Magic Leap Raises Big New Round of Funding (Oct 12, 2017)
Magic Leap, the stealth AR startup based in Florida, has just raised yet more funding, according to a regulatory filing, though the exact amount isn’t yet public. It has an authorization to raise up to $1 billion at a roughly 17% premium to its last round, and Singapore’s Temasek is expected to be one of the investors. That Magic Leap is raising even more money ahead of what’s been widely expected to be a launch late this year is both a sign that its investors are still excited by what they see, and also likely a sign that it isn’t quite ready to launch and therefore start generating revenue yet. Both Magic Leap and a small group of people who’ve seen its product continue to be very bullish about its technology, but it remains tight-lipped about exactly what it’s building, what form its product will take, how it will be priced, or when it might launch. Hopefully that will change soon, because for now gaming-centric headset VR and smartphone-based AR are really the sum total of the combined AR and VR markets, and Magic Leap has the potential to add an interesting new segment to the market.
Indian ride sharing service Ola, which is the main rival to Uber in that market, is in the process of a large fundraising round, with backing from Tencent, SoftBank, and a variety of others. Ola arguably needed additional funding to be able to compete on more level terms with Uber, while Tencent and SoftBank have invested previously in India and the international ride sharing space respectively, their interests merging in Ola. The biggest risk for Uber in India is another failure and ultimate concession of the market to a stronger local competitor along the lines of what’s happened in China and Russia over the past eighteen months, so it’s clearly not about to give up there. But the two have been battling for supremacy for some time now without an obvious winner, in what’s one of the fastest-growing and potentially one of the largest ride sharing markets in the world.
There’s been reporting for months now about SoftBank being interested in taking a stake in Uber, both making a new investment and buying shares from existing stakeholders, but a major sticking point was said to be worries on both sides of the deal about a potential return by Travis Kalanick to a senior leadership role at the company. It appears that those worries are being resolved by a commitment on all sides to keep Kalanick out of those roles as a condition of SoftBank’s investment. Both the potential new funding and that guarantee are good news for Uber, as we’ve seen plenty of evidence recently of the ongoing fallout from Kalanick’s toxic tenure as CEO, not least Uber’s pending London ban. The funding, meanwhile, will be helpful as Uber continues to lose money, though its belt tightening should lower the need to raise many additional rounds before its IPO, especially if that happens as soon as new CEO Dara Khosrowshahi seems to think it should.
Despite SoundCloud’s repeated protestations that it’s not on the verge of going under, the scuttlebutt has been that it is indeed just a few months from running out of cash, and two recent new investors have been reported as potential saviors: Singapore’s Temasek Holdings and the Raine Group. SoundCloud is now reportedly communicating with existing investors and asking them to back the rescue effort by these two new backers as a last-ditch attempt to avoid having to wind down the business. Some of the numbers involved are a bit crazy – the new investment is $169.5 million at a $150 million pre-money enterprise valuation and some existing shareholders will see their liquidity preference slashed by 40%. But all this would apparently put the company on a much sounder financial footing and allow it to consider searching for a way out of its current predicament. I’m still bearish that there’s any way to really turn SoundCloud around given its history and what’s happened in the industry since it experienced its meteoric rise, and imagine the most likely long-term outcome is still an acquisition for intellectual property and possibly customer data. Update: Recode is reporting that the CEO will be replaced and kicked upstairs to the board chair role in favor of former Vimeo CEO Kerry Trainor if the deal goes through, which now seems very likely based on other reporting later in the day.
Essential, Android founder Andy Rubin’s fledgling smartphone outfit, has announced additional funding from companies including Tencent and Amazon, but still refuses to say exactly when its smartphone will go on sale, saying only that a date will be announced in a week or so. It’s also announced that Amazon and Best Buy will be the retail partners for launch, while Sprint was announced earlier as the exclusive US carrier partner. If you’ve read any of my previous pieces on Essential, especially the first one, you’ll know how skeptical I am that an effort like this can succeed. The market is so mature at this point and the distribution and other battle lines so clear that breaking in with yet another Android phone will be a real challenge, one further exacerbated by what’s going to be limited distribution on the weakest carrier in the US. The funding is therefore intriguing, because it suggests these backers see something in the phone that I don’t. Importantly, it’s Amazon’s Alexa Fund specifically that’s making that company’s investment, something the Journal piece I’m linking to here doesn’t dig into at all, but which suggests that the phone will major on Alexa integration, something hinted at earlier by Andy Rubin as part of a statement about the phone’s ecumenical approach to voice assistants, but not made explicit. And backing from both Foxconn and Tencent is intriguing in the context of a phone that’s mostly being launched in North America for now. Recent conversations I’ve had suggest Amazon’s smartphone sales business is going very well, but of course many of its sales are of the kind of low-end prepaid handsets people buy outright anyway rather than the higher-end premium hardware Essential will be selling. I continue to be very bearish on Essential, but at least it sounds like we might finally see the hardware hit the market soon.
Chinese ride-sharing company Didi Chuxing has raised what Bloomberg says is the largest single funding round ever, apparently to help pay for a long-expected international expansion. Didi now of course owns Uber’s business in China and also received a billion-dollar investment from Apple last year, but has mostly stuck to its home market for now. People in the know have been saying it was going to start trying to build a business outside of China for some time, so this move isn’t that surprising, but it’s almost certain to bump up against its part owner Uber in at least some markets given the latter company’s international reach, which could get interesting. Big Chinese tech companies have mostly failed to expand much beyond China with the exception of those selling cheap electronics, and Didi will face an uphill battle in ride sharing markets internationally unless it partners with local players (possibly including Uber). I’m very curious to see which markets it goes after and how.
There were reports about new fundraising for Lyft a while back, and it looks like it’s now completed a decent-sized round at a significantly higher valuation than its last round a year ago. The FT article also suggests that Lyft has been benefiting from Uber’s recent troubles, though there’s actually been little evidence of that and some to the contrary. It’s still smart for Lyft to raise funding and fuel its rapid expansion in the US during this time, but there’s no guarantee that it’ll be able to gain meaningful share as a result given that it seems to have been able to do little of that even in what’s been a disastrous period for Uber on the PR front.
via Financial Times
I think it’s safe to say that Tesla’s plans for Model 3 manufacturing represent the biggest test the company and Elon Musk have faced by a long way. The ramp contemplated is so rapid and takes the company so far beyond its historical production rate that it seems almost impossible for it to meet its targets. And yet here it is raising more money to fund what’s going to be a massive capital spend in the first half of the year to prepare for that production run that’s scheduled to begin in July. In the first half of last year, the company spent around half a billion dollars on capex, and it plans to spend $2-2.5 billion in the first half of 2017, which gives some sense of just how big the leap is from anything the company has done in the past. That’s going to cause a massive cash drain, hence the new funding. Musk continues to execute extremely well on his long-term plans eventually, but hitting short-term targets continues to be his big weakness, and it feels like the Model 3 is either going to be the worst example of that flaw or the biggest possible exception to the pattern. I’m betting it’s the former.
Lyft looks to raise $500M as Uber stumbles – USA Today (Mar 2, 2017)
As I mentioned in covering Lyft’s rapid expansion into new cities in the first two months of the year, taking advantage of Uber’s current struggles is smart, but it’s going to be costly. This news that Lyft is raising more money is validation of that view, but may also be a sign that it work even harder to take advantage of this window of opportunity. That’s smart – Uber is especially vulnerable with both drivers and riders at the moment, and the differentiation between the two is so limited that as long as Lyft has the capacity it could take really meaningful share.
via USA Today
Troubled LeEco lands 16.8 billion yuan lifeline after selling stakes in video, movie assets to Sunac China – South China Morning Post (Jan 13, 2017)
Despite its recent launch in the US and a strong presence at CES last week, most of the recent headlines about LeEco have been about its shaky finances rather than its products or services. It looks like it’s now solved at least its short term cash crunch by selling down some of its stakes in various subsidiaries, which should help fund its overseas expansion and particularly its aggressive entry to the US market. From my conversation with LeEco at CES, it appears the focus in the near term will be on expanding distribution channels and content relationships (with more of the latter to be announced very shortly), but until then the value proposition feels pretty thin, and without carrier partnerships all the retail distribution in the world won’t get it far in phones.