Asian investors have plenty of cash, a hearty appetite for investments and a different approach to doing deals

Asian investors have plenty of cash, a hearty appetite for investments and a different approach to doing deals

The VC landscape has been shifting radically in the past few years as Asian investors pump cash into startups. Last year, Asian VCs invested 40 percent of the $154 billion in global venture financing, compared to a 44 percent stake for U.S. investors, according to a recent Wall Street Journal analysis.

Asian VCs largely fund companies close to home, but their portfolios are expanding to include U.S. businesses. That influx of capital can be a valuable lifeline for founders who need cash to fuel hiring, product development and growth.

Securing that money, however, demands cross-cultural sensitivities and negotiation skills more commonly exhibited by diplomats and ambassadors. American startup founders are often stunned to see how much control Asian investors demand in exchange for capital.

If you’re being courted by Asian investors — and it’s more likely than ever that you will be — you’ll need to adjust the VCs’ expectations. That can be a challenging task when the parties have different perspectives on appropriate management styles and levels of control.

Taking stock

Disparate expectations often arise because laws governing investments, disclosures and financing terms vary from country to country, and conventions can be different. Prospective foreign investors routinely question the need for rights that are customary in the U.S. and may dismiss specific venture capital lingo as unnecessary or irrelevant.

For example, conversion rights or registration rights appear to be arcane provisions that can be negotiated, but in the world of U.S. venture-backed companies, these are part of the overall deal structure and are expected by the stakeholders.

Doing deals

American founders have a similar knowledge gap when it comes to typical Asian deal terms. U.S. founders aren’t accustomed to putting their own assets on the line to secure financing, though this is common in Asia for early-stage founders. Similarly, American entrepreneurs are often shocked to see Asian VC term sheets that require founders to pay the investors a significant sum for deal-related expenses — a provision that is binding even if the deal is never completed.

Without an understanding of why Asian investors include this provision, this demand seems ludicrously overreaching. Its purpose is to ensure that all parties approach negotiations with focus and gravity. With a significant amount of money on the line, the reasoning goes, the parties are more motivated to reach accord. This stipulation is familiar in Asia, but I routinely delete it from term sheets during contract negotiations because it seems counterintuitive to reaching an arm’s-length agreement.

Shunning Asian capital may ultimately cost you down the line.

Remember that the Asian VC market, while explosive, is still in its infancy: Chinese-led venture funding has increased 15-fold since 2013, according to The Wall Street Journal. Because this market is so immature, investors aim to add language to term sheets that will give them an advantage.

It’s also typical to see term sheets that include full-ratchet anti-dilution protection and most-favored-nation clauses. But their ubiquity doesn’t mean founders must be stuck with them. I encourage would-be investors to embrace realistic expectations by reviewing deal point studies, which summarize the typical terms in recent deals. Most major law firms, including mine, produce their own.

Keeping your cool

If a financing term sheet contains troublesome or even outrageous terms, don’t take it personally. Task your lawyer with explaining to foreign prospective investors why the term sheet they provided is wildly different from typical U.S. deal terms. Leave the expression of deep disappointment to your counsel so your feelings won’t taint your relationship with the investors.

I recently provided this type of feedback to a group of would-be strategic investors from China. When they produced pages of unreasonable terms, I directed them to the model financing documents on the sites of the National Venture Capital Association (NCVA) and Series Seed. The forms from these neutral sources include typical terms and agreements drawn up by a group of investors, entrepreneurs, counsel and advisers. They need to be tweaked for each financing scenario, but they cover all the basics and beyond. In this instance, the Chinese investors reviewed this information and did some additional research. They then returned with far more conciliatory terms, which the founder ultimately accepted.

If you’re concerned that the need for negotiations and diplomacy with foreign investors will be time-consuming and distract you from your business goals, reconsider. Shunning Asian capital may ultimately cost you down the line.

Many Chinese VCs are well-connected, and a respectful, productive relationship with these investors can help you open doors to wealthy investor conglomerates eager to fund promising startups. Those connections can, in turn, lead you to larger, global markets that you could never have accessed otherwise.


Source: Tech Crunch

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Source: Engadget

Samsung Galaxy Note 9 review: A better Note for most of us

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The biggest, beastliest phone of the year is here, and, spoiler alert, the Galaxy Note 9 lives up to the lofty expectations. In addition to a huge battery, large screen and generous onboard storage, Samsung taught the old S Pen a few new tricks that…
Source: Engadget

Twitter gives InfoWars the same one-week ban it gave Alex Jones

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While companies like Apple, Facebook, Spotify and even Pinterest have taken down InfoWars content from their platforms, there has been one very public holdout — Twitter. But BuzzFeed News reports today that the company is now limiting the InfoWars a…
Source: Engadget

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Google releases a searchable database of US political ads

Google releases a searchable database of US political ads

In an effort to provide more transparency and deliver on a promise to Congress, Google just published an archive of political ads that have run on its platform.

Google’s new database, which it calls the Ad Library, is searchable through a dedicated launch page. Anyone can search for and filter ads, viewing them by candidate name or advertiser, spend, the dates the ads were live, impressions and type. For anyone looking for the biggest ad budget or the farthest reaching political ad, the ads can be sorted by spend, impressions and recency, as well. Google also provided a report on the data, showing ad spend by U.S. state, by advertiser and by top keywords.


The company added a bit of context around its other recent ad transparency efforts:

Earlier this year, we took important steps to increase transparency in political advertising. We implemented new requirements for any advertiser purchasing election ads on Google in the U.S.—these advertisers now have to provide a government-issued ID and other key information that confirms they are a U.S. citizen or lawful permanent resident, as required by law. We also required that election ads incorporate a clear “paid for by” disclosure.

The search features are pretty handy, but a few things are missing. While Google’s database does collect candidate ads in the U.S. it does not include issue ads — broader campaigns meant to influence public thought around a specific political topic — nor does it collect state or local ads. The ads are all U.S.-only, so elections elsewhere won’t show up in here either. Google says that it is collaborating with experts on potential tools that “capture a wider range of political ads” but it gave no timeline for that work. For now, ads that the tool does capture will be added into the library on a weekly basis.


Source: Tech Crunch

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Source: Engadget

Uber reports Q2 losses of $404 million, up 32 percent from Q1

Uber reports Q2 losses of 4 million, up 32 percent from Q1

While Uber isn’t required to disclose its financial results, Uber has done so for the past few quarters as it gears up to go public next year. In Q2 2018, Uber’s net revenue was up 8 percent quarter-over-quarter, at $2.7 billion. Year-over-year, that’s a 51 percent increase.

Uber recorded gross bookings — the total taken for all of Uber’s transportation services — of $12 billion, a six percent quarter-over-quarter increase and a 41 percent year-over-year increase. But while Uber’s gross bookings increased, so did its losses. In Q2, Uber had adjusted EBITDA losses of $404 million compared to $304 million in losses in Q1.

Uber’s losses added up, given its investments in Eats, India, the Middle East, bikes and scooters. This quarter, Uber expanded Eats into a number of new cities in Europe, the Middle East and Africa, acquired food delivery startup Andoannounced its expansion of JUMP bikes into Europe and made its scooter ambitions official.

Other key stats for Uber’s Q2 2018:

  • Adjusted EBITDA margin: 3.4 percent of gross bookings (in Q2 ’17, that was 6.3 percent)
  • Gross cash: $7.3 billion (+1 billion quarter-over-quarter)

“We had another great quarter, continuing to grow at an impressive rate for a business of our scale,” Uber CEO Dara Khosrowshahi said in a statement. “Going forward, we’re deliberately investing in the future of our platform: big bets like Uber Eats; congestion and environmentally friendly modes of transport like Express Pool, e-bikes and scooters; emerging businesses like Freight; and high-potential markets in the Middle East and India where we are cementing our leadership position.”

While Uber technically had a good quarter, it doesn’t mean that all is well. Regarding Uber’s self-driving car efforts, the company has spent between $125 million and $200 million a quarter over the last 18 months, The Information reports. According to The Information’s sources, some of Uber’s investors are urging the company to get rid of its self-driving car program, which has been the source of many headaches at Uber as of late.

Uber declined to comment on The Information’s reporting.

In March, one of Uber’s self-driving cars struck and killed a pedestrian in Tempe, Arizona. In the weeks and months following the accident, Uber officially pulled the plug on its self-driving car operations in Arizona and laid off self-driving car operators in San Francisco and Pittsburgh.

As Uber prepares for its 2019 IPO, the name of the game is to reduce losses. In July, Uber shut down its self-driving trucks division. But Uber Freight, which matches drivers with cargo needing to be shipped, is reportedly on track to make $500 million in the next 12 months.

Meanwhile, Uber is aiming to take its ride-hail network into the skies with uberAIR. Uber’s plan is to develop and commercially deploy these air taxis by 2023. But in recent months, Uber has lost two key executives; Head of Policy for Autonomous Vehicles and Urban Aviation Justin Erlich and Uber Chief Product Officer Jeff Holden, who oversaw Uber Elevate, left the company.

Khosrowshahi will be joining us at Disrupt SF in September. You don’t want to miss it.


Source: Tech Crunch