction”
● As a result of the incompletion of the investment, Tandem has
postponed the launch of a planned savings account product
Investment into Tandem fails as Chinese overseas
investment policy shifts to “not ‘no’, but ‘not so fast’”
Source: http://uk.businessinsider.com/house-of-fraser-pulls-29-million-investment-in-challenger-bank-tandem-over-china-concerns-2017-3
https://venturebeat.com/2017/03/26/how-chinese-led-globalization-will-impact-tech/
https://www.nytimes.com/2017/03/12/business/dealbook/china-deals-capital-controls-hollywood.html
“Reading Chinese government statements only gets you so far.
Speaking with Chinese business counterparts can shed a lot of light
on government thinking. By their reckoning, restrictions on capital
leaving the country are a reaction to the overseas investment
boom of 2016. The message the Chinese government is sending
isn’t exactly “no” so much as “not so fast,” and the expectation, at
least in the Chinese business community, is that the clamp-down at
the end of last year will begin to loosen sometime this summer.”
Hagai Tal, CEO Tapica
Writing in VentureBeat
...falling victim to tightening of Chinese capital controls
A proposed £35M investment in Tandem collapses...

4. ● Will the tech industry act upon the call to action to 1) play a greater role in
educating students about tech & how it shapes the world 2) increase access to
tech careers through new entry routes 3) promote visible role models at all levels
and 4) help women to reach their full potential in the industry?
● As the study articulates clearly, the gender imbalance is not just “a missed
opportunity for women and society, but also for businesses” with a “growing body
of evidence” that having a more diverse workforce makes for “better business”
● The impact is also felt at the national level given the impact on the productivity and
competitiveness of local economies as a whole. As PwC puts it “if half the
population is being overlooked as a source of talent, then the UK is effectively
trying to compete internationally with one hand tied behind its back”
4
What do you need to know?
Why does it matter?
Key questions
● PwC conducted a study involving 2,000+ A-Level & University students in the UK
to better understand the gender gap in technology.
● According to the ‘Women in Tech’ report, only 5% of leadership positions in the UK
tech industry are held by women, while just 15% of people working in STEM roles
in the UK are female
● 83% of males are studying STEM at school versus just 64% of females. At
university, there is a similar discrepancy with 52% of males studying a STEM
subject versus just 30% of females. The biggest barriers are: better grades in other
subjects, not finding STEM subjects interestings, STEM not being relevant to
preferred career ambitions, teachers not making STEM subjects appealing and a
need to get the highest possible grade
● Only 27% of female students surveyed said they’d consider a career in tech versus
62% of males. Just 3% said it would be their first choice, versus 15% of males.
One factor is the fact that just 16% of females have a career in tech suggested to
them versus 33% of males
PwC data discloses extent of gender imbalance in schools
and universities
Source: https://www.pwc.co.uk/who-we-are/women-in-technology/time-to-close-the-gender-gap.html
PwC report shows how the gender gap starts at school

5. Tech should use its ‘changing the world for the better
narrative’ to attract women into the tech industry
5
Source: https://www.pwc.co.uk/who-we-are/women-in-technology/time-to-close-the-gender-gap.html

6. ● Picnic, a hyperlocal Dutch grocery delivery company founded in late 2015, has
raised €100M/$109M in a Series B round from local Dutch investors NPM Capital,
De Hoge Dennen, Hoyberg and Finci
● The company reportedly hit €30M in (not confirmed, but gross?) revenue in 2016,
in its first full year in commercial operation in just one city (Utrecht) and has
acquired 30,000 households as customers. The company claims it will provide
employment for 2,000 people by end of 2017. The company had been in stealth
mode for three years before the launch at the end of 2015
● The company uses local distribution centres “to collect & parse” local produce for
delivery uses custom built electric vehicles. The vehicles deliver uses a model
reminiscent of milkmen, i.e. following set routes and times, which it claims
improves efficiency & predictability for users. The company only orders products
from suppliers after a customer has paid so has no inventory
Picnic: emerging Dutch success story that showcases the
depth of ambition and capital pools outside core countries
● The UK’s Ocado remains the first European breakout company in the grocery
delivery company. Can the support of the Dutch ecosystem produce another
national champion?
● Can Picnic successfully scale its operations for one pilot city to go nationwide in
the Netherlands?
● Investment round indicates huge confidence in the potential & early metrics of this
model. Company reports that during its pilot test it “grabbed 80% of grocery
deliveries from incumbent supermarkets in the area”
● The round, filled entirely by local investors, shows how ambition and capital
availability has huge momentum across Europe as a whole, not just in the region’s
most developed markets, such as UK, Germany or France
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What do you need to know?
Why does it matter?
Key questions
Source: https://thenextweb.com/eu/2017/03/28/grocery-delivery-picnic-100mm-funding-round/#.tnw_H8iz1v6B
http://www.npm-capital.com/en/npm-capital-invests-in-online-supermarket-picnic
Picnic’s mission is refreshing. It thinks big and shows what is possible in
the Netherlands in terms of technological innovation and creating new
employment. The Dutch investors have shown their willingness to make a
major investment in a company that has a long-term vision. This is a
fantastic development.’
His Royal Highness, Prince Constantijn of the Netherlands
...and gets the Royal seal of approval
Picnic announces a mega-funding round...

7. ● Are we set to see a greater risk appetite from European family offices, or will their
relative conservatism versus other regions persist?
● How can Europe’s tech industry engage more closely with the universe of
European family offices?
● Family offices worldwide sit on an estimated $4 trillion of assets under
management, with a global average AUM of $759M and therefore represent a
huge pool of potential investment dollars
● In Europe, the average family office manages assets of $795M with European
family offices controlling 40% of total AUM globally, equivalent to $1.6T. European
offices much more preservation focused than other regions
● The inevitable ‘search for yield’ is increasingly pushing more family offices to
explore private equity (incl. VC), increasingly 2.3 percentage-points or the
equivalent of $80B
7
What do you need to know?
Why does it matter?
Key questions
● According to the Global Family Office Report, the average family office portfolio
allocates 11% of total AUM is invested in direct VC/PE deals & another 7% in PE
funds, equivalent to $720B
● According to a Concentric survey of 300 family offices worldwide, around 70% are
either actively investing in tech VC or evaluating it
● This masks large regional differences. In Europe, where risk appetite is lower,
family offices have 8% of AUM in direct PE/VC investments versus 12% in US and
17% in Asia-Pacific
● The hottest area in terms of asset categories for family offices is “co-investment”
Family Offices: an under-tapped $4 trillion source of funds?
Source: Concentric, http://concentricteam.com/families-and-venture-capital-a-venture-into-the-unknown-or-a-return-to-its-roots/
https://www.slideshare.net/KorinaMarkou/global-family-office-report-2016-66056937
https://venturebeat.com/2017/03/26/european-startups-need-help-from-family-office-investors/
“The asset category
where family offices are
absolutely clamouring to
do more is in the area of
co-investing, with an
astonishing 51% of
responding family offices
looking to increase their
holdings. This red-hot area
is discussed in the next
chapter.”

8. Global Family Office Report 2016
8
Source: Concentric, http://concentricteam.com/families-and-venture-capital-a-venture-into-the-unknown-or-a-return-to-its-roots/
https://www.slideshare.net/KorinaMarkou/global-family-office-report-2016-66056937
https://venturebeat.com/2017/03/26/european-startups-need-help-from-family-office-investors/

9. ● At present, this US trends is counter to other countries. Will the US
trend reverse? Will other countries see a similar trend?
● Given regulatory costs are cited as a disincentive, will we see any
form of intervention to alter incentives for public listings?
● The decline is due to a fall in the propensity to list due to a mix of
factors, such as the cost of regulation, the availability of capital in the
private markets, the perceived onus of quarterly reporting, the risk of
being targeted by activist investors and higher visibility resulting in
greater potential political pressures
● Aside from the incredible data to support a recent tech narrative
about a decline in the propensity to list, the data reveals interesting
implications about issues, such as the increased concentration of
industries into fewer, larger companies through consolidation
9
What do you need to know?
Why does it matter?
Key questions
● The number of publicly-listed companies in the US has declined from
7,322 in 1996 to 3,671 in 2016. Interestingly, the 50% decline
compares to a 30%+ increase in 71 other non-US countries
● At the same time, the total market cap of all public companies has
more than doubled from $12.3T to $25.3T, resulting in an average
market cap per company of $6.8B today versus $1.7B 20 years ago
and just $0.6B in 1976
● A model of “how many companies should be listed” in the US reveals
a shortfall of more than 5,800 public companies
The 20-year “incredible” transformation of US stock market
Source: Credit Suisse,
https://doc.research-and-analytics.csfb.com/docView?language=ENG&format=PDF&sourcei
d=em&document_id=1072753661&serialid=h%2b%2fwLdU%2fTIaitAx1rnamfYsPRAuTFRG
dTSF4HZIvTkA%3d
“The Incredible Shrinking Universe of Stocks”

10. M&A wrap up
Acquiror Target Target desc. Amt Comments
Altice Teads Video ad technology $306M
Altice wants to become a converged ‘global’ player in telecoms, content and advertising.
Latest in a series of transactions that have seen telcos acquire adtech businesses. Other
telcos that have acquired adtech assets include Verizon, Telenor, SingTel and Telefonica.
Teads had raised $128M, but that includes $70M+ in debt funding
Amazon Souq.com Ecommerce in the Middle East
$650M -
$750M
Souq.com is the leading online retailer in the Middle East with the transaction representing
Amazon’s first major play to build its presence in the region. The company had raised
$425M from investors including Tiger Global, Naspers & Baillie Gifford.
Alibaba Damai Online ticket sales N/A
Alibaba makes another bet to move into the entertainment space. Damai offers tickets for
concerts, movies and sporting events. Alibaba already had a 32% stake prior to the deal.
Damai has 60M active users and sold 1.8M
Rover.com DogVacay Dog-sitting marketplace N/A
Rover has acquired DogVacay in a deal that converts DogVacay equity into stakes in
Rover. The terms and price were not disclosed. DogVacay had raised $47M from
Benchmark, GSV, First Round, DAG Ventures, OMERS and others
Audi Silvercar Airport car rental company N/A
Audi is acquiring Silvercar for an undisclosed sum. Silvercar operates its high-end
car-sharing business at 15 US airport locations and has 150 employees, primarily based at
HQ in Austin. Audi was formerly a minority investor in the company. Audi has already been
playing in the mobility services arean, for example, through its Audi On Demand service
that provides a high-end service for renting Audi cars.
Canon Europe Kite.ly Mobile personalised printing platform N/a
Canon Europe, like many other incumbent electronics manufacturers, is looking to build out
its digital services portfolio. Canon, which has a large printing business, sees the
acquisition as a means to expand the growth of mobile printing. Kite.ly tech is integrated
into hundreds of apps
Eventbrite Nvite Ticketing and registration platform NA
Event tech company Eventbrite acquires ticketing and registration platform Nvite; terms
undisclosed; Eventbrite was last valued at $1B and is expected to go public; Eventbrite has
raised $197M to date; Nvite previously raised $1M
10

11. General News In Brief
11
Footnotes
Companies What happened?
Tencent/Tesla Tencent Takes 5% stake. Follows investment in NIO
Starbucks
Starbucks is set to test a mobile order-only store at its Seattle HQ, reports VentureBeat; the firm has two on-site
stores, one of which has been adapted to solely handle pre-orders; customers will collect their items via a large
pickup window
Munchery / JoyRun /
Blue Apron
The ever-growing complexity of the food delivery market illustrated by three pieces of news: Blue Apron
reportedly gearing up for a 2017 IPO, Munchery raising $5M of a $15M round that will recap the company and a
$10M Series A for a food delivery company, JoyRun, that is executing against a P2P delivery model that is akin
to UberPOOL using a concept of “buyers” and “runners”. Runners act as couriers and can pool
pick-ups/deliveries
Apple
Apple hires Shiva Rajaraman to work on the company’s video strategy, according to The Information;
Rajaraman previously served as a product lead for YouTube and as VP of product for Spotify; he will also be
working on Apple Music, and other media properties
Facebook
Facebook announces Personal Fundraisers; will allow individuals to launch fundraising campaigns for
education, life events, medical emergencies, pets, more; beta rolling out in the next few weeks to US users
aged 18-plus; also, verified Pages can now add charity donation buttons to live streams
Dropbox
Dropbox secures a $600M credit facility ahead of a public offering, according to Bloomberg sources; JPMorgan
is leading the deal, but it's unclear if they will be involved with an IPO; the firm is aiming for an offering at the
end of 2017, though plans are yet to be confirmed