Photo: The LEGO Group.
June 1, 2020
Good morning! This Monday, some founders prefer family offices to VCs, we might not need to worry about Big Tech vultures, and Dallas PD had to face K-pop fans. Want Index in your inbox each morning? Subscribe here.
What Matters This Week
- ZoomInfo is set to IPO this week, the first software IPO this year. The company hopes to raise as much as $801 million.
- It's a big week for WFH earnings. Zoom reports Tuesday, followed by DocuSign and Slack on Thursday — all of which will show whether the hype has translated into a material financial boost. Broadcom also reports Thursday, with Oppenheimer analysts expecting "solid demand for [its] networking and storage products," though they caution that plunging smartphone demand could cause problems.
- Friday's jobs report is expected to show the U.S. unemployment rate soaring to 19.6%, while average hourly earnings are expected to fall slightly.
As of 4:42 a.m. PDT: Nasdaq Futures: -0.15% | Euro 600: 0.85% | Nikkei: 0.84% | Hang Seng: 3.36%
- The Semiconductor Industry Association is reportedly lobbying for $37 billion in federal funding to help grow the U.S. chipmaking industry.
- Samsung is building a new NAND facility in South Korea.
- Zoom said it will release stronger encryption for paying customers.
- Waymo is reportedly resuming delivery operations in the Bay Area.
- Sony said the PlayStation 5 was on track for a 2020 launch. More details on the console will be revealed on Thursday.
- All Japanese Apple stores will reopen by Wednesday.
- TikTok clone Zynn topped the app charts by paying users to use the app and invite other users.
- Lyft was sued by a former driver, who alleges the company violated sick-pay rules.
- Huawei has reportedly stockpiled U.S. chips, building a supply of Intel and Xilinx chips that could last up to two years.
- A new U.K. review could reportedly limit Huawei's 5G involvement in the country even more, thanks to U.S. sanctions making it harder for the U.K. to assess the risk of its chips.
- Flipkart can't launch a food-retail business, the Indian government said.
- India ordered internet service providers to block WeTransfer, without giving a specific reason for the decision.
- The District of Columbia "requested removal of all dockless vehicles."
- KKR, Cinven and Providence offered to buy Spanish telecom company Masmovil Ibercom for $3.3 billion.
- Charter Communications and ViacomCBS bought one-third each of Blockgraph, Comcast's targeted-advertising unit.
- Zynga acquired Peak, a mobile game developer, for $1.8 billion.
- Jeff Bezos invested in Beacon, a British digital logistics company backed by Eric Schmidt and Travis Kalanick.
- The U.S. has approved Grindr's sale to an investor group, reportedly backed by edtech founder James Lu.
- Chile approved Uber's Cornershop acquisition.
- NetEase reportedly plans to raise almost $3 billion in a Hong Kong listing, scheduled for next week.
- Tencent is reportedly in talks to invest $200 million in Warner Music ahead of its IPO this week.
- Uber and Grubhub are reportedly negotiating a breakup fee.
- China's BYD will supply electric vehicle batteries to Ford.
- Yum China said Beyond Burgers will be available at select KFC, Pizza Hut and Taco Bell locations in China.
The future of cloud is Lego
A lot of digital ink has been spent figuring out who will win the Cloud Wars: Microsoft, Google, Amazon, IBM? But according to one cloud CEO, that's the wrong way to think about it.
- "The way I see the cloud evolving, it's going to be a much more heterogeneous environment," said David Friend, CEO of Wasabi. Wasabi is a cloud storage platform, compatible anywhere Amazon's S3 storage is — but at one-fifth the price.
- Friend says Wasabi can beat Amazon because it's focused on just one thing. Wasabi has its own file system, increasing the amount of disk-bits it can use. It also finds other efficiencies here and there — something Friend says Amazon and Google can't do because they're spreading themselves too thin.
- Storage is "not a priority" for Amazon, Friend said: "When you go to the Amazon AWS conferences, they don't talk about storage. They talk about AI."
The future, he thinks, is a world where you have different providers for different functions, all of which connect with each other like Lego bricks, using a standard set of APIs. (Amusingly, Friend thinks those APIs will likely be Amazon's, thanks to its existing scale.)
- "When I was growing up, if you walked into a data center, every piece of gear in the data center had an IBM logo on it," Friend said — much like the cloud world is today. But "if you walk into a data center today, you'll see 20 or 30 different brands of equipment, all working together based on standards." That's where cloud will end up, he thinks.
- "These walled gardens like Amazon … people hate that," he said. "They can get away with it right now, because they're Amazon, but they're not going to get away with it forever."
To execute that vision, Wasabi recently raised funding — a round notable for not including any VCs.
- Wasabi's gone with family offices instead, because "a family office has no specific obligation to pay the money back to anybody."
- "We had a VC at Carbonite [Friend's previous company] who ran up against a time limit on their fund, and wanted to sell the company for … $12 a share," Friend said. "Luckily, I was able to block that, because a year later the stock was selling for $40 a share."
- "Everything is great and friendly until your interests diverge," he warned, saying that things are just easier with the "evergreen" funds of family offices. He would have gone to VCs if they hadn't filled the round, but as it was, he says he had no need.
Another bonus of family offices? "Most of them are people who have made their fortunes on their own," Friend said, "so they understand my job better than a lot of VCs do, some of whom have never run anything."
- "I work at Facebook and I am not proud of how we're showing up. The majority of coworkers I've spoken to feel the same way. We are making our voice heard." — Facebook Director of Product Management Jason Toff was vocal about the company's response to the protests and Donald Trump's posts.
- "The folks who aren't digital aren't exactly picking it up." — JPMorgan's Jamie Dimon didn't echo Goldman Sachs's claims that the pandemic was accelerating digital banking, though he did say that existing digital customers are increasing their use.
- "For the foreseeable future, we've got to make sure that this platform is really built to last." — Kickstarter CEO Aziz Hasan said the company has to focus on being "resilient" before it starts experimenting with new features.
- "Their current models don't really work." — Kitchen Fund's Dan Fleischmann thinks delivery apps are "hurting" amid the pandemic.
- "Singapore has become a battleground between Chinese tech and U.S. tech who both see it as a springboard for the region." — Savill's Ashley Swan has seen Big Tech looking into Singapore real estate.
Everyone's Thinking About
Are Big Tech vultures circling?
There's been a lot of talk recently about the threat this pandemic poses to competition, with U.S. representatives, including Alexandria Ocasio-Cortez, pushing for a merger moratorium to stop Big Tech from using the crisis to snap up small companies. But is that actually something we need to worry about?
- "The idea that they're like vultures, going around looking for dead meat to scavenge, is mistaken," Hampleton Partners' Jonathan Simnett recently told me. As a sell-side M&A adviser, he thinks "quality still rules."
- "Good tech companies … will be demanding high prices," he said, especially if their market is expanding and will continue to expand.
- And "there will be competition to buy those companies," Simnett said, thanks to Big Tech's need to "buy or die."
- "There's a lot of companies out there, and I can't emphasize this enough, that the Big Tech players will want to buy, that are doing very well," he added. "And that has to be paid for."
There is some downward pressure on valuation, though. Simnett said that the retreat from private equity buyers, who are busy dealing with their own portfolios, could cool the market.
- And deals done to increase market share are on hold, he thinks, saying there's been "a complete decline in the multibillion" deal market. Right now, companies are buying because they want tech and talent.
Big Tech's advantage right now isn't necessarily that it can buy distressed companies, Simnett thinks.
- "The opportunity's as much that nobody else is looking," he said.
K-pop fans take on Dallas PD
Dallas Police Department has an app that lets people submit evidence of crimes, and it recently told people they could submit "video of illegal activity from the protests." People … did not like that. And so K-pop fans spammed the app with videos of K-pop, leading the police to take the app down "due to technical difficulties." 2020's protest songs are wild.