Venture Chronicles - February 2020

Overlooked #9

Hi, it’s Alexandre from Idinvest. Overlooked is a weekly newsletter about underrated trends in the European tech industry. Today, I’m sharing the most insightful news of February.

For 2020, I want to pick one piece of news per day and write a short comment about it. I want to talk about something that strikes me. Something that happened in the tech ecosystem. Here is the issue for February!

Please note that the date picked for each event is not always the exact date of the event but the date I decided to write about the event.

  • Saturday, Feb. 1: Buffer and AngelList have published their annual State of Remote Work for 2020 with data from 3.5k remote workers around the world. The report contains numerous great insights. It’s interesting to notice that (i) collaboration & communication, (ii) loneliness and (iii) incapacity to unplug from work are the three main struggles for remote workers. (Buffer)

  • Sunday, Feb. 2: Investors have blind spots and tend to invest in what they are familiar with. Diversity is venture capital is crucial not only because it’s better for the industry but also to avoid those blind spots. In this post, Danielle explains that black people have different consumer habits and spending compared to the rest of the population. Mastering them is a great source of opportunities. (Danielle Coleman)

  • Monday, Feb. 3: Kineis is raising €100m from CLS, the CNES and BPI France to deploy its constellation of 25 nano satellites dedicated to IoT applications. Industrial satellite player CLS is becoming the majority shareholder in the company. It’s another data point proving that Venture Capital is not the most appropriate source of funding for hardware intensive projects especially in space where the timeline to make a return on investment on a constellation is longer than the lifetime of a VC fund. (Maddyness 🇫🇷)

  • Tuesday, Feb. 4: Inato is raising a €12.7m round led by Cathay Innovation and Obvious Ventures. It helps pharma companies to increase the pool of patients engaged in clinical research to reduce the costs and increase the efficiency of clinical trials. Inato did €3m in sales in 2019 and is already working with Sanofi and Ipsen. Obvious is a US pharma VC fund which will help Inato to enter the US market. (Techcrunch)

  • Wednesday, Feb. 5: Top executives of SoftBank’s $100bn Vision Fund I are rumored to be on their way out. Softbank is struggling to raise its Vision Fund II and several portfolio companies are not performing as expected (cf. WeWork failed IPO and layoffs announced recently). (FT)

  • Thursday, Feb. 6: The Paris Sciences & Lettres (PSL) Innovation Fund managed by Elaia is announcing a second closing at €76m. It will invest tickets from €500k to €1m in entrepreneurial projects led by former researchers. A dozen of projects have been already funded including Aqemia, Pili, Pocketstudio, Sancare and SeqOne. (Maddyness 🇫🇷)

  • Friday, Feb. 7: Deliveroo has been convicted for concealed employment in France. This is the first case of this kind in France. The freelance status of food delivery riders is being contested in numerous countries. Should they be declared as salaried staff? Should Deliveroo provide them with benefits tailored to their activity like insurance, micro-credit, pensions? (Le Monde 🇫🇷)

  • Saturday, Feb. 8: Facebook is acquiring UK-based startup Scape Technologies for a price estimated around $40m. Scape is a computer vision startup aiming at providing a better location accuracy than GPS and was backed by Entrepreneur First, Mosaic Ventures and Fly Ventures. Another acqui-hiring play from Facebook to preempt AI talents early on in their company journey. (Techcrunch)

  • Sunday, Feb. 9: It’s Sunday. Time to take a step back. While preparing my newsletter on Shopify, I have listened to a How I Built This? podcast episode with its CEO, Tobias Lütke. A great discovery! (NPR)

  • Monday, Feb. 10: Impala is raising a $20m series B led by Lakestar to build the API for the hotel industry just 5 months after a $11m series A led by Stride and Kima Ventures. Impala is building an API on top of hotel existing property management systems to help them better manage their activities without switching their existing infrastructure. Two learnings: 1/ crazy days to work in venture capital and 2/ Jean de la Rochebrochard remains one of the best European fundraisers for the companies he deeply believes in. (Techcrunch)

  • Tuesday, Feb. 11: Revolut is adding an account aggregation feature to its app. It’s a feature I have been waiting for a long time to be able to manage all my accounts in a single app which has a great UX. It will help users to shift to Revolut for their primary account. (Techcrunch)

  • Wednesday, Feb. 12: French cybersecurity company CybelAngel is raising a $36m series B co-led by Prime Ventures and Tempocap with the participation of BPI and Open CNP. CybelAngel is a digital risk management platform helping companies to prevent and manage data leaks. (CybelAngel)

  • Thursday, Feb. 13: Headspace is raising $93m with a mix of debt and equity with the idea of legitimating scientifically the benefits of meditation and mindfulness. This will open a new market for the company that will be able to attract dollars from the social security and from insurers. Headspace has impressive metrics: 62m downloads, 2m paid subscribers, 600 companies using Headspace for their employees. (Techcrunch)

  • Friday, Feb. 14: N26 is shutting down its operations in the UK. This event is one of the first real consequence of the Brexit because the company has a European banking license that will no longer be valid in the UK. To keep operating in the UK, N26 should have followed a new long application process. At the same time, the strong competition in the field from other players like Monzo, Starling and Revolut could have deterred the German neobank to put more investment in this country. (Techcrunch)

  • Saturday, Feb. 15: Bill and Melinda Gates have published their 2020 annual letter of their foundation. 20 years after the creation, the goal remains the same: dive anyone the chance to “live an healthy and productive life.” If you are interested by their work, you should also watch the Netflix series on Bill Gates and on his key projects for the foundation. (Bill Gates, Netflix)

  • Sunday, Feb. 16: It’s Sunday. Time to take a step back. An investor at TechNexus called Brett Bivens published a blog post promoting bottom-up investing. Being investment thesis driven, meeting entrepreneurs with a “prepared mind” like Accel is not the best way to make outsized returns. Startups are complex biological systems that will evolve overtime. It’s impossible to predict their outcomes at early stage based on identified trends. That’s why Benchmark invests when they find valuable Venn diagrams that already exist when other funds are investing in circle until these circles eventually form a Venn diagram. "Our job is not to see the future, it’s to see the present very clearly." (Brett Bivens)

  • Monday, Feb. 17: Jeff Bezos, Amazon’s CEO, is launching a $10bn fund called Bezos Earth Fund to fight against climate change. It’s the last initiative launched by main corporations and leaders in the tech industry to tackle this issue in the past few months. Is this initiative a way for Jeff Bezos to prevent any potential tech backlash on the impact Amazon has on the environment with its heavy logistic operations? (The Verge)

  • Tuesday, Feb. 18: Atomico is announcing its last $820m fund to invest across Europe in series A, B and C. The previous fund was raised in 2017 for a total amount of a $765m size. It’s the biggest early stage venture fund raised in Europe in the past 12 months. Atomico is positioning itself as an operational fund with a in-house team helping their startups to scale on key areas like marketing and recruitment. (Sifted, Atomico, Techcrunch)

  • Wednesday, Feb. 19: Trax is acquiring a French startup called Qopius working on implementing in-store image recognition solutions for the retail sector. AmazonGo is putting emphasis on self checkout but image recognition is useful in stores for many other applications like inventory management or anti-theft solutions. Trax was a larger player pursuing the same mission of digitizing retail store. The mission is hard because retailers are super slow to digitize their in-store operations but it’s worth pursuing! (Trax)

  • Thursday, Feb. 20: Founders Fund is raising $3bn across two funds. Super interesting to read their criteria to make a deal approved within the partnership depending on its size. For instance, two investment team members is enough for deals under $1.5m while for deals over $10m two partners and the three general partners must give their approval. (Techcrunch, Axios)

  • Friday, Feb. 21: Lambda School is announcing a $100m fund to let almost “anyone” invest in its students Income Share Agreements (ISAs). Initially, ISAs were funded through VC financing but it was suboptimal because the risk/reward profile of investing in ISAs (c. 10% targeted IRR with a low default rate) is super different compared to invest in a VC-backed company (c. 25%+ IRR with a high default rate). Lambda is launching this fund in partnership with ISA marketplace Edly and is keeping skin in the game as the school will make more money if their students are successful. It’s the natural evolution of the model. It could be compared to a D2C company funding working capital through VC funding in the early days and then raising debt to have a more adequate asset-liability alignment. Or it could be compared to fintechs like Wagestream raising debt to fund finance employee drawdowns instead of using its equity. (Lambda School)

  • Saturday, Feb. 22: Bessemer has published a great paper on B2B marketplaces. I am planning to make an issue on this topic. I’m super bullish on this model as numerous B2B markets remain outdated (intermediated, inefficient, paper-based etc.) and are larger than B2C markets. Bessemer is mentioning key success factors to build a B2B marketplace: (i) a vertical specialization, (ii) an attractive economic value proposition, (iii) a focus on bringing trust, (iv) not trying to bypass intermediaries from day 1. (Bessemer)

  • Sunday. Feb. 23: It’s Sunday. Time to take a step back. To prepare my newsletter issue on crypto, I read this amazing report from Non Fungible on NFT. Following the explosion of NFT at the end of 2017 and beginning of 2018 driven by Cryptokitties, the NFT growth has slowed down in 2019 with only a 17% growth in the market capitalization ($210m) and a 3% in the number of users (113k). (NonFungible)

  • Monday, Feb. 24: Austrian VC Speedinvest is raising a €190m fund to invest in European seed stage companies. Speedinvest has 40 investment professionals which is a lot compared to the rest of the industry and an internal team of 20 people to support companies in the portfolio. It’s also a super performing fund with a 5x gross multiple on its first fund. With this announcement, the fund is opening an office in Paris which is the logical next step in their successful strategy to penetrate the French seed market which is super competitive. (Les Echos 🇫🇷, Speedinvest, Techcrunch)

  • Tuesday, Feb. 25: UK neobank Revolut is raising a $500m series D at a $5.5bn valuation led by TCV. It has 10m customers in European countries and has shared some growth metrics like the fact that the number of users have grown by 169% and daily active users by 380% in 2019. Revolut was super impressive at releasing numerous features in the past months either built in-house or with a partnerships - insurance, crypto and share trading, donations, money savings etc. (Techcrunch)

  • Wednesday, Feb. 26: Intuit is acquiring Credit Karma for $7.1bn. Intuit is adding another consumer oriented product to its offering (Turbotax, Quickbooks, Mint) and is knocking out a potential competitor as Credit Karma has been offering free tax filing service since 2017 - competing with TurboTax. (The Verge)

  • Thurdsay, Feb. 27: a16z is leading a $150m round into gaming company Roblox. The company fits perfectly in the thesis that the next social network will be a game. Like for Minecraft modes, in Roblox, users can either build their own games or play games built by other users. It’s a series G in a profitable and growing company (Mar 2018 50m MAUs in Mar. 2018, 100m MAUs in Aug. 2019, 115m MAUs in Feb. 2020). (a16z, Techcrunch, Jeff Chau, Blake Robbins, Wall Street Journal)

  • Friday, Feb. 28: Estonian scooter startup Tier is acquiring German scooter company Coup - which had announced backed in Nov. 2019 that it was ceasing operations. Tier is buying Coup’s assets including 5,000 mopeds and its charging infrastructure and will add the moped service to its app in Berlin in May. It’s another consolidating operations in this ultra competitive micro-mobility market. (Techcrunch)

  • Saturday, Feb. 29: US-based and worldwide know accelerator, Y-Combinator is publishing a 70-pages guide to raise a series A. It’s a must read for founders (and newbie investors like me). (YC)

    • I was surprised to learn that founders accepting pre-emptive offers in YC portfolio are diluted 1.4% more for less money compared to those who run a full fundraising process.

    • It’s super important to have a backup plan if the fundraising is not successful. Raising a A round is hard - even with all the money out there in the market.

    • Prepare not only a deck but also an investment memo to send to investors. Out of context slides can lead to confusion. Not a well-written memo.

    Thanks for reading! See you next week for another issue! 👋