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GP.Bullhound
Tech Trends, Unicorns
and Clusters
7 June 2017
Strictly private and confidential
2
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# Tech
Cos.
The rise of technology
Source: Capital IQ, Financial Times Global 500
1996 2001 2006 2011 2017
0 2 1 3 5
0
5
10
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36
3
Number of years to become a billion dollar revenue company
$bn
5years
35 years
15 years
5 years
8 years
Disruption is increasing in velocity and magnitude
Confidential
4
A Recap of GP Bullhound’s 2017 Predictions
1. THE NEXT GENERATION OFArtificial Intelligence
2. CORDLESS CONTENTAnywhere and Everywhere
4. THE DAWN OFV R / A R Content
3. E-SPORTS TAKESCenter Stage
10. YEAR OF THEEuropean Decacorn
8. SaaS SOFTWAREReigning Supreme
5. DRIVERLESS CARS STILLRequire H u m a n Direction
6. FINTECHShifting Tectonic Plates
9. TECH IPOS SETFor Take Off
7. SOCIAL MEDIATransformation
1 THE NEXT GENERATION OF ARTIFICIAL INTELLIGENCE
6
Confidential
2016 posted record levels of investment in the industry
» 635 deals totaling $4.9bn led by Khosla Ventures, Intel, Google, a16z and NEA
» 40+ AI acquisitions in 2016, led by Google, Apple, Intel, Salesforce, Microsoft and Samsung
AI pioneers help enterprises reduce costs and optimize data analysis
» Starts at non-core administrative tasks and services before moving to CRM and marketing
» Disruptive AI developers Cylance, iCarbonX and Sentient have raised over $500m in total
AI-powered Virtual Personal Assistants (“VPA”) will increase in sophistication
» Tech giants continue to develop VPAs, such as Siri, Cortana, Alexa and Google Now
» Innovation in VPA will be driven by third-party developers
THE NEXT GENERATION OF ARTIFICIAL INTELLIGENCE1
E-SPORTS TAKES CENTER STAGE3
8
Confidential
E-sports is becoming $1bn industry with the rise of gaming groups and contests
» Grew at 50%+ CAGR from 2014-2016, with 250m+ followers and $493m revenue in 2016
» 112 major e-sports events globally in 2015, $21m+ in ticket sales and $61m in prize money
» 36m viewers for the 2015 League of Legends Final vs. 30.8m for game 7 of 2016 NBA Final
Millennials are the most important generation for the growth of e-sports
» Millennials make up 53% of e-sports fans, the highest concentration of any sport supporters
» Major tech and media companies are looking to connect with their millennial audience
E-sports is expanding into mobile gaming
» Super Evil Megacorp, Twitch and Supercell hosted a Clash Royale tournament in Helsinki
Significant investment expected to flow into the industry
» Media groups attracted to the vast advertising and sponsorship opportunities
» Corporate and financial investors seeking the next blockbuster game
E-SPORTS TAKES CENTER STAGE3
DRIVERLESS CARS STILL REQUIRE HUMAN ATTENTION5
10
Confidential
By 2035, 12m+ driverless cars will be sold yearly as the industry grows to $77bn
» Autonomous cars can solve safety and efficiency issues in transportation
» Human errors alone account for approximately 1.3m fatalities and 50m causalities a year
» Uber tested driverless car in Pittsburgh and Tesla sold cars with autopilot technology
Tech players & carmakers explore self-driving tech via Invts, P'ships and R&D
» Samsung acquired Harman for $8bn
» Volvo and Uber agreed to develop hardware and software for self-driving cars
» Toyota and General Motors have invested in Uber and Lyft, respectively
Fully autonomous cars have a long way to go before widespread adoption
» Tech at a nascent stage, with technological, safety, security, insurance & regulatory issues
» The biggest obstacle that driverless cars face is the need for regulatory clarification
» Adoption will be determined by customer acceptance vs. the pace of tech development
DRIVERLESS CARS STILL REQUIRE HUMAN ATTENTION5
SOCIAL MEDIA TRANSFORMATION7
12
Confidential
Western social media players dominate technological innovation
» Globally social networks have demonstrated a clear shift from desktop to mobile
» Race for innovation driven by high smartphone & internet usage and fierce competition
» Asia presents a huge opportunity as its smartphone ownership & internet accessibility climb
Asian players have developed an edge on user retention and monetization
» Monetized quicker than Western players due to less competition & low innovation pressure
» Pioneered the model of messaging app as a gateway to all consumer services
» Actively acquiring tech-oriented firms in the US and EU to strengthen their Int'l. position
Expect Western and Asian social media giants to offer vastly similar features
» Asian platforms continue to pursue cross-border M&A for Western expansion
» Western platforms integrate value added services into their existing products
» Chatbot is expected to play a key differentiating role in the future battle for user control
SOCIAL MEDIA TRANSFORMATION7
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The increasingly crowded Unicorn club
Source: CBInsights – Private Unicorns since 2011
Date of $1bn Valuation
UNICORN
HUNTING PERMIT
MUST CHECK SPECIMEN FOR SLOWING GROWTH
RATES, WEAK FUNDAMENTALS, AND HIGH CASH BURNS
SEASON
START
2016
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Unicorn hunting season – justified?
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European Unicorns make money…
Source: Company data, Capital IQ, Mergermarket, press articles, GP Bullhound analysis as at April 2016
Note: CAGR is calculated based on data available, the amount of years taken into account varies across data set; (1) % of sample, sample includes 37 of the 47 companies; (2) company profitability based of EBITDA
» Unprofitable Unicorns
sacrifice profit for
growth
» Average CAGR for
unprofitable Unicorns
141% vs 49% for
profitable Unicorns
» Unprofitable companies
are on average 4 years
younger
(2)
(2)
(2)
(2)(2)
(2)
(2)
60%of unicornsare profitable(1)
PROFITABLE UNICORNS UNPROFITABLE UNICORNS
40%of unicorns
are unprofitable(1)
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Unicorns are being built everywhere
Source: Company data, Capital IQ, Mergermarket, press articles, GP Bullhound analysis as at April 2016
» 10 new Unicorns spread across 7 different countries; US created 30
» Denmark and Switzerland created their first Unicorn
EUROPE US
SWEDEN
LUXEMBOURG
DENMARK
SWITZERLAND
ISRAEL
GERMANY
UK
30
10
18
Country
Cumulative
Value$39.6bn $31.1bn $20.8bn $4.7bn $7.2bn $3.4bn $9.3bn $8.0bn $4.0bn $2.3bn $1.6bn $1.1bn $1.1bn $1.0bn
No. of
Unicorns18 7 6 4 3 3 2 2 1 1 1 1 1 1
LTM
Additions2 1 2 1 0 2 0 0 0 0 0 1 1 1
Which country is the Unicorn champ?
Source: Company data, Capital IQ, Mergermarket, press articles, GP Bullhound analysis as at April 2016
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European Unicorns maturing to decacorns?
Source: Company data, Capital IQ, Mergermarket, press articles, GP Bullhound analysis as at April 2016
$1bn - $2bn
$2bn - $5bn
>$5bn
2015 2016
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#20
#16
#7
#24
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Educating investors and market
Key value drivers of Unicorns
Source: Company data, Capital IQ, Mergermarket, press articles, GP Bullhound analysis as at April 2016
Network Effect Uber – Free Rides / Blitz on SF
Fintech – P2P to I2P – loss of 50% of network effect ?
Decisiveness
Data, Data, Data Uber, Avito, Delivery hero
Hiring Obsess about star talent – no boundaries – Bla Bla – US
Hyper growth – take 6 month view
Acquisitions Just Eat, Delivery Hero, Bla Bla Car
Dropbox, Airbnb
Attack core weakness Farfetch - stock risk and multi channel opportunity vs Netaporter
King.com – Switch off old revenue (60m) to create social games
60m lost – replaced with 190m 1 year later
Access to Capital ABC
Foster understanding of fast-growth businesses – Hello Fresh
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Mega-successful Founders 22
Listed Leaders 23
Savvy Sellers 24
+ paragraph
Fast Followers 25
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Local Dragons 26
Local Dragons – Angels / city 27
2,125
420383
325270 250
196168 161 153 147 130 124
050
100150200250300350400450500
#
Skilled Scientists 28
Electro Men 29
People Mashups 30
Transport 31
Barmen and Baristas 32
Dynamic Talent 33
Our next challenge...
Cumulative value of European unicorns ($bn)
Source: Company data, Capital IQ, Mergermarket, press articles, GP Bullhound analysis.
Note: valuations as of June 2017 34
815
451
116
6331 24
Apple Facebook Europe Uber Airbnb Snap
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