The Midwest: A New Technological Frontier

As reported in TechCrunch, the Midwest is no longer just a flyover space for high tech proprietors and investors flying between Silicon Valley and New York city. The Midwest has become a bastion for high tech startups in addition to the regions more traditional manufacturing entrepreneurship. Mark Kvamme, a co-founder of the Midwest’s largest — and most recent — venture investment firm, Drive Capital, recently said that, “In the last five years there have been 52 companies [from the Midwest] that have either gone public or been acquired for north of $1 billion." Recently, Sprint invited a group of 10 mobile-health related startups to its accelerator program based in Kansas City. Earlier in March, the Digital Sandbox KC released information stating that it had raised $7 million in follow-on funding for graduates of its accelerator program. Regardless of previous geographical prejudices, the Midwest is now a must visit for tech investors looking for the next big thing. Kansas City continues to lead by example through amazing entrepreneurship programs like Google's Fiberhood and the Kauffmann Foundation's numerous initiatives. Read the entire story from TechCrunch here.

Sequoia Funds Mobile Marketing Automation App Kahuna

After hitting it big with WhatsApp, Sequoia announced $11 million in Series A funding for Kahuna, a startup that helps marketers test and automate their push notifications. Kahuna is only a few months old, launching in the Fall of 2013. Its customers now include Yahoo!, QuizUp (another Sequoia portfolio investment), 1-800 Flowers and more. Deal makers will be keeping a close eye on Sequoia after they hit it big with WhatsApp. Do they have the perfect formula for choosing start up apps?  Probably not.  Although their team is undoubtedly talented, there are too many factors that go into the success or failure of young companies such as Kahuna to make batting 1.000 a reality. However, another Sequoia holding called QuizUp has taken the world of trivia by storm, creating an addictive, simple, 1-on-1 trivia game where people from across the world can battle wits via their mobile device in selected categories that vary from math to video games from the 90s.  It is an incredibly addictive game.. so maybe Sequoia is on to something. Click here to read the original article.

Merge or Die: Are Mergers the New Growth Catalyst in a Sluggish Economy?

As 2014 begins to take shape, many in the M&A industry are worried about a repeat of 2013, when conditions seemed ripe for deal making but those deals failed to execute.  Other than several mega deals, 2013 was largely disappointing. For context, world wide M&A was $4.27 trillion in 2007 on more than 40,000 transactions. Only a year later, 2008, we saw that amount fall to $1.9 trillion. Reuters estimates that private equity firms ended 2013 with $1.074 trillion in dry powder. Bain Capital has postulated that there is $300 trillion in capital laying dormant around the world that could be used for M&A. Capital is also still cheap, as interest rates remain relatively low. So, with all of these things pointing towards more deals being executed, when will it begin? In a recent article from Institutional Investor, Robert Teitelman postulates that there could be a "new normal" in terms of how companies grow. In a low growth global environment, he says, acquisitions are one of the only ways to increase the size of your business. US GDP was a healthy 3.2% in Q4 2013 after being 4.1% in Q3, but other parts of the world are not showing that same growth. Most expected M&A activity to be back to pre-crisis levels by now, considering the health of the overall stock market and US economy. However, it has only rebounded to mid 2000s levels. Chris Ruggeri is a principal in Deloitte’s financial advisory unit and leading manager of the firm’s M&A practice. She summed up the lack of deals by saying, “We’ve been sort of stuck. Confidence fuels growth. And growth fuels M&A. To get growth, you need confidence. It’s not there.”  Let's hope the confidence returns and deal makers start pulling the trigger, or 2014 could be a repeat of 2013.

Mobli Receives $60M in Funding from América Móvil

November 6, 2013 11:18 by Clayton Reeves in Telecom, Venture Capital  //  Tags: , ,   //   Comments (0)
It's getting crowded in the mobile video and picture sharing space.  As reported in TechCrunch, Mobli, an Israel based picture/video sharing service and competitor to apps like Instagram, received a $60 million investment from América Móvil. América Móvil, if you remember, is the Latin American telecom giant led by billionaire Carlos Slim. The strategic investment will provide Mobli with access to América Móvil's millions of mobile users. In addition, the funds will allow Mobli to introduce a new "visual search engine." “Mobli has developed a remarkable technology and this strategic alliance will allow América Móvil to bring value added experiences for its users throughout the Americas,” Carlos Slim recently said. This isn't the first high profile backing Mobli has received - celebrities such as Leonardo DiCaprio, Tobey Maguire, and Serena Williams have already invested in the company, which is now valued at around $1 billion. Read more from TechCrunch here. Snapshot of mobli milestones: Source: CrunchBase

Increasing Seed Valuations Making Series A Rounds Difficult

October 18, 2013 08:55 by Clayton Reeves in Capital Markets, Economy, Financing, M&A, Private Equity, Venture Capital  //  Tags: ,   //   Comments (0)
As reported by Pitchbook, seed valuations have increased 62.5% from 2009 through the first three quarters of 2013 for a cumulative annual growth rate of 13.8%. Meanwhile, Series A valuations are increasing, but at a slower rate, from $6.8 million in 2009 to $8.9 million. This 30.8% growth represents an annualized rate of 10.3%. Inflated seed-stage valuations may be having an effect on a startup's ability to raise funding in the Series A round, as seed investors want to see appreciation in their investment, while Series A investors believe the seed valuation was too high. Source: Pitchbook As seed-stage investments increase, companies are finding it more difficult to raise Series A financing.  This is at least partly due to a shift in VC investment philosophy, which has seen the share of seed-stage investments grow as a proportion of total VC investments over the last three years.  VC firms are trying to pick out winners earlier, and get them for a reasonable price.  The competitive bidding, however, is causing those valuations to increase.  It will be interesting to see how this plays out over the next several years, and if the Series A crunch will continue. Read the entire article here.

A Busy Week in M&A!

As reported by Daily Finance, deal-makers have wrapped up three multi-billion dollar acquisitions so far this week as the markets get a late start thanks to Labor Day. This week has proven to be a busy one in terms of billion+ acquisitions, as three have been wrapped up already. Microsoft, Verizon and lesser known Jarden (consumer products) all completed deals with price tags over the billion dollar mark. Microsoft agreed to purchase Nokia's cellphone business for $7.2 billion in a move that has been anticipated by many. Controlling the business allows MSFT to make a more unified and coordinated challenge to Apple, Google and Samsung in the mobile market. This will allow the company to leverage their Windows platform, which has already gained more traction in mobile than many expected (although the desktop version has left much to be desired). Additionally relevant, and perhaps less obvious, is what impact the move will have on Microsoft's executive team moving forward. MSFT has "acquired" Nokia's CEO, Stephen Elop in the deal; Elop is a proven leader and will automatically be the top contender to succeed Steve Ballmer. Verizon's deal was more of a self purchase, as it completed the purchase of 45 percent of Verizon Wireless held by British Telecom giant Vodaphone. At a price of $130 billion, the cost was steep. However, this gives Verizon Communications full control of the company and its 100 million subscribers. Finally, in a deal that smells incredible, Jarden purchased privately held scent seller Yankee Candle, best known for its candles. That deal is valued at almost $1.8 billion. What does this mean for the wider market? It is difficult to tell. September is usually a bad month for stock markets, which could make M&A deal makers skittish. However, mega-deals of this nature are a good sign that activity in the second half may pick up as predicted. Read the entire article here.

Women Venture Capitalists: Taking a Bigger Piece of the Pie

Women's positions, or lack thereof, in powerful financial roles is often a contentious topic. However, in terms of venture capital, it seems that there is a trend towards more involvement from the fairer sex. According to Pitchbook, companies with at least one female founder have been increasing their share of venture rounds every year for the last 10 years. This trend is material; 10 years ago, women-founded companies represented a meager 4% of all venture deals in the United States, but in 2013 we have seen that number rise to 13%. Source: PItchbook Men continue to dominate the arena, but the trend is positive. Women own 28.2% of all businesses in the US, according to The Center for Women’s Business Research. So, the venture percentage is still not as high as it should be, in order to be proportionate to gender based ownership. However, in certain sectors, women are dominant. Through the first half of 2013, women-founded companies comprised 40% of venture deals in the retail space and 33% in the consumer services space.  Both of these figures represent high water marks for the space. Hopefully these figures will continue to increase, as diversity is always a catalyst for innovation and new perspectives. Read the entire article here.

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