Atomico's Need-to-Know, 10 August 2017 - Essential Information for Founders and VCs

1. 10 August 2017
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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
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3. ● Will the number of GPs joining early moves proliferate and what investment
models will LPs be prepared to back? Will we see more funds outside US move,
especially given the level of non-US engineering driving innovation?
● What role will greater regulatory oversight have on the nascent market? Will it
serve as a brake, or perhaps, as a catalyst for accelerated progression?
● While there are many (many) reasons to be cautious about the ICO model, what is
not in question is that the cryptocurrency world is attracting top-class talent and
that there are high potential projects being worked upon among a ‘mixed’ field
● While greater regulatory oversight may put a brake on what has been termed a
‘wild west’, the ICO model as a mechanism to raise funds is unlikely to disappear
● As such, if VCs want access to companies pursuing this route, they will need to
decide not only on the right structure to do so (equity v tokens, direct or via fund,
etc), as well as think about how they will position themselves to founding teams in
a market with an evolved set of expectations
● Funds such as Polychain & MetaStable have attracted dollars, not only because
they’ve arguably developed the strongest understanding of the market, but
because their networks enable preferential access to best-in-class token offerings
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What do you need to know?
Why does it matter?
Key questions
● Initial Coin Offerings (ICOs) have been used by companies to raise $1.6B in seven
months in 2017, with July again breaking records with $500M raised.
● Last week, Bessemer became the latest high profile VC to disclose (via WSJ) that
it has committed capital to a blockchain hedge fund, MetaStable (co-founded by
Naval Ravikant), as a means to access token-based cryptoassets
● Other VCs that are thought to have made commitments to funds include Sequoia
Capital, Founders Fund, Andreessen Horowitz, USV. The two main funds to have
attracted VC $ are Polychain Capital & MetaStable, with VCs either backing the
firm, their funds or both (e.g. USV).
● Meanwhile, more than 70 crypto-focused hedge funds are said to be in the
process of being raised, attracted by the volatile swings that have helped driven
huge returns for earlier investors as blockchain ecosystem grown to $115B
VCs dip toes in token-based cryptoassets via hedge funds
Source:
https://www.wsj.com/articles/lps-bless-bessemers-move-into-crypto-investing-1501241400?mod
=djemVentureCapitalPro&tpl=vc
https://medium.com/@etiennebr/my-token-ico-blockchain-capital-markets-landscape-617e6ff1ea
e1
Token / ICO ‘capital market’ landscape (via @ebrunet)

4. ● How quickly can CRISPR technology move from being lab-based to ready for the clinic?
● What role should different stakeholders, whether governments, entrepreneurs, investors or
consumers - play in balancing a desire to speed commercialisation of AI/CRISPR with
ensuring that due attention is paid to ethical considerations?
● We will so-called ‘jurisdictional competition’ play out with countries ‘competing’ to create a
framework to promote the accelerated development of technology in their jurisdictions?
● Any sufficiently disruptive new technology has always raised huge ethical questions, from
the printing press to the atom bomb. Indeed, this has given rise to a whole branch of
research, technoethics, dedicated to exploring the role of ethics in technology
● AI and genetic engineering hold incredible potential to change the future of humanity, but
with the possibility of huge potential economic, social, political and technical consequences.
Beyond the inevitable debate about ‘designer babies’, some of the lives ethical debates
driven by AI incl. algorithmic bias or prejudice in legal systems, automation & employment,
autonomous vehicles, but also more recently, the ‘rights of robots’
● While there is huge investment to drive these technologies forward, many are concerned
that we’re not paying sufficient attention to ensuring morality/ethics are integrated into the
development of these technologies “before it is too late”
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What do you need to know?
Why does it matter?
Key questions
● Researchers, led by a team from the Oregon Health & Science University, claim to have
successfully edited a viable human embryo to edit and replace a mutation in a gene called
MYBPC3 that causes a deadly genetic heart defect, known as hypertrophic
cardiomyopathy, a cause of sudden death in young people
● In doing so, the team is said to have shown progress against two important safety hurdles
that have impacted the application of CRISPR-Cas9 in gene therapy - off-target mutations
and generating mosaics
● Meanwhile, the high profile exchange of words between Elon Musk and Mark Zuckerberg
serve more than anything to highlight just how contentious - and increasingly mainstream -
the ethical debate around AI is becoming. This is prompting increased funds being
channelled into research into AI-related ethics, as well as governments launching their own
efforts to better understand the impacts, e.g. a UK House of Lords Select Committee
As human embryo successfully ‘edited’, coupling of ethics
and tech becoming more tightly integrated than ever
Source: http://www.nature.com/news/crispr-fixes-disease-gene-in-viable-human-embryos-1.22382

5. ● What impact will the UK and others’ bans have on oil companies,
carmakers, and oil rich-states?
● How realistic are the timelines put forth by these countries? Will the EV
infrastructure support these timelines?
● What opportunities will be created in the first- and second-order supporting
infrastructure required to transition to a full-EV world?
● European is positioning itself as a clear leader in autotech both through
technological development and support by government policies
● After pulling out of the Paris Climate Agreement it seems highly unlikely
that the US government will implement any new policies
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What do you need to know?
Why does it matter?
Key questions
● The U.K. will ban the sale of new gasoline- and diesel-driven vehicles
starting in 2040 as a push towards 100% electric vehicles
○ Follows similar announcements by Netherland (2025), Norway
(2025), India (2030), and France (2040)
● Not only in government policy, but European consumers are also leading
the way in electric vehicle adoption
○ 24% of new vehicles sold in Norway are battery-electric and 6% in
the Netherlands (vs. US at <2%)
○ Germany is expected to soon come out with a similar ban with car
manufacturers meeting recently with government officials to discuss
stopping development of combustion engines in 2023
Europe leading in push for Electric Vehicle adoption
Sources: https://www.axios.com/the-u-k-joins-a-growing-ban-on-gasoline-powered-cars-2465682467.html
http://www.thisismoney.co.uk/money/cars/article-3835857/Britain-biggest-electric-car-buyer-Europe-nears-500-000-road.html
Europe represents #2 market for EVs
EVs forecasted to be 50% of new sales by 2040

6. ● What implications are there for other marketplace categories? Will we see regional
champions push more aggressively to win in their local markets?
● Will we see a phase of consolidation or alliances emerge in other marketplace
categories where it may make sense to build “roaming” footprints?
● What are the next categories within AutoTech that hold promise?
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What do you need to know?
Why does it matter?
Key questions
● Past month has seen a clear spike in AutoTech investments across a number of
different sub-categories
● There’s been a surge of deal activity in the ridesharing market
○ Softbank emerging as key source of capital for the category
○ Lyft growing faster than Uber in US
○ Uber exiting Russia via a deal with Yandex.Taxi
○ Didi Chuxing announced an investment in Taxify
● Outside ridesharing, Carspring (Rocket-founded used car buying platform)
announced a Series B raise including Rocket and Channel 4 Growth Fund, while
Carwow (already backed by Accel and Balderton) raised a Series C led by
Vitruvian Partners. Shift also raised a large round from BMW iVentures.
● Looking at tech focused on vehicle maintenance, Caroobi (from Germany)
announced its round, while Booster raised a $20m Series B to fill your car at work
Spike in AutoTech investment activity; challenge to the thesis
of global winner-takes-all marketplaces
Sources: https://www.theverge.com/2017/7/25/16026216/lyft-gross-booking-growth-faster-uber-2017
https://techcrunch.com/2017/08/01/chinas-didi-invests-in-taxify/
https://techcrunch.com/2017/07/30/carwow-series-c/
https://techcrunch.com/2017/08/01/carspring-2/
https://techcrunch.com/2017/08/01/booster-raises-20-million-to-fill-your-car-at-work/
Car Buying PlatformsVehicle Maintenance Tech
Ride-Sharing and Finding
vs.
● The growing challenge to Uber - and its retreat from a growing number of
geographies - is providing a challenge to the oft-cited thesis that “marketplaces
tend towards global winner-takes-all dynamics. While dominant players are
emerging, they increasingly look to be at a regional level. Outside of ridesharing,
it’s hard to identify marketplaces that have truly won ‘globally’. Airbnb? Amazon?
● Auto industry focused technologies and marketplaces continue to attract investor
attention particularly those companies making used car buying easier. Even as
ride sharing and finding platforms grow, continues to be a market for technologies
serving traditional auto transport market

7. ● What other policies or programs can the UK government put in place to
support startups?
● What are the international best practices that the UK should adopt?
● What’s the timeline for starting investments out of the fund?
● How will the National Investment Fund fit alongside other UK
Government-backed vehicles?
● Fund was originated based off data suggesting a £4b funding gap between
US and UK startups with <10% of UK firms raising 4+ rounds of funding vs.
25% of US startups
● UK government also wants to ensure access to capital if Brexit ends the
relationship with the European Investment Fund
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What do you need to know?
Why does it matter?
Key questions
● Earlier this week, the UK government announced a National Investment
Fund to “help cutting-edge British startups become world-leading unicorns”
○ Fund size is expected to >$1bn (£760m)
○ Structure is still unknown and could be set up as a public-private
partnership or be placed fully on the government’s balance sheet
● Mains goals of the fund are commercializing research from UK universities,
supporting investments from pension funds, and increasing investment into
startups outside of London
○ Part of broader initiative around “Patient Capital” and examining
better ways to supply and deploy capital
UK National Investment Fund Announced
Sources: https://www.gov.uk/government/news/new-national-investment-fund-to-back-innovative-uk-firms
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/634338/financing_growth_in_innovative_firms_consultation_web.pdf
UK Government Analysis of Startup Ecosystem

8. ● Will these startups campuses materially impact the competitive advantage
of the ecosystem? Where will the next “startup campus” be built in
Europe?
● Is there a need for this type of co-location in Asia or other geographies, as
well?
● Reflects another example of a city working to achieve efficiency through
co-locating startups in huge, campus-like, facilities
● An example of recreating the type of human capital density of the Valley to
facilitate knowledge sharing, problem solving through shared experiences,
and talent interchange with the added collaboration of policy makers and
large corporates
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What do you need to know?
Why does it matter?
Key questions
● Startup Lisboa, the Lisbon government backed accelerator, announced
that international real estate develop Factory will be building a massive
new startup campus, Hub Criativo do Beato
● Lisbon’s project will challenging Paris’ Station F to be the world’s largest
startup campus
○ Station F is 34,000m2
whereas Hub Criativo do Beato is expected
to be 35,000m2
after phase I almost tripling to 100,000m2
when
complete
● Factory previous built two smaller-scale startup campuses in Berlin
Expansion of European Startups Campuses
Source: https://techcrunch.com/2017/07/25/startup-hub-builder-factory-plans-gargantuan-new-campus-in-lisbon/
Renderings of Hub Criativo do Beato & Station F

9. General News In Brief
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Footnotes
Companies What happened?
Kleiner
Kleiner announced it has recruited Mamoon Hamid as a new GP. Mamoon was a co-founder of Social Capital before
joining Kleiner. Earlier, KPCB had announced the closure of its seed fund, KPCB Edge, which had been set up two years
earlier. All seed investing will now go through its core fund. It also announced the departure of Mike Abbott and Arielle
Zuckerberg, as well as three other Partners that had worked on the Edge fund.
AltspaceVR
AltspaceVR, a company building a social platform for VR, and one of the higher profile companies to building apps for
virtual reality, announced it it shutting down. The company was one of the better funded app devs in the space (raised
$16M from Lux Capital, Maven, Comcast, others) and so its inability to raise follow-on funding has been taken a negative
signal for the category, which continues to see only modest growth in hardware adoption.
Grab
Southeast Asia-focused ridesharing company Grab raised $2.5B in a huge new funding round, largely taking the money
from Softbank, which continues to be a key source of capital for ridesharing companies (e.g. Ola, Didi)
Cryptocurrencies
SEC released its investigative report into the DAO token sale, ruling that offers and sales of digital assets by “virtual”
organizations are subject to the requirements of federal securities laws, although individual investment transactions will
depend on the facts and circumstances on a case-by-case basis; Shortly afterwards, the Monetary Authority of Singapore
also issued a ruling clarifying its view that some digital assets/cryptoassets also fall under their definition of ‘security’ and
that issuers and intermediaries would need to register and subject themselves to securities law/licensing requirements
China/Russia
Both China and Russia announced measures to restrict use of VPNs, as both nations seek to exert greater censorship of
citizens’ Internet access. In China, Apple removed all VPN apps from the Chinese App Store, while in Russia, President
Putin has now enacted a law to ban VPNs used
Amazon
Announced it is doubling its R&D employee base in London from 450 to 900. This is part of a wider expansion of its
UK-based workforce to 24k by end-2017. Outside London, it has R&D team in Edinburgh & Cambridge.
Prosper
Said to raise a new financing round of ca. $50 million that will value the company at $550 million, down from$1.9B when it
last raised back in 2015. The new investor is unknown, although said to be Chinese. Prosper had already reduced its
common stock valuation and repriced employee stock options to $0.22 per share, down from $2.14, according to
securities filings.

10. M&A Wrap Up
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Acquiror Target Target desc. Amt Comments
Internet Brands WebMD Health Health information portal $2.8b
WebMD has been exploring potential sale since February; Internet Brands (owned by KKR) plans to
combine WebMd with other smaller platforms (DentalPlans.com, VeinDirectory.org, and
AllAboutCounseling.com).
Global Payments ACTIVE Network
Global marketplace for activities and
events
$1.2b Global Payments acquired communities and sports division of Active Network from Vista Equity
Sage Intacct
Cloud-based financial management and
accounting applications
$805m
Sage, an almost 20-yr old enterprise software company, acquired Intacct to bolster its cloud-based
offerings; interesting example of UK-based legacy player buying a US player
GrubHub Eat24 Web-based food and delivery service $288m
Yelp sold Eat24 to GrubHub; Yelp shares were up +20% post announcement as the street sees this
as Yelp to focus more on its core business
Stripe Payable 1099 compliance software N/A
Stripe acquired long-time partner Payable to better support on-demand and marketplace businesses
to process payments to contractors and vendors
Metro MissFresh
Fresh produce e-commerce mobile
application
N/A
Canadian food retailer Metro acquired Montreal-based meal-kit maker MissFresh; appears to be
following in trend of prepared meal delivery (e.g. BlueApron, HelloFresh, etc.)
Modern Times Group Kongregate
Mobile and online game publisher and
web gaming portal
$55m
Strategic move by Modern Times Group to build their online gaming offers through acquisition of
Kongregate from Gamestop
Wyndham Worldwide Love Home Swap Home-swapping website $53m
RCI, a division of Wyndham Worldwide, acquired Love Home Swap; co-founder and CEO will step
down from the company as part of the deal
Prodea Arrayent IoT connectivity platform N/A
Prodea Systems, a cloud services firm, has acquired Arrayent to build out a IoT services platform
helping companies gather data from sensors that can then be used for enterprise applications
Facebook Source3
Licensing and rights management
platform for distribution of 3D content
N/A
FB plans to use Source3’s technology to crack down on users that post intellectual property without
permission
Facebook Ozlo
Personal AI assistant for finding
information from a user's phone
N/A Appears to be a move to augment the capabilities of M, Facebook’s virtual assistant for Messenger
Beyond Pricing Smart Host Analytics platform for home renting N/A
Beyond Pricing is acquired the assets and technology of Smart Host to improve pricing algorithm;
Smart Host team will not be joining the company post-acquisition
NASDAQ Sybenetix
Surveillance software for individual
traders
N/A Nasdaq plans to integrate Sybenetix’s technology into its current “reg-tech” offerings

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