Nairobi, the capital of Kenya, has a nickname: “Silicon Savannah.” The origins of the moniker go back to 2007, when the Kenyan telecom company Safaricom launched M-Pesa, the mobile payments system that preceded both Square and Apple Pay. Kenyans were fast to adopt M-Pesa; by 2013 it had 17 million users in its home country, and important voices were saying that “paying for a taxi ride using your mobile phone is easier in Nairobi than it is in New York.” Shortly after M-Pesa’s arrival, four technologists launched Ushahidi, a platform that let users digitally map and report violent outbreaks happening during the election crisis. It was one of Africa’s first apps.
In Kenya, mobile payments are rapidly replacing cash transactions.
Innovation tends to beget innovation, so over the past few years a handful of startup incubators have been operating in Kenya, to attract and nurture local talent. The Citi Mobile Challenge is one such accelerator. Citi runs these programs globally—the bank has connected startups with investors in the United States, Europe, Latin America, and Asia Pacific, in addition to the Middle East and Africa—but Kenya’s proclivity towards mobile payment solutions makes it a fitting region for Citi’s Mobile Challenge, whose self-stated mission aims “to inspire developers to reimagine mobile banking.”
That idea is top of mind for Kenyan entrepreneurs, too. “The problem that we’re trying to solve is really around how to get pools of capital in the hands of small- and medium-sized enterprises that really need capital, but couldn’t find it by going through traditional avenues like banks,” says Ivan Mbowa, a co-founder of Umati Capital. Umati’s solution is typically Kenyan, in that it relies on mobile technology. The company, founded in 2012 by Mbowa and Munyutu Waigi, creates supply chain financial technology that links small and medium enterprises with suppliers, quickly, and fairly. Umati calls itself a financial institution, but differentiates itself from a bank in that its product is an Android app that can crunch data about small-scale suppliers and buyers to facilitate purchases and payments more easily.
Summary: US and Asia lead in developing Micro-VC ecosystems to generate products that are innovative spurring community drive; at this point, Europe is lacking in it’s development in the Micro-VC funding markets. It is concluded that Europe has less Micro-VC funds than the rest of the world.
A.io Take: Generating more Micro-VC funds in Europe could be an ailment to the slowing markets of today. From a management position the larger VC funds could be “soaking up all the sun” leaving Micro-funds shaded from their potential growth. However, great products have the potential to catch fire and develop into titans if they were only offered opportunities for funding at the initial stages. That is, small-time VC funds should play an integral role in stimulating the market, creating competition, and developing open source research.
A lot of activity can be seen in the Insurance Technology sector at the moment. Investment volume grew by 241% from 2014 to 2015, and 2016 show no signs of a slowdown so far. Startups seeking to change the insurance industry are appearing in every corner of the world. So are corporate investment arms, accelerator programs, and Venture Capital firms. For us it was time to take a step back and try to get an overview of what’s going on….
Investment: from zero to one
Let’s quickly take a look at investment into Insurtech. Nothing was really going on until 2014. From 2013 to 2014, investments in Insurtech grew by 218%. Investment continued to rise in 2015 with investment up 241% from 2014. It is difficult to see how 2016 will play out, but after a strong first quarter it seems like Insurtech has come to stay.
InsuranceTech investment and deal volume from 2011–2016
Insurance Companies are showing interest
On the investor side we see an increased interest from corporates, with the most recent entrants being Aviva with a 100 million pound investment fund, and AXA Strategic Ventures with a €230 million fund. Around 87% of the investments made by insurance companies are deployed in Insurtech startups, while the remaining 13% are invested into non-insurtech statups. Among the most well known recent deals are USAA’s participation in the €147M investment round in Prosper, the P2P lending platform, and Pingan Ventures participation in the €434M investment in Lufax.com.
The ecosystem
Investment is growing, and so is the ecosystem. Historically, healthcare is the space where most of the activity have been observed. However, this seems to be changing rapidly. In 2014, 70% of all Insurtech deals were health, and only 30% non-health. In 2015, 51% of the deals were in health, and 49% in non-health.
With no further ado, here is a snapshot of the space as we see it:
Twitter buying Magic Pony is a sign of the UK's AI talent (Source: Getty)
With the news that Magic Pony has been acquired by Twitter, we are witnessing a crucial turning point - five of the world’s biggest technology companies have now purchased UK-based Artificial Intelligence (AI) companies.
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Over the coming days and weeks, we will undoubtedly read plenty of thought pieces pointing to the UK as the epicentre of artificial intelligence technical talent, with questions asked about how the UK is creating skills the tech giants cannot yet find in their own Silicon Valley backyard.
However, I am more excited about looking forward and considering what these acquisitions mean for the European technology market from a global perspective.
I also want to consider what the impact will be of these ground-breaking AI technology teams staying in the UK – which has been the case with Evi based in Cambridge, DeepMind in King’s Cross and now Magic Pony in Soho.
In fact, I would be happy to go as far as to say that with the news today, we are witnessing the beginnings of Europe’s very own Silicon Valley-esque tech specialism. Of course we are currently celebrating the fifth anniversary of Tech City and London Technology Week is taking place, but in terms of leading the way in building internationally renowned, genuinely technological innovation, I think today’s AI development marks an exci
The company looks beyond cereal with a new venture capital fund
Venture capital investment in food startups has been on the rise in recent years, with companies sinking millions into meal kits, food delivery services, and other new products. Kellogg's latest project is proof that the trend shows no sign of slowing.
On Monday, the cereal giant announced the launch of a new $100 million fund which will invest specifically in food projects. As Fortune reports, "the idea is to take minority stakes in those newer, smaller firms to help support their growth — mainly through the expertise Big Food makers like Kellogg can bring to packaging, marketing and distribution."
AngelList, an online platform that matches high potential startups with investors and employees currently indicates that 578 accelerators are in operation, up from one in 2005. Why the enormous increase in the number of accelerators in the United States over the past decade?
What’s Behind the Growing Number of Business Accelerators in the U.S.?
Accelerators — organizations that provide early stage companies with mentoring, capital and access to investors in return for an equity investment — are an organizational innovation. They provide a better way to manage the financing of high potential early stage businesses than previous alternatives.
This innovation solves several problems with the process of investing in early stage companies. First, business accelerators facilitate investor diversification. Many investors want to put smaller amounts of money in a large number of companies. However, many investors do not have the means to identify and evaluate potential investments in a large number of small start-ups. By investing in accelerator funds, which, in turn, own shares in the startup companies themselves, early stage investors can invest in a wide variety of early stage companies at relatively low cost.
Accelerators also make it possible to structure investments in startup companies as real options. Real options provide the right, but not the obligation, to make future investments. Because no one knows ahead of time which start-up companies will succeed and which will fail, investors would like to make small investments in many companies to see how they develop. For those whose future seems most promising, the investors would like to have the right, but not the obligation, to make additional investments. Accelerators provide that opportunity to early stage investors.
Accelerators make it easier and cheaper for investors to identify businesses in a wide variety of locations. Because business accelerators accept applications from companies from anywhere who then relocate to the accelerator for a few months, accelerators provide their limited partners with the opportunity to find promising companies in places where they do not have a network of contacts.
These organizations also make it easier for investors to learn about compani
How Much Can InsurTech Startups Really Disrupt Insurance?
InsurTech startups are Silicon Valley's newest darlings, but they aren't disrupting insurance. They're just varnishing and refining the experience. Maybe that will matter more?
Sometime in the 1300s a merchant in Genoa figured out he could make money by betting on cargo being lost at sea. Thus the modern insurance industry was born. Some sophistication and refinement aside, the basic insurance model hasn’t changed much since.
But don’t forget: we now live in the age of disruption! Startups in the insurance industry, or the “insurtech” sector, have seen new highs in funding this year, largely on the promise of revolutionizing the very way we think of insurance. Insurance, however, like most of the financial industry, may prove less disruptive than many founders and hypesters want you to believe. The core principles are built on relatively straightforward math, and math is hard to disrupt.
Ethereum cryptocurrency drops $500 million with “smart contracts” model in question.
News emerged Friday that The DAO, a venture capital fund operating through a decentralized blockchain inspired by Bitcoin, had been robbed of more than $60 million worth of Ether digital currency, or about 1/3 of its value, through a code exploit. The DAO, which raised more than $150 million in May, had been intended as a showcase for the potential of Ethereum, a blockchain platform for cloud-based financial agreements.
The nature of the hack was outlined in an open letter claiming to be from the attacker, posted to Pastebin this morning. In part, it reads:
I have carefully examined the code of The DAO and decided to participate after finding the feature where splitting is rewarded with additional ether. I have made use of this feature and have rightfully claimed 3,641,694 ether, and would like to thank the DAO for this reward.
In a blog post yesterday, Vitalik Buterin, the creator of Ethereum, described the hacker’s tactic as based on a “recursive calling vulnerability” in The DAO’s code.
According to one member of the development team who spoke with CoinDesk, the DAO will now be shut down, with funds to be returned to investors. An alternative would be the creation of a ‘fork’ that would nullify the transactions initiated by the hack.
But the damage done by the exploit goes far beyond direct investors in The DAO. The market for Ether cratered on news of the theft, with the price of the digital currency dropping from a peak of over $21 yesterday to around $12.93 as of this writing, as tracked by CryptoCompare, on surging volume. That drop wiped out more than half a billion dollars of Ether’s market value.
The severity of Ether’s drop reflects an existential crisis triggered by the hack. The DAO has been touted as the first major implementation of a Decentralized Autonomous Organization, a financial organization underpinned by so-called “smart contracts,” written in computer code and enforced through a blockchain which controls investors’ digital currency holdings.
Fintech is talked about as one of the most exciting segments of technological disruption right now, but after the implosion of so-called UK unicorn Powa Technologies, and trouble at high profile US online lenders Lending Club and Prosper, there’s been something of a sobering in the space. While those examples all face particular issues, they are also a reminder of the huge challenges facing companies trying to disrupt this industry.
On a panel at The Europas in London this week, TechCrunch’s Mike Butcher asked the co-founder and CEO of venture capital firm Mangrove Capital Partners, Mark Tluszcz, about a piece he wrote in the Financial Times called ‘Investors should ignore the hype about fintech’. Tluszcz said that looking at the evolution of the industry, there was “no question” London is the number one place to be if you’re building a fintech startup. However he says that hype risks overshadowing other exits in the city and that “fintech has delivered more hype than returns” so far.
He argued that while there has been promising innovation around specific verticals in finance, there hasn’t been a single business that turned the industry on its head in the style of Uber, Skype (in which Mangrove was an early investor) or WhatsApp in their respective fields.
“I am not a sceptic, I have just not yet found company that is truly disruptive,” said Tluszcz, speaking at the annual conference. “In today’s current crop there are a lot of great businesses but there is not one great disruptor.
“Investors are financing sub-sets of finance like transferring and lending. They are all great businesses but in isolation they become medium-sized, not transformational. The question remains – can fintech companies turn into big large scale businesses?”
Valuation games
TransferWise is one of the companies whose rapid growth over the past few years has helped drive hype around the London fintech scene in particular. Its co-founder Taavet Hinrikus, speaking on the same panel, pointed to the challenge a new brand faces when it tries to break into the tightly-knit world of finance and convince customers to start trusting its service over a brand they are familiar with. For now, at least, the disruption of finance by technology is happening by sector.
“Finance is a notoriously hard industry,” said Hinrikus. “You have to think about how to build your brand and trust over the long term. It’s not for the faint hearted.”
“When you look at the fundamentals of our cost base compared to banks and the speed at which we can move we are building something that is cheaper and faster but that is also much easier to use. We have more than 5% market share in the UK and however good your marketing is, ultimately it is useless with a s*** product.”
TransferWise is also a fintech unicorn, meaning that it is valued at USD1 billion – a figure that was seized on with maniacal fervour by many in the tech world as a benchmark for success over the past few years. Hinrikus is notable for having always shied away from talks about valuations and price tags and when asked whether that kind of thing is important to him his response was just: “No.”
Speaking on the panel Tluszcz echoed a warning that is now gaining momentum across the industry: that aiming for a billion-dollar valuation is the wrong target when building a company, distracting entrepreneurs from the long term goal.
“Hailing unicorns and billion dollar valuations is like celebrating winning FA cup before playing the final,” says Tluszcz. “You want to build a company you sell or take public.”
Speaking on the same panel was Passion Capital partner and the UK government’s special envoy for fintech Eileen Burbidge. She countered, however, that it is worth acknowledging that compan
China Renaissance CEO and
founder Fan Bao.Courtesy of China
Renaissance
China is the single biggest story in investment banking right
now.
From the highly-acquisitive Chinese companies driving the
mergers-and-acquisitions market to the plethora of growing
private startups that could shape the future of the initial
public offering market - every deal maker on Wall Street
is scrambling to "get in on China."
China Renaissance CEO and founder Fan Bao is already at the
heart of this story.
His recent accomplishments include the $1.78 billion US
listing of JD.com, the $286 million IPO of microblogging app
Weibo, and single-handedly pulling off the merger of the
ride-hailing rivals Didi Dache and Kuaidi Dache.
After seven years in banking and
a short stint with a Beijing-based startup, Bao founded China
Renaissance in 2004 to advise the flourishing community of
Chinese tech entrepreneurs seeking high-quality advice that were
too small to attract the attention of bulge-bracket firms.
Business Insider caught up with Bao in San Francisco this
week for his first US interview. He was in town meeting with the
Silicon Valley investing community and speaking at the 2016
Bloomberg Technology Conference.
Venture capital firm Draper Esprit raised over £100 million in a
rare VC stock market listing on Wednesday.
The London-based company, which has invested in healthy snack
food startup Graze and fashion website Lyst, raised a total of
£103 million across two stock markets: The London Stock Exchange
and The Irish Stock Exchange.
Shares were issued at 300 pence each and climbed to highs of 312
pence. They were trading at 306 pence each at market close on
Thursday.
Draper said it plans to use the proceeds of the listing to
provide development and expansion capital to companies in its
existing investment portfolio.
The move is unusual given that VCs typically raise money through
a limited partnership (LP) model, where the LPs entrust the VCs
to put their money into growing technology companies that will
significantly increase in value over time.
Simon Cook, chief executive and cofounder of Draper Esprit, said
in a statement:
Our motivation for evolving our Venture Capital business model
was twofold. Firstly, we wanted to be able to invest for longer
in our emerging companies and to be able to build bigger stakes
as companies remained private for longer periods, capturing
more value for shareholders. Secondly, we wanted to further
democratise funding for entrepreneurs.
Traditionally the Limited Partnership model in Europe has
restricted who can invest in venture capital backed companies
and many growing technology companies are not accessible to
institutions or public investors until they go public. Now
everyone can participate in the growth of VC backed companies
from their earliest stages through series A and B to their
success in the later stages up to and including their IPO.
Draper said it has been involved in investing over $1 billion
(£705 million) into more than 200 technology businesses and has
been linked to businesses with a total aggregate value of over $8
billion (£5.6 billion), with an exited value of over $6 billion
(£4.2 billion).
It may be exciting to get the attention of venture capitalists who can propel your company forward. But just getting in the room with them is far from a guarantee that they'll write you a fat check. You need to be extremely well-prepared before you make your pitch.
Take it from someone who knows: Brad Feld, the co-founder of venture capital firm Foundry Group and startup accelerator Techstars, has heard thousands of pitches in his long ca
Avec Impact, Nokia entend adresser une solution de gestion des objets connectés aux fournisseurs de services, entreprises et gouvernements qui veulent déployer rapidement de nouveaux services.
Nokia renforce son catalogue d’offres dédiées à l’Internet des objets (IoT). L’équipementier vient d’annoncer le lancement de IMPACT (Intelligent Management
Unlike its tech competitors, Apple Inc. doesn’t have a venture-capital arm. The reason goes to the core of Apple itself — it’s all about secrecy.
At least that’s what experts say, after Apple
AAPL, -0.33%made a $1 billion investment in Didi Chuxing, nearly double the total 2015 spending of the largest corporate venture arm, with no signs of forming a separate investment vehicle. And while Apple has several advantages which imply it never needs to form one, a venture-capital arm might benefit the company’s tax bill if Didi sells or goes public.
Several experts say that if Apple did have a venture-capital arm, the investments it made could give the public an indication of Apple’s future strategy and interests.
Axa ne veut pas passer à côté des nouveaux usages en matière de numérique. Quitte à devoir aller chercher les innovations hors de son paquebot de 160 000 collaborateurs et de plus de 99 milliards d'euros de chiffre d'affaires en 2015. Pour cela, le groupe d'assurance français a lancé l'an passé son fonds d'investissement AXA Strategic Ventures (ASV). Doté d'une enveloppe de 230 millions de dollars, sa vocation est de repérer et de prendre des participations dans des start-up présentant un intérêt pour les métiers d'Axa.
Concrètement, cela se traduit par des tickets moyens de 500 000 à 2 millions d'euros pour l'amorçage, et de 2 millions à 5 millions d'euros en phase de croissance. Parmi ses derniers investissements figure notamment la start-up allemande Medlanes qui développe une plateforme permettant aux patients d'entrer en contact avec des professionnels de santé pour leur faire part en ligne de leurs premiers symptômes, ou encore la société britannique Biobeats, spécialisée dans les données de santé… l'un des principaux enjeux du géant de l'assurance.
Près de 20 millions d'euros investis
« L'assureur, ce qu'il doit faire, c'est connaître le risque de ses clients, l'anticiper, et le gérer de plus en plus de manière préventive. Toutes les techniques – que l'on appelle Big data – de collecte et d'analyse de la donnée, c'est au cœur du métier de l'assurance, et donc au cœur de notre stratégie d'investissement », détaille François Robinet, managing partner chez ASV.
Aujourd'hui, Axa Strategic Ventures, qui dispose de bureaux à Paris, Londres, New York et San Francisco, compte plus de 18 projets dans son portefeuille, qui représentent près d'une vingtaine de millions de dollars d'investissement. Au-delà de la donnée, on retrouve aussi des start-up spécialisées dans le crowdfunding ou encore le blockchain.
Interview de François Robinet, managing partner chez AXA Strategic Ventures :
philosophy behind all of Andreessen Horowitz's investments. But the Silicon Valley VC firm has a few specific areas of tech that are lighting up its radar right now.
With $1.5 billion in a new fund to invest in startups, managing partner Scott Kupor told Business Insider about a few areas that the firm is super excited about:
Machine learning and artificial intelligence: "The applications are all across the board," Kupor said. Chris Dixon led the firm's investment in Comma.Ai, a self-driving car and AI startup. Now it's looking for more companies that are using machine learning to drive decisions.
Virtual reality: Andreessen Horowitz already made one successful investment in Oculus, which sold to Facebook for $2 billion. Now, it's looking at companies that are making VR content. "That's an area where we've been spending a lot of time, and you'll see us do more there now that the platforms are kind of established," Kupor said. Beyond content, the firm is also looking for companies that are applying virtual reality to industries in ways it hasn't seen before.
Enterprise infrastructure: "We continue to think we're at the early stages of what's really the transformation happening of enterprise IT. So you're going to be seeing us doing a lot more storage companies, networking countries, infrastructure applications ... All this stuff where you have enterprise buyers on the other end," Kupor said. Andreessen Horowitz added Martin Casado as a general partner in February to help lead its investments in the enterprise space.
Financial services: Historically, this hasn't been a big space for the firm, but it brought on Alex Rampell to oversee its investments in fintech. "You'll see us do things around the lending space, potentially insurance, other things that are happening in financial services we think is really interesting," Kupor said.
While Kupor called out these four areas specifically, it doesn't mean that the firm is not interested in any company that falls outside the categories. The firm is still looking for entrepreneurs with big ideas that have the software to back it.
"For us, we're always looking for companies where software is the differentiating factor of the business," Kupor said. "It's dangerous in this business to red-line areas."
Salesforce Ventures, the VC arm of the $50 billion cloud software maker, has suddenly cut back its spending, after establishing itself as one of the most aggressive corporate VC firms in the past couple years.
According to Salesforce's latest quarterly filing, the company only spent $22 million in "strategic investments," which is mostly tied to Salesforce Ventures, marking the lowest spend since the October 2014 quarter.
It's a big step down from the same quarter of last year, when Salesforce spent $144.4 million in strategic investments, and a total of $366.5 million in all of 2015.
The slow down in Salesforce Ventures' spending is yet another sign of a cooling VC environment that's been developing since late last year. Investors have become much more conservative with their money and startups are finding it harder to raise funding at their intended valuations. Instead, big companies like Salesforce have shifted their focus to the M&A market, accelerating their pace of acquisition in both the private and public markets.
"I think it’s safe to say that the pause in valuations at the end of last year, and the pullback in valuations at the beginning of this year have simply left fewer investment opportunities for VCs, crossover funds and investment arms of public companies like Salesforce," market research firm Stifel's analyst Tom Roderick told Business Insider. "The appetite just isn’t really there right now."
Growth hits the wall
Salesforce's strategic spending started to taper off in the third quarter of 2015. After spending $144.4 million and $150.4 million in the first two quarters of 2015, it dipped to $30.3 million and $41 million in each of the two subsequent quarters.
In the first quarter of this year, Salesforce not only reduced its strategic investments to the lowest level in nearly 2 years ($22 million), it also saw the fair market value of its portfolio companies drop for the first time sequentially. The growth of its fair market value hit the wall this quarter at $706.9 million, after going from $215 million in the July 2014 quarter to $714.1 million in the January 2016 quarter.
Some of the change has to do with the liquidation of YOUR SL and Steelbrick, two companies Salesforce had invested in and bought recently. Since they've been acquired, they're no longer included in the fair value of Salesforce's strategic investments.
But a big part of it likely has to do with the broader market downturn. Some of Salesforce's largest portfolio companies, including Dropbox, DocuSign, and Evernote, saw some form of mark downs by hedge fund investors in recent months, a sign that they may not be growing as fast as they used to. Salesforce works with internal and third party accounting firms to assess the fair value of its private investments, but also takes into account the market valuations by other investors.
In fact, Salesforce CEO Marc Benioff hinted at a loss of appetite for large size funding, when he said in an interview late last year that "unicorn" startups, valued at over $1 billion, "manipulated the private markets" and that he's no longer investing in them because he thinks "it's a bad thing."
Funds targeting $100mn or less see six consecutive years of increased fundraising, and account for 69% of all venture capital vehicles on the road
Since the Global Financial Crisis (GFC) when an all-time high $9.3bn was raised in 2008, micro venture capital fundraising has seen six consecutive years of growth, increasing from $6.5bnn in 2009 to reach $8.5bn in 2015. Furthermore, over the past decade micro venture capital funds have consistently represented the majority of VC funds reaching a final close; micro-sized funds accounted for 61% of all venture capital funds to close in 2015 and more than two-thirds (67%) the previous year. So far in 2016, 169 micro venture capital funds have reached a final close raising a combined $2.4bn.
The micro venture capital fundraising market is becoming increasingly competitive with 501 vehicles currently out raising, targeting $23bn in investor capital. The sector currently accounts for over two-thirds (69%) of all VC funds in market and a quarter of the aggregate target capital. Of these micro venture capital funds 68% are targeting $50mn or less with the remaining 32% seeking between $51-100mn.
Micro Venture Capital Funds – Other Key Facts:
Activity by Region: The US remains the primary geographic focus for the majority of (58%) of micro venture capital funds in market, followed by Asia (19%) and Europe (11%). Asia-focused funds, however, have seen more funds (60) reach a final close than the US (54) in 2016 YTD.
Fundraising Success: 2016 stands to be the fifth year in which the proportion of funds reaching or surpassing their target size has grown. So far this year, 75% of micro venture capital funds have achieved or exceeded their target size, an increase from 49% that did likewise in 2012.
Micro VC Spectrum: The ten smallest venture capital funds in market are each targeting $1mn-3mn, of which nine intend to invest principally in North America. Conversely, 74 funds are each looking to raise $100mn, collectively accounting for 32% of aggregate targeted capital by micro venture capital funds.
Average Fund Size: Since the GFC, the average fund size of micro venture capital funds closing has not exceeded $41mn nor dipped below $33mn, w
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