Weekly Innovation Review (WIRE) #52
Latest News from the World's Leading Innovators
Headline Developments
Not the best week for Facebook (FB)! Firstly, the entire company’s ecosystem (FB, Instagram, WhatsApp and Messenger) ground to a halt for several hours. This is an extraordinary occurrence for a company of this size. Trying to keep this as simple as possible, this was an internal problem (i.e. no hacking/sabotage) with a configuration change with Facebook routers knocking out their Border Gateway Protocol (BGP) - which decides the most efficient route for data to travel across the internet (like FedEx for data!). With no BGP, Facebook was effectively sucked into a black hole - completely vanishing from the internet. Here’s another issue - Facebook staff’s keycards all run through the company’s servers, so engineers couldn’t physically access the servers to fix the issue! If you want to read into more technical details then please scan Facebook’s post here or this quite insightful piece here from Cloudflare (NET); the latter of which will be a beneficiary as millions of companies around the world look at strengthening their web infrastructure.
Whilst that was bad news for Facebook, it did result in a boon for Telegram (private) who added 70m new users during the day of the outage. Other platforms like Signal (private) also added “millions of new users” whilst Twitter (TWTR) welcomed…..well…..everyone!
Topping off a forgettable week for Facebook was former product manager Frances Haugen, testifying before a Senate subcommittee after leaking internal documents to the Wall Street Journal, outlining Facebook’s own studies that suggest Instagram and social media, in general, have negative psychological effects on young girls. In her testimony, she said, “Facebook’s products harm children, stoke division, and weaken our democracy” and for a short while during the platform’s outage, “Facebook wasn’t used to deepen divides, destabilise democracies, and make young girls and women feel bad about their bodies”.
Other Developments
Amazon (AMZN) is having a bit of a Wikileaks moment today with its game-streaming platform Twitch (private) suffering a major data breach, with hackers so far leaking data including details of creator payouts, the entirety of twitch.tv, the entire source code of Twitch, code relating to proprietary Software Development Kits (SDKs), an unreleased Steam competitor from Amazon Game Studios, internal security tools….etc. According to Video Games Chronicle, the hacker (who pulled 125GB of sensitive data) carried out the attack to “foster more disruption and competition in the online video streaming space”. Scarily, this leak is also labelled as “Part One”!
On 19th October Google (GOOG) may finally get the opportunity to launch a phone that is comparable (or even superior) to the iPhone. The event will see the release of Pixel 6 and Pixel 6 Pro, equipped with their first internally designed Arm System on a Chip (SoC) which will power a lot of the AI features such as voice recognition and on-device live captions and translation. It’s also expected to have superior cameras (1x 50MP wide, 1x 48MP telephoto, 1x 12MP ultra-wide) vs 3x 12 MP lenses on the iPhone 13 Pro Max. Reports also suggest Pixel is likely to have longer battery life and offer a faster charging time.
According to Insider, Amazon’s (AMZN) team behind the Amazon Go stores are looking to launch a range of smart fridges which will “track your inventory and purchase habits, predict what you want, and have it delivered”. It’s also reported that the fridge could track expiry dates, suggest recipes based on the fridge contents, and offer convenient ways to order more food from Amazon Fresh or Whole Foods stores. This follows a string of product releases from Amazon from smart-TVs to home surveillance and robotics - all pointing towards what Amazon hope will be a ubiquitous home ecosystem to not only compete with Google and Apple, but to surpass it due to obvious synergies across fulfilment and cloud.
Circle (pending listing) is the latest crypto target of the SEC, receiving an investigative subpoena from the regulator requesting “documents and information regarding certain of our holdings, customer programs and operations”. The subpoena came one month after Circle began offering a high-interest yield product on USDC and comes at a time where the SEC is really starting to crack down on any expansion of DeFi products in particular.
New Listings
Online course provider Udemy (UDMY) has filed to go public, with the platform highlighting headline numbers of $479m in revenues and 40% annual revenue growth generated by over 44m ‘learners’ and 201m course enrollments across over 183,000 courses over 2020. The company is split across two divisions - Consumer (DTC) and Udemy Business (UB). Impressively, the UB segment has grown from 19% of total revenues (2019) to 32% for the last six months. By comparison, Coursera has generated $190m in revenues and 49% revenue growth, with ~40% of revenue derived from business and university partners. Coursera also has a marginally better Gross Profit Margin of 60% vs 55% for Udemy.
GlobalFoundries (GFS), the third-largest semiconductor fab in the world, has released its prospectus ahead of its upcoming Nasdaq listing. The company, wholly owned by Abu Dhabi’s Mubadala Investment Co, was formed when AMD spun off their fab business in 2009 (valued at ~$1.5b) and, shortly afterwards, acquired Singapore’s Chartered Semiconductor for $1.8b. Today, the organisation pulls in ~$6b in annualised revenues with a gross profit margin of 11%, with a number of valuable contacts in the pipeline expected to pull in ~$17b in revenue over the next 4.5 years (average contract duration). As you can see below, the applications areas are varied and cover mobile devices, automotive, image sensors and networking products (to name a few).
M&A | Cap Raise | Earnings
Vietnam’s Sky Mavis (private), the developers of the hugely popular Axie Infinity NFT game (below), has raised $152m in Series B funding from FTX, Andreesen Horowitz, Samsung NExt and a number of others. The company says the added funding will allow them to “expand our reach, reinforce our legitimacy when it comes to regulatory protection, and will give us the flexibility to scale and hire aggressively without touching our AXS token reserves”. The Axie Infinity game (which is much like Pokemon) has more than 250k daily active players who each battle with their acquired Axie (which is an NFT).
This deal comes when NFT trading volume has hit $10.7 billion in 3Q21 - a whopping 704% increase from the previous quarter according to DappRadar!
Perfect Day (private), who sell a range of animal-free dairy products (i.e. ice cream, yoghurt, cheese) have raised a $350m Series-D led by Temasek, Canada’s CPP and board member (and Disney exec Chair) Bob Iger. This brings Perfect Day’s valuation to $1.5 billion. Perfect Day’s technology uses cow’s DNA sequence (from a digital database - not the cow!) as a blueprint that is inserted into yeast-based microflora (which then undergoes a fermentation process producing proteins that can be used as a base for dairy products).
Singaporean super app Grab (private) has taken a 90% share of Indonesian payments platform OVO (private), acquiring the stakes of Indonesian e-commerce major Tokopedia (private) and local conglomerate Lippo Group (private). This was catalysed by Tokopedia’s recent merger with Grab rival Gojek, the latter of which owns the Indonesian payments platform GoPay (thus triggering a requirement from regulators for the mergedco to spin-off one of the services as part of a broader restructure).
Zoom (ZM) have been forced to abandon their acquisition of Five9 (FIVN) deal after shareholders in the latter rejected the deal (helped by proxy advisor ISS recommending a no vote). Shareholders were not satisfied with the scrip deal (worth ~$14.7 billion) as it was only reflective of a 13% premium to the last traded price. Furthermore, a 25% drop in the Zoom share price further diluted the value, thus forcing the hand of shareholders. According to Zoom’s Eric Yuan, the deal “presented an attractive means to bring our customers an integrated contact centre offering”....but ït was in no way foundational to the success of our platform, nor was it the only way for us to offer our customers a compelling contact centre solution”.
Have a great week.
Charlie
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.