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Posts Tagged ‘Gerbsman Partners’

Zscaler finally accepts VC dollars — and gets $38M

Posted in Board Of Intellectual Capital, Internet Security, Investments, mobile 2.0, Startups, Strategy, Technology, Venture Capital, Venturebeat, Web 2.0, Wireless, Wireless 2.0, tagged , , , , , , , , , , , , , on August 30, 2012| Leave a Comment »

Article from GigaOm.

Zscaler a four-year-old startup that has bootstrapped its business by providing a new form of security designed for a mobile and cloud-dependent workforce, has raised $38 million in first-time financing. The round was led by Lightspeed Venture Partners and an unnamed strategic investor.

Zscaler has been fairly successful in its four years building a significant base of clients including Crutchfield Corporation, La-Z-Boy and Telefonica. The company’s software as a service is hosted in more than 100 data centers around the world and essentially protects a company’s web traffic. It does this by routing requests through Zscaler’s software. But there’s no software for users to download on their clients and there’s also no appliance for corporate IT to worry about.

As the cloud and mobility do away with the perimeter model of security where a firewall may prevent harmful traffic from getting in and corporate secrets from getting out, Zscaler is one of several new companies trying to adapt security to a world where there is no perimeter. And even if the corporate IT thought it had a perimeter, the corporation may not own it or have a say in what runs on it. A perfect example of this might be the CEO’s iPad (a aapl).

Zscaler doesn’t solve all problems, but it’s certainly ahead of the pack in thinking about security in a forward-looking way. Other companies trying to address the changes in security required by BYOD and corporate access to the cloud applications are Bromium and CloudPassage. And by waiting to take on venture capital Zscaler’s CEO Jay Chaudhry has joined a select group of established companies who are finally succumbing to the lure of VC cash. For example Qualtrics, a ten-year-old company this year raised $70 million in its first round of outside investment. Another company, Code 42, avoided VC dollars for 11 years before this year raising $52.5 million.

Read more here.

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Chart: What next for Spotify, as expansion losses mount?

Posted in Board Of Intellectual Capital, Business models, Economy, Entrepreneurship, Gerbsman Partners, Investments, Management, Market research, tagged , , , on August 28, 2012| Leave a Comment »

Article from GigaOm.

Spotify's Daniel Ek And Martin Lorentzon

Spotify more than doubled its revenue through 2011/12 after expanding to new countries like the U.S.. But the cost of doing so ballooned by the same proportion. The company spent 97 percent of the the €187.8 million it earned. So annual loss widened to €45.4 million.

In its 2011/12 Luxembourg filing, the company acknowledges: “In a low-margin business dependent on rapid growth to cover fixed costs, it is crucial that the group continues to penetrate existing and new markets as quickly as possible…”

With economics like this, global scale may be the only thing that can make Spotify truly sing. But, with Asia and Latin America build-out next on the horizon, it could be at least another year before roll-out costs ebb to the point where profitability is remotely in sight.

If Spotify is not yet a successful business, it is nevertheless a strategically significant one for others in the music industry. It has become the number-two income source for some labels in some countries. More interesting, however, is its direct relationship with labels, the four majors of which are believed to own 18 percent of the firm.

Through that relationship and through Spotify’s underlying API and third-party apps initiatives, it could yet become the industry’s de facto streaming platform – a fabric used by a thousand other services; part-operated by the labels themselves. As one friend described it to me: “A social not-for-profit for the good of the music industry, a rights clearing house.”

Herein may lay a dilemma…

As Spotify continues laying the costly groundwork for global dominance of subscription streaming, it needs more funding to make up for what is, so far, its unsustainability.

“To cover losses during the expansion phase, the group has been financed by existing and new equity owners,” Spotify’s Luxembourg filing says. “We cannot exclude the need or desire to raise more funds in the future.”

The problem is, if Spotify takes a fifth investment round to go on globalising, as has been rumoured, that could dilute the equity of its most vital partners – the labels.

To the labels, their stake is likely of more strategic than financial value – as already stated, they are helping create a digital streaming API that could bear great fruit. So they may want to hang on to the influence that they currently have.

If a new investment in Spotify diluted the labels, they may start charging Spotify more standard royalty rates, rather than the favourable rates it is believed it has been granted until now. That could mean Spotify’s costs escalate still further.

Spotify could dodge this problem by attracting investors only to spin-off regional subsidiaries in its next two target markets – Asia and Latin America – thereby ringfencing its core from dilution.

Four years after its foundation, trailblazing Spotify is the music business’ greatest chance at meaningful new revenue in a digital generation. But it remains to be seen exactly to whom it will provide the most value.

The well-run company is investing heavily in what could become a very valuable global business. But, until its international expansion is completed, we will be hard-pressed to ascertain its true value.

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As Knight Capital Gains a Lifeline, It Loses Market-Making Duties

Posted in Board Of Intellectual Capital, Business models, Distressed IP, Economy, Intellectual capital, International Finance, internet, Internet Security, Investments, Market research, Strategy, Technology, Venture Capital, tagged , , , , , , , , , , , , , on August 6, 2012| Leave a Comment »

Article from NYTimes.

The Knight Capital Group confirmed on Monday that it had struck a $400 million rescue deal with a group of investors, staving off collapse after a recent trading mishap, even as the New York Stock Exchange temporarily revoked the firm’s market-making responsibilities.

The rescue package, which was arranged by the Jefferies Group, includes investments from TD Ameritrade and the Blackstone Group. Getco and Stifel, Nicolaus & Company were also involved.

“We are grateful for the support of these leading Wall Street firms that came together to invest in Knight,” Tom Joyce, the firm’s chairman and chief executive, said in a statement. “The array of participants in this capital infusion underscores Knight’s critical role in the capital markets.”

In a regulatory filing, Knight Capital said the investors agreed to purchase $400 million of the brokerage firm’s preferred stock. Under the terms of the deal, Knight will also expand its board by adding three new members.

The deal could provide the investors with more than 260 million shares of the firm, affording the investors the right to buy the shares at $1.50 a piece, according to the statement. Last week, before the trading blunder, the firm’s shares closed over $10.

The rescue deal will hugely dilute existing shareholders of the company. In mid-morning trading, shares of Knight Capital were down 24 percent.

The lifeline was assembled in the wake of Knight Capital’s disclosure of a $440 million trading loss. The loss stemmed from a technology error that occurred on Wednesday when the firm unveiled new trading software, a glitch that generated erroneous orders to buy shares of major stocks. The orders affected the shares of 148 companies, including Ford Motor, RadioShack and American Airlines, sending the markets into upheaval.

Knight Capital said it reached the deal on Sunday, and it expected to close the transaction on Monday. It was a rapid a recovery for a firm that just days ago was facing collapse.

Still, the firm faces significant challenges. The New York Stock Exchange said on Monday it “temporarily” reassigned the firm’s market-making responsibilities for more than 600 securities to Getco, the high-speed trading firm that also invested in Knight. Market makers buy and sell securities on behalf of clients.

The move, the exchange said in a statement on Monday, was a stop-gap measure needed until the investor deal was final. Once the recapitalization plan is complete, Knight will resume its duties.

“We believe this interim transition is in the best interests of investors, our listed issuers, market stability and efficiency, as well as Knight, as the firm finalizes its equity financing transaction,” Larry Leibowitz, chief operating officer of NYSE Euronext, said in the statement.

Knight Capital also faces heavy regulatory scrutiny. The Securities and Exchange Commission is examining potential legal violations as it pieces together the firm’s missteps.

The problems for Knight Capital began at the start of trading on Wednesday. The firm tweaked its computer coding to push itself onto a new trading platform that the New York Stock Exchange opened that day. Under this program, trades from retail investors shift to a special platform where firms like Knight compete to offer them the best price.

But when Knight’s new system went live, the firm “experienced a human error and/or a technology malfunction related to its installation of trading software,” the firm explained in the filing on Monday.

Chaos ensued. The error caused Knight to place unauthorized offers to buy and sell shares of big American companies, driving up the volume of trading and causing a stir among traders and exchanges.

Knight had to sell the stocks that it accidentally bought, prompting a $440 million loss. The loss drained Knight’s capital cushion and caused “liquidity pressures,” the firm said in the filing.

“In view of the impact to the company’s capital base and the resultant loss of customer and counterparty confidence, there is substantial doubt about the company’s ability to continue as a going concern,” the filing said.

Knight and its chief executive, Thomas M. Joyce, began contacting potential suitors for parts of the business, and the firm consulted restructuring lawyers on a potential Chapter 11 filing, according to the people with direct knowledge of the matter.

But events soon turned in the firm’s favor.

The firm secured emergency short-term financing that allowed it to operate on Friday, and it used Goldman Sachs to buy at a discount the shares Knight had erroneously accumulated.

Some of the firm’s biggest customers, including TD Ameritrade and Scottrade, said that they had resumed doing business with Knight by Friday afternoon.

The firm capped its efforts to stay afloat on Sunday with the rescue deal. Knight expects to finalize the agreement on Monday morning and detail the financing terms in a regulatory filing.

“Knight’s financial position and capital base have been restored to a level that more than offsets the loss incurred last week,” Mr. Joyce said in a statement. “We thank our clients, employees and partners for their steadfastness during a brief yet difficult period and we are getting back to business as usual.”

Read more here.

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DOE funds 19 next-gen battery projects with $43M

Posted in Board Of Intellectual Capital, Business models, cleantech, Economy, Entrepreneurship, Gerbsman Partners, Intellectual capital, Investments, Market research, Startups, Strategy, Technology, Venture Capital, tagged , , , , , , , , , , , , , , on August 3, 2012| Leave a Comment »

Article from GigaOm.

The Department of Energy’s program that gives grants to early-stage energy projects — called ARPA-E — has allocated another $43 million for 19 battery projects, including grants for futuristic batteries made of new chemical mixes, using brand new architectures and utilizing nanotechnology. The ARPA-E program has been aggressively funding next-generation battery technologies over the years, and though these are small grants, the amount of innovation happening is substantial.

The funds go to projects that are very early stage, and are supposed to help bring disruptive R&D closer to commercialization. While Japanese and Korean conglomerates dominate the industry of producing small format lithium ion batteries for laptops and cell phones, these next-gen batteries are mostly targeted for electric cars and the power grid. Some of these projects also aren’t strictly traditional batteries, and a couple are flow batteries, which are large tanks of chemicals that flow into a containerized system and provide energy storage for the power grid (see Primus Power’s flow battery pictured).

Notable winners of the funds include big companies like Ford, GE, and Eaton, small startups like Khosla Ventures-backed Pellion, and projects out of the labs of Oak Ridge National Laboratory, Battelle Memorial Institute, and Washington University in St. Louis.

Here’s some of the winners (for the full list of 19 go here):

  • Ford: $3.13 million for a very precise battery testing device that can improve forecasting of battery-life.
  • GE Global Research: $3.13 million for sensors thin-film sensors that can detect and monitor temperature and surface pressure for each cell within a battery pack.
  • Eaton: $2.50 million for a system that optimizes the power and operation of hybrid electric vehicles.
  • Pellion Technologies: $2.50 million for the startup’s long range battery for electric vehicles.
  • Sila Nanotechnologies: $1.73 million for the startup’s lithium ion electric car battery that it says has double the capacity of current lithium ion batteries.
  • Xilectric: $1.73 million to “reinvent Thomas Edison’s battery chemistries for today’s electric vehicles.”
  • Energy Storage Systems: $1.73 million for a flow battery for the grid, with an electrolyte made of low cost iron, and using a next-gen cell design.
  • Battelle Memorial Institute: $600K for a sensor to monitor the internal environment of a lithium-ion battery in real-time.

Read more here.

 

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Private Equity Assets Hit Record $3 Trillion

Posted in Board Of Intellectual Capital, tagged , , , , , , , on August 1, 2012| Leave a Comment »

Article from CNBC.

The value of assets managed by the private equity industry globally continued to rise last year, hitting a record $3 trillion despite financial market turmoil and sluggish economic conditions.

The results will provide a boost to the private equity industry which has been struggling with difficult conditions for raising new funds, a slump in deal making activity and heightened public scrutiny following the US presidential campaign of Mitt Romney, the Republican candidate who ran Bain Capital before turning to politics.

Despite the increased criticism, the private equity industry has continued to attract assets from investors such as pension funds seeking investment returns to meet their obligations.

In November, the Teacher Retirement System of Texas said that it would hand $6 billion to private equity group’s KKR and Apollo Global to manage. The cash is to be invested in buyouts, as well as other funds run by the asset managers, such as those investing in corporate debt.

Earlier this year Blackstone proved that it was still possible to raise mega-funds, as it completed a $16 billion fundraising that began in January 2011 to launch the sixth largest fund on record, according to Prequin.

Research by Prequin published Monday showed the industry’s assets under management rose by 9.4 percent, down slightly from last year’s 11.9 percent but the second highest year of growth since 2007.

“The sustained growth of industry assets highlights the fact that private equity continues to be attractive to institutional investors that are willing to forgo liquidity in return for outperformance,” said Bronwyn Williams of Prequin. “ Despite the uncertainty and volatility that has prevailed in recent years, faith remains that private equity fund managers can still deliver these returns.”

Private equity returns annualised over 10 years to 2011 outpaced the S&P 500 and MSCI Europe indices.

The rate of growth of assets remains, however, well below the 33.6 percent and 37.6 percent rates registered when the private equity market was still booming in 2007 and 2006, respectively.

Other industry observers are less bullish, believing the increasing asset values simply show the time lag before private equity funds come to the end of their lives. Moreover many funds are being forced to hold on to assets longer than they would normally before selling them.

The number of private equity funds still active shrank for the first time in 2011, according to private equity fund advisers Triago, who added in a report in March that the number of casualties in the private equity fund world are likely to rise dramatically from 2015 as poorly performing portfolios of investments from the height of the credit bubble come to the end of their lives.

The Prequin findings also highlighted a widening gulf between the best and worst performing funds. “The key issue for investors remains identifying, researching and selecting the best potential fund managers for their portfolios,” said Ms Williams.

Read more here.

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