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Archive for July, 2015

eBay just lost the part of its company that was driving all its growth

On Friday, eBay and PayPal are splitting back into two separate companies. PayPal will begin trading on the Nasdaq under the ticker symbol PYPL, the same symbol it traded under before eBay bought it back in 2002.

So what are eBay’s prospects now? According to this chart based on eBay’s earnings reports, compiled for Business Insider by Statista, they’re pretty grim. eBay’s payments business — PayPal — has been responsible for most of eBay’s revenue growth since 2012, and it has been responsible for nearly all its revenue growth this year.

The values on this chart show the percentage of eBay’s annualized revenue growth that can be attributed to each segment. For example: In Q4 2014, eBay’s revenue grew by $396 million compared with Q4 2013. Of this $396 million, PayPal contributed $327 million, marketplaces contributed $33 million, and the enterprise division contributed $36 million. That means PayPal was responsible for 82% of eBay’s annualized revenue growth during this quarter, marketplaces for 8%, and enterprise for 9%.

eBay announced earlier this week that it was selling its enterprise business to a consortium led by the private-equity firm Permira for $925 million. That will leave eBay with only its marketplace business — which has shrunk for the past two quarters.

071715 cotdStatista

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The Update to the Bidding Process for “EDGEhome/GreenEdge Technologies – Patent & Product Competitive Advantages ” and “Asset Purchase Agreement”

Further to Gerbsman Partners previous e-mails and sales letter of June & July, 2015, regarding the sale of certain assets of GreenEdge Technologies, Inc., (GreenEdge), GreenEdge has outlined below the “advantages of why companies in the home automation market should be reviewing and acquiring the GreenEdge IP/Patents.

I also attach the form of agreement (“APA”) that we will be requesting the bidders for certain Assets and Intellectual Property of GreenEdge execute and deliver in connection with such transaction. The GreenEdge Assets have been previously supplied, as outlined in the GreenEdge sales letter.

Gerbsman Partners has been retained by GreenEdge Technologies, Inc. to solicit interest for the acquisition of all or substantially all of GreenEdge’s assets, including its Intellectual Property (“IP”), in whole or in part (collectively, the “GreenEdge Assets”).

Any and all the assets of GreenEdge will be sold on an “as is, where is” basis and will be subject to “The Bidding Process for Interested Buyers”, outlined below.

Prior to the bid date of July 31, 2015., I would encourage all interested parties to have their counsel speak with Robert O’Connor, Esq. of Wilson Sonsini. He is available to discuss any questions or comments of a legal nature relating to the transactions contemplated by the APA. 415 947 2099 office, 415 279 6579 cell roconnor@wsgr.com

 

“Advantages of why companies in the home automation market should be reviewing and acquiring the GreenEdge IP/Patents”
1) If you are a company with legacy/low tech products and you want to make smart products, you will be interested in EDGEhome’s assets because:
a.  EDGEhome’s patents will give you offensive and defensive smart home/IoT IP opportunities
b.  EDGEhome’s mature iOS and Android user interface and cloud service give you a fast track to market with excellent usability and rich features
c.  EDGEhome’s wireless transceiver module allows you to quickly make almost any device smart
d.  If you make regular lighting / switch / outlet devices and you need smart devices, or if you want to go in this direction but you don’t have these devices, EDGEhome allows you to quickly and efficiently deliver them to market without developing them yourself
2) If you are a company that makes smart switches, lighting controls, and/or outlets, or you are a company that wants to develop these types of devices, you would be interested in EDGEhome’s assets because:
a.  EDGEhome’s patents protect valuable use cases including electronic tamper-resistant outlets, dimmable outlets, and outlets that intelligently switch things off to save electricity. These provide a potential significant royalty generation opportunity, and significant defense against litigious competitors in the smart home / home automation / IoT marketplace.
b.  EDGEhome’s devices all measure electricity usage point-by-point and control individual outlet plugs individually, enabling energy monitoring and energy savings in a compact package
California Title 24 compliance for plug-load intelligent control provides powerful and valuable use cases for commercial, hotel, and industrial customers in California and beyond
c.  EDGEhome’s devices are designed to be low cost with high capability, giving you a potential cost advantage and opportunity for high gross margins
3) If you are a large, established home automation system provider, you will be interested in EDGEhome’s assets because:
a.  EDGEhome’s patents provide offensive and defensive opportunities and potential royalties versus other established competitors in the home automation space, including historically litigious competitors. Patents protecting electronic tamper resistance for electrical outlets, dimmable outlets, and outlets that control plugs individually will be of particular interest.
b.  EDGEhome’s market-tested, complete, turnkey, electrician installed, cost-effective, and extensible smart home system gives you an instant mid-tier offering that opens up the mass market and base-feature opportunity in new homes, without cannibalizing your established brand.
c.  EDGEhome can easily inter-operate with your existing systems and devices.
d.  EDGEhome’s energy monitoring and point-by-point control gives you the opportunity to get demand-response revenue from electric utilities, revenue from big-data, and California Title-24 compliance required for businesses, hotels, and industrial buildings.
4) If you are an established consumer electronics manufacturer who has not yet delivered a smart home / IoT system, you will be interested in EDGEhome’s IP because:
a.  EDGEhome’s patents give you offensive and defensive smart home / IoT capabilities to slow competitor actions, to deliver unique capabilities, to defend yourself against smart home competitors with a larger patent portfolio, and to generate revenue from royalties
b.  EDGEhome’s turnkey, complete, easy to use, and extensible system can jump-start your entry into the smart home / smart building market without having to develop the system and devices yourself
c.  EDGEhome’s modular transceiver allows you to quickly integrate your devices into the system
d.  EDGEhome’s temperature, energy usage, and voltage/current waveform sensors enable powerful use cases of safety & security and convenience when coupled with your existing devices
5) If you are an existing smart device provider, and you want to deploy a system or want to add smart lighting and electrical devices to your portfolio, you will be interested in EDGEhome because:
a.  EDGEhome’s smart lighting controls, smart switches, and smart outlets allow you to quickly deploy a powerful, energy monitoring, extensible, desirable, and cost effective lighting/outlet system which puts powerful sensors in each device. With EDGEhome’s modular wireless protocol support, you can easily support your protocol in EDGEhome’s devices or use EDGEhome’s protocol
b.  EDGEhome’s patents give you offensive and defensive capabilities to protect unique competitive advantages including electronic tamper resistant outlets which provide tamper resistance required by the national electric code in a smaller and less expensive package than can be achieved through mechanical means, and allows your to provide one-of-a-kind capabilities like dimmable electrical outlets or smart control of devices plugged in out outlets.
c.  EDGEhome’s point-by-point control and real-time electrical monitoring capability in each device enable valuable and powerful consumer value propositions to satisfy California Title-24 for hotels and businesses, to enable revenue from electrical utilities for demand-response capability, and the opportunity for rebates from electrical utilities due to EDGEhome’s energy reduction capabilities.
d.  EDGEhome’s room temperature monitoring capability in every smart outlet and smart switch enable an in-building temperature profile and thermostat capabilities which are unmatched by any competitors.
6) If you are a smart thermostat provider, or you are a legacy thermostat provider who wants to create a smart thermostat offering, you will be interested in EDGEhome’s IP because:
a.  EDGEhome’s smart outlets and switches each monitor room temperature in real-time, throughout a house or building. This enables thermostat and climate control capabilities which are unmatched by any competitor.
b.  EDGEhome’s patents include a pending patent that allows distributed temperature sensors to be used along with a temperature-compensation routine that subtracts out self-generated device heat to provide accurate temperature profile throughout a building.
c.  EDGEhome’s turnkey, easy to use, and extensible system and user interface was designed to support low cost, powerful, and intuitive temperature reporting and thermostat capability that can be linked with lighting and electrical control. This along with EDGEhome’s secure, modular, and low cost wireless protocol allows you to quickly deploy a smart thermostat to the market quickly and efficiently.
The Bidding Process for Interested Buyer

Interested and qualified parties will be expected to sign a nondisclosure agreement (attached hereto as Exhibit A) to have access to key members of the management and intellectual capital teams and the due diligence “war room” documentation (the “Due Diligence Access”). Each interested party, as a consequence of the Due Diligence Access granted to it, shall be deemed to acknowledge and represent (i) that it is bound by the bidding procedures described herein; (ii) that it has an opportunity to inspect and examine the Green Edge Assets and to review all pertinent documents and information with respect thereto; (iii) that it is not relying upon any written or oral statements, representations, or warranties of Gerbsman Partners or Green Edge, or their respective staff, agents, or attorneys; and (iv) all such documents and reports have been provided solely for the convenience of the interested party, and Green Edge and Gerbsman Partners (and their respective, staff, agents, or attorneys) do not make any representations as to the accuracy or completeness of the same.

Following an initial round of due diligence, interested parties will be invited to participate with a sealed bid, for the acquisition of the Green Edge Assets. Sealed bids must be submitted so that they are actually received by Gerbsman Partners no later than Friday, July 31, 2015 at 3:00 p.m. Pacific Time (the “Bid Deadline”) at Green Edge office, located at 15333 Avenue of Science, Suite 110, San Diego, CA 92128. Please also email steve@gerbsmanpartners.comwith any bid.

Bids should identify those assets being tendered for in a specific and identifiable way.

Any person or other entity making a bid must be prepared to provide independent confirmation that they possess the financial resources to complete the purchase where applicable. All bids must be accompanied by a refundable deposit check in the amount of $250,000 (the refundable deposit will be held in Green Edge’s legal counsel trust account.). The winning bidder will be notified within 3 business days of the Bid Deadline. Unsuccessful bidders will have their deposits returned to them within 3 business days of notification that they are an unsuccessful bidder.

Green Edge reserves the right to, in its sole discretion, accept or reject any bid, or withdraw any or all of the assets from sale. Interested parties should understand that it is expected that the highest and best bid submitted will be chosen as the winning bidder and bidders may not have the opportunity to improve their bids after submission.

Green Edge will require the successful bidder to close within a 7 day period. Any or all of the assets of Green Edge will be sold on an “as is, where is” basis, with no representation or warranties whatsoever.

All sales, transfer, and recording taxes, stamp taxes, or similar taxes, if any, relating to the sale of the Green Edge Assets shall be the sole responsibility of the successful bidder and shall be paid Green Edge at the closing of each transaction. For additional information, please see below and/or contact:

For additional information, please see below and/or contact:

Steven R. Gerbsman
Gerbsman Partners
(415) 456- 0628
steve@gerbsmanpartners.com

Kenneth Hardesty
Gerbsman Partners
(408) 591-7528
ken@gerbsmanpartners.com

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Facebook made a huge move this week that could lead to its next billion-dollar business

Facebook

Earlier this week, Facebook made a big change to its chat app, Messenger: It’s no longer requiring people to have a Facebook account to join.

And we’re already starting to see hints of those monetization efforts. Facebook introduced peer-to-peer payments on Messenger in May. Because the company isn’t charging anything per transaction, it doesn’t make the company any money just yet. However, it is potentially getting a bunch of credit cards on file.

That means that sometime in the not-too-distant future, it would be very easy for Facebook to start letting users buy other things through Messenger, like stickers or gifts for their friends (both of which are big businesses for other, international chat apps).

The company has also started letting third-party software developers create apps to run inside Messenger.

Right now, all of the apps are free and we haven’t seen any with in-app purchases from which Facebook could take a cut. But that probably won’t always be the case.

The company also announced during its developers’ conference in March that it was going to start letting brands and businesses use Messenger to send customers receipts or shipping updates for products they bought or handle any other customer-service issues.

If Facebook can find a way to make messaging between consumers and businesses effective and valuable for both, it will likely find a way to squeeze some money from brands in the process. Especially if almost every one of those brands’ customers has Messenger — which is more likely now that they don’t also have to have a Facebook account.

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Which billion-dollar ‘unicorn’ startups are at most risk of dying? Here’s what some data suggests …

Unicorn maskFlickr/perhapstoopink

There’s been a lot of talk about tech unicorns recently.

A unicorn is a term used to describe a startup worth $1 billion or more. Like the fictional animal, unicorn companies are supposed to be rare and magical.

Lately, tech’s unicorns have become rather common. Last month, the Wall Street Journal compiled its own “billion-dollar club” — a list of 78 venture-backed private companies with valuations of $1 billion or more.

When a company hits a billion dollar valuation, most people assume the company is stable and on a clear path to sustainable success.

But at a SXSW keynote a few weeks ago, Benchmark Capital’s Bill Gurley warned that Silicon Valley’s optimism could eventually lead to the demise of some of these unicorn companies.

“I do think you’ll see some dead unicorns this year,” he said.

One week later, Sequoia partner Michael Moritz chimed in and stated, “There are a considerable number of unicorns that will become extinct.”

So, which of today’s tech unicorns could be at risk?

We reached out to a dozen venture capitalists to see which unicorns are most at risk of dying. Nobody was willing to name names. (Wimpy!)

So, we turned to Danielle Morrill, CEO and cofounder of Mattermark, which tracks all sorts of data about private companies. Mattermark examines the number of employees a company has, how much money a company has raised, a website’s estimated number of monthly unique visitors, app downloads, and more. Investors use Mattermark to keep tabs on startups.

Mattermark collects data from a number of sources, including but not limited to: AngelList, Alexa.com rankings, app store rankings, anonymous sources, and social media.

When investors started predicting the death of unicorn startups, Morrill went data diving.

“VCs love to say this stuff, but they never actually say who [the dead unicorns are],” Morrill says. “So I was thinking: how would you figure out which companies were really in danger? We have some really interesting data that we track that can give you some sense of how they’re doing.”

bill gurleyDavid Paul Morris/Bloomberg via Getty ImagesBill Gurley, the man who has been ringing the alarm bells about startup valuations.

The warning signs

The companies Morrill pays the most attention to are consumer-facing, low-margin companies that need to get people online and using their services without spending too much on customer acquisition. To identify companies that could be in trouble, Morrill first looked at companies whose employee base has stopped growing or started shrinking.

“I was having a conversation with someone from a company that caters toward startups and she said, ‘If their employee count starts to drop, very rarely does it come back around and start to grow again.’ And that’s very interesting. If you track employee count at a granular level, you can see the six-month and one-year change in employees,” Morrill said.

“So you look at some of these unicorn companies and you can see their employee count is kind of flat, or even maybe declining a lot or a little. And that’s a really bad sign because to IPO your company, you still have to be growing pretty fast from a company perspective. Generally to grow revenue you have to hire more people. It’s pretty uncommon to find some magical place where you can stop hiring people and your revenue still grows 100% year over year.”

Danielle Morrill mattermarkDanielle Morrill/LinkedInDanielle Morrill is the founder of Mattermark, a company that tracks private companies’ data.

The second major dead unicorn warning sign Morrill looks for: how are a company’s social media mentions trending? If mentions increase and web traffic from social sites increase, then a company may be spending more on marketing. A drop in web traffic or social media mentions could indicate marketing budget has been chopped to decrease burn, or general interest in the startup is waning.

Morrill emphasized that unicorns with these warning signs may not be “dead,” per se, but that they’re going to really struggle to find their next infusion of cash in a down market. “In 1999 or 2000 they would have tried to go public on the Internet company hype, but that probably won’t work now,” she said. “The B2B ones can find buyers, though not necessarily at valuations matching their last rounds. The consumer ones, especially with very low margins, could be in a lot of trouble.”

To help us identify at-risk unicorns, Morrill looked at a list of companies that fit the following criteria:

  • Haven’t exited
  • Have raised $100 million or more
  • Employee count growth in the past 6 months is 5% or less (many are negative)
  • Have raised new funding in the past 36 months

Not all of the companies that fit these criteria are unicorns, so we whittled it down to only show companies with billion-dollar valuations.

From there, we took a look at the companies on Mattermark’s data platform with the lowest growth scores and Mindshare scores — a proprietary ranking algorithm that takes into account factors including estimated downloads, web traffic and social media numbers. A negative or low Mindshare score can indicate declining customer interest in a company.

To be clear, the only reason a company ever goes bust is that it runs out of cash. So, while we’re looking at user numbers, and downloads, the only that really matters is how much cash is in the bank. And that’s something Mattermark doesn’t know.

Things don’t look good for these unicorns

Based on Mattermark’s data, these unicorns could be most at risk:

Gilt Groupe

The flash-sales website was anticipated to be one of the buzziest e-commerce companies in the world. It generated hundreds of millions of dollars in revenue. Now, though, it has downsized and it is struggling to maintain that growth. A recent fundraising round indicates Gilt, which is valued at $1.1 billion after raising $286 million in funding from investors including General Atlantic, Matrix Partners, and TriplePoint Capital, will probably continue to delay an IPO.

Gilt Groupe did not return a request for comment for this story.

Gilt’s estimated downloads on iTunes spiked in May 2014, but have decreased since then:

GiltMattermark

Gilt’s available job listings are up from December 2014, but have decreased month over month.

Gilt4Mattermark

Gilt’s employee count has declined since December.

GIlt5Mattermark

Gilt’s social mentions on Facebook have declined, as have its inbound links:GIlt3Mattermark

Gilt2Mattermark

VANCL

You may have never heard of it, but VANCL is a Chinese online retailer that sells men’s and women’s clothes and shoes. According to the WSJ, it’s valued at $3 billion after raising $512 million from investors including IDG Capital Partners, Temasek Holdings, and Tiger Global Management.

The company was supposed to go public in 2011, but didn’t, and it’s since raised another $100 million with no announced plans to IPO.

VANCL did not return a request for comment for this story.

VANCL’s employee count has declined since early 2014:

vancl chart mattermark

VANCL’s estimated monthly uniques have declined, according to Mattermark:vancl chart mattermark

These unicorns may also be at risk

There are some other big, billion-dollar names on the list, though their growth scores are higher and don’t indicate as much risk. Some of the buzzier companies among them include Spotify, Jawbone and Evernote.

Spotify

Here’s Spotify’s open jobs history over the past year and a half. According to Mattermark data, it has declined.

Spotify3Mattermark

Spotify’s inbound links are up from November 2014, but still down from September 2014.SpotifyMattermark

When reached for comment, Spotify said Mattermark’s numbers weren’t correct, but did not offer more correct figures.

After publishing, Spotify clarified some figures that counter Mattermark’s data and point to strong growth. Specifally, the company says its active users and download growth looks like this:

  • March 12 2013 – 6,000,000 subscribers/24,000,000 active users
  • May 21 2014 – 10,000,000 subscribers/40,000,000 active users
  • Nov 11 2014 – 12,500,000 subscribers/50,000,000 active users
  • Jan 7th 2015 – 15,000,000 subscribers/60,000,000 active users

“This data from Mattermark would be a real problem if it was 1999, but since it’s 2015 and 85% of our new users come from mobile we’re not too concerned about inbound links to our website being flat,” Spotify spokesperson Graham James says.

Evernote

Evernote shows declining inbound links from other sites as well as a decline in Facebook mentions.

Evernote declined to comment for this story.

evernoteMattermark

evernoteMattermark

Jawbone

Last of all, here are some charts from wearable company Jawbone:

jawboneMattermark

It looks like Jawbone’s estimated monthly uniques peaked in December or January, and have been declining since then.

jawbone mattermarkMattermark

Jawbone’s open jobs history, according to Mattermark, has declined.jawbone mattermarkMattermark

Inbound links to Jawbone are also declining, according to Mattermark.

We reached out to Jawbone for comment, but Jawbone did not comment on this story.

Looking at the data, we also found patterns of companies that could be in trouble.

  • Mattermark’s data suggests that a number of e-commerce companies could struggle.
  • The list contains a lot of biotech and energy startups. “They’re just struggling so much,” Morrill says. On a list of 241 potentially hurting companies, 77 were biotech, cleantech, or energy-related.

Morrill admits her criteria and list may not be perfect, but she hopes it will be eye opening for the startup community.

“Even if the list is not perfect, hopefully it gives people a place to look and be much more critical and conscious of what’s really going on,” she says.

So, there you have it. A list of some unicorns that some data suggests are at risk.

Disagree with this list? Think all these companies are in great shape and that some other unicorns are toast? Then tell us what you’re thinking and why.

Talk is cheap. If you’re going to predict that many billion-dollar companies are about to drop dead, don’t stop there. Name names!

Disclosure: Kevin Ryan and Dwight Merriman, the founders of Gilt Groupe, are investors in Business Insider.

 

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The Update to the Bidding Process for “EDGEhome/GreenEdge Technologies – Patent & Product Competitive Advantages ” and “Asset Purchase Agreement”

Further to Gerbsman Partners previous e-mails and sales letter of June, 2015, regarding the sale of certain assets of GreenEdge Technologies, Inc., (GreenEdge), I attach the form of agreement (“APA”) that we will be requesting the bidders for certain Assets and Intellectual Property of GreenEdge execute and deliver in connection with such transaction. The GreenEdge Assets have been previously supplied, as outlined in the GreenEdge sales letter.

Gerbsman Partners has been retained by GreenEdge Technologies, Inc. to solicit interest for the acquisition of all or substantially all of GreenEdge’s assets, including its Intellectual Property (“IP”), in whole or in part (collectively, the “GreenEdge Assets”).

Any and all the assets of GreenEdge will be sold on an “as is, where is” basis and will be subject to “The Bidding Process for Interested Buyers”, outlined below.

Prior to the bid date of July 31, 2015., I would encourage all interested parties to have their counsel speak with Robert O’Connor, Esq. of Wilson Sonsini. He is available to discuss any questions or comments of a legal nature relating to the transactions contemplated by the APA. 415 947 2099 office, 415 279 6579 cell roconnor@wsgr.com

Good afternoon

I have attached an update from EDGEhome, an outline the “EDGEhome Patent & Product Competitive Advantages”, along with an NDA, for your further review and consideration of the opportunity. This is not a confidential document and can be used to evaluate the quality and advantages of the EDGEhome Intellectual Property.

Please utilize this information in conjunction with the Sales Letter describing EDGEhome, its Assets and Intellectual Property Portfolio that was previously sent, and the “Date Certain M&A” Bidding Process below.

The Bidding Process for Interested Buyer

Interested and qualified parties will be expected to sign a nondisclosure agreement (attached hereto as Exhibit A) to have access to key members of the management and intellectual capital teams and the due diligence “war room” documentation (the “Due Diligence Access”). Each interested party, as a consequence of the Due Diligence Access granted to it, shall be deemed to acknowledge and represent (i) that it is bound by the bidding procedures described herein; (ii) that it has an opportunity to inspect and examine the Green Edge Assets and to review all pertinent documents and information with respect thereto; (iii) that it is not relying upon any written or oral statements, representations, or warranties of Gerbsman Partners or Green Edge, or their respective staff, agents, or attorneys; and (iv) all such documents and reports have been provided solely for the convenience of the interested party, and Green Edge and Gerbsman Partners (and their respective, staff, agents, or attorneys) do not make any representations as to the accuracy or completeness of the same.

Following an initial round of due diligence, interested parties will be invited to participate with a sealed bid, for the acquisition of the Green Edge Assets. Sealed bids must be submitted so that they are actually received by Gerbsman Partners no later than Friday, July 31, 2015 at 3:00 p.m. Pacific Time (the “Bid Deadline”) at Green Edge office, located at 15333 Avenue of Science, Suite 110, San Diego, CA 92128. Please also email steve@gerbsmanpartners.comwith any bid.

Bids should identify those assets being tendered for in a specific and identifiable way.

Any person or other entity making a bid must be prepared to provide independent confirmation that they possess the financial resources to complete the purchase where applicable. All bids must be accompanied by a refundable deposit check in the amount of $250,000 (the refundable deposit will be held in Green Edge’s legal counsel trust account.). The winning bidder will be notified within 3 business days of the Bid Deadline. Unsuccessful bidders will have their deposits returned to them within 3 business days of notification that they are an unsuccessful bidder.

Green Edge reserves the right to, in its sole discretion, accept or reject any bid, or withdraw any or all of the assets from sale. Interested parties should understand that it is expected that the highest and best bid submitted will be chosen as the winning bidder and bidders may not have the opportunity to improve their bids after submission.

Green Edge will require the successful bidder to close within a 7 day period. Any or all of the assets of Green Edge will be sold on an “as is, where is” basis, with no representation or warranties whatsoever.

All sales, transfer, and recording taxes, stamp taxes, or similar taxes, if any, relating to the sale of the Green Edge Assets shall be the sole responsibility of the successful bidder and shall be paid Green Edge at the closing of each transaction. For additional information, please see below and/or contact:

For additional information, please see below and/or contact:

Steven R. Gerbsman
Gerbsman Partners
(415) 456- 0628
steve@gerbsmanpartners.com

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