💸 IPOs, Coinbase, and Israel’s startup ecosystem ... The Seed #11
🌱 Welcome to the 11th issue of the Seed and welcome to our new subscribers!
⚙️The Seed is a weekly newsletter with easy-to-read content focusing on Entrepreneurship, Innovation and Technology. Our slogan: "Growing ideas through seeds of information"
🚨This week’s big news: Are you expert or passionate about one topic, and want to write about it? Contact us here and be published in The Seed!
💡 This week’s concepts
Initial Public Offerings (IPOs)
UiPath, Deliveroo... We keep on talking about IPOs, but what is it exactly?
An Initial Public Offering (IPO) is when a company decides to sell some of its shares on the stock market to raise capital. It's said that the company goes public because then anyone can freely buy shares of the company and own a part of it.
There are actually different ways to go public, but IPO is the simplest one. Currently though, a direct listing is trendy among tech companies, with Roblox and Coinbase choosing this path.
💪 Why does a company want to go public?
Most of the time, a company makes an IPO in order to raise capital, but sometimes it is to improve a company’s public image or to satisfy its investors.
For many investors, it's seen as the "Holy Graal", the moment when the Return on Investment (ROI) is the highest because the company valuation skyrockets.
⚔️ But going public is not that easy.
When a company goes public, VC investors don't value the company anymore: the market does. Sometimes, the valuation is way lower than expected like for WeWork or Deliveroo (called "Floperoo" in the City after its failed IPO in London Stock Exchange).
Moreover, the company faces the stock market legal environment which is way less compliant than the venture investment one, but also riskier.
Thus, an IPO is a decisive moment in a company's lifecycle as it's the moment the company faces its maturity obligations.
📈 News and Trends
Some news
🐔 What a week for the French Tech!
This has been particularly a good week for France as both Blablacar and Ornikar raised about hundreds of million euros. Globally, French startups have raised almost €500M, a sign that the French ecosystem is on par with its neighbors.
🍏 Apple AirTags
Do you often lose your keys? It's now over with Apple AirTags. AirTags are Bluetooth detection tags that you can attach to any object. It allows you to find your objects from the "Locate" application of your Apple device.
🚨This week’s big news: Are you expert or passionate about one topic, and want to write about it? Contact us here and be published in The Seed!
The success story - Alan
🧸 See Alan's mascot?
Well, it has been transformed into a unicorn this week!
Indeed, Alan, a French InsurTech startup has just announced a new fundraising of 220 million dollars valuing it at 1.67 billion dollars, only 5 years after its creation.
The startup's main product is digital complementary health insurance dedicated to companies that aim to facilitate the management of health insurance for the company.
Alan is also expanding with many additional products such as a chat available with a doctor, Alan Baby to provide medical advice for your baby's health, etc.
❤️ Weekly Crush
Coinbase
In our previous newsletter, we briefly mentioned that Coinbase just went public. But what is it, and what may be its future? Let’s find out today.
👾 What is Coinbase, and how does it work?
Coinbase is an online platform where you can buy, sell and store cryptocurrencies such as Bitcoin or Ethereum.
After entering some personal information (name, address, last 4 digits of SSN…), you can select any currency you want to buy, for as little as $1.99 worth. Based on the volume you are buying, Coinbase will take a commission - 0.5% of the amount, plus a flat fee (for a $10 investment, this fee is $0.99).
Their original mission was to make the trade of cryptocurrencies easier, which they now extend to "increasing economic freedom in the world".
📊 Coinbase in a few figures…
2012: Coinbase is created in San Francisco, by Brian Armstrong and Fred Ehrsam, after the two founders met on… Reddit! At the time the project was named "BitBank".
$547.3M: Total amount raised by Coinbase in less than 8 years.
56M: Number of verified users. 6.1M of them make at least one transaction per month.
April 14, 2021: Coinbase went public, for a valuation of $85.7 billion at the end of the day.
🤔 What future for Coinbase?
Over the past few months, the cryptocurrency market has been booming. More companies are now accepting Bitcoin and other cryptocurrencies as means of payment (cf Tesla), or help you trade them (e.g., Venmo that announced this new feature a few days ago).
As a consequence, Bitcoin's price kept going up and has reached an all-time high at $63,000 just before Coinbase's direct listing, compared to around $7,500 one year ago. But as of April, 22th, 2021, its price is around $51,000 - or a 20% drop over 10 days. And here’s the main risk for Coinbase: that the interest in cryptocurrencies fades away.
What’s more, Coinbase is facing a lot of competition, that usually has lower fees, more trading options, and supports more currencies. For example, Binance, which was founded in 2017, is now the largest crypto exchange platform in the world. It offers 10 times as many cryptocurrencies and has lower fees.
🔎 Focus
🇮🇱 Israel’s startup ecosystem
Israel is an unusual country. If you doubt that, we recommend you to read “Start-up Nation: The Story of Israel’s Economic Miracle” which conveyed the idea that Israel was meant to produce an enormous number of technology startups despite its small size.
During the past decade, the country gave birth to ground-breaking startups like Waze, which was eventually picked up by Google for more than $1 billion in 2013. Waze’s 100 employees at the time received about $1.2 million each on average, one of the largest payouts to employees in Israeli high tech.
☀️ A favorable climate
Israel is quite famous worldwide for its culture, a mix of traditions, national military service, and higher education helped by the widespread use of English. All of these make Israel a fertile place for fast-moving companies to appear, mainly in the "Silicon Wadi" the Israeli equivalent of the American Silicon Valley.
Much of Israel’s high-tech industry has emerged from former members of the country’s elite military intelligence units, such as the Unit 8200 Intelligence division. From age 13 Israel’s students are exposed to advanced computing studies, and the cultural push to go into tech is strong.
🙀 How are they doing recently?
Since the book mentioned in the introduction was released in 2009, startup funding in Israel has increased by 400%. In 2019 there was a 30% increase in startup funding, and Bay Area VCs and large US banks invested $1.4 billion into Israeli companies showing their growing interest.
Currently, Israeli startups are particularly successful in cybersecurity, FinTech, AI, and IoT, a topic we covered a few weeks ago. That said, every sector is experiencing growth.
🦄 Unicorns
There are currently 63 tech companies in Israel that are valued at over $1 billion, for a population of fewer than 9 million people. It wouldn't surprise you to know that Israel is the country with the most unicorns per million inhabitants (7:1), followed by Singapore and the USA.
Last year, 4 startups reached the $1 billion valuation: mobile game developer Moon Active; Cato Networks, a cloud-based enterprise security platform; ride-hailing app developer Gett; and behavioral biometrics startup BioCatch.
⤵️ What's next?
First, Israel’s government is very supportive of its high-tech economy. When it noticed seed-stage startups were flagging, the Israel Innovation Authority (IIA) announced the launch of a new funding program to help seed-stage and early-stage startups, earmarking $25 million for the project.
Then, women entrepreneurship is blooming. In 2020, Israel was first in the Mastercard Index of Women entrepreneurs, ahead of the USA or Switzerland. Initiatives like QueenB, a non-profit organization created by Gad Aladgem that teaches mid-school girls how to code, and equal access to tech culture in Israel can explain this success.
Last, Israel is home to Danit Peleg, a fashion designer who created 3D printable fashion NFTs. She has been nominated by Forbes among the Top50 women in Tech and it's a sign of how much women in Israel can succeed within the tech industry.
That’s it for this week! Hope you enjoyed it and see you next Friday 🙌
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