ALTIOTAKE - AUGUST 2021

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Head in the Clouds

Every year, more and more people have their head in the clouds . . . that is, cloud infrastructure. For the 4thconsecutive year, revenue in the cloud infrastructure market has grown, according to recent findings released by Synergy Research and Canalys. The market is dominated (61-63% of market share) by three major cloud service providers: Amazon (31-33%), Microsoft (20-22%), and Google (8-10%). Over the last 18 months as companies increasingly pivoted towards the cloud, the cloud infrastructure market saw its largest-ever yearly revenue increase, up $11.7B. Though migration to the cloud was already well underway, the pandemic’s worldwide shift to digital and heightened calls for environmental responsibility accelerated this movement and fuelled the revenue growth we see here.

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What's going on with tech in China?

You may have heard quite a bit about China’s recent government crackdowns on tech companies, but this was just the beginning. On 11 August, China’s State Council and the Communist Party’s Central Committee released a 10-point plan to strengthen and tighten its economy over the next five years. The document includes strengthening capacities in science, technological innovation, culture, and education. However, there are also plans to review regulation of anti-trust laws, internet finance, artificial intelligence, big data, and cloud computing. The document comes at the end of a tough summer for Chinese tech companies, after EdTech, FinTech, InsureTech, gaming, and music were under the microscope for a handful of regulatory reviews. And since February, China’s biggest tech companies have lost a combined $1 trillion market capitalisation. Before the document was released, a number of tech companies halted their public offerings due to volatile trading and uncertain future regulations, include NetEase. The bright side? Regulations and policies are no longer uncertain. On the contrary, we now have a clearer picture of the Chinese government’s intentions with its tech industry. Time to brace for regulatory impacts.

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Under the Sea

On 16 August, Google announced Apricot, an initiative to bring connectivity to Asia-Pacific with a new subsea cable. Due to come online in 2024, the 7500-mile undersea internet cable will connect Japan, Taiwan, Guam, Philippines, Indonesia, Singapore. But Google isn’t doing this alone. Facebook has announced collaboration with Google alongside regional telecom providers. Apricot joins Google’s other subsea initiatives to link the US with South America and Asia-Pacific. Undersea cables are responsible for the majority of international internet traffic movement, and this initiative will help meet rising data demands of increasing 4G, 5G and broadband access.

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Making the Video Game Industry Accessible

Game developer Electronic Arts (EA) just pledged to make its accessibility-centred technology patents freely available for use. The patent pledge was announced the same day as EA was granted a patent for its Ping System that transmits contextually aware audio-visual communications through mappable controller inputs. The other four patents include image processing and rendering as well as audio generation to aid players with visual, hearing, and other disabilities. EA is the first in the industry to announce a patent pledge for accessibility-related technology but hopes other game developers will follow suit to “equip developers with the know-how to advance the state of the art in game development” (Chris Bruzzo, EA Games). IP and patents have typically been heavily protected within the video game industry. But with these accessibility-related innovations, EA is sharing its IP and knowledge to make its products more accessible and inclusive for a greater audience.

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ALTIOTAKE - JULY 2021

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Where the FinTech money flows

London FinTech just broke records for VC investment, securing more funding in 6 months than any other year. VC Investment in London FinTech reached $5.3B in the first half of 2021, compared to $4.5B for all of 2020. Put into perspective, London FinTech secured 2.5 times more VC investment than any other European city (Berlin comes in 2nd at $1.9B). London is the second largest global hub for fintech (first being San Francisco), with 3,018 fintech companies calling London home. Fast-growing fintech markets including cryptocurrency, payments, insurtech, and open banking contributed to the surge in VC investment.

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5 Years in FinTech

Tribe Payments released the Fintech Five by Five Report this week, identifying five emerging technologies that will be big in the next five years. These five emerging technologies are AI, APIs, Blockchain, Low-code, and Edge Computing.

Some of the Key Findings include:

-       APIs stand to have the most impact in the next year, while AI will have the greatest impact over the long term

-       90% of fintechs use APIs already, driven by Open Banking successes

-       70% of fintechs are already using AI in some form

Fintech is pioneering the way to bring the finance world into the modern world, employing technologies at the forefront of innovation. Much of these “emerging” technologies underpin fintech already, but fintech will continue to push the boundaries of these technologies in the next few years, redefining how the financial sector operates.

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Ready Player Netflix

This week, Netflix announced that it would be expanding into gaming, starting with ad-free mobile games included in members’ subscription. Netflix’s growth has plateaued for the first time since 2019, struggling to sustain the same level of immense growth seen in the height of the pandemic. But it’s going to be hard to beat the 16 million new users added in Q1 2020 as lockdowns were enforced around the world. The expansion into gaming is a long-term strategy aimed at retention and engagement of users. Netflix has acknowledged that competition doesn’t just come from other streaming services, recognising that it competes with gaming for time and attention. Can the introduction of gaming give Netflix a competitive edge in the crowded entertainment space?

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Who has the right to repair?

Right-to-repair legislation is a hot topic in 2021, as the UK, US, and EU have all introduced plans to curb anticompetitive restrictions on repairing consumer goods. The European Parliament is pushing to remove obstacles that prevent repair, resale, and reuse, and introduced rules in March that require manufacturers of electrical goods to make their products repairable for at least 10 years. In July, the UK announced right-to-repair rules that require manufacturers to make spare parts available to both 3rd parties and consumers purchasing electrical appliances. However, this includes primarily household appliances, not smartphones or laptops. In July, Biden administration issued an executive order to encourage competition and urge the FTC to consider right-to-repair concerns. Last week, the FTC voted unanimously to ramp up law enforcement against repair restrictions. While governments cite a need to curb anticompetitive behaviour and cut down on e-waste, electronic manufacturers argue that their repair restrictions protect intellectual property, prevent cybersecurity risks, and provide safety for consumers. Though both have valid arguments, it seems like tech companies will soon have to pass over the wrench to someone else.

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ALTIOTAKE FROM 28 JUNE - 2 JULY

Each week, we review the press, highlighting and responding to interesting and relevant articles in the news.

When at first you don’t succeed try, try again.

After abandoning an attempt to acquire Plaid earlier this year, Visa has its sights set on another open banking fintech, Tink. Visa plans to acquire Tink for $2.15B, helping it expand beyond traditional card payments into open banking. Tink connects to connect banks accounts with apps and services using a single API, vastly simplifying open banking. However, the deal isn’t final yet, and still must face regulatory approval, a hurdle that Visa couldn’t overcome when trying to acquire Plaid. The Visa-Plaid deal fell through due to a US DOJ antitrust lawsuit claiming the acquisition would reduce competition. Visa’s determination to acquire an open banking API is quite telling.  FinTechs like Plaid and Tink have the potential to disrupt the traditional card payment and debit business, especially that of Visa.

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Virgin Galactic Passes its Flying Test

Virgin Galactic just passed its drivers test…for taking commercial passengers into space. The announcement caused Virgin Galactic’s stock to jump 38.9% on Friday, the company’s highest single-day rise. Virgin Galactic’s spacecraft Unity will carry up to six “spaceflight participants” (i.e. not trained astronauts) and two pilots. There’s a new kind of space race emerging in space tourism, as Big Tech companies compete to get tourists (and their founders) into orbit first. Virgin Galactic, SpaceX, and Blue Origin are all in the running to get paying customers up into space. However, though Jeff Bezos is scheduled to head into suborbit on 20 July aboard Blue Origin, the spaceflight company has yet to receive FAA approval for commercial passengers, putting Virgin Galactic at the forefront of this race.

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Etsy's Consolidation of Handmade, Unique E-Commerce

Etsy, Inc has announced the acquisition of Elo7, called the “Etsy of Brazil” by Etsy CEO Josh Silverman. A top 10 ecommerce site in Brazil, Elo7 connects approximately 1.9 million active buyers to around 56k active sellers, primarily consisting of custom and made-to-order merchandise. This acquisition will allow Etsy to establish a foothold in Latin America, an underpenetrated region that could significantly expand Etsy’s TAM. This news comes less than a month after Etsy announced the acquisition of Depop, a leader in the fast-growing fashion resale market popular with Gen Z consumers. Together, Elo7 and Depop allow Etsy to reach new markets with huge growth potential and strengthen their position in the ecommerce sector.

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ALTIOTAKE FROM 21-25 JUNE

Each week, we review the press, highlighting and responding to interesting and relevant articles in the news.

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Can Ads make VR more realistic?

Digital advertising is about to enter a whole new (virtual) world, as Facebook has announced it will begin to test VR advertising on its Oculus headsets. With the revenue boost from digital advertising in VR, Facebook hopes that this will help pave the way to mainstream consumer VR. The announcement contained a section on privacy that was as long as the press release itself, foreshadowing concerns about targeted VR ads. If successful, this trial may open up entirely new ad formats that are unique to VR, altering our perceptions and interactions with digital advertising. Since this post was published, however, the developer that had publicly agreed to test the VR advertising has pulled out due to player feedback before testing even began.

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East Meets West, Present Meets Past

Tesla is paying homage to the historic trade route of the Silk Road, announcing a 5000km Supercharger route in China from east to west. China is Tesla’s second-largest market (after the US), but sales have dramatically dropped this spring (April and May both saw serious downturns). Tesla’s Supercharger route builds off Xi Jinping’s initiative called both “The New Silk Road” and the “Belt and Road Initiative” that seeks to modernize China’s transportation infrastructure. Xi has employed historic continuity before to legitimise his ambitious plans for China. Now, Tesla is co-opting this heritage to position itself as a conduit of trade and knowledge exchange, while promoting electric vehicle use.

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Wait, what podcast?

While tech giants like Facebook and Google try to break into podcasting, there’s a startup called WaitWhat that's trying to figure out what comes after podcasts. The media invention company, WaitWhat, closed a fundraising round at $12M this week, led by Raga Partners, Laurene Powell Jobs, and others. WaitWhat has a unique approach to create content that can scale horizontally by not defining media by its format.WaitWhat's mission stands in clear contrast to the tech giants trying to play catch up with podcasts, replicating other platforms with little innovation. Altio sees potential in the disruptors who seek to look beyond short-term algorithms and proven models, pushing the boundaries of media to continually innovate.

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ALTIOTAKE FROM 14-18 JUNE

Each week, we review the press, highlighting and responding to interesting and relevant articles in the news.

Facebook (smart)Watch Party

Facebook may try to break into the smartwatch arena, taking on Apple’s 33% dominant market share. The reported fitness and social device may have a heart rate monitor, LTE connectivity, and two cameras, one front-facing for video calls and one detachable (GoPro style). This is not the first time Facebook has shown interest in the smartwatch sphere as they attempted to buy Fitbit back in 2019. Facebook has demonstrated interest in moving towards consumer devices, though its Oculus VR headsets and Portal video device accounts for less than 3% of its revenue. However, can Facebook shake privacy concerns and convince users that their data (especially sensitive health data) will be protected?

Transatlantic Tech & Trade

On Tuesday, Presidents Joe Biden and Ursula von der Leyen launched the EU-US Trade & Technology Council (TTC). The transatlantic collaboration will create new trade standards and regulations for emerging technology, encourage bilateral trade, collaborate on researching and developing technologies together, and promote democratic values online. The TTC vowed to forge a more resilient supply chain less dependent on China and address semiconductor shortages by providing incentives. In joining forces, the TTC may serve as a direct counter to China’s state-controlled tech sector, pooling investment, research, and development to compete globally.

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NASCAR, but make it in the sky

Airspeeder just announced EXA, the first racing series for flying electric cars. EXA is “where pilots and flying machines merge at the digital frontier,” as drone racing pilots will remotely control multicopters along AR-enabled sky-tracks. But the mission of Airspeeder goes beyond just making Star Wars podracing a reality. Founder Matt Pearson is focused on hastening the arrival of electric flying cars, acknowledging that “competition accelerates progress.”Just as NASCAR and Formula 1 drove innovation in production cars (i.e. clutchless manuals, rearview mirrors), EXA has the potential to drive innovation in electric vertical take-off and landing (eVOTL) and advanced air mobility technologies (AAM) through intense competition.

ALTIOTAKE FROM 7-11 JUNE

Each week, we review the press, highlighting and responding to interesting and relevant articles in the news.

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Fleeting Ads

Last week, Twitter began pilot testing full-screen vertical advertisements on Fleets in the US. Fleets, Twitter’s version of the ephemeral Stories on Instagram and Snapchat, were introduced in November 2020. Fleet Ads will allow up to 30 seconds of content, which is shorter than Instagram and TikTok, but may be more effective for advertising purposes. In the last year, Twitter has increasingly experimented with ways to monetize its platform and compete with other social media platforms like Facebook, Instagram, TikTok, and Snapchat. Can Fleet Ads reverse Twitter’s losing streak in the Digital Advertising arena?

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United Flights will be Boom-ing

Supersonic startup Boom just got its first official U.S. customer as United Airlines announced that it will buy 15 of Boom’s Overture aircraft. Production of the Overture passenger jet is planned to start in 2025, with commercial flights commencing in 2029. Boom plans to be the first commercial aircraft to run on 100% sustainable aviation fuel from day one, helping U.S. airlines reach the goal of net-zero carbon emissions by 2050. Supersonic flight can reduce travel time in half, making a trip from London to New York in just under 3 hours. Though supersonic commercial flights have been attempted before, the aircrafts were highly fuel inefficient and bore massive maintenance coats – problems that Boom intends to remedy with its sustainable design.

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Bosch is Chipping Away at the Semiconductor Shortage

This week, German engineering and technology company Bosch announced plans to open a $1.2billion semiconductor chip plant in Dresden. Bosch’s connected Dresden factory will focus on fabricating automotive microchips, fuelling innovation in electric and autonomous vehicles. As the largest investment in the company’s history, Bosch’s new factory could help to address the shortage of semiconductors in the auto industry. But can Bosch help bring semiconductor fabrication back to Europe?

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Who Would Win?

Sustainability Edition

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This article is the first in our three-part Sustainability Series, where we will be examining aberrations and inconsistencies in ESG ratings, what it means for a company to be sustainable, and what you, as an individual, can do to lead a sustainable life.

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If you’re like us, you’re tired of seeing greenwashing everywhere you look. There’s Big Oil putting out commitments to “net-zero” while continuing to frack and drill, gas-guzzling companies using influencers and social media to portray a “green” brand, and automakers reporting impartial or falsified emission disclosures. And much of this is just to get a score from an unregulated, unstandardised rating system.

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To show the absurdity of relying on ESG scoring alone, let’s play a game to guess which company would have a higher ESG score.

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As with all games, there are rules to play by. We’re using Refinitiv and Sustainalytics for the ESG scores as they are publicly available. Refinitiv ranks companies from 0-100 into quartiles from worst to best, with 100 being the best ESG score. Sustainalytics ranks companies by risk, where the lowest score (least risk) wins, while scores above 40 denote a “severe risk.”

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Ready? Let’s get started.

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First Up: Royal Dutch Shell vs. Vestas Wind Systems

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Who has the better ESG score here, a crude oil and natural gas energy company or a wind turbine company?

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Well, that depends upon who you ask. For Refinitiv, it’s Shell, the 1897 traditional Big Oil company that plans to reduce its oil production by only 1-2% a year by 2030. For Sustainalytics, Vestas is considerably less risky than Shell (as one would expect).

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How?

Vestas and Shell are not listed in the same industry by Refinitiv, though both produce energy. Shell sits at the top of the Oil & Gas industry, while Vestas is classified as a Renewable Energy company. Though Refinitiv says relative scoring based on industry materiality reduces bias, it actually obscures the true impact of a company. When the point of ESG scoring is to objectively identify sustainable practices (or lack thereof), standardizing by industry doesn’t make sense when an entire industry like Oil & Gas is unsustainable. It’s like trying to compare apples and oranges when you really only want to know about apples.

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Next Up: Tesla vs. Ford Motor Company

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On the left, we’ve got Tesla, the “technoking” of EVs. On the right, there’s Ford, the All-American assembly-line classic. Tesla and Ford Motors are leading auto manufacturers in an industry that accounts for 11.9% of global CO2 emissions (road transport).

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So who comes first in this race for best ESG rating? Good ole’ Ford Motors.

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ESG scoring doesn’t perform so well for the golden boy of electric vehicles. Refinitiv puts Tesla solidly in the Third Quartile (“good ESG performance”), while Sustainalytics classifies Tesla as “High Risk.” Both ratings rank Tesla as less ESG-compliant than Ford Motors.

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How?

While Ford is now on the EV bandwagon, it was dragging its feet for quite some time. Tesla pioneered the EV sector, disrupting the traditional auto industry and forcing innovation amongst older players like Ford. However, in the eyes of ESG, Tesla’s disruptive innovation is not considered very sustainable -- why?

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The leading EV manufacturer does not report carbon emissions nor does it commit to carbon targets. Ford, on the other hand, discloses all its emissions, including those from the cars they produce and sell. Ford’s emissions may be significantly higher, but it is rewarded for reporting those emissions. Additionally, EVs have a higher environmental impact during manufacturing due to the metals needed to construct batteries (lithium, nickel, cobalt).  

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Last, but not least: Beyond Meat vs. JBS

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Okay, we’ve got a plant-based protein up against the largest meat processing company in the world. Who wins?

So no one really wins this round since neither are in the Fourth Quartile, but JBS (68/100) does come out higher than Beyond Meat (17/100) according to Refinitiv. That’s right, a meat processor scores 4 times higher than pea protein. For Sustainalytics, both companies are in the “Severe Risk” category.

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How?

Beyond Meat has a transparency problem. A 2018 S&P Global Market Intelligence report critiqued Beyond Meat for not disclosing environmental impacts. At the time of writing, Beyond Meat has yet to disclose any impact or emission reports. Because of this, Beyond Meat’s weighted environmental disclosure ratio is 0% while Tyson Foods’ is 98% (the second largest meat processor after JBS).

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Though Beyond Meat hasn’t disclosed its environmental impact, the company did point to a University of Michigan study that compared the Beyond Burger to a ¼ lb. US beef burger. The study found that a Beyond Burger consumes 99% less water, 93% less land, 46% less energy, and generates 90% fewer GHG Emissions than a typical beef burger. But, according to ESG raters, this study wasn’t enough.

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Who won from this exercise? Certainly not the planet. These scores are all over the place -- and we’re only looking at two rating systems (there are 50+ major systems out there, and hundreds more small rating agencies). If anything, this exercise probably confused your understanding of sustainability and what it means for a company to be sustainable. The only thing clear to us is that ESG needs serious standardization and regulation to mature into something that we take seriously.

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If we can’t guess the ESG score of the company, is that a lapse of our judgement or the rating systems? Are we blinded by greenwashing? Or are the rating systems the ones blinded by empty statements of carbon neutrality? (Spoiler alert: It’s probably not us)

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Moral of the story: Don’t judge a company by its ESG score.