The all-computer run NASDAQ could be to blame for a lack of a Facebook stock pop Friday, when the social network started its first day of trading. Orders flooded in...
Hi. While this blog is a part of Seed Catalyst’s website, I realised over the initial few weeks that a lot of you are first introduced to the firm via the blog rather than our home page.
So to introduce myself - I’m a business consultant working with early stage technology firms to help streamline their strategy and go-to-market approach and support them for fund raising.
With this blog, I aim to capture key market trends that I see in the industry, the ecosystem and cross-plays in some of the more interesting and upcoming sectors, as well as cover interesting companies that I meet.
I will also be addressing vexing and interesting valuation and deal/term-sheet structures that would be of interest to technology start-ups at various stages of their growth.
Pond Ventures is a VC I have been following for quite a while now. The first interaction was while working on an early stage fund-raising for a semiconductor firm in early 2008. While searching for VCs who may be interested, it was disheartening to note how few there were – that is firms interested in investing in:
- Early stage
- Capital intensive
- Semiconductor
Pond Ventures was the only one which fit the bill on all counts. There were a few others but they had diversified portfolios. Pond had a very semiconductor focused portfolio which was quite surprising for Europe. But then unfortunately I didn’t see much activity from them over the last 2-3 years; had started wondering if they have gone under and have just enough financial bandwidth to do follow-ons in existing investments. It does happen to the best of us.
Well, I haven’t seen them raise any new funds but on a positive note they have had a spate of interesting exits. So let’s hope that their model of a ‘capital efficient investment model...to commercialise ground-breaking technology’ continues for some time (http://www.thedeal.com/magazine/ID/038545/community/a-new-model-for-vc-investing.php). After all we can’t have all venture capitalists investing in facebook, groupon, color and other social/digital media upstarts, can we?
Some of the recent Pond exits:
Nanotech Semiconductor was acquired by Gennum Corporation (6th April 2011) for $34 million with $6 million in potential earn-outs over the next twelve months. The firm is focused on analog and mixed signal driver and receiver ICs for fibre optic networks. Revenues for the FY 2010 were $7.4 million; a 5x P/R exit. They have received $13.5 million of total investments since 2005; approximately a 16% IRR.
Gigle Networks was acquired by Broadcom Corporation (22nd November 2010) for $75 million with $8 million in earnouts. The firm focused on S-o-C solutions for home networking on power lines. The firm received $31 million in investment over 2006-07; a 24% IRR.
4Home was acquired by Motorola (3rd December 2010). The firm focused on energy management, home security, home health and media management through a carrier grade software platform. The firm had raised $9 million in funding. Terms of the transaction not disclosed; hence no IRR calculation.
Broadway Networks was acquired by Finisar (20th September 2010), all cash transaction, terms not disclosed. The firm had developed a pluggable transceiver that allowed switches and routers to connect directly to passive optical networks.
They still have a few other investments like PicoChip, Mirics and Acco in their portfolio. All in all nothing sensational in terms of exits but slow and steady. I wonder if such a performance helps in raising a new fund. I would sincerely hope so. After all someone has to invest in hard core R&D and technology innovation.
I don’t want to be the nitpicker but I think two investments over the last week really emphasize the difference between the UK and the US investment environment.
In the US, the $41 million investment in Color has rocked the media airwaves. The best of VCs, Sequoia, Bain, SVB, have invested in a picture sharing mobile app? However, as the CEO Bill Nguyen has emphasized, they are far from being just another pic sharing app. On the contrary, he claims, they are a research centric company with multiple patents looking to merge location, proximity, pictures and social. ‘An elastic social graph.’
The jury is divided:
Is this another example of the potential bubble we are seeing in early stage investments?
Or
Is this another example of the vision of US VCs investing in great technology, not to address current needs and markets, but to address needs and desires that we didn’t know we had and thus generate new markets from scratch?
In the UK, at the other end of the scale, is a £50 million investment by Lyceum Capital in Access, a business management and accounting software firm. They have £28 million in turnover with EBITDA of £5.5 million and provide ERP software, financial management systems and HR solutions to a mid-market clientele. A safe, stable, reliable investment. No cutting edge research or technology. Not even a mention of current or potential SAAS based delivery of services. Another one of tens of little shops dotted across the landscape, it’s a wonder they are still surviving in spite of the onslaught of Eastern European and South Asian software houses.
The firm has various awards for best place to work and for their financial software. Let’s hope the investment helps move them from a staid product profile to a more futuristic delivery of services.
So, in summary, what is the difference? The visionary risk taking nature versus the risk averse, past performance based approach.
But, I shouldn’t be too harsh.....it is changing......hopefully......
Miniature base stations - thumbs up for virtualisation
Written by rhitu barua
Tuesday, 22 February 2011 15:49
A lot of the noise at MWC last week was around the Nokia-Microsoft partnership and the tablet onslaught. But in the noise, an interesting development seems to have gone unnoticed, that is Alcatel-Lucent’s miniature base station.
Eliminating the need for cumbersome base stations, Alca-Lu is launching 2.5 inch radio cubes which combine 2G, 3G and LTEwideband active array antennas along with a multiband remote radio head and an SOC for baseband processing. They are so small that they can be integrated with a lamp post while at the same time halving op costs and CO2 emissions. In addition they are firmware upgradeable and utilise beam forming to connect more efficiently with mobile devices. The devices are utilising microwave technology advances for backhaul and compression to connect back to the network.
Alca-Lu is positioning them for rural penetration thanks to their operational efficiency with the ability of using microwave (or IP) to connect back to the network. This is, in itself, a killer rationale for utilisation in countries with geographically dispersed populations. Moreover, in a world where mobile data is growing at gargantuan rates, Alca-Lu describes lightRadio as ’a flexible architecture that distributes intelligence throughout the network so that it can dynamically expand to meet growing demands.’
Well, if these devices become wide-spread, they could be the death-knell for femtocell devices.
And then of course, not to be left behind, NSN launched their “Liquid Radio”. This device too consists of the antenna, radiohead and baseband processing. However, unlike Alca-Lu which plans on completing most of the baseband processing ‘in the cloud’, so to speak, NSN will utilise the cloud only for overloaded cells with some baseband processing maintained at the unit itself.
Architectural variations, we don’t mind.
China Mobile, Verizon and Orange have already started showing interest, with the market expected to reach $16 Billion over the next five years......we’re watching...
I have been meaning to write a paper on the mobile payments industry for a very long time but for some reason or the other the task kept getting postponed. And now I find FirstPartner has done an excellent coverage of the market space. So why re-invent the wheel. For those interested, a visit to their website is certainly warranted (http://www.firstpartner.net/research-releases/downloads-market-maps/).
The topic is all the more sujet du jour thanks to all the talk from major handset vendors about all phones being NFC enabled over the next few years. The Samsung Nexus S is NFC enabled as will be the next Apple iPhone. RIM too will be launching their NFC enabled version by the end of the year. A previous look at the NFC growth (http://www.seedcatalyst.com/joomla/market-trends/mobile-payment-arrives-finally)
I was once asked what mobile payments encompassed and how it was different from m-commerce. Well, m-payments would be anything ranging across fund transfer, over the counter proximity payments, bill payments, account check, ticketing, mobile purchases and now even virtual good payments...the list is long. M-commerce is one sub-set of this world.
FirstPartner has split mobile payments into the various sub-categories of
- digital content, app stores, social media
- m-commerce and utilities and finally
- physical retailer and transit.
They have listed these as individual categories but I have grouped them such because the service provider will tend to vary according to these sub-categories. The first bullet is addressed by micro-payment providers linked to banks or operators. The second i.e. m-commerce can be bank transactions, utilities payments, online ticketing and can be provided by banks or platform providers linked to these banks. Finally we have NFC-based mini-payments which would include transport, the morning cuppa at Starbucks or supermarkets. The players here are diverse because the service overlaps across banks, handset vendors and platform providers. Operators and SIM card vendors are the one category which could be eliminated from the value chain but they are trying their best to remain relevant!
So that brings us to the common element across all - platform providers. In most cases, account check, bill payment and fund transfer (m-commerce) are being provided by banks with a downloadable mobile application from a provider e.g. Monitise. If the service is bill payment, mobile purchases and fund transfer but not integration with the bank account, the scope of participants increases to include operators tied up with emerging payment service providers such as Obopay, Paypal, Bill2Mobile etc.
Emerging markets have operated slightly differently due to the maturity of a different set of players i.e. banks and operators rather than platform vendors. In terms of services, mobile enabled fund transfer and mini-payments take on a significant role due to the financial exclusion of a significant proportion of the populations. We have looked at the sector before (http://www.seedcatalyst.com/joomla/new-developments/mobile-banking-the-multi-dimensional-opportunity) where local operators have tied up with banks enabling banking transactions as well as transfers. However the platform vendors are also gradually maturing. For mobile purchases, there are home-grown payment service providers such as Eko Mobile (http://www.seedcatalyst.com/joomla/market-trends/financial-innovation-shades-of-emerging-and-developed-markets-in-mobile-banking) and Obopay. In fact, not to get outdone, recently Western Union has signed an agreement with State Bank of India, one of India’s largest banks with 100 million subscribers, enabling a WU mobile transfer from anywhere to an SBI account via a mobile transaction.
I think the significant development we need to see is that the traditional payment providers are not left behind in the battle for the mobile handset. We are gradually beginning to see the two worlds merging together. A recent transaction which exemplified this trend was the acquisition of Playspan by Visa. Playspan is an online game monetization-as-a-service provider. A leader in the micro-payments market, they will further drive Visa’s presence in the m-commerce and digital payment domain. There are still a number of players like Bango, Boku et all in this space waiting for Mastercard to wake up.
Another sub-sector which needs integration is enablement of mobile payments at physical retail outlets aka proximity payments. There has been recent news of Visa showing an interest in start-up Square. The firm has created a small device which enables any mobile device to accept credit card payments. Will there be an acquisition? It’s hard to believe that Visa would acquire a hardware manufacturer. However that is a sector which certainly needs closer integration.
Perhaps a way forward for them would be with a firm like Obopay. Doubt they are up for acquisition though?
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