Too Big to Fail?
Weekly Recap: June 10th — 14th
Antitrust laws could see a revision. Fred Wilson covered the topic and advocated Congress to view this as an opportunity to Open Up vs. Break Up. He voices an interesting idea.
If we are going to “break up” these large social media platforms, I would urge elected officials and regulators to think about pushing them to move from platforms to protocols instead of just ripping them apart.
Antitrust Laws were written during the industrial age for railroad and tobacco companies with a focus on price and competition to protect consumers. The laws are garnering attention due to President Trump’s comments on the United Technologies proposed an all-stock merger with Raytheon, as well as comments on the EU’s antitrust lawsuit against Google.
In what would be the largest merger in the aerospace and defense industry, it’s hard to compare to the platforms of Instagram, Twitter, and the likes of DuckDuckgo. Not stating that the idea to transition from platform to protocol is a bad proposition, I don’t think to break tech companies up is even an option. These companies don’t manufacture weapons; they drive innovation through their services, gathering troves of data on their users.
The Economist wrote about antitrust and tech back in 2017.
Few want to live without Google’s search engine, Amazon’s one-day delivery, or Facebook’s newsfeed. Nor do these firms raise the alarm when standard antitrust tests are applied. Far from gouging consumers, many of their services are free (users pay, in effect, by handing over yet more data). Take account of offline rivals, and their market shares look less worrying. And the emergence of upstarts like Snapchat suggests that new entrants can still make waves.
As more of these companies services continue to integrate with our daily lives, the more our information is at risk of falling into the wrong hands. To make matters worse, cybersecurity is experiencing a shortage of talent, with over 300,000 open positions in 2017, and projected to grow to 3.5 million by 2021. We are amassing a digital footprint and its spread across various companies and their ecosystems, ranging from Facebook to Google to Amazon to Snap and so on.
Companies are taking note and redefining the rules in their ecosystems. Apple takes a closed privacy stance, reinforced through their actions and has long been apart of the company’s identity, dating back to the Steve Job’s. Google promotes a connected ecosystem that focuses on analyzing user data and even went through an organizational restructuring to sustain this strategy. When it comes to the way these companies treat their platforms, it varies across the board. There was even a controversy over Facebook A/B testing their news feed improve your happiness.
In regards to Antitrust cases on Big Tech, two cases set a precedent, U.S. vs. I.B.M., and the U.S. vs. Microsoft. Both of which dragged on for years costing the government and the companies millions in legal fees resulting in lackluster outcomes. The lawsuit against Microsoft focused on the company’s potential monopoly in the operating system, major applications, and the browser. Microsoft would have controlled the future of the web, squashing Netscape, Google, Facebook, and Amazon.
In today’s tech climate, rather than one dominant player, Microsoft stands amongst four major tech companies operating across various industries, Amazon, Google, Apple, and Facebook. These five players loom over innovation, often competing for talent in emerging fields. A far cry from the days in 1998, when Microsoft seemed invincible. In 2019, one company is not deciding our future.
Congress is probably looking to the recent GDPR and its provisions on data as a solution. In June 2018, California’s state legislature passed a new data privacy bill that would create a model for Congress to follow. The bill will become operative on January 1, 2020, and affects organizations that serve or employ California residents. Seeing as antitrust laws don’t mention “Terms of Service,” it might be due for a revision. However, this still leaves the case of Raytheon and United Technologies up in the air.
Notable IPO
The Cybersecurity space is white hot, and its only getting started. Crowdstrike went public, selling 18 million shares at $34 a piece, well above its offering range of $20-$30, or the $19-$23 indicated earlier. Raising $612M with this sale of equity the company’s market cap was $6.69 Bn, up from its last round valuation of $3.35 bn. After the first day of trading, shares jumped by 70% after the first day of post-IPO trading. It closed at $74.85 a share on Thursday (6/20/19).
Notable M&A
Salesforce acquired Tableau for a $15.7Bn all-stock deal, making it the third business intelligence acquisition in the past month. Google bolstered its cloud service scooping up Looker for $2.6Bn, and SiSense acquired Periscope with an undisclosed purchase price.
Noteworthy Financings:
Brex, a San Francisco-based provider of industry-specific corporate credit cards, raised a $100M Series C at a 2.6Bn post-money valuation, with investors getting 3.85% in return for the capital. Kleiner Perkins led the investment with participation from Greenoaks Capital, Ribbit Capital, Institutional Venture Partners, and DST Global.
Dan Primack notes it “reflects how lending startups believe they need fortress balance sheets, much like what was seen with SoFi,” which raised a $500M equity round from Qatar Investment Authority back in May.
A fortress balance sheet seeks to optimize operations and reserve more cash with its business operations, therefore, building a capital cushion — made famous by Jamie Dimon and JP Morgan.
Knowbe4, a Florida-based platform for security awareness training, raised $300M in a venture round led by KKR and participation from TenEleven Ventures and follow on from Elephant valuing the company at $1Bn. The company provides training and a phishing attack simulation platform to help companies combat threats introduced by employees.
Email remains to be the number one threat facing IT security, with 76% of organizations say they experienced phishing attacks in 2017. Training employees to be vigilant to a suspicious email is going to be an emerging market. Attackers continue to exploit email-based social engineering attacks. A new strategy known as Whaling targets a “big fish” inside the organization disguised as an email from real executives.
Modern Fertility, a San Francisco-based direct to consumer fertility test startup, raised a $15M Series A led by Forerunner Ventures, to develop a database of anonymized data about its mostly younger demographic. Previous investors include Union Square Ventures, First Round Capital, and BoxGroup.
Forerunner is a prominent investor in the consumer goods space, with investments in Birchbox, Warby Parker, and Dollar Shave Club. Kristen Green will be joining the board as a part of this round. Her experience on Dollar Shave Club’s board should lend itself well.
Privitar, a London-based company that helps startups and engineers incorporate privacy protection into their data projects, raised a $40M Series B led by Accel and participation from IQ Capital, 24 Haymarket, Partech, and Salesforce Ventures. Privitar enables organizations to mine data sets containing Personally Identifiable Information (PII) while also preserving the individual data in the subjects, also known as anonymous analytics.
Anonymous analytics is an emerging field in the cybersecurity space and will play a critical role if a company like Modern Fertility wants to analyze their userbase without exposing PII. Most anonymous analytics companies are focused on financial service and government clients for now.
WorkRamp, a San Francisco-based employee onboarding platform, raised an $8M Series A led by Bow Capital with participation from Slack Fund, and follow on from Initialized Capital, and Susa Ventures.
As startups continue to receive funding at record levels, solutions will arise to ease back-office operations enabling companies to focus on what they do best. If you have ever launched a startup, these problems are all too common. That is actually how some of the companies in this space start, giving entrepreneurs domain experience to their particular pain points. Slack Fund’s investment does give WorkRamp validation in their mission.
Rapid API, a San Francisco-based marketplace which enables developers to connect directly to thousands of public APIs, raised a $25M Series B led by M12 with DNS Capital participating and follow on from Andreessen Horowitz and Green Bay Ventures.
If startups require assistance on back-office functions, engineers will require tools to streamline development. Traditionally, devs would go directly to a website to connect with a company’s API. M12 leading the investment signals Microsoft’s intention to add to their portfolio of dev tools. See Microsoft’s $7.5Bn acquisition of Github last year — also featuring Andreessen Horowitz on the cap table.
SpotOn, a San Francisco-based provider of payment processing with customer engagement tools, raised a $40 million venture round led by Franklin Templeton and Dragoneer Investment Group participating. The company plans on adding another 30 to 50 employees to its Chicago office with this injection of capital.
When it comes to Point of Sale (POS) systems, VeriFone dominates the market with 7.6Bn+ transactions processed annually across 150+ countries, capturing 50% of the world’s noncash transactions. Multiple industries are influenced as well, including retail, transportation, and food & beverage.
Vectra, a San Jose-based cybersecurity platform that uses AI to detect attackers in real time and perform incident investigations, raised a $100M Series E from TCV with Accel and Khosla Ventures following on.
With the shortage of talent in the cybersecurity space, being able to detect attacks and perform investigations in real time through AI will lighten the load of an organizations IT team. Black Hats are just as, if not more sophisticated in their methods than most organizations can defend, with both sides often operating using the same toolkits. Security Orchestration and Automation will be a mainstay in the arsenal of the IT team’s line of defense.
New Fund:
Okta raised a $50 Million Venture Fund that will fuel the next generation of modern identify solutions.
Let me know your thoughts on this article below. This is a new format I’m playing around with and would appreciate any feedback on the flow of the post or level of detail in the content.
