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February 24, 2019
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E-commerce startup Zilingo raises $226M to digitize Asia’s fashion supply chain

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If you’re looking for the next unicorn in Southeast Asia, Zilingo might just be it. The 3.5-year-old e-commerce company announced today that it has raised a Series D round worth $226 million to go after the opportunity to digitize Asia’s fashion supply chain.

This new round takes Zilingo to $308 million from investors since its 2015 launch. The Series D is provided by existing investors Sequoia India, Singapore sovereign fund Temasek, Germany’s Burda and Sofina, a European backer of Flipkart -owned fashion site Myntra. Joining the party for the first time is new investor EDBI, the corporate investment arm of Singapore’s Economic Development Board.

Zilingo isn’t commenting on a valuation for the round, but a source with knowledge of the deal told TechCrunch that it is ‘a rounding error’ away from $1 billion. We had heard in recent months that the startup was getting close to unicorn status, so that is likely to come sooner or later — particularly given that Zilingo has made it to Series D so rapidly.

Raising more than $300 million makes Zilingo one of Southeast Asia’s highest-capitalized startups, but its meteoric growth in the last year has come from expansion from consumer e-commerce into business-to-business services.

CEO Ankiti Bose — formerly with Sequoia India and McKinsey — and CTO Dhruv Kapoor first built a service that capitalized on Southeast Asia’s growing internet connectivity to bring small fashion vendors from the street markets of cities like Bangkok and Jakarta into the e-commerce fold.

Zilingo still operates its consumer-facing online retail store, but its key move has been to go after b2b opportunities in the supply chain. That’s to say that it is building a network of supply chain pieces — manufacturing, logistics, payments, etc — that it can take to retailers or brands. So, in theory, anyone wanting to get into private labels or fashion selling could use Zilingo as an end-to-end solution to make and source their product.

Revenue grew by 4X over the past year, with b2b responsible for 75 percent of that total, Bose told TechCrunch. She declined to provide raw figures but did say net income is in “the hundreds of millions” of U.S dollar. The company — which has over 400 staff — isn’t profitable yet, but CEO Bose said the b2b segment gives it “a clear pathway” to break-even by helping offset expensive e-commerce battles.

Ankiti Bose and Dhruv Kapoor founded Zilingo in 2015.

The supply chain’s ‘outdated tech’

Moving into the supply chain after building distribution makes sense, but Zilingo has long had its eye on services.

That business-focused push started with a suite of basic products to help Zilingo sellers manage their e-commerce business. Those initially included inventory management and sales tracking, but they have since graduated to deeper services like financing, sourcing and procurement, and a ‘style hunter’ for identifying upcoming fashion trends. Zilingo also widened its target from the long tail of small vendors operating in Southeast Asia, to bigger merchants and brands and even to the fashion industry in Europe, North America and beyond that seeks access to Asia’s producers, who are estimated to account for $1.4 trillion of the $3 billion global fashion manufacturing market.

Zilingo’s goal today is to provide any seller with the features, insight and network that brands such as Zara have built for themselves through years of work.

In Southeast Asia, that means helping small merchants, SMEs and larger retailers to source items for sale online through the Zilingo store. But in Europe and the U.S, where it doesn’t operate an outlet, Zilingo goes straight to the sellers themselves. That could mean retailers seeking wholesale opportunities from Asia or online influencers, such as Instagram personalities, keen to use their presence for e-commerce. Beyond just picking out items to sell, Zilingo wants to help them build their own private labels using its supply chain network.

That rest of the world plan has been on the cards since last year when Zilingo closed a $54 million Series C, but now the next stage of the journey is deeper integration with factories.

“If you think about these factories that make the products, the process isn’t optimized over there,” Bose said in an interview. “The guy or girl running factory likely has no technology, they don’t even use Excel. So we’re going to small and medium factories, increasing capacity utilization, helping to manage payroll, getting loans and other fintech services.”

Kapoor, her co-founder, adds that the fashion supply chain is “is marred by outdated tech.”

“It’s imperative for us to build products that introduce machine learning and data science effectively to SMEs while also being easy to use, get adopted and scale quickly. We’re re-wiring the entire supply chain with that lens so that we can add most value,” he added in a statement.

Zilingo encourages retailers and brands to develop their own private labels by tapping into the supply chain network it has built

AWS for the fashion supply chain

Bose said Zilingo’s early efforts have boosted factory efficiency by some 60 percent and made it possible to develop links to retailers while also enabling factories to develop their own private label colletions, rather than simply churning out unbranded or non-descript products.

A large part of that work with factories is consultancy-based, and Zilingo has hired supply chain experts to help provide quality guidance and perspective alongside the software tools it offers, Bose said.

She compares it, in many ways, to how Amazon conceived AWS. After it built tech to fix its own problems internally, it commercialized the services for third parties. So Zilingo started out offering a consumer-facing e-commerce platform but it is making its sourcing networks open to anyone at a cost — almost like supply chain on an API.

That gives its business a two, if not three, sided focus which spans selling to consumers in Southeast Asia through Zilingo.com — which is present in Thailand, Singapore, Malaysia and Indonesia with the Philippines and Australia coming soon — reaching overseas retailers through Zilingo Asia Mall, and developing the b2b play.

In Southeast Asia, its home market, Zilingo doesn’t pressure its merchants to sell on its platform exclusively — “we don’t mind if they go to Instagram, Lazada, Tokopedia and Shopee,” Bose said — but in the U.S. it doesn’t have a go-to consumer outlet. It’s possible that might change with the company considering potential partnerships, although it seems unlikely it will launch its own consumer play.

Zilingo was once destined to compete with the big players like Lazada, which is owned by Alibaba, Shopee, which is operated by NYSE-listed Sea, and Tokopedia, the $7 billion company that’s part of SoftBank’s Vision Fund, but its supply chain focus has shifted its position to that of enabler.

That’s helped it avoid tricky times for specialist e-commerce services, which battle tough competition, pricing wars and challenging dynamics, and instead become one of Southeast Asia’s highest-capitalized startups. The company’s U.S. plan is ambitious, and it is taking longer than expected to get off the ground, but that makes it a startup that is worth keeping an eye on in 2019. It’s also an example that the startup journey is not defined since, in some cases, the biggest opportunities aren’t presented immediately.

News Source = techcrunch.com

Groww, an investment app for millennials in India, raises $6.2M

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Groww, a startup hoping to make saving and investment opportunities more widely available to young people in India, has closed a $6.2 million Series A to grow its business.

Founded in 2017, the Bengaluru-based company was part of Y Combinator in the U.S. last year and it went on to raise a $1.6 million “pre-Series A” round in June of last year. Groww was started by four ex-Flipkart staffers — Lalit Keshre, Harsh Jain, Neeraj Singh and Ishan Bansal — who realized how difficult investing in India is, particularly among young people.

This new money is led by Sequoia India with participation from Y Combinator, Propel Venture Partners and Kauffman Fellows. The company also counts Singapore’s Insignia Ventures Partners, Lightbridge Partners and Kairos among its backers.

Groww lets its users invest in mutual funds, including systematic investment planning (SIP) and equity-linked savings scheme. It claims over one million registered users, most of whom are aged under 40 and mobile-first, according to the company. Available on iOS, Android and the web, it offers over 5,000 mutual funds which can be invested in directly from its app.

Keshre, who is Groww’s CEO and previously led Flipkart’s logistics platform, told TechCrunch that the new money will be spent on hiring and developing tech to support the launch of new products. That could include direct investments and ETFs while, further down the line, Keshre said there’s an ambition to offer insurance and more.

“We’re used across India not just in metros,” Keshre said in an interview. “Our users are spread across all the major cities… [they’re] working-class, young millennials straight across India.”

Groww’s founding team [left to right]: Ishan Bansal, Lalit Keshre, Neeraj Singh and Harsh Jain

Keshre said the focus is on keeping the app and its design simple but, like Robinhood in the U.S, he said that the broader goal is to democratize investing, particularly among younger segments of the population in India. For now, he added, there is no plan to venture overseas since Groww is just scratching the surface of what it could become in India.

“There are 200 million people with investable income in India, but only 20 million investors. The only way to bring the next 180 million onboard is by making investing simple,” he said in a statement.

Note: Article updated to correct that Groww is available on iOS and the web as well as Android.

News Source = techcrunch.com

New e-commerce restrictions in India just ruined Christmas for Amazon and Walmart

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The Indian government is playing the role of festive party pooper for Walmart and Amazon after it announced new regulations that look set to impede the U.S. duo’s efforts to grow their businesses in India.

Online commerce in the country is tipped to surpass $100 billion per year by 2022 up from $35 billion today as more Indians come online, according to a report co-authored by PwC. But 2019 could be a very different year after an update to the country’s policy for foreign direct investment (FDI) appeared to end the practice of discounts, exclusive sales and more.

The three main takeaways from the new policy, which will go live on February 1, are a ban on exclusive sales, the outlawing of retailers selling products on platforms they count as investors, and restrictions on discounts and cashback.

Those first two clauses are pretty clear and will have a significant impact on Amazon — which has pumped some $5 billion into India — and Walmart, which forked out $16 billion to buy India-based Flipkart.

Both online retailers have been able to make a splash by tying up with brands for exclusive online sales, particularly in the smartphone space where, for example, Amazon has worked with Xiaomi and Flipkart has collaborated with Oppo. The new guideline would appear to end that practice, while adding further restrictions to complicate relationships with vendors. From February, brands will be forbidden from selling more than 25 percent of their sales via any single e-commerce marketplace.

Walmart bought Flipkart for $16 billion, but already both founders of the Indian company have left [Photo by AFP/Getty Images]

Beyond restricting companies like Oppo — Xiaomi prioritizes its own Mi.com site for sales — that 25 percent ruling is a headache for Amazon, which operates a number of joint ventures with Indian retailers. Those JVs were designed to circumvent a 2016 ruling that prevented foreign e-commerce businesses from owning inventory, but now they seem outlawed.

Cloudtail India (a 49:51 JV between Amazon and Catamaran Ventures) is Amazon’s biggest seller while another major one is Appario Retail, a collaboration with Patni Group. Together, both sell more than 25 percent of product on Amazon, use exclusive deals and are part-owned by Amazon. That’s three strikes.

Those rules will have Amazon and Walmart-Flipkart working to find alternatives, but there’s more with restrictions on discounts and cashback offers, which could massively cramp the appeal of online commerce, which has been to undercut brick and mortar retailers with heavy subsidies.

Here’s the relevant part of the note:

E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field…

Cash back provided by group companies of marketplace entity to buyers shall be fair and non-discriminatory.

Exactly what constitutes a “level playing field” or “fair” may be open to interpretation, but clearly this update gives offline retailers a route to protest pricing on online retail sites.

The first thought is that these new updates are focused on the core business model tenants that make e-commerce what it is today.

“It will kill competition and there will be nothing for online retailers to differentiate on,” Amarjeet Singh, a partner at KPMG, href=”https://qz.com/india/1508340/indias-new-e-commerce-fdi-rules-may-hurt-amazon-flipkart/”> told Quartz in a comment.

The new regulation is widely seen as a response to concerns from smaller sellers, who feel marginalized and powerless compared to larger organizations. Now, with capital-intensive policies such as discounts, exclusive sales relationships and strategic investment off the table, smaller players will gain a foothold and be able to do more from e-commerce, that’s according to Kunal Bahl, CEO of Snapdeal — a niche e-commerce firm that once competed head-to-head with Flipkart and Amazon.

It’s shaping up to be a very different year for e-commerce in India in 2019.

News Source = techcrunch.com

With today’s IPO sinking, a year of highs and lows for SoftBank

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If there was a word that dominated startup and tech news coverage this year, it was SoftBank. The Japanese telecom conglomerate’s Vision Fund pushed out a prodigious amount of capital this year — quite literally billions of dollars — into companies as diverse as a molecular manufacturer (Zymergen) and a robotic pizza delivery business (Zume Pizza). It was a year of highs as its Flipkart transaction produced billions in returns, as well as a year of incredible lows, what with the crisis over Saudi Arabia’s murder of Jamal Khashoggi. Saudi Arabia is the largest investor in the Vision Fund.

But the Vision Fund is only part of the SoftBank story this year. The company’s mobile unit started trading today on the Tokyo Stock Exchange (ticker: 9434), the second largest IPO of all time after Alibaba, raising $23.6 billion. But after weeks of pushing the stock to Japanese retail stock investors, those same consumers dumped the stock upon its debut, dropping by 15% from its debut at ¥1,463 to its close at ¥1,282. That’s the second worst IPO performance this decade for a Japanese company.

Highs and lows come with any ambitious project, and certainly for Masayoshi Son, the founder and chairman of SoftBank Group, nothing — not even piles of debt — will stand in his way.

Today, Arman and I wanted to look back at SoftBank’s year, and so we’ve compiled ten areas for analysis around the group’s telco business, its Vision Fund, and its other major investments (Sprint, Nvidia, Arm, and Alibaba).

SoftBank: The Telecom

1. Its IPO did what it had to do (raising money), but bad early performance will be a challenge for 2019

Ken Miyauchi, president and chief executive officer of SoftBank Corp., strikes the trading bell during the company’s listing ceremony at the Tokyo Stock Exchange (TSE) in Tokyo, Japan, on Wednesday, Dec. 19, 2018. Kiyoshi Ota/Bloomberg via Getty Images

At its core, SoftBank Group is fundamentally a telecom, and the third-largest player in the Japanese market. Masayoshi Son has for years wanted to transform SoftBank from a mature telco player into a leading investment house for funding the next-generation of technology companies.

There’s just one problem: SoftBank is sitting on piles of debt. As Arman and I wrote about a few weeks ago:

The bigger number though is sitting on the liabilities side of the company’s balance sheet. As of the end of September, SoftBank had around 18 trillion yen, or about $158.8 billion of current and non-current interest-bearing debt. That’s more than six times the amount the company earns on an operating basis, and just slightly less than the public debt held by Pakistan.

And though SoftBank’s sky-high debt balance tends to be a secondary focus in the company’s media coverage, it’s a figure that SoftBank’s top brass is well aware of, and quite comfortable with. When discussing the company’s financial strategy, Softbank CFO Yoshimitsu Goto stated that the company is in the early stages of a transition from a telco holding company to an investment company, and as a result is “likely to be perceived as a corporate group with significant debt and interest payment burden” with what is “generally considered a high level of debt.”

Those debt loads have made corporate maneuvering quite complicated. And so the company decided to put its mobile telco unit up for public trading as a means of getting a fresh injection of capital and continue its transformation into an investment shop. By raising $23.6 billion today, the company did just that.

The 15% drop in value on its debut though shows that the market has yet to fully buy into Son’s vision for where SoftBank is heading. That lowered price will make the corporate financial math around debt tougher, and will be a key theme for 2019.

2. The Japanese government wants to increase competition in the telco space, putting massive pressure on SoftBank’s financials

Japanese Prime Minister Shinzo Abe. Photo by Matt Roberts/Getty Images

Japan’s telco market is quite dormant, with mature, oligopolistic companies charging some of the highest prices on the planet for mobile service. Japan’s government also doesn’t auction off spectrum, which has saved telcos billions of dollars in direct cash costs, helping them to become reliable profit-generating juggernauts.

That cozy world is being shattered by the policy of Japanese prime minister Shinzo Abe, who has made increasing competition in the industry a major policy initiative. That includes putting 5G spectrum up for what will essentially be a competitive auction, demanding lower prices from telcos, and opening the market to new entrants like Rakuten (see #3 below).

As a result, incumbents like NTT DoCoMo have announced rate cuts of up to 40 percent on mobile services, while warning investors that it may take five years for the company to return to current profitability. Those announcements caused stock traders to dump Japanese telco shares this year, shedding $34 billion in the days following the announcements.

At a time when SoftBank most needs its cash flow to pay off its debt, the world is rapidly moving against it. The company has insisted that it can keep revenues and profits stable and even grow into the competition, but the announcements from its larger competitors dump cold water on its claims. SoftBank’s profits surged in its last quarter, but mostly from its Vision Fund investments rather than its core telco business.

3. Rakuten’s entrance into the Japanese mobile service market will scramble the traditional three-way oligopoly

Hiroshi Mikitani, owner of Rakuten. BEHROUZ MEHRI/AFP/Getty Images

One of the big news stories for SoftBank came from ecommerce giant Rakuten, which announced that it will launch a new mobile service in Japan starting as early as next year. As Arman and I wrote about at the time:

Though a new entrant hasn’t been approved to enter the telco market since eAccess in 2007, Rakuten has already gotten the thumbs up to start operations in 2019. The government also instituted regulations that would make the new kid in town more competitive, such as banning telcos from limiting device portability.

Rakuten’s partnerships with key utilities and infrastructure players will also allow it to build out its network quickly, including one with Japan’s second largest mobile service provider, KDDI.

Rakuten has obvious built-in advantages as the second largest ecommerce company in Japan following Amazon, and that will put pressure on other incumbents — including SoftBank — to meet its prices or to compete with more marketing dollars to reach customers. Again, we see a tough road ahead for SoftBank’s telecom business at a very vulnerable time for its balance sheet.

SoftBank: The Vision Fund

4. The Vision Fund actually got bigger this year

Photo by Tomohiro Ohsumi/Getty Images

The Vision Fund’s massive vision got just a bit bigger this year. When the fund announced its first close in May 2017, it set a target final fund size of $93 billion. In 2018 though, the Vision Fund received another $5 billion in commitments. When we add the $6 billion already committed for SoftBank’s Delta Fund, which is a separate vehicle used to alleviate conflicts around the company’s Didi investment, Masayoshi Son now has more than a $100 billion at his disposal.

But that’s not all! The Vision Fund has also been rumored to be raising $4 billion in debt so that it can fund startups faster (picking up on that debt theme yet?). Its LPs, which include Saudi Arabia, Abu Dhabi, and Apple, are given time to fund their commitments to the Vision Fund, and so the fund wants to have cash in the bank so that it can fund its investments faster. Debt structures in the fund are complicated, to say the least.

Masayoshi Son has repeatedly said that he wants to raise a $300 billion Vision Fund II, possibly as soon as next year, eventually ramping to $880 billion in the coming years. Whether the company’s debt load and controversy over Saudi Arabia (see #6 below) will allow that vision to come to pass is going to be a major question for 2019.

5. Seriously: is there any company not getting a multi-hundred million dollar term sheet from SoftBank these days?

Photo by Alessandro Di Ciommo/NurPhoto via Getty Images

SoftBank dominated headlines throughout 2018 with a steady cadence of monster investments across geographies and industries. Based on data from regulatory filings, Pitchbook, and Crunchbase, SoftBank and its Vision Fund led roughly 35 investment rounds, with total round sizes aggregating to roughly $30 billion, or over $40 billion when including investments in Uber and Grab, which were announced in 2017 but didn’t close until early 2018.

Surprisingly, SoftBank’s latest filings indicate that as of the end of September, the Vision Fund had only deployed roughly $33 billion, or about one-third the total fund, though the actual number might be quite a bit larger. SoftBank has led twelve rounds since September, including buying a $3 billion dollar warrant for WeWork and finalizing a large round that included secondary shares into Chinese news aggregator ByteDance.

In addition to investing directly through its Vision Fund, SoftBank also regularly makes and holds investments at the group level, with the intention of selling or transferring shares to the Vision Fund at a later date. As a result, SoftBank currently holds around $27.7 billion in investments that sit outside the Vision Fund, including the company’s stakes in Uber, Grab and Ola which it expects to eventually transfer to the Vision Fund pending LP and regulatory approvals. Assuming it plans to move the majority of these investments to the Vision Fund, SoftBank might have already deployed close to half the fund.

For all of that money flowing out the door though, there are limits even to the Vision Fund’s ambitions. Just today, the Wall Street Journal reported that LPs are pushing back against a plan to buy out a majority of WeWork, which would push the Vision Fund’s investment in the co-working startup to $24 billion. From the article:

Some of the people said that [Saudi Arabia’s] PIF and [Abu Dhabi’s] Mubadala have questioned the wisdom of doubling down on WeWork, and have cast doubt on its rich valuation. The company is on track to lose around $2 billion this year, and the funds have expressed concern that WeWork’s model could leave it exposed if the economy turns, some of the people said.

If the investment went through, WeWork would represent roughly a quarter of the fund’s capital, an astonishing level of concentration for a venture fund. Its a bold, concentrated bet, exactly the kind of model that entices Son.

6. The Vision Fund generated its first massive returns with Flipkart, Guardant and Ping An, with a huge roster to come

Photo by AFP/Getty Images

In just the first full year of operations, the Vision Fund has already begun to see the fruits of its investments with several portfolio company exits.

It made a spectacular return on Indian ecommerce startup Flipkart, where SoftBank realized a $1.5 billion gain on its $2.5 billion investment in just about a year. Walmart, which bought a 77% stake in Flipkart as part of its ambitious overseas strategy, valued the company at $21 billion.

Flipkart may have been the year’s largest highlight for the Vision Fund, but it wasn’t the only liquidity the fund saw. Its pre-IPO investment in Ping An Health & Technology Co, which produces the popular Chinese medical app Good Doctor, debuted on the Hong Kong Stock Exchange, and Guardant Health, which makes blood tests for disease detection, went public in October to rabid investor enthusiasm.

While those early wins are positive signs, the proof of the Vision Fund’s thesis will come early next year, when companies like Uber, Slack and Didi are expected to go public. If the returns prove favorable, then the fundraise for Vision Fund II may well come together quickly. But if the markets turn south and complicate the roadshows for these unicorns, it could complicate the story of how the Vision Fund exits out of these high-flying investments.

7. Murder is wrong. That makes the math for SoftBank really hard.

JIM WATSON/AFP/Getty Images

The tech media world went into a frenzy over Saudi Arabia’s horrific and horrifically public killing of dissident journalist Jamal Khashoggi. That put enormous pressure on SoftBank and its Vision Fund, where Saudi Arabia’s Public Investment Fund (PIF) is the largest LP with a $45 billion commitment.

There have been strong calls for Masayoshi Son to avoid Saudi Arabia in future fundraises, but that is complicated for one simple reason: there are just not that many money managers in the world who can a) invest tens of billions of dollars into firms backing risky technology investments, and b) are willing to ignore SoftBank’s massive debt stack and existential risks.

So SoftBank faces a tough choice. It can have its fund, but will need to get money from unsavory people. That might be fine — after all, Saudi Arabia is also the largest investor in Silicon Valley. Or it can walk away and try to find another LP that might replace the Kingdom’s huge fund commitment.

If the Vision Fund’s numbers look good after the early IPOs in 2019, I can imagine it being able to paper around Saudi Arabia’s commitment with a broader set of LPs that might be intrigued with technology investing and trust the numbers a bit more. If the IPOs stall though, whether because of internal company challenges à la pre-Dara Uber or broader market challenges, then expect a next fundraise to feature Saudi Arabia prominently, or for no fundraise to take place at all.

SoftBank: The Other Stuff

8. Good news on SoftBank’s Sprint side with its merger with T-Mobile looking like it will move forward

CEO of T-Mobile US Inc. John Legere and Executive Chairman of Sprint Corporation Marcelo Claure. Photo by Alex Wong/Getty Images

Since SoftBank acquired Sprint for $20 billion back in 2013, Sprint’s heavy debt balance has led to lackluster performance and the downgrade of SoftBank’s credit ratings to junk, where they’ve remained since.

After initial discussions stalled in 2017, SoftBank reinitiated merger discussions with T-Mobile’s German parent, Deutsche Telekom in 2018, eventually reaching an agreement for a Sprint/T-Mobile merger that would see SoftBank’s ownership stake fall from just over 80% of Sprint to just 27% of the combined entity.

Despite the poor track record for telco deal approvals and the increased scrutiny of cross-border M&A from U.S. regulators, SoftBank’s proposed merger recently received key approvals from the Committee on Foreign Investment in the United States (CFIUS), the Department of Justice, the Department of Homeland Security, and the Department of Defense. Part of that agreement came when SoftBank agreed to eliminate Huawei equipment from its infrastructure. While the deal still needs approval from the Federal Communications Commission, the road forward seems to be relatively clear.

If the deal ultimately goes through, SoftBank will no longer have to consolidate Sprint financials with its own and can instead report only its owned share of Sprint financials (and debt expense), improving (at least the optics of) SoftBank’s balance sheet.

9. SoftBank’s massive bet on Nvidia could be a $3 billion winner even as Nvidia faces crash

Justin Sullivan/Getty Images

SoftBank became Nvidia’s fourth largest shareholder in 2017 after building up a roughly $4 billion stake in the company’s shares. As I detailed last week, Nvidia’s stock has gone into free fall over the past two months, as the company faces geopolitical turmoil, the loss of a huge revenue stream with the collapse in crypto, and an increasingly competitive battle in the next-generation application workflow space.

Now, SoftBank is reportedly looking to sell its Nvidia shares for possible profits of around $3 billion. As Bloomberg reported, that’s because the acquisition was built as a “collar trade” that protected SoftBank against a drop in Nvidia’s share price (a good reminder that even when a stock loses half of its value, it is entirely possible for people to still make money).

The opportunity though is that SoftBank almost certainly still wants to continue to play in the next-generation AI chip space, and needs to find another vehicle for it to hitch a ride on.

10. ARM could be the saving grace of chips for SoftBank

Masayoshi Son, CEO of Japanese mobile giant SoftBank, and Stuart Chambers, Chairman of British chip designer company ARM Holdings, are pictured outside 11 Downing street in central London. NIKLAS HALLE’N/AFP/Getty Images

In 2016, SoftBank made its biggest purchase ever when it acquired system-on-a-chip designer ARM Holdings for $32 billion. ARM’s designs were dominant among smartphones, which at the time was seeing rapid adoption and growth worldwide.

The good news hasn’t stopped since, although ARM has had to pivot its strategy in 2018 to adapt to changing market dynamics. Apple, which has seen its next-generation iPhone sales stalling, has been rumored to be moving to using ARM chips for a wider array of its products, including its Mac lineup. Beyond that expansion, ARM is now increasingly designing chips for the data center, and engaging in next-generation markets around artificial intelligence and automotive. ARM’s CEO has said that he sees a path to doubling revenues by 2022, which shows a healthy clip of growth if that pans out.

There are headwinds though. Consolidation in the semiconductor space has been a theme the past two years, and that will allow the surviving companies to be more ferocious competitors against ARM. Up-and-coming startups could also crimp the company’s growth in next-generation workloads, a risk shared with other incumbents like Nvidia.

That said, ARM seems to be in a much more strategic position than Nvidia these days, as ARM has managed to maintain its linchpin role, and that should ultimately roll up to a valuation that SoftBank will be excited about.

11. Alibaba is putting heavy pressure on SoftBank’s balance sheet

Jack Ma, businessman and founder of Alibaba, at the 40th Anniversary of Reform and Opening Up at The Great Hall Of The People on December 18, 2018 in Beijing, China. (Photo by Andrea Verdelli/Getty Images)

While SoftBank has slowly been cashing in after winning big on its early backing of Alibaba, the company’s ownership stake still sits at roughly 29%.

SoftBank’s Alibaba ties have helped the company fuel its incessant appetite for leverage, with SoftBank using its stake in Alibaba as collateral for an $8 billion off-balance sheet loan, which prevented additional downgrades of Softbank’s credit. But a tougher macro backdrop and slowing sales growth have caused Alibaba to follow the precipitous decline of other Chinese tech stocks in 2018, falling nearly 20% year-to-date and 30% in the last 6 months.

That decline means tens of billions of dollars of losses for SoftBank’s already overstretched balance sheet, and as with many of these stories, will make financing its vision challenging in 2019.

And so we get back to the core theme of 2018 for SoftBank: debt, leverage, and financial wizardry in pursuit of a bold transformation into a technology investment firm. That transformation has certainly not been smooth, but it has moved forward bit by bit. If SoftBank can navigate the changes in the Japanese telco market, exit some major investments in its Vision Fund, and manage its big commitments in Sprint and Alibaba, it will reach its destination, with a few ultimately superficial bruises along the way.

News Source = techcrunch.com

Moglix raises $23M to digitize India’s manufacturing supply chain

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We hear a lot about India’s e-commerce battle between Walmart, which bought Flipkart for $17 billion, and Amazon. But over in the B2B space, Moglix — an e-commerce service for buying manufacturing products that’s been making strides — today it announced a $23 million Series C round ahead of a bigger round and impending global expansion.

This new round was led by some impressive names that Moglix counts as existing investors: Accel Partners, Jungle Ventures and World Bank-affiliated IFC. Other returning backers that partook include Venture Highway, ex-Twitter VP Shailesh Rao and InnoVen Capital, a venture debt fund affiliated with Singapore’s Temasek. The startup also counts Ratan Tata — the former chairman of manufacturing giant Tata Sons — Singapore’s SeedPlus and Rocketship on its cap table.

Founded in 2015 by former Googler Rahul Garg, Moglix connects manufacturing OEMs and their resellers with business buyers. Garg told TechCrunch last year that it is named after the main character in The Jungle Book series in order to “bring global standards to the Indian manufacturing sector.” The country accounts for 90 percent of its transactions, but the startup is also focused on global opportunities.

“The entire B2B commerce industry in India will move to a transactional model,” Garg told us in an interview this week. He sees a key role in bringing about the same impact Amazon had on consumer e-commerce.

“We think there’s an opportunity to start from a blank sheet and rewrite how B2B transactions should be done in the country,” he added. “The entire supply chain has been pretty much offline and fragmented.”

In a little over three years, Moglix has raced to its Series C round with rapid expansion that has seen it grow to 10 centers in India with a retail base that covers over 5,000 suppliers and supplying SMEs.

Yet, despite that, Garg has kept things lean as the company has raised just $41 million across those rounds, including a $12 million Series B last year, with under 500 staff. However, Moglix is laying the foundations for what he expects will be a much larger fundraising round next year that will see the company go after international opportunities.

“This [new] round is about doubling, tripling, down on India but also establishing a seed in a couple of countries we are looking at,” Garg said.

Moglix aims to make the B2B online buying experience as intuitive and user-friendly as e-commerce sites are for consumers

Adding further color, he explained that Moglix will expand its Saas procurement service, which helps digitize B2B purchasing, to 100 markets worldwide as part of its global vision. While that service does have tie-ins with the Moglix platform, it also allows any customer to bring their existing sales channels into a digital environment, therein preparing them to get their needs online, ideally with Moglix. That service is currently available in eight countries, Garg confirmed.

Beyond making connections on the buying side, Moglix also works with major OEM brands and their key resellers. The basic pitch is the benefits of digital commerce data — detailed information on what your target customers buy or browser — as well as the strength of Moglix’s distribution system, tighter fraud prevention and that aforementioned digital revolution.

“Brands have started to realize [that digital] will be a very important channel and that they need to use both [online and offline] for crafting their distribution,” explained Garg.

Indeed, a much-cited SPO India report forecasts that B2B in India is currently a $300 billion a year market that is poised to reach $700 billion by 2020. Garg estimates that his company has a 0.5 percent market share within its manufacturing niche. Over the coming five years, he said he believes that it can reach double-digit percent.

While it may not be as sexy as consumer commerce, stronger unit economics — thanks to a large part to different buying dynamics of business customers, who are less swayed by discounts — make the space something to keep an eye on as India’s digital development continues. Already, Garg paid credit to GST — the move to digitize taxation — as a key development that has aided his company.

“GST enabled good trust and accelerated everything by 2/3X,” he said.

There might yet be further boons as the Indian government chases its strategy of becoming a global manufacturing hub.

News Source = techcrunch.com

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