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Radio giant Sirius acquires Pandora Media in $3.5bn deal

Two US companies are set to create the world’s largest audio entertainment business after radio giant SiriusXM announced it will pay $3.5bn (£2.7bn) for streaming service Pandora Media.

The all-share deal, which will be finalised in the first half of next year, will create a $7bn entity.

Shares in the target rose 18.4 per cent to $10.75 in pre-market trading, above Sirius’ implied price of $10.14.

The deal gives Sirius better mobile strength, stronger digital presence, and access to Pandora’s ad capabilities.

SiriusXM chief executive Jim Meyer said the deal “represents an exciting next step in our efforts to expand our reach out of the car even further”.

“Through targeted investments, we see significant opportunities to drive innovation that will accelerate growth beyond what would be available to the separate companies, and does so in a way that also benefits consumers, artists, and the broader content communities,” he added.

Shares in Pandora climbed 37.1 per cent in August after better-than-expected second quarter results, posting a 2.1 per cent year-on-year revenue increase to $384.8m.

Discounting the divestment of Ticketfly to Eventbrite for $200m, revenues increased 12 per cent.

Pandora’s declining advertising income was offset by a 67 per cent increase in subscription revenue.

Sirius already held a 15 per cent stake in Pandora following its $480m investment in the company earlier this year, replacing a $150m investment from private equity firm KKR.

Sirius is advised by Allen & Company and Bank of America Merrill Lynch. Centerview, LionTree and Morgan Stanley are advising the sell side.

Both boards have unanimously approved the transaction, and it awaits the go-ahead from Pandora shareholders.

Sirius expects to count over $5.7bn in 2018 revenues, with adjusted earnings of $2.2bn before tax, depreciation and amortisation.

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Marsh & McLennan Buys UK Insurance Firm JLT In $5.6bn Deal

FTSE 250 insurance firm JLT has accepted a $5.6bn (£4.3bn) takeover offer from US financial services giant Marsh & McLennan.

Shares in JLT, which employs more than 4,000 people in the UK, soared 32 per cent in early trading on Tuesday after the deal was announced.

The bid values JLT at $6.4bn and will see the company’s shareholders receive £19.14 per share, a premium of almost 34 per cent to the closing price on Monday.

Marsh employs more than 65,000 people around the world, with operations in 130 countries.

The company said it expects the deal will help it reduce expenses by around $250m, partly through job cuts.

Based on preliminary evaluations, Marsh said, it expects a potential headcount reduction of between 2 and 5 per cent of the combined group’s workforce. JLT employs more than 10,000 people, meaning the potential number of jobs lost could be more than 3,500.

Marsh chief executive Dan Glaser said the acquisition “creates a compelling value proposition for our clients, our colleagues and our shareholders”.

“The complementary fit between our companies creates a platform to deliver exceptional service to clients, and opportunities for our colleagues,” he said.

“On a personal level, I have come to know and respect Dominic Burke and his management team from my time both at MMC and as an underwriter. I am confident that with the addition of the talented colleagues of JLT, Marsh & McLennan will be an even stronger and more dynamic company.”

Mr Burke, JLT’s chief executive, said: “I am enormously proud of what JLT has achieved, founded on our people, our culture and our unwavering commitment to our clients. MMC is, and always has been, one of our most respected competitors and I believe that, combined, we will create a group that will truly stand as a beacon for our industry.”

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Slack Makes Third Acquisition In 3 Months

In its latest acquisition, messaging powerhouse Slack has picked up Astro.

The move is part of Slack’s mission to bundle up workplace communication into one place. Astro, founded out of Palo Alto in 2015, is the maker of an AI-powered app that allows email and calendar information to be viewed directly from Slack’s messaging interface, essentially providing a way for workers to check all their messages in the same place without moving between apps. With the acquisition, Astro’s tech will be rolled into Slack’s platform.

Slack has acquired five companies—including Astro—since it was founded in 2009, per the PitchBook Platform. Notably, three of those acquisitions have occurred since the beginning of the summer.

In July, Slack picked up Missions, an app developed by Robots & Pencils that allows users of Slack to automate routine tasks. Later that same month, the San Francisco-based company agreed to acquire Hipchat and Stride, two of Atlassian’s messaging products. As part of that deal, Slack is integrating the collaboration apps into its own product, much like it’s doing with Astro.

Pre-2018, Slack had made just two acquisitions in nine years. Its first ever was Spaces, a collaboration startup it picked up in 2014. The following year, Slack bought Screenhero, a startup that developed a platform for users to access one another’s screens. The deal for Astro is reportedly the biggest of Slack’s acquisitions, and most of the company’s 28 employees are said to be joining Slack upon the deal’s closing.

The deal comes a month after Slack announced a major new fundraise. The company brought in $427 million at a valuation of more than $7.1 billion in late August, further solidifying its ranking as one of the most valuable VC-backed companies in the US.

From Astro’s perspective, the acquisition represents an exit for its investors, which include Redpoint Ventures and Aspect Ventures. The company raised more than $8 million in a Series A funding last year.


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Trucking Startup Convoy Is Raising Up To $198M

Convoy has authorized the sale of up to $198 million in new shares, PitchBook has learned.

On Friday, Convoy confirmed it has raised $185 million in a round led by CapitalG, the growth equity arm of Google parent Alphabet. David Lawee of CapitalG is joining the company’s board of directors.

With the funding, the company is valued at nearly $1.1 billion. For the Seattle-based startup, that’s a big jump from the $362.5 million valuation it reached in July 2017 with a $62.5 million funding round. In 2015, the year Convoy was founded, the company brought in $18.5 million at a valuation of $58.5 million.

Offering a platform with on-demand fleet management tools for trucking companies, Convoy’s technology matches trucks with businesses that need to ship freight. According to the company’s website, 40% of trucks that travel across the country are empty. Convoy’s goal is to fill up those vehicles with goods from businesses that use its app.

Existing investors in Convoy include Y Combinator, Bezos Expeditions, Greylock Partners and Mosaic Ventures. Salesforce CEO Marc Benioff, Dropbox founder Drew Houston and U2’s Bono and The Edge have also backed the company, among others.


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Retail Apocalypse? What Retail Apocalypse?

Much has been written about the death of bricks-and-mortar retailers, driven by the failure of prominent brands on both sides of the Atlantic. Toys R Us was one such high-profile collapse this year, but the list of failed entities ranges from smaller speciality retailers selling outdoor clothing to discount stores.

The common narrative suggests that this is driven by the rapid growth of ecommerce and the insatiable appetite for expansion by the likes of Amazon and Alibaba.

But that is only part of the reason according to Mark Cummins, the founder of retail technology company Pointy, which raised $12 million from backers such as Polaris Partners earlier this year.

It’s not all doom and gloom

“The ‘retail apocalypse’ narrative has been very overplayed,” he said. “There were some prominent retail bankruptcies and store closures, especially in the US, and that’s very attention-grabbing. But no one gives a headline to a store opening. If you look at the underlying statistics, they tell a very different story. On net, retail locations increased.”

Global retail sales are also still growing. The market is projected to be worth $24.6 trillion in 2018, compared with $23.4 trillion in 2017, according to data from Statista. On top of this, global venture capital activity in the sector has dramatically risen. So far, 2018 has seen 210 VC deals in the retail space worth around €5 billion, per the PitchBook Platform, more than double the total amount of capital invested last year, which stood at €2.2 billion.

Instead, according to Cummins, the struggle for physical stores stems from traditional retailers’ lack of ability to adapt digitally. “They are still quite unsophisticated in the sense that they’re not software companies, and they have to increasingly deal with digital. For many of them, it’s just not their forte.”

On the face of it, this isn’t too major a concern, since ecommerce still only accounts for around 12% of global retail transactions—although Statista estimates its share will increase to as much as 17.5% by 2021.

Adapt or die

However, the way consumers buy both larger products and day-to-day items is becoming increasingly driven by mobile technology and other distribution channels—meaning bricks-and-mortar stores are, in some cases, not even in consideration for some purchases. Said Cummins: “If you’re looking for a product and you pull out your phone and you search, what you see is mostly ecommerce retailers, so the local retailers aren’t even in consideration. That is a genuine threat to them.”

Pointy—the company Cummins founded after selling his previous business Plink to Google—is seeking to address this and enables retailers to make their stock visible online without them having to invest heavily in an entire ecommerce ecosystem. But for Cummins, this is only a first step. “It’s not going to transform your business overnight if you put your inventory online, but those who don’t are having their business gradually eroded by others who are more visible,” he said. “It might be a small effect, but all these things are cumulative.”

A cautionary tale

Toys R Us is probably the classic example of this gradual erosion. Instead of building its own online platform, it formed a 10-year partnership with Amazon in 2000, paying the internet giant $50 million a year plus a percentage of sales for Amazon to be the exclusive retailer of its products online. While an initial success, the deal left the retailer with barely any online presence; visitors trying to log on to, for instance, were instead redirected to Amazon.

Once the internet giant saw how profitable this was, it broadened its offering and began to allow Toys R Us competitors to sell as well. And although the company eventual sued and won the right to terminate the agreement, it had lost years of momentum—Toys R Us only brought ecommerce operations in-house last year.

Using tech as an advantage

Digitizing a business’ stock is not just about increasing foot and online traffic or survival; it can also lead to new ventures. And herein lies the opportunity, according to Cummins. “Making your stock visible online is great, but it is also the building block for everything that happens next,” he said. “If your inventory is digitised, then maybe you could plug into a delivery system. If you want to do click-and-collect or anything like that, you have to have your store-level inventory available in the cloud.”

Traditional retailers are not bound for death, and mobile-driven shopping should not be viewed as one of the horsemen of the retail apocalypse. But what needs to happen is a recalibration of the old bricks-and-mortar model. A “click and mortar” model, which combines the traditional outlet with an online presence and easy access for consumers, appears to be the way forward in order to stem the demise.


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The Future Of Urban Mobility Has Two Wheels (or so VC’s think)

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Saudi Arabia pledges $1B+ to Lucid instead of backing Tesla

The Public Investment Fund of Saudi Arabia (PIF) has agreed to invest more than $1 billion in Lucid Motors, a Newark, CA-based electric car company planning to launch its first commercial vehicle, the Lucid Air luxury sedan, in 2020. Lucid will use the cash for several purposes, including to finish developing and begin production on the Air, build a factory in Arizona and launch its North American retail strategy. The startup has raised prior VC funding from Venrock and Tsing Capital.

The announcement comes about a month after reports of an investment first emerged, which in turn came days after several reports connecting the PIF to a possible deal with Tesla. The Lucid transaction falls in line with the PIF’s forward-looking plan called Vision 2030, which calls for the kingdom to pursue investments that will lessen its dependence on oil.

To that end, the PIF has been liberal in dispensing parts of its $230 billion in AUM. In 2017 alone, the wealth fund announced its intent to commit up to $20 billion to Blackstone’s planned $40 billion infrastructure fund, up to $45 billion to a SoftBank-led tech fund, and an unspecified amount toward a proposed $500 billion project to build a new city called Neom on the coast of the Red Sea. To help fund such large-scale transactions, the PIF announced on Monday that it has raised $11 billion through a syndicated loan that it plans to use for general investment purposes.

The latest news would seem to erase the possibility that the PIF has immediate plans to expand its current 5% stake in Tesla, a move that seemed much more likely when CEO Elon Musk tweeted last month that he had “funding secured” to take Tesla private. Musk since retracted his statements about taking Tesla private and is now under SEC investigation.

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FoodShot launches investment vehicle to improve agtech and food systems

The future of farming has a tough row to hoe, as the global population is projected to reach nearly 10 billion by 2050. New strains on the food supply created by this growth will come to test the very business models that large producers and distributors have deployed in the past to address similar challenges. But FoodShot Global hopes to smooth the path ahead by backing moonshot technologies and supporting business models that can help overcome the major barriers to feeding a growing population.

The newly launched investment platform represents a partnership between a number of important players in the food and agtech space, including Rabobank, Mars, The Rockefeller Foundation, Generation Investment Management, Armonia and Acre Venture Partners, among others.

For co-founder and chairman Victor Friedberg (pictured), FoodShot represents a means to bring solutions to market. Friedberg, who also co-founded  S2G Ventures, spent years investing in the food and ag sector, and he believes that new tools are required for change. FoodShot’s strategies include using integrated funding across debt, equity and cash to cultivate and commercialize new tech focused on the program’s theme of “Soil 3.0,” a framework for conceptualizing a food system capable of sustainably producing nutrient-dense food while increasing yields for producers.

“The consumer is still going to drive this change, whether that’s in Africa, China, Europe or the US,” Friedberg told PitchBook. “My belief is that if you’re going to actually produce a healthy, sustainable and democratized food supply, then everything down the system is going to have to change, starting with the soil.”

The program plans to make equity investments of up to $10 million and back debt funding of up to $20 million annually. And FoodShot is looking to support projects located at the intersection of food and agtech—or, as Friedberg is fond of saying, from “soil to shelf”—by employing a systems investment thesis that addresses consumer preferences for personalization and sustainability from the food supply.

“For millions of years, nature has basically evolved to balance the books, but for the last 10,000 years or so we’ve perfected a system where we make mostly withdrawals,” he said. “At some point in the future, nature is going to make a margin call.”

For FoodShot, heading that off means backing regenerative farming practices and the agtech that can verify the efficacy of those practices with investments into soil sensing and measuring systems.

This area of agtech has garnered significant attention from the wider VC world in recent years, with sensors and farm equipment enjoying a bumper crop of investment last year. In 2017, VCs struck 46 deals in the space comprising some $94 million. And this year has sustained that heady pace of activity, already hitting a decade high for capital invested with $106 million across 31 financings.

“Venture capital is an amazing tool for change, but as food, agriculture and climate systems are global in nature and deeply interdependent,” Friedberg cautioned, “they will require new tools, and multistakeholder and multidisciplinary solutions.”

Although producers know a lot about what’s going on above the soil, they know far less about what happens underground. And that’s why FoodShot is particularly interested in methods of below-ground phenotyping, which can examine a plant’s physiological and biochemical properties at the interface of root and soil.

“We don’t have a global soil map. So, we need to get to this baseline where we get below the surface and invest in tech that can do that, and that will create efficacy around regenerative farming,” Friedberg said.

To that end in particular, FoodShot will award a “groundbreaker prize” of $500,000 to support research in and development of new economic models. One example is transitional acreage where the farmer, regardless of location, would be able to look at the soil and understand quickly what’s wrong in order to identify resources—from, say, microfunders—that can help to transition vulnerable tracts from destructive to regenerative practices. And Friedberg believes capital access here could come from extant companies to support new entrants.

FoodShot-backed projects will gain access to its entire network of partners, including the University of California at Davis’ Innovation Institute for Food and Health to receive lab and faculty support to develop new products and conduct field tests. Finalists will also have access to Rabobank resources, such as Terra, its food + ag tech accelerator.


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What’s next for European PE when the taps are dry and a recession looms?

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Six big things: Peter Thiel, Palantir and the power of information

Peter Thiel is a proud nerd. So it only makes sense he named his data-mining startup after a creation of JRR Tolkien.

In “The Lord of the Rings,” a palantir is a powerful crystal ball, a sort of telepathic device that shows the viewer glimpses of both present and past; in Tolkien’s invented High Elvish language, “palantir” means “far-seeing.” It’s a way to gain knowledge, offering information that would otherwise be impossible to obtain. This, surely, was what Thiel had in mind when he co-founded Palantir Technologies nearly 15 years ago.

Yet in the possession of the powerful, the palantir can have a dark side. In Tolkien’s trilogy, a palantir falls into the hands of Saruman, a wizard who’s believed to be leading the battle against the dark lord Sauron. But Sauron has a palantir, too. And he uses it to manipulate Saruman, sending him images and messages—in other words, data—that convince Saruman the fight is hopeless, that the only option is to embrace evil. The palantir brings Saruman new and powerful information, yes. But it’s up to him to make sense of it. Humans (or wizards, as it were) still have to process the information a palantir provides.

Which brings us back to Palantir, with an uppercase P. Thiel’s startup has created what is by all accounts one of the most powerful tools for data collection and analysis in human history, one that could be used to discover life-saving new drugs and fight financial fraud. But it’s also one that can (and has) been used for much more nefarious means. Its original purpose was as a tool of war in Afghanistan and Iraq. Across the US, it’s being deployed by police departments for the rather “Minority Report” purpose of “predictive policing.” By tracking in detail the everyday lives of American citizens, Palantir’s software could in certain hands be a serious threat to safety and privacy. All that data still must be processed.

The company’s name may be more accurate than Thiel ever intended.

Minor controversies have erupted, but for the past decade-and-a-half, Palantir has largely managed to stay out of the public eye. Will that change if it becomes a publicly traded company? The fact that we may be about to find is one of the six big things to know from the past week in VC:

1. A Palantir IPO looms

Reports emerged this week that the Thiel-founded startup is working with Morgan Stanley on an IPO for either 2019 or 2020. The financials around such an offering will be highly interesting: While Palantir’s valuation topped $20 billion in 2015, a Bloomberg report from earlier this year indicated Morgan Stanley had marked its valuation of the company down by some $6 billion. Palantir expects to turn a profit this year for the first time.

2. Farewell, sweet Theranos

The most spectacular collapse in venture capital history is almost complete. As soon as September 10, Theranos will officially begin winding down its operations after spending the past five months seeking a miracle round of funding, according to a letter sent to investors this week by CEO David Taylor. A one-time $9 billion valuation is long, long gone. May the blood-testing startup live forever as the ultimate example of why investors should conduct at least a titch of due diligence.

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