Weekly Innovation Review (WIRE) #20

Latest News from the World's Leading Innovators

Headline Developments

Adam Neumann, co-founder and former CEO of WeWork (private), is nearing a settlement with Softbank (9984.JP) by agreeing to a near $500m cut in his payout from the company’s new owners.  According to the WSJ, Softbank is looking to spend $1.5bn to buy the shares of early WeWork investors and employees (including Neumann), and clear the way for another IPO attempt.

Snap Inc (SNAP) shares surged ~20% this week after saying they are in a position to drive multiple years of revenue growth of more than 50%.  “Via the work on our self-serve ad platform, we’re in a position to drive multiple years of 50% plus revenue growth”, said Peter Sellis, Snap’s senior director of ad products.  Snap, up 7x YoY, has transformed considerably in the last couple of years, driving substantial user engagement (256m DAUs) via unique experiences such as Snap Originals (short-form original video content), Spotlight (short-form user-generated video), snap map, gaming, lens studio and the diverse range of advertising formats.  All of this is expected to see a material appreciation in Snap’s ARPU in the coming years.

Apple (AAPL) is reportedly on the lookout for LiDAR sensors, a key sensory component of autonomous vehicles, according to Bloomberg.  The report claims Apple has built a lot of the software in-house and that a vehicle launch may be five years away.  As a minimum, we know they’re testing AVs (in California) and are building out their iOS car experience (as Google are doing with Android).  Potential partners (or targets?) on the LiDAR front would include Velodyne (VLDR), Luminar (LAZR), AEye (private), Ouster (private), Innoviz (private) and Baraja (private). The image below is courtesy of Innoviz.

Elon Musk has shed some light on SpaceX’s (private) Starlink platform, replying to a user who had just received their beta kit (which promises speed between 50 to 100 Mbps).  The user, who is seeing 110-130 Mbps, was informed by Musk that speeds would “double to ~300Mb/s” and that “most of earth” will have coverage by year's end. 

Other Developments

Hyundai (005380.KS) has released a new EV, the 2022 Ioniq 5 SUV, a stunning EV with up to 480kms (300 miles) of range on a single charge.  That puts it in the same range as the Mercedes EQS and Tesla Model 3 on expected price/mileage.  However, the real selling point - as with all EV releases now - is the UX - eco-friendly recycled materials, customisable interior options, advanced AR display, auto lane change etc.  For more information, you can check out the reveal here.

China’s banking regulators are putting more thorns in the side of Jack Ma’s Ant Group (private) now tightening rules governing how online lending platforms fund their loans.  Under the regulations, online lending platforms like Ant will now have to contribute 30 per cent of the funding for loans they offer, in partnership with banks.  Commercial banks will also be capped on the capital they commit to online lending.  The new rules will come into action next year.

IBM (IBM) is looking to sell its IBM Watson Health unit, to focus on higher-growth cloud computing operations.  They are reportedly in the early stages of deliberations and looking at a range of options from a private sale to a SPAC.  IBM Watson Health generates about $1bn in revenue, however, is still loss-making and hasn’t lived up to much of the earlier hype on revolutionising health care.

Leaked promo videos have shown legitimate-looking Samsung (005930.KS) AR Glasses and Glasses Lite.  In the videos, published by WalkingCat, the user can be seen engaging with various content (movie, e-mail, design software and conference calls) all via the Samsung glasses.  Even if the claims are spurious, it is certainly realistic that the technology and applications are real, with Apple (AAPL), Snap (SNAP), Google (GOOG) and Google / Qualcomm (QCOM)-backed Magic Leap (private) at the forefront of AR wearable tech.

Silicon Labs (SLAB) jumped 10% after reports that the company is exploring a number of options for the business, including the sale of its analogue chip unit for $3-$5bn.  This would bring much-needed capital into the business and enable them to double-down on IoT / edge applications where we are seeing intense competition from the likes of Marvel (MRVL), Skyworks (SWKS), Qorvo (QRVO), Broadcom (AVGO) etc.

Spotify (SPOT) announced a lossless ‘HiFi’ streaming tier for 2021, offering CD-quality streaming to all Spotify apps as well as Spotify Connect-enabled devices. At present, Spotify audio quality caps out at 320kbps whilst CD-quality streaming peaks at ~1400kbps.  There is no word yet on pricing for ‘HiFi’, however, if we look at Tidal, they charge $20/month for the high-quality v $10/month for standard (same as Spotify premium).  Completely back of envelope, if we assume Spotify low-ball and charge $15/month for ‘HiFi’ and 5% of their 155m premium subscribers upgrade, that’s an additional ~$500m in revenue (a 6-7% boost to FY2020).

Microsoft’s (MSFT) LinkedIn is rolling out a gig marketplace to take on Fiverr (FVRR) and Upwork (UPWK). LinkedIn has 740m users and delivered $8.8B revenue in 2020. The gig service is similar to platforms such as Fiverr and Upwork, which host freelance work from web design to home repair and make money by taking a commission (13%-27%). LinkedIn’s offering will focus on white-collar work such as consulting, marketing, and writing.

IPOs

A couple of flying taxi startups are getting the propellers in motion for a market listing this year.  Firstly, Archer Aviation (private) which plans on going public via a SPAC, aims to launch a network of urban taxis in Los Angeles by 2024. This announcement comes 2 weeks after United Airlines jumped on board as a customer and investor in the company.  Secondly, Joby Aviation (private), developing an all-electric flying taxi, released a video (below) showing their aircraft in action. They announced plans to list on the NYSE via a merger with SPAC Reinvent Technology Partners in a deal valuing the business at $6.6bn.

The fintech formerly known as TransferWise (private) is now called Wise.  The rebranding comes ahead of an expected IPO and better reflects the company as a “cross border payments network” as opposed to an international money transfer service.  The business is split into three units, Wise, the retail a/c to send and spend money, Wise Business, the business a/c with bank feeds, mass payouts and multi-user access and finally the Wise Platform, which a broad range of FinTechs and digital banks leverage to give their customers cheaper payments and international banking features.

The hotly anticipated, and on again / off again listing candidate Roblox (private) is on again! The company filed an S-1 with the SEC stating their intention to go public via a direct listing on the NYSE “on or about” the 10th March.  The company, a gaming platform for kids, with phenomenal engagement and user-created content, saw 2020 revenue hit $924m (up 82% YoY) from 32.6m DAUs.  Impressively, free-cash-flow was $411m for 2020. Other high growth, cash flow positive peers like Skillz (SKLZ), DraftKings (DKNG) and Unity Software (U) are trading >30x fwd P/S which would put Roblox’s valuation at a minimum of $42bn (it’ll probably trade much higher though given it’s significant IP)!

Cyxtera Technologies (private), which offers colocation services across 61 data centres around the world, will merge with Starboard Value Acquisition Corp (SVAC), giving the merged entity an EV of ~$3.4bn.  Cyxtera was formed after being carved out of CenturyLink (now Lumen).

Health insurance startup Oscar Health (private) is hitting the markets, targeting a valuation of close to $7bn.  The company has 402k members, from which they generate $1.6bn in revenues (up ~60% YoY) and a Net Loss of $406m.  You can think of Oscar as the neobank challenger for the insurance sector, built around a full stack tech platform, leveraging data and various products to provide affordable, engaging services.

Silicon-based battery company Enovix (private) will go public in a merger with SPAC Rodgers Silicon Valley Acquisition Corp (RSVA) in a $1.1bn deal. Enovix’s first commercial factory in Fremont, CA will be ready later this year and will produce batteries for small devices such as radios and smartwatches. The company is aiming to sell batteries for electric vehicles after 2025. Enovix batteries use an anode of 100% silicon rather than the customary graphite.

Markforged (private), a leader in industrial 3D printing, will go public via a merger with one (AONE).  Once the deal closes, the company is expected to be worth $2.1bn. Markforged was the first to introduce continuous carbon fibre 3D printing, before venturing into lower-cost metal 3D printing.  In 2020 the company launched its new platform, a cloud-based 3D printing software called The Digital Forge.

POS startup Toast (private) is eyeing a $20bn debut, assessing various options including a sale or merger with a SPAC.  The company, which was hammered during the pandemic, provides a wide range of software and hardware devices for the hospitality industry including POS platform, mobile ordering, delivery, loyalty and mobile POS systems.  One of their competitors, Olo (private) is also hitting the market via an IPO, aiming to raise $100m.  Olo provides a software platform that consolidates digital orders into a single ticket stream (i.e. dine-in, take-out, uber eats, Grubhub etc).

M&A | Cap Raise | Earnings 

Redfin (RDFN) is making a major push into the home rental market, signing an agreement to purchase RentPath for $608 million in cash. Once approved the deal will boost Redfin’s traffic by attracting a younger audience of renters to Redfin.com. “RentPath has more than 20,000 apartment buildings on its rental websites and grew its traffic more than 25% last year,” Redfin CEO Glenn Kelman said. “We can almost double that audience, as one in five of Redfin.com’s 40+ million monthly visitors also wants to see homes for rent...we can create an online destination for every North American to find a home.”

CrowdStrike (CRWD), a leader in cloud-delivered endpoint workload protection, is set to acquire Humio (private), a log management and observability technology company. CrowdStrike will pay ~$400 million. The acquisition of Humio will bolster Crowdstrike’s XDR (extended detection and response) capabilities, allowing for vision not only over a company’s network of enterprise devices but also over the network itself. This follows CrowdStrike’s acquisition of Preempt for $96 million (3QFY20), which allowed them to enter the identity protection market through Preempt’s focus on Zero Trust security.

One of the more exciting companies in the smart-home sector, Plume (private), has raised $270m in Series E funding from Insight Partners, valuing the business at $1.35bn.  Plume identified a weakness in relying on traditional WiFi for smart home experiences.  Instead, they developed their own set of tools (‘SuperPods’ and ADAPT signal steering), available to ISPs to optimise device performances for the home.  The video below outlines the tech a little better!

Australian digital design startup Canva (private) has been on a bit of an acquisition spree purchasing Kaleido.ai (private), makers of a drag-and-drop background removal service for images and video and Smartmockups (private) - a product mockup generator (i.e. t-shirts, magazines, packaging).  According to Cliff Obrecht, co-founder and COO of Canva, “these acquisitions really tie into us becoming that collaborative visual communications platform for the world”.  Canva currently has 50m MAUs (100% growth YoY).

Zomato (private) has raised $250m from existing investors Tiger Global, Kora and Fidelity, valuing the food delivery app at $5.4bn.  India’s Info Edge (NAUKRI.BO) will own 18.4% following the new raise. This puts them on a trajectory towards a public listing, with revenues doubling in the past year to ~$340m.

Public.com (private) have pulled in the big guns, bringing Michael Bolton on board to ask “how am I supposed to trade without you?’’.  This comes at the same time they raised $220m from Will Smith’s Dreamers VC, Accel, Greycroft and Lakestar.  Public is trying to differentiate itself from platforms like Robinhood (private) by promoting responsible investment.  For example, education around long-term portfolios and the absence of margin accounts and options to discourage day trading.

Roku (ROKU) reported a 58% increase in net revenue in 2020 to $1.78 billion which is the 4th year in a row of revenue acceleration. In 2020, Roku added over 14 million active accounts, ending the year with 51.2 million active accounts. To put this into perspective, Roku’s U.S. active account base is now more than twice the number of U.S. subscribers of the biggest cable company. In 2020, 38% of all smart TVs sold in the U.S. were Roku TV models.

Have a great week.

Charlie and Vishal

LinkedIn or E-Mail (cnave@granitebaycap.com)


Granite Bay Capital is an innovation focussed investment company with a deep focus on the companies at the leading edge of innovation across major themes such as AI, ubiquitous computing, sustainability, automation and longevity. Any views expressed in this article are those of the author(s) and do not constitute financial advice.