Amazon in the Nordics, live festivals vs movie theaters and Apple.

#40

Hi - welcome to a new edition of Sunday CET!

It’s a slow, lazy period, as half of Europe is in the last holiday leg (Nordics, Germany, Benelux) and the other half just started its one summer month off (Southern Europe, France, Spain).

The Q2 macro data is out, EU declined 11.9% QoQ and US went down 32.9% in Q2 annualized (normalized is a 9.5% decline QoQ). However, Europe looks better as the virus seems to be contained in spite of the recent spikes - US is kind of out of control, still on a consistently upward spread trajectory.

Q3 will look different as at the end of June the economic activity has been slowly restarted and the key is Q4 when we will hopefully have more information about a vaccine public timeline that would ease the uncertainty.

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More money in the market

FUNDS

🇮🇹 Primomiglio
🇮🇹 United Ventures
🇷🇺 The Untitled Ventures
🇪🇸 Fuel Ventures

BETS

🇬🇧 digital biotech developing speech-based AI algorithms for diagnosis and monitoring of health conditions
🇮🇹 cloud-based computational hub for running healthcare simulations
🇫🇷 intelligent thermal technologies for the connected textiles
🇩🇪 language exchange app
🇬🇧 sex therapy app provider
🇩🇪 AI-powered MRI imaging machine at a fraction of the cost
🇪🇸 device manufacturer for automatically monitoring babies’ contractions and fetal heartbeat
🇬🇧 SAAS for online platform communities
🇩🇪 co-living platform

DEALS

🇭🇷 Infobip secured $200+ million from PE firm One Equity Partners
🇪🇸 KKR invests 150 million in MasterD
🇱🇺 IQONIQ raised €100 million in capital funding from Lux Media Investments
🇸🇪 Cisco acquired Modcam
🇪🇸 Cabify sold “non-strategic assets” worth more than €22 million to stay afloat
🇪🇸 Nautal was acquired by Click & Boat from France.


Observations, research, data

🇩🇪 Götz Gleichmann and Redstone launched a €125 million venture debt fund.

🇬🇧 Sequoia added a new partner in its London office, George Robson, who previously was doing product management for Revolut. He will join the Romanian Luciana Lixandru, who used to work for Accel.

🇬🇧 Here’s a list of 35 UK-based angel investors.

🇸🇪 A detailed breakdown of the types of startups from Sweden which raised rounds less than $1 million in the first part of 2020. ($)

🇪🇺 Pitchbook’s Q2 European Venture Report

🇱🇺 A good guide on how to create a stock options plan as part of the employees compensation package.

🇳🇴 Investor profile - Northzone ($):

  • Partners founder/operator/investor ratio of 0.75

  • 2 out of the 9 new companies they invested in the past 18 months are software companies active in the construction industry

  • 4 of those 9 are from the UK and 5 of them were added as part of $15M+ deals

  • the US portfolio includes a startup doing an open-source framework for blockchain-based projects founded by two Argentinians in 2015

🇬🇧 Entrepreneurs ranked VC Brand a lowly 7/10, whereas VCs believe their brand to be a significant competitive edge, ranking it as the 2nd most important reason for “being chosen”.

This speaks volumes to the egos in VC. In reality, we need to realize that we are service providers who are there to support the entrepreneurs - not the other way around. Investors need to adjust to the pace of our Founders - they should not need to adjust to us.

link

🇩🇪 Europeans adjusting risks, the German auto manufacturer edition:

Daimler owned 9.1% of Tesla just 6 years ago. They proudly sold for $700M to improve their yearly earnings, stating that they would focus on their own brands.

Today, Tesla is 4x Daimler. And this is only the beginning.

🇪🇺 EU announced new regulations for a more fair and transparent relationship between games companies and the app stores. Apple and Google are the main players which have to comply.

🇺🇦 How Alexander Kokhanovskyy wants to make Kyiv the world’s esports mecca and bring Ukraine closer to the level of South Korea and the USA.

🇧🇪 More than one million paying customers attended Tomorrowland Around the World last weekend, over two-and-a-half times more fans than the in-person Belgian dance festival typically draws.

It’s unclear whether the million people is just live streamers or actual payers - you need to pay to access the stream - but the huge number is a remarkable milestone in behavior change. When things will get back to normal the business potential for festival organizers is basically much-much higher than the one within a one weekend window on physical premises.

🇺🇸 In somewhat related news, Universal and AMC Theatres strike a deal allowing new films to play at home sooner. Under the agreement, Universal's new films will have just three weekends - or 17 days - of exclusivity, rather than the customary 70 days.

The movie theater business has been in denial for a long time, and Covid just accentuated their problems. Movie going is not about movies but about the experience and, when things will get back to normal, their only chance is to double down on the highly differentiated experiences, such as what Tomorrowland is experimenting with.

Or - they will be bought by Amazon.

🇸🇪 Here’s a great interview with Daniel Ek making a good point that only complainers make their voice heard while musicians with great Spotify experience tend to be quiet and, well, focus on making money.

And speaking of this, here’s a fantastic op-ed about those complainers and the transition to the new realities. If you’re so inclined, the piece can also be read in a different key by replacing music bands with entrepreneurs in general.

The game changed. Like it did when we went from singles to albums. Once again, why should the music business get to stay in the past when every other business does not, what makes artists so special that they never have to adjust to business change?

Music is close to a lottery.

You’re not entitled to a living in art. Just like you’re not entitled to a living in professional sports. There’s a limited number of qualified people. Who make a lot, while you’re shut out. Be thankful in music that there’s no barrier to entry, that you can play at all.

🇪🇺 Amazon is set to launch in Sweden and other Nordic countries this fall. It is a long-expected move, and kind of a big deal as the Swedish/Nordic society is, in general, a closed one to big business from outside.

In Sweden retail’s case, consumers have available mostly Swedish/Nordic brands on the shelves, with little non-Nordic competition, as all the active operators are tightly controlled by a group of local wealthy families. And, like in any oligopoly, they drastically limit the market entrance from outsiders (same goes with the banks or telecoms, for example).

It is notable Apple’s case which acquired a property for opening a flagship store downtown Stockholm, only to be denied after getting their papers in order by the local authorities, who had a sudden change of heart a few years later. Unofficially though, rumours say that actually there were commercial interests at stake as Apple's way didn’t want to get local businesses involved in the Apple Store operations (they never do) and the political angle was a way to make them change their minds. Apple didn’t and was really pissed about it.

And so, Amazon is kind of a big deal in the Nordics, as their fortes - customer focus and low prices - are exactly Nordic weaknesses and will likely shake the market and provide a much-needed competitiveness and wider access, which ultimately will benefit consumers.

🇨🇿 You know things are bad when the Czech beer sales go down by 55% - brewers revenues dropped with some €179 million as horeca was closed due to pandemic reasons.

🇪🇸 Spain’s far-right party wants the government to regulate fact-checkers, as it submitted a proposal to prohibit the fact-checking of “opinions” and would hold fact-checkers legally liable for labels like "fake news".

🇫🇷 Students under 18 years will ride Paris transit free when school year starts in September.

🇸🇮 Slovenia has a time-honoured tradition of using the sounds of bees buzzing to relax everyone from firefighters to school children, acting as an alleviant for anxiety and stress.

MORE

Apple acquired Mobeewave, a Canadian company with a solution that makes any phone a POS with just an app. 

That means Apple will go down the value chain and make it as easy to add merchants as it made adding consumers via their cards. The goal is to become the important connecting link managing the relationship between merchants and consumers to process identity, loyalty, rebates, rewards and coupons. 

And, why not, create a business layer on top of it, a la App Store, and take a 30% cut.

Square in US and iZettle (owned by PayPal) in Europe are some top of mind providers in the space and which will likely collide with Apple.

Apple allegedly paid $100 million for the acquisition - also interestingly, Mobeewave raised money from Samsung and Mastercard, about $25 million in total.

🌪️ This week the US Congress interviewed the CEOs of four of the most powerful tech companies on the planet - Apple, Google, Facebook and Amazon - for the purpose of establishing grounds for monopolistic behaviour.

I followed a bit the live discussions, and, as always in such situations, it is striking the huge information and knowledge asymmetry between the tech regulators and the tech creators. The congress people seemed very unprepared for the job they were supposed to do, made a lot of silly claims and irelevant points, proving once again that the gap is so big between the two worlds that the politics is out of control.

Here’s what I wrote just 8 weeks ago:

The tech ecosystem has developed tremendously in the past 15 years, in spite of the shitty politics from across both ponds.

That is the very reason for which governments want to regulate Google and Facebook. The gap is so big between the two worlds that the politics is out of control.

More regulation and protectionism will not narrow it [the tech gap] down, au contraire, it will force tech to be more creative, they invent things for a living after all. And yes, US is a very different beast than Europe but smart people adapt.

In conjunction with the hearings, a lot of internal emails were made public, which make for an interesting economic history learning - worth digging through, you can find them here.

Also notable Zuck’s statement claiming that Facebook is a laggard:

In many areas, we are behind our competitors.

The most popular messaging service in the U.S. is iMessage. The fastest growing app is TikTok. The most popular app for video is YouTube. The fastest growing ads platform is Amazon. The largest ads platform is Google. And for every dollar spent on advertising in the U.S., less than ten cents is spent with us.

Zuck’s PR taught him to play humble and assertive - but really, does anybody believe anything he says in public at this point? Btw, Facebook’s ad business outpaced Google’s in Q2 — here’s why.

🗞️ The New York Times has 6 million subscribers and reader revenue now accounts for six of every 10 dollars of the revenue. They bring in about 400 million a quarter:

  • print subscription biz: $155.4 million

  • digital subscription business: $130 million

  • print ads: $55 million

  • digital ads: $51 million

It’s a US-centric business (they want to change that), also to keep in mind the horror stories about how they treat their customers and making it very difficult time to cancel subscriptions via long telephone-only queues (here’s an example).

For context, last year FT claimed to have reached 1 million subscribers, 80% of which digital, and a reach of 16 million monthly uniques, 70% outside of the UK.

Bonus link: BuzzFeed starts selling products directly to consumers

💲 You think Pokemon Go is a 2018 fad? Players spent $17.5 million during Pokémon Go Fest 2020 held last week.

That’s exactly over one weekend, or two days, to be more precisely.

Sensor Tower estimates show players spent $8.9 million on Saturday, July 25 and $8.6 million on Sunday, July 25. By comparison, revenues for Friday, July 24 reached $7.8 million.

The $8.9 million generated on the first day of the event makes it the most lucrative single day for player spending in the game since July 29, 2016, when players spent $13.3 million.

Btw, there’s a makeup edition in a couple of weeks. Since the start of the year, Pokémon Go has generated $539 million, and a lifetime of $3.7bn across 4 years.

🐱‍💻 Twitter’s hack from last week was orchestrated by a 17 years old.

He did it with a 22-year-old from US and a 19-year-old from the UK. Amazing what kids can do these days!

🤖 Researchers from Intel, MIT, and Georgia Institute of Technology said that they had created AI software that can rewrite code to make it more efficient. The system identifies a program's functionality and then analyzes similar programs to recommend improvements. They say it’s 40x more accurate at this approach than previous attempts. link

🏫 More innovative thinking about the education system

Kids are in K-12 for thirteen years. Do twelve instead, reallocating the budget for the last year as seed funding to start a company.

K-12 in US is primary and secondary education from kindergarten to 12th grade.

Bonus:

Learning about entrepreneurship from an business school academic is like learning about sex from reading a book - it's less messy, less fun, not realistic, and in the end all involved end up deeply disappointed in the real-world results.

🔭 Linkedin spy scandal shines spotlight on China’s online espionage

Spies are known to pose as headhunters or people with enticing career opportunities in order to connect with individuals viewed as potential sources who could be tapped for information

Dickson Yeo, a visiting scholar at George Washington University, liked to tout his US-Asia connections. “Bridging North America with Beijing, Tokyo and south-east Asia,” the Singaporean doctoral candidate wrote on his LinkedIn profile, where he advertised his credentials as a political risk analyst with connections to hundreds of policymakers in the US capital.

But last week Mr Yeo admitted in court that he had been working for the Chinese intelligence service. He used the LinkedIn social media network to target Americans in the military and government and harvest information from them.


Encore

📚 BOOKS

  • World After Capital by Albert Wenger, who is a partner at USV. Free read.

🗞️ INTERESTING STUFF

Happy Sunday!


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