Apple Acquires Drive.Ai, eSport’s gets a Killer App, and Zuckerberg Backs Privacy Legislation
Weekly Recap #3: June 24th — 28th
Facebook’s Zuckerberg Backs Privacy Legislation. We could be witnessing regulation, which would have a lasting impact on the industry for decades. Privacy is a hotly contested issue in tech at the moment, especially with Facebook’s launch of Libra. A compliance regulation similar to GDPR could solve some of the concerns over Antitrust in tech.
However, government regulators should tread lightly. Market forces have been left to decide the fate of tech companies. Look at Fairchild, Intel, and IBM. These companies were the Google’s of their day, training skilled managers and dominating large market shares. They are still around, but waves of disruption eroded their markets.
Establishing regulations will increase barriers to entry and might create an environment where companies like Facebook, Google, or Amazon could maintain their market share without facing competition. The average company invested $1M in preparation for GDPR.
Big technology companies have deep pockets, enabling them to outpace startups, and new entrants, in spending. Whatever the decision may be, I hope it is one that is not made with a narrow outlook on the future. Advancements in anonymizing data could solve these problems as well. However, it will be up to the market to innovate on these ideas, not regulatory intervention.
Notable M&A
Apple acquired Drive.Ai, a developer of AI software for autonomous vehicles. Deal terms were not disclosed, but it is speculated to be less than the $77M investors put into the company. Drive.Ai was recently valued at $200M with a recent Series B led by New Enterprise Associates, with participation from GGV, Northern Light Venture Capital, and HOF Capital.
Apple is treating this as an acqui-hire, focusing on engineering and product design talent. Apple is also receiving Drive.Ai’s autonomous cars and other assets to reinforce its autonomous car efforts known as Project Titan. Apple is known for its M&A strategy, supplementing internal projects through acquisitions rather than using them to buy-into new markets.
Once thought to be a failed project due to layoffs, Apple sparked rumors it’s still developing working on Project Titan as reports surfaced they were hiring from Waymo and Tesla. The supply of AI developers is facing a shortage due to the high demand. Financial services and technology sectors are absorbing 60% of AI talent. Apple is 1 of 46 in the war for talent. Winners and losers will be decided based on who captures the most developers.
Noteworthy Financings:
Alma Health, a New York-based co-working space expressly for therapists, clinical social workers, and wellness professionals, raised $8M Series A led by Tusk Ventures, other participants include First Round, Primary Ventures, Box Group, and Able Partners. The company launched last year with one brick and mortar space on madison ave featuring services such as billing, scheduling, and tools for treating patients.
With the recent IPO of WeWork, their model is being adapted to other industries. As WeWork innovates on the model, others will seek to duplicate their success by specializing in niche industries. Alma is focusing on therapists and wellness professionals, one that can prove profitable as there are 577,000 mental health professionals and 682,100 social workers practicing in the U.S. Let’s run through a quick bottom-up analysis, similar to the one we ran on Collective Health.
After running the numbers on Alma’s pricing model, there are a few outcomes depending on which membership a customer chooses. Alma Health is looking at a Total Addressable Market (TAM) between $2.5Bn for the Flex membership and $7.5Bn for the Dedicated membership. Averaging out the three memberships, Alma could be looking at a TAM of $3Bn.
The Drone Racing League, New York-based Startup that combines eSports Formula 1 with virtual reality, raised a $50M Series C led by Lux Capital and RSE Ventures. DRL combines pilots with iconic locations for racing tracks to create racing content. The league is split up into ‘Seasons’ comprised of matches known as ‘Levels’ culminating in the World Championship.
The goal is to take drone racing to the mainstream, and it looks like DRL is building their sport to last. Taking a look at their Youtube channel’s highlights, it’s easy to see the potential. A fast-paced, easy to follow, sport that can captivate an audience.
The key is broadcasting to gain exposure and engaging content to capture interest. With the rise of eSports, The Drone Racing League will tap into the same broadcasting infrastructure and its influencers to gain mainstream appeal.
DRL will leverage social media networks powered by influencers (Youtube, Twitch, Instagram, Twitter, Reddit, Discord) and Broadcasting platforms (Twitch, Twitter, Amazon, Cable) in the next wave of sports to overtake this era’s popular sports (Football, Basketball, Soccer, and Golf).
Engaging content refers to the many different points of interest DRL needs to incorporate into the sport, from building their own racing drone to the celebrity status of Pilots doubling as influencers for the sport.
The Drone Racing League also has a racing simulator on Steam with the tracks copied over from professional tournaments. This simulator is streamed on twitch, gaining an audience in the offseason and providing pilots with training as well. This creates its own repeatable broadcast for DRL by reinforcing its sport with an audience for training. By treating the sport as a product, DRL is reinforcing its defensibility through engaging content.
There isn’t a competitive eSport that incorporates a hardware component and software component into the brand. Drone racing is comparable to other team vehicle-based sports such as Rocket League, a soccer video game, and BattleBots, a competitive league where contestants build and battle robots. DRL has a unique position within eSports taking advantage of both hardware and software components.
One last point I want to make, there is a Virtual/ Augmented reality component that might be expanded upon for an alternative viewing experience. DRL is definitely building a lasting brand in eSports, they may be under the radar, but with the global appeal, the sport may be a mainstay in the competitive and casual space. When it comes to the business models at play, and when the communities on social media take off, the current momentum is only scratching the surface.
CarIQ, San Francisco-based company developing a payment gateway to enable vehicles to autonomously connect to a bank’s payment network, validate, and pay for their services, raised a $5M Series A led by Quest Venture Partners with participation from Avanta Ventures, Citi Ventures, Alpana Ventures. The company gives data governance at the vehicle level, eliminating vehicle expense fraud. The vision for the network is to enable a car to autonomously schedule appointments and pay for the services rendered to eliminate the need for human interaction.
Payment is a crowded market. However, connecting devices and owning the data for a network that connects payments will have the power to disrupt the space. This gateway could capture payment responsibility for tolls, drive-through revenue, car maintenance & care, and gas. In 2018, 142.86 billion gallons of finished motor gasoline were consumed in the United States. At an average cost of 2.76 per gallon, the total cost spent on Gasoline in the United States is roughly $398.57Bn. CarIQ is positioning themselves to capture a large share of capital acting as a middle man for transactions for cars.
Orderful: Bay area-based startup that aims to monetize supply chain management through an API Service, has raised $10M in Series A led by Andreessen Horowitz. Orderful enables companies to trade electronic data interchange (EDI) information, a set of technical standards for computers to communicate supply chain data between businesses. These communications result in businesses making purchase decisions, accounting reconciliations, and transfer shipping details. In other words, its the foundation of how supply chain management works.
The company does not have competitors in the space, but Amazon does have something for internal purposes. Amazon is known for building internally, then productizing. However, Amazon is a partner, and customers can interface with them through the APIs.
Ocrolus, New York-based startup that taps AI and ML to parse financial documents, raised $24 Series B led by Oak HC/FT with participation from RiverPark Ventures, QED Ventures, Laconia Capital Group, ValueStream Ventures, Stage 2 Capital, Fintech Collective, and Bullpen Capital.
The resulting technology could replace financial analysts, or drastically reduce an analysts workload to review financial documents. Ocrolus could even lead to more affordable access to financial information and provide a low-cost data platform. This could undercut existing players in the market like Bloomberg, Reuters, PitchBook, and CapIQ. Companies that charge thousands of dollars for their data platforms due to the volume of information and sophisticated metrics it provides.
Homeroom, a San Francisco-based marketplace platform for after school programs, raised $3.5M led by forerunner with participation from Precursor Ventures and Kapor Capital. Homeroom’s platform allows school organizers, parents, and vendors to organize sign-ups, process and track payments, book and manage classes happening on their school site.
After School programs are challenging to track, schools will want to create a streamlined experience for students to engage in activities. Building in school organizers, parents, and vendors will establish a buy-in that will lend to defensibility through future switching costs. As of now, most of the tracking is handled through email and spreadsheets. The company makes money by taking a cut every time a parent signs their child for an after school program.
