Issue 29

Scoop: Secretive self-driving car startup Zoox is raising up to $630 million

Autonomous vehicle company Zoox has authorized the sale of up to $630 million in new shares, PitchBook has learned. The terms of the deal have not been announced and are subject to change.

The company didn't immediately respond to a request for comment.
A full $630 million funding could value the company at up to $3.43 billion, per a PitchBook estimate.
Rumors of a possible fundraise emerged in September 2017, when Axios reported that Zoox was in talks with SoftBank about a funding that could total up to $1 billion and value the startup in the range of $3 billion to $4 billion.

Zoox is reportedly building a self-driving car from the ground up, with previously expressed hopes of deploying an entire fleet by 2020. With rivals like Cruise Automation, Waymo, Uber and Lyft working on autonomous vehicle technology, the company is part of a race to get self-driving cars on the road.
Since Zoox was founded in 2014, the secretive startup hasn’t released much information about its autonomous vehicle technology. The company is “building an advanced mobility experience that will support the future needs of urban mobility for both people and the environment,” per its website, language that some suggest could mean Zoox is developing an on-demand service.

The Foster City, CA-based company has previously brought in almost $300 million of equity funding, garnering a valuation of $1.55 billion in 2016. Investors in Zoox include Lux Capital, DFJ and AID Partners Capital. Zoox was founded by Australian entrepreneur Tim Kentley-Klay and Jesse Levinson, who was previously part of Stanford’s autonomous technology unit.'s stock market value hits $900 billion, threatens Apple’s stock market value reached $900 billion on Wednesday for the first time, marking a major milestone in its 21-year trajectory as a publicly listed company and threatening to dislodge Apple as Wall Street’s most valuable jewel. 

After Jeff Bezos founded the online book-selling company in his garage in 1994, Amazon survived the dot-com crisis and then expanded across the retail industry, altering how consumers buy products and setting off a Darwinian struggle among brick-and-mortar stores.

After announcing on Wednesday that it sold more than $100 million products during its annual Prime Day sale, the Seattle, Washington company’s stock briefly touched $1,858.88, giving Amazon a stock market value of $902 billion. It later reversed, trading down 0.16 percent for the session.
Amazon’s stock has surged more than 57 percent in 2018, bringing its increase to over 123,000 percent since it listed on the Nasdaq in 1997. An investor who bought 1 share of Amazon for $18 in the IPO would now have an investment worth more than $22,200, including three stock splits in the 1990s.

Amazon, video streaming service Netflix and a handful of heavyweight technology companies have fueled Wall Street’s rally in recent years and they remain key parts of portfolio managers’ portfolios.
Apple replaced Exxon Mobil in late 2011 as the U.S. company with the largest stock market value. The Silicon Valley company’s shares have risen 12 percent in 2018, bringing its stock market value to $935 billion.

The calculations for Apple and Amazon’s market capitalizations are based on the number of shares outstanding in their March-quarter reports. Amazon has increased its share count by over 1 million shares per quarter in recent years, and if it continued that in the June quarter, its stock market value may already have exceeded $900 billion.

Amazon reports its results on July 26 and Apple, which has been reducing its share count through buybacks, reports its June-quarter results on July 31.

As Amazon expands into grocery retail through its acquisition of Whole Foods Market last year, and as more businesses move their IT departments onto the cloud, its stock price has been red hot, recently trading at 111 times expected earnings, compared to more-profitable - but slower growing - Apple’s valuation of 15 times earnings.

Amazon dislodged Microsoft Corp as the No. 3 U.S. company by market capitalization in February. Since then, Microsoft has been overtaken by Google-owner Alphabet.

From – Reuters

IBM gets boost from new businesses, tops estimates

International Business Machines Corp on Wednesday reported second-quarter profit and revenue that topped analysts’ expectations as it benefited from growth in higher-margin businesses including cybersecurity and cloud computing.

Under Chief Executive Officer Ginni Rometty, IBM has been focusing on an array of new technologies ranging from artificial intelligence to cloud computing as it tries to offset weakness in its legacy business of selling hardware and software.

The newer businesses, which are spread across its various divisions, have been bundled into what the company calls “strategic imperatives”.

Revenue from these businesses grew 15 percent to $10.1 billion in the second quarter, accounting for more than half of the company’s total revenue.

IBM Chief Financial Officer James Kavanaugh said the company’s investments to reposition itself have been paying off.

“We accelerated our growth, really capitalizing on these emerging high value areas,” Kavanaugh told Reuters.
Overall revenue rose nearly 4 percent to $20 billion, beating analysts’ average estimate of $19.85 billion, according to Thomson Reuters I/B/E/S.

The company’s revenue has now risen for three straight quarters after falling for nearly six years. Operating gross profit margin in the quarter slipped to 46.5 percent from 47.1 percent.

“One of the key components was as-a-service growth ... and as that scales through, you’re starting to see margin expansion shine. Gross margin closed the gap,” CFRA Research analyst David Holt said. Net income rose to $2.4 billion, or $2.61 per share, in the quarter ended June 30 from $2.33 billion, or $2.48 per share, a year earlier.

Excluding items, IBM earned $3.08 per share, beating analysts’ average expectation of $3.04 per share. Shares of the Armonk, New York-based company rose about 2.5 percent to $148.13 in trading after the bell.

From – Reuters

KKR ventures into Silicon Valley for $2B AppLovin deal

In its latest backing by the Bay, KKR has agreed to invest $400 million in AppLovin, a marketing company that helps app developers reach more users. The deal will value the company at a reported $2 billion, up from an estimated valuation of $1.4 billion that AppLovin attained last year.

The move comes about eight months after Palo Alto-based AppLovin was forced to abandon plans to sell a majority stake in itself to Chinese firm Orient Hontai Capital based on objections from the US government, part of a larger crackdown on Chinese investment in American tech companies. 

KKR's cash for the deal will come from a $13.9 billion mega-fund the firm closed last year. The move marks the continuation of three trends for the buyout powerhouse that are almost surely related: An increase in growth investments, a budding love affair with the Bay Area and a closer focus on the software sector. 

KKR completed an average of 17 growth deals over the past four full years, according to the PitchBook Platform, up from an average of seven in the four years prior to that. While the firm has yet to equal a decade high of 22 in 2014, its frequency of minority deals has stayed elevated. Growth transactions have made up more than 11% of KKR's overall investments so far in 2018, the second-highest rate of the past 10 years.

Perhaps more stark is the way KKR has increased its presence over the past 10 years in and around the Bay Area—a region where the firm maintains two separate offices. Between 2008 and 2013, on average, KKR made about two investments per year in companies based in the Bay Area, per PitchBook data. In the years since, that activity has sprouted:

It's probably no coincidence that KKR's rate of investment in the software industry has also trended up in recent years. In 2012, the firm completed just two deals in the sector, per the PitchBook Platform, representing 4% of its overall activity. By 2016, that figure had shot up to 17 deals, a nearly 17% share of KKR's annual portfolio.  

Minority investments in Bay Area software companies: Is this private equity or venture capital that we're talking about? 

Together, all that data tells a clear story: One of a once-traditional buyout firm that's become more comfortable behaving in less-traditional ways, whether that means converting to a corporation or striking the kinds of deals that used to be the domain of VCs.  

From – PitchBook

US female-founded companies have raised $7B so far this year

In a year poised to bring in the most venture capital investment for US startups since the dot-com boom, female founders are also experiencing VC highs.

In the first six months of 2018, US companies with at least one female founder brought in $7.2 billion in venture capital funding, about 12.5% of all VC collected so far this year, per PitchBook data. That $7.2 billion includes four rounds of at least $100 million: Tmunity's $135 million financing, Twist Bioscience's $125 million round, and a pair of $100 million fundings for wedding planning startup Zola and office catering service.

Last year, US-based female-founded companies raised a total of $12.3 billion, a small percentage of the $81.9 billion secured by all US-based companies, though still a decade high for women entrepreneurs. (The oft-cited statistic, that just 2.2% of VC funding went to female founders in 2017, refers to companies founded solely by women, not those that also have male founders.)

At the current pace, women founders will bring in more VC this year than last, though considering that the entire venture capital market is expected to surge past previous highs, it's only natural. As of the end of June, VCs had already injected $57.5 billion in US-based startups. That means that 2018 is set to be the first year since the dot-com boom with more than $100 billion in deal value, per the 2Q 2018 PitchBook-NVCA Venture Monitor.

Overall, investment in female founders is keeping pace with the VC market as a whole. A good thing, of course, but it doesn't appear there will be an otherwise notable increase in investment in the space this year. It's clear that there's still a lot of work to be done before businesses founded by women are regularly pulling in an equitable portion of VC dollars.

From – PitchBook
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