September 11, 2020

Image: Museums Victoria / International Trade Administration / Barta IV / Protocol
Hello! This week: What's behind Berkshire Hathaway's Snowflake investment, why Amazon might be tempted by Reliance Retail, and ServiceNow CFO Gina Mastantuono on Shopify's underhyped acquisition.
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Snowflake's amended S-1 this week raised eyebrows for a few reasons. One was its huge valuation: Its proposed price range values the company at up to $23.7 billion, way higher than the $12.4 billion it was valued at in February. And then there was the name of an investor that's already committed to buying shares: Berkshire Hathaway.
So is this a big shift in the company's strategy? I spoke to some Berkshire-watchers to find out.
One thing to note: "This really isn't Buffett, you know, 'old dog, new tricks,'" Edward Jones analyst James Shanahan said. "This is the influence of his investment managers." That's Todd Combs and Ted Weschler, and indeed it was Combs' signature on the Snowflake document, not Buffett's.
There may also be a hint of desperation to it. "This represents a desire on the part of Berkshire to be invited to be a participant in other deals," Seifert said, explaining that Berkshire's deal flow may have slowed in recent years.
But don't get too carried away about this being a Berkshire reborn for the modern age. "I really wonder when we will go from these investments in the delegated investment portfolios, to investments in digital transformation and in these platforms at the Berkshire corporate level," Chris Rossbach told me.
And anyway, this is Berkshire, so it's always worth watching. "What they do is highly relevant, and I think still has a signaling value," Rossbach said. "If they end up buying one of the big digital platforms … [or] encourage Todd and Ted to do these kinds of deals," he added, "it's something we should all be watching."
Stronger care … from more efficient operations
In a defining moment for healthcare, it's even more crucial to deliver patient-centered care efficiently. At Philips, we are committed to providing intelligent, automated workflows that seek to improve patient care. More efficient healthcare means stronger, more resilient healthcare.
Forgive me if you've heard this one already: Mukesh Ambani is on a fundraising spree.
Actually, make that another fundraising spree. After Jio Platform's $20 billion raise earlier this year, sister company Reliance Retail has also begun selling stakes. On Wednesday, Silver Lake invested $1.02 billion in the company at a $57 billion valuation, while usual suspects KKR, L Catterton, Abu Dhabi Investment Authority and Saudi Arabia's Public Investment Fund were all reported to be in talks to invest too.
But the big news came yesterday morning: Reliance has reportedly offered to sell Amazon a $20 billion stake, in a deal which could reshape what's arguably the world's most interesting ecommerce market.
Reliance Retail is already a titan of Indian shopping. It owns the largest physical retail business in the country and controls around one-third of India's organized retail sector. But physical retail isn't enough: Earlier this year, Reliance Retail launched JioMart, a joint ecommerce venture with Jio Platforms, that has the express aim of giving Reliance control over India's huge unorganized retail market of neighborhood retail stores, called kirana.
When JioMart was announced, it was seen by many people as Reliance going up against Amazon and the Walmart-owned Flipkart, which both have large ecommerce operations in India. Both have typically focused on organized retail, though they're both also pursuing a kirana strategy. But Pathak thinks that's easier said than done, pointing out that it requires a huge field sales team to educate kirana owners, and a large offline presence. That's something Reliance has plenty of, but "Flipkart or Amazon will take some time from that perspective," Pathak said.
Investing in Reliance Retail could be a way for Amazon to jump ahead. Rather than compete with Reliance, the two could work together to fight a common enemy: Walmart. A tie-up is also just prudent, Pathak argues, as a way of diversifying risk: "These are early times in the digital retail side of things, so what companies ideally will do [is] cover all the grounds, rather than sticking with a single strategy."
Has COVID-19 been net good or bad for the tech industry?
The pandemic has turned digital transformation into a business imperative. We're seeing this on multiple fronts, from survival to thriving. We're recognizing the importance of business continuity, productivity and agility. Look at companies like Disney and Dominos — they're literally becoming software companies. If digital transformation was important before, failure to digitize is now a losing strategy.
What tech stock do you have your eye on?
Microsoft. They continue to innovate and tackle challenges that arise from COVID-19 from every facet, whether it's introducing new innovations to support the remote workforce or helping people around the world acquire digital skills needed for the COVID-19 economy.
What was the most overlooked and/or overhyped deal of the last 12 months?
One potentially underhyped deal is Shopify's acquisition of 6 River Systems. The acquisition lets Shopify extend its online footprint into brick-and-mortar fulfillment warehouses with robotics, letting independent stores compete with ecommerce giants. This deal underscores the continued acceleration of digital transformation in the retail space.
What piece of financial advice should a founder ignore?
"Technology alone solves problems." Technology alone won't solve problems, people do. If you automate a bad process, it's still a bad process. My advice is to find new ways to partner cross-functionally with your C-suite peers to maximize the value of your investments. We call it East-West collaboration. I've been impressed with how collaborative the ServiceNow team has been since I joined in January.
Stronger care … from more efficient operations
In a defining moment for healthcare, it's even more crucial to deliver patient-centered care efficiently. At Philips, we are committed to providing intelligent, automated workflows that seek to improve patient care. More efficient healthcare means stronger, more resilient healthcare.
Thoughts/feedback/tips? Email me — shakeel@protocol.com — or tips@protocol.com. And subscribe to get Index in your inbox every week. Thanks for reading — have a great weekend, and see you next week.
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