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3 biotechs that investors should buy next after Pfizer's $11 billion deal for cancer drugmaker Array BioPharma

Mon, 06/17/2019 - 1:52pm  |  Clusterstock

  • US drug giant Pfizer just announced that it is acquiring biotech Array BioPharma for $11.4 billion. 
  • This latest deal points to a trend of big companies snapping up cancer-focused biotechs, with Merck buying the cancer biotech Tilos Therapeutics for up to $773 million last week.
  • Investors should consider three biotechs that could get a boost from the trend, according to analysts at Stifel and Cantor Fitzgerald: Exelixis, Blueprint Medicines, and Mirati Therapeutics.
  • Click here for more BI Prime stories. 

Giant pharmaceutical company Pfizer just announced that it is buying the biotech Array BioPharma for $11.4 billion, a major deal that's only the latest example of big drugmakers snapping up cancer-focused biotechs. 

It's a trend that's well worth investors' attention, analysts at Cantor Fitzgerald and Stifel say.

They point out three biotechs that could get a boost, either because of growth opportunities down the road for the biotechs or because they are potential deal targets. 

Pfizer's latest move is part of a wider trend among big drugmakers aimed at expanding their portfolios of cancer treatments, which have proven to be lucrative investments across the industry. 

Drugmaker GlaxoSmithKline bought up cancer drugmaker Tesaro for $5 billion late last year, for instance, and Eli Lilly announced the acquisition of biotech Loxo Oncology early this year.

Array already sells a combination of two cancer drugs, Braftovi and Mektovi, for the skin cancer melanoma. The biotech is also testing the combination out in more than 30 research trials, including to treat colorectal cancer. 

Pfizer offered $48 per share for Array, representing a 62% premium to the stock's closing price as of June 14, pointed out analysts Varun Kumar and Alethia Young at Cantor Fitzgerald

And the development should boost other companies developing similar, "targeted" cancer drugs that home in on things like a specific gene mutation in order to better treat cancer, they said.

Read more: Pfizer just struck an $11 billion deal, and it marks an ambitious shift in the US drug giant's blockbuster cancer strategy

Across these deals, a common theme is that companies have been eyeing drugs with strong research data that are in late stages of development, "and/or relatively well-defined commercial opportunities in a niche market," they said. 

Here are three other cancer biotech companies that could also get a boost, according to Wall Street analysts.


Founded back in 1994, Alameda, California-based Exelixis has four drugs that are sold to treat various diseases around the world, including thyroid cancer, renal cell carcinoma, melanoma, and hypertension. 

The biotech, which is publicly traded, has a market value of almost $6 billion and was recently added to the Standard & Poor's MidCap 400 index, which measures the performance of profitable mid-sized companies.

Last year, Exelixis reported revenue growth of nearly 90% largely due to an 85% increase in revenue from the drug Cabometyx, which is used to help treat renal cell carcinoma, the most common type of kidney cancer. 

The recent Pfizer deal should be a "tailwind" boosting small and mid-size cancer company stocks thought to have good research data supporting their drugs, Stifel analyst Stephen Willey said. 

Exelixis was one company that quickly came to mind, Willey said. Still, an investment might be difficult to rationalize because Exelixis might have a shorter duration of patent protection on its products, he said.

Blueprint Medicines

Another company that Stifel's Willey said could benefit from investor interest after the Pfizer deal is the Cambridge, Massachusetts-based biotech Blueprint Medicines.

The biotech company, which has a market value of about $4.3 billion, develops drugs for genetically-defined cancers and immunotherapy drugs that use the body's immune system to fight cancer. Blueprint is also working on therapies for rare diseases.

One approach that the biotech is employing in cancer hones in on enzymes called kinases, which monitor the function of proteins in cells. These types of "kinase drugs" are already approved in the US, but they focus on less than 5% of known kinases, according to Blueprint. The biotech is working to make next-generation, better kinase medications.

Mirati Therapeutics

Mirati Therapeutics could be on the radar of big drug companies, the Cantor Fitzgerald analysts say.

The company is based in San Diego, California and has a market value of $3.4 billion.

Mirati is developing a cancer drug that targets the KRAS gene mutation, which is commonly seen in cancers but has also been so hard for pharmaceutical companies to reach that it's been called "undruggable."

For now, "we think it is unlikely to be a potential M&A target at this stage given first clinical data is still pending," and expected in the second half of this year, the analysts said.

But investors are already intrigued by the drug, they noted, and plenty in industry are paying attention to the biotech.

Africa Needs More Angel Investors - Forbes

Mon, 06/17/2019 - 8:39am  |  Timbuktu Chronicles
Meghan McCormick writes:
Epic Games, Uber, Juul Labs, Magic Leap, Instacart, Katerra, Opendoor, and Lyft share many common traits. As you might have guessed, they are U.S.-based, male-led, venture-backed technology companies. What you might not have realized is that each of them individually attracted more venture capital in the last year than was invested in the entire continent of Africa in 2017. The top three, Epic Games, Juul Labs, and Uber each attracted $1.2B, or more than twice the amount of venture capital invested in Africa...[more]

Markets Live: Monday, 17th June 2019

Mon, 06/17/2019 - 6:10am  |  FT Alphaville

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The Future of Payments 2018

Sun, 06/16/2019 - 10:02pm  |  Clusterstock

The payments industry is transforming.

Noncash payments methods are quickly becoming the norm.

Business Insider Intelligence projects digital payments to continue to grow through 2023 and beyond.

This shift has created a battle between incumbents and startups vying to become the leaders of the future of payments.

While incumbents have massive scale to lean on, startups typically offer a much friendlier user experience. Whoever can master both first will win the battle.

That will require navigating four key digital transformations: diversification, consolidation and collaboration, data protection and automation.

In this FREE section of The Future of Payments 2018 slide deck from Business Insider Intelligence, we look at the first key digital transformation: diversification.

Subscribe to Business Insider Intelligence today for full access to the complete deck.

As an added bonus to this FREE section, you will gain immediate access to our exclusive BI Intelligence Daily newsletter.

To get your copy of this free slide deck, click here.

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Boeing CEO admits 'mistake' with 737 Max ahead of Paris Air Show, as analysts note 'ominous dark cloud' hanging over the entire industry

Sun, 06/16/2019 - 3:25pm  |  Clusterstock

  • Boeing CEO Dennis Muilenberg admitted his firm made mistakes that were "not acceptable" in handling a safety feature that's been implicated in two deadly crashes of the company's signature 737 Max aircraft. 
  • Ahead of the aircraft industry's premier event, Boeing is promising more transparency as it works to get its best-selling plane back up in the air. 
  • But Boeing's problems may be dwarfed by a broader economic storm that many analysts believe is threatening a slowdown in the $150 billion commercial aircraft industry. 
  • Amid safety concerns and trade tensions, analysts say aircraft sales figures could be the lowest in years and industry demand looks "genuinely scary."
  • Read more stories like this on Business Insider.

Boeing is in full-on damage-control mode as the aerospace industry faces a rash of concerns that threaten to send it into a slump.

Ahead of the Paris Airshow this week, one of the aircraft industry's most important events, Boeing CEO Dennis Muilenburg told reporters his company made a "mistake" in how it handled the cockpit safety feature that's been implicated in two deadly crashes of the company's signature 737 Max aircraft. 

The company has drawn widespread condemnation for not alerting pilots and regulators that a safety indicator in the planes didn't work, which has been faulted for contributing to the crashes in Indonesia and Ethiopia that killed nearly 350 people. 

Boeing's 737 Max has been grounded for months as the company reckons with the fallout, and Muilenberg slammed his firm's communication as "not acceptable" and promised more transparency as they try to get their best-selling plane back up in the air. 

Regulators say the aircraft isn't expected to be in operation again until the end of the year, far longer than initially anticipated. 

But Boeing isn't the only one reckoning with headwinds ahead of the industry's biggest event of the year. Delta CEO Ed Bastian said last week the entire airline industry is still "traumatized" by the 737 Max fiasco, which has sent them scrambling to cope with grounded planes and tarnished public confidence.

And Boeing's problems may be dwarfed by a broader economic storm that many analysts believe is threatening a slowdown in the $150 billion commercial aircraft industry. 

"Boeing's MAX crisis isn't the most ominous dark cloud, since it can be solved, but traffic numbers are genuinely scary," said Teal Group aerospace analyst Richard Aboulafia told Reuters. "If March and April are a sign of things to come, we're looking at broader industry demand and capacity problems."

Amid trade tensions and safety concerns, the multi-year streak of surging airline orders could be stopped short. 

Last year, the Farnborough Airshow resulted in more than 950 aircraft orders and commitments. Some analysts are expecting only 800 at the event in Paris, while others project the total at a far gloomier 400. 

"Net orders might be the lowest in years," Aboulafia said.

US President Donald Trump is expected to meet with Chinese President Xi Jinping at the G20 summit later this month, where their high-profile tariff battle could reach a denouement or escalate further, shaking an array of global industries and dampening investor sentiment.

Other analysts had a more upbeat outlook, noting that booming Asian economies and the forthcoming releases of more fuel-efficient planes could help buoy the industry. 

"We're talking to so many airlines who still want more aircraft, and there's really been no lessening of those discussions," John Plueger, CEO of Air Lease Corp, told Reuters.

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NOW WATCH: WATCH: The legendary economist who predicted the housing crisis says the US will win the trade war

Founded by Ezra Muinde @ezrashedracks - Anzia Sokoni #Kenya Teaches Farmers about Market-Driven farming.

Sun, 06/16/2019 - 1:10pm  |  Timbuktu Chronicles
Ezra Muinde is the founder of Anzia Sokoni an alternative education provider for farmers:

THE AI IN INSURANCE REPORT: How forward-thinking insurers are using AI to slash costs and boost customer satisfaction as disruption looms

Sun, 06/16/2019 - 1:02pm  |  Clusterstock

The insurance sector has fallen behind the curve of financial services innovation — and that's left hundreds of billions in potential cost savings on the table. 

The most valuable area in which insurers can innovate is the use of artificial intelligence (AI): It's estimated that AI can drive cost savings of $390 billion across insurers' front, middle, and back offices by 2030, according to a report by Autonomous NEXT seen by Business Insider Intelligence. The front office is the most lucrative area to target for AI-driven cost savings, with $168 billion up for grabs by 2030.

There are three main aspects of the front office that stand to benefit most from AI. First, Chatbots and automated questionnaires can help insurers make customer service more efficient and improve customer satisfaction. Second, AI can help insurers offer more personalized policies for their customers. Finally, by streamlining the claims management process, insurers can increase their efficiency. 

In the AI in Insurance Report, Business Insider Intelligence will examine AI solutions across key areas of the front office — customer service, personalization, and claims management — to illustrate how the technology can significantly enhance the customer experience and cut costs along the value chain. We will look at companies that have accomplished these goals to illustrate what insurers should focus on when implementing AI, and offer recommendations on how to ensure successful AI adoption.

The companies mentioned in this report are: IBM, Lemonade, Lloyd's of London, Next Insurance, Planck, PolicyPal, Root, Tractable, and Zurich Insurance Group.

Here are some of the key takeaways from the report:

  • The cost savings that insurers can capture from using AI in the front office will allow them to refocus capital and employees on more lucrative objectives, such as underwriting policies.
  • To ensure that AI in the front office is successful, insurers need to have a clear strategy for implementing the tech and use it as a solution for specific problems.
  • Insurers are still at different stages when it comes to implementing AI: a number of them need to find ways to appropriately build their strategies and enable transformation, while the others must identify how to move forward with their existing strategy.
  • Overall, incumbents should focus on a hybrid model between digital and human to ensure they're catering to all consumers.

 In full, the report:

  • Outlines the benefits of using AI in the insurance industry.
  • Explains the three main ways insurers can revamp their front office using the technology.
  • Highlights players that have successfully implemented AI solutions in their front office.
  • Discusses how insurers should move forward with AI and what routes are the most lucrative option for players of different sizes.

Interested in getting the full report? Here are two ways to access it:

  1. Purchase & download the full report from our research store. >> Purchase & Download Now
  2. Subscribe to a Premium pass to Business Insider Intelligence and gain immediate access to this report and more than 250 other expertly researched reports. As an added bonus, you'll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. >> Learn More Now

The choice is yours. But however you decide to acquire this report, you've given yourself a powerful advantage in your understanding of AI in insurance.

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Genius says it caught Google red handed copying its lyrics and robbing them of valuable search traffic

Sun, 06/16/2019 - 12:55pm  |  Clusterstock

  • is taking Google to task for copying its lyrics and displaying them in search results, according to The Wall Street Journal
  • A few years back, Genius got suspicious and devised a plan to put unique patterns in its lyrics by alternating types of apostrophes.
  • The company said this system helped them find more than 100 instances in which Google directly copied lyrics from Genius.
  • Google denied doing anything wrong and said it licenses its lyrics from outside companies. 
  • Visit Business Insider's homepage for more stories. is accusing Google of copying its lyrics and displaying them in search results, contributing in part to a broader slide in the site's traffic, according to a report from The Wall Street Journal

Music fans have for years relied on Genius to suss out what musical artists are saying as well as the meaning behind the words. But Google has jumped into the game as well, displaying lyrics in search results and cutting out the need to visit a particular lyrics company's website. 

A few years back, Genius got suspicious that Google was simply lifting its content wholesale — an accusation the search giant denies — and the website devised a ploy to catch them. 

It started in 2016, when Genius got exclusive access to the lyrics for hit song "Panda" by Desiigner. That meant their rendition was spot on while lyrics at most other places were strewn with errors and miscues. 

That is, except for Google. 

"We noticed that Google's lyrics matched our lyrics down to the character," Dan Gross, Genius' chief strategy officer, told the Journal in an email.

So Genius started creating unique patterns in its lyrics by alternating the font of apostrophes between curly and straight. When you converted the sequence of apostrophes to Morse code, it spelled out "red handed," according to the Journal.

Using this system, Genius says it found more than 100 instances of Google lifting its lyrics. The company said it brought the practice to Google's attention in 2017 and more recently in April sent the tech giant a letter arguing it was not only violating Genius' terms but also antitrust law. 

Google denied the charges, telling the Journal in a statement that the lyrics it posts in boxes in search results are licensed from other companies. LyricFind, one of the companies Google licensed lyrics from, denied sourcing them from Genius.

"We take data quality and creator rights very seriously and hold our licensing partners accountable to the terms of our agreement," Google told the Journal.

A Google spokesperson provided the following statement to Business Insider: "The lyrics displayed in the information boxes and in Knowledge Panels on Google Search are licensed from a variety of sources and are not scraped from sites on the web. We take data quality and creator rights very seriously, and hold our licensing partners accountable to the terms of our agreement. We're investigating this issue with our data partners and if we find that partners are not upholding good practices we will end our agreements."

Genius, of course, does not own the copyright to the lyrics it publishes. The musicians do. That means it may have tough luck taking its complaints and evidence to court to hold Google or its partners accountable. 

Read the full story at The Wall Street Journal.

This story has been updated with an additional statement from Google.

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I signed up for $1 million of life insurance before I ever had a family, and it sounds like a lot — but if I could do it again, I'd get twice as much

Sun, 06/16/2019 - 11:30am  |  Clusterstock

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  • Eric Rosenberg signed up for a $1 million life insurance policy shortly before starting a family.
  • Life insurance policies should be picked based on your family's projected expenses for housing, utilities, food, and other needs. Some households may want more insurance to cover major future costs like a college education or a mortgage payoff.
  • To figure out how much coverage he needed, he multiplied an inflated estimate of his annual expenses by 10, then added more for college costs for his future kids — and erred on the side of too much coverage rather than too little.
  • Now, he says, he would have preferred to get $2 million worth of coverage instead. But since he's older now, adding to his existing policy would be more expensive than if he had done it up front.
  • Policygenius can help you compare life insurance coverage to find the right policy for you, at the best price »

When it comes to life insurance, signing up sooner rather than later is usually a good idea.

The cost of life insurance typically only goes up as you get older, so I wanted to lock in the best possible rate in my 20s. While I didn't have my family yet, I planned to have kids in the next few years and wanted to make sure they would be covered in case of a sudden loss of my income.

Getting life insurance was a relatively quick, easy, and painless process. The hardest part was deciding how much coverage I wanted. Based on back-of-the-napkin math, you can quickly figure out exactly how much coverage to choose for your family.

Here's how I did it and a blueprint to pick your own life insurance coverage amount.

Projected expenses and life insurance

Term life insurance is a product designed to make up for lost income if you lose a member of your family or cover new costs that would arise. While few people like to think about the worst case scenario of passing away or losing a spouse, it is a possibility that should be planned for just in case.

If you are the primary income earner for your family, what would their situation look like if your paychecks suddenly stopped? Would they be able to keep their home? Could they still put food on the table? And consider what would happen if a non-income-earning spouse passed away. Perhaps daycare or other expenses would jump significantly. This is what life insurance helps you manage.

For a baseline, look at your typical annual expenses and multiply by 10. So if your household monthly expenses are $50,000 per year, you should look for a policy of at least $500,000. But consider that a minimum, not a maximum. Inflation and income increases will likely lead to higher annual expenses in the future. You don't want to find yourself with less coverage than your family needs.

Factoring in one-time lump costs

My annual expenses were far less than $100,000 when I signed up for my policy, and still are. That means I picked a policy with a higher value than 10 times my annual expenses (or income). The difference between my annual expenses at the time and $100,000 was more than a rounding error.

I planned that my expenses would go up (they have), but I also wanted to add an extra cushion to make sure my family could easily manage funeral expenses and other future costs. I didn't know how many kids I would have at that point, but I knew I wanted to help with college or a potential mortgage payoff.

If you are serious about sending your kids or future kids to college, consider typical annual college costs, the rate they have been rising, and add a reasonable projection on top of the 10 times expenses from above.

Policygenius can help you compare life insurance policies to find the right coverage, and the right rate, for you »

Get more insurance coverage when in doubt

Knowing what I do today about the cost of college and a mortgage payoff, I would probably have doubled the $1 million policy I chose. That's right: If I could do it again, I would pick $2 million in coverage instead.

If I signed up for a new $1 million term policy today for a combined $2 million, I would likely have to pay quite a bit more per month for the second million. I'm older and my dad was since diagnosed with cancer, among other risk factors.

If you are getting new life insurance and on the fence about how much to get, always round up. Term life is very inexpensive compared to the coverage you get. Buying a quality policy for your family is a vital piece of a family's financial plan.

Don't wait to get life insurance

If anyone relies on you for your income, life insurance isn't optional. While parents may play superhero with their kids from time to time, none of us are invincible. I took my expenses, multiplied by 10, rounded up, and added a little more to choose my $1 million policy. That blueprint may also work for you, but don't feel limited from adding more.

The cost of life insurance is almost certain to go up for you in the future, so planning ahead and getting the coverage you want now is the smartest way to go. Don't kick yourself for not signing up for coverage when you were younger. Get it today and lock in the rate for decades to come.

Insurance-comparison site Policygenius can help you find the right coverage at the best rate for you »

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'Men in Black: International' has the worst opening ever for the franchise with just $28.5 million

Sun, 06/16/2019 - 11:23am  |  Clusterstock

  • Sony's "Men in Black: International" scored the lowest opening weekend in the franchise's history with an estimated $28.5 million.
  • It's the third-straight weekend that a sequel had a poor opening at the domestic box office.
  • Visit Business Insider's homepage for more stories.

Studios are learning this summer that audiences have no time for their tired franchises.

This weekend it's Sony that's taking the lumps as "Men in Black: International," the first "MIB" movie in seven years, opened with a franchise-low $28.5 million at the domestic box office.

The first "Men in Black" in 1997 previously had the lowest opening with $51 million, but back then that was really good. In fact, if you count inflation, that would be a $100 million opening today.

The $28.5 million performance, though number one at the domestic box office for the weekend, is below Sony's $30 million opening weekend projection, which most felt was a little too ambitious seeing how the weekend was shaping out.

The movie's Thursday preview screenings (even starting them at 4 p.m.) only brought in $3.1 million. On Friday, the movie only brought in $10.4 million on over 4,200 screens. The movie had a global total over the weekend of $102.2 million.

Read more: Insiders were shocked when DC Universe's "Swamp Thing" was suddenly canceled despite a huge investment in the series and rave reviews

Sony thought it had built some padding around the relaunch of the franchise with its $110 million budget, less than half the budget of "Men in Black 3" in 2012. But even the fun tandem of Chris Hemsworth and Tessa Thompson playing the agents didn't grab audiences or critics. The movie had a franchise-low 24% Rotten Tomatoes score.

If a sequel failing at the box office sounds like a familiar story this summer, that's because it's on its way to becoming a trend.

This marks the third straight weekend where a sequel has crashed at the domestic box office. First, Warner Bros.' "Godzilla: King of the Monsters," underperformed. Then last weekend Disney/Fox's "Dark Phoenix" was an epic fail for the X-Men franchise, taking in only $32.8 million. The first ever in the 20-year franchise not to have at least a $50 million opening. And now "Men in Black: International" is added to the list.

Thankfully Disney/Pixar will be hitting the multiplex next weekend with the anticipated "Toy Story 4."


SEE ALSO: Even after "Avengers: Endgame," this year's box office is down thanks to a bleak summer full of stale sequels

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'Deaths of despair' are taking more lives of millennial Americans than any other generation

Sun, 06/16/2019 - 11:15am  |  Clusterstock

"Deaths of despair" are increasing among young Americans. 

These deaths — related to drugs, alcohol, or suicide — claimed the lives of 36,000 American millennials in 2017 alone. Drug overdoses are the most common cause of death.

That's according to Jamie Ducharme for TIME, citing a report by public-health groups Trust for America's Health and Well Being Trust. The report looked at millennials ages 23 to 38 in 2019 using the most recent data available from the CDC.

Deaths of despair have increased across all ages in the past 10 years, but more so among younger Americans, reported Ducharme.

From 2007 to 2017, adults ages 18 to 34 saw a 69% increase in alcohol-related deaths; 108% increase in drug-related deaths — largely fueled by the opioid crisis; and a 35% increase in death by suicide.

The report cites a few reasons behind these upticks — young adults are more inclined to engage in risk-taking behaviors, comprise the highest number of enrolled military personnel, and disproportionately live in "high-stress environments" like correctional facilities.

But there are other structural factors at play, according to the report, namely the myriad financial problems millennials are facing: student loan debt, healthcare, childcare, and an expensive housing market. These four costs are part of The Great American Affordability Crisis plaguing millennials that's putting them financially behind.

Read more: 2019 is the final class of millennial college graduates. Next stop: The Great American Affordability Crisis.

The affordability crisis is affecting millennials' mental health

Financial burdens and lack of social support may explain why depression is on the rise among millennials. They've seen a 47% increase in major depression since 2013, according to a Blue Cross Blue Shield report. However, one in five don't seek treatment — likely because they can't afford it.

Studies have found a correlation between indebted people and mental health problems. While this research, by its nature, can't identify causality, the likelihood of having a mental health disorder is three times high among those unsecured debt, according to a meta-analysis, or study of studies, in the Clinical Psychology Review. People who have completed suicide are eight times more likely.

Millennials don't always have someone to share the mental burden of this with — they're less likely to have social support than other generations, as they're marrying later and are less connected to political or religious communities, according to Ducharme's reporting.

SEE ALSO: Depression is on the rise among millennials, but 20% of them aren't seeking treatment — and it's likely because they can't afford it

DON'T MISS: The US birthrate is the lowest it's been in 32 years, and it's partly because millennials can't afford having kids

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Here's how this founder convinced Silicon Valley heavyweights Paul Graham and Peter Thiel to invest $5.8 million in his startup — without using a pitch deck

Sun, 06/16/2019 - 9:45am  |  Clusterstock

Arjun Mohan had a plan to land some of Silicon Valley's biggest investors for his heavy machine rental startup, Tenderd — and it didn't involve the traditional investor pitch deck.

Instead, Mohan chose to forgo the deck his team had created while they were in the famed Y Combinator accelerator program, and opted instead to push for in-person conversations. That way, Mohan told Business Insider, he could address questions or hesitations immediately, and explain some of the counterintuitive lessons his team had learned while building the company.

Mohan's strategy paid off, and last week, Dubai-based Tenderd announced it raised $5.8 million in seed funding from some of the biggest names in tech investing, including Y Combinator cofounder Paul Graham and Founders Fund founder Peter Thiel.

"We weren't really raising tens of millions of dollars, so a lot of investors are investing a few hundred thousand to a million [dollars], and were able to pull the trigger on the investment without having a pitch presentation, and a partner meeting," Mohan told Business Insider. "It only took us a few meetings to get them to sign on the dotted line."

Read More: Tech VCs are squabbling over a popular type of funding for startups that one prominent investor calls a 'nightmare' and a 's**t show'

Tenderd, which allows users to rent and manage construction equipment, was only the second startup from a country in the Middle East or Northern Africa to be accepted by Y Combinator, which is known for mentoring and funding high-growth startups like Dropbox and Airbnb from their earliest days. 

"We were quite happy to be selected by YC and I give a lot of credit to YC as well," Mohan said. "They are looking at emerging markets because they see lots of opportunity for growth in the Middle East and Asia. I'm obviously glad they saw the value and invested in us."

Y Combinator also participated in the round as part of the program, and was joined by Paul Buchheit, Justin Mateen, Matt Mickiewicz, BECO, VentureSouq, SOMA, Dynamo, and Global Founders Capital.

"Our initial investment was kicked off by Paul Graham," Mohan said. "He was back from sabbatical and helping us with our pitch deck. He liked us and liked our team, so he decided to make an investment."

The construction industry has been top of mind for Silicon Valley investors looking for the next crop of successful enterprise startups with practical applications of artificial intelligence and machine learning, Mohan says.

Tenderd actually charges more to rent equipment in bulk, Mohan explained — that's one of the counterintuitive insights he shared with investors, because coordinating multiple vendors or contracts is enough of a hassle that customers are willing to pony up for the convenience of working with one vendor.

"We wanted to share these counterintuitive insights in a more organic fashion instead of just bullets in a deck," Mohan said. "It forced them to have a conversation, and if they really insisted on a deck I would shoot over bullets in an email."

SEE ALSO: Brex, the credit card for startups, raised $100 million at a $2.6 billion valuation — more than double what it was worth nine months ago

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Reddit cofounder Alexis Ohanian took 16 weeks off to be with his family when his daughter was born. Here's a look inside his fight for paid paternity leave — and why he's bringing it to Congress

Sun, 06/16/2019 - 9:30am  |  Clusterstock

Famous fathers aren't held to a high enough standard, Reddit cofounder-turned-venture-capitalist Alexis Ohanian told Fast Company

That's partially why he's been outspoken about his decision to take 16 weeks of paid leave after his daughter with Serena Williams was born in 2017.

Since then, Ohanian has become a leader in the fight for paid paternal leave, and his social media profiles are the front lines. 

Read more: Alexis Ohanian has taken out billboards for wife Serena Williams, but he says a simple Sunday morning ritual means more to their relationship

Now, he told Fast Company, it's time to take the battle to Congress. 

"It's not a question of IF we'll get #paidfamilyleave in the USA, just a matter of WHEN," Ohanian tweeted, "And WHEN we do, we need dads to take full advantage of it."

Keep reading to learn more about Ohanian's own experience with paternity leave and what he's done to make sure other fathers can have the same experience.

SEE ALSO: 11 famous people who built their fortunes off their side hustles

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Ohanian has a one-year-old daughter, Alexis Olympia Ohanian Jr., with his wife, tennis star Serena Williams.

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Ohanian married Williams in November 2017 and brought their newborn along for the ride.

After his daughter's birth, Ohanian took 16 weeks of paternity leave and has publicly encouraged other fathers to do the same.

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"Out of office," Ohanian wrote on Instagram in September 2017. "This is Parental Leave life. She's clearly dreaming up all the startups she'll start... And Grand Slams she'll win.... And...."

Source: Good Morning America

Williams suffered from health problems after Olympia's birth, requiring Ohanian to take charge of Olympia's care.

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The situation "solidified the importance" of paid parental leave for Ohanian, he told Fast Company. "I know how fortunate we are, and it's heartbreaking to think how many American families have to go through some version of this and have an existential fear of losing their job or not being there for their family when their family needs it most."

Since the birth of his daughter, Ohanian has used his social media platforms to celebrate the way fatherhood has transformed his outlook on life.

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"Becoming a father has meant I get to re-experience things through the fresh, unjaded eyes of my daughter," Ohanian wrote on Instagram in March.

"Even just some delicious fresh fruit merits a happy dance. I'm getting to relearn what it means to be joyful myself. Even small moments of appreciation and reflection are going a long way."

And paid parental leave isn't just good for families, according to Ohanian — it's also good for business.

"I call out hustle porn for its BS and celebrate founders who are taking care of themselves and spending time with their families because it's the right business decision," Ohanian told Fast Company.

Ohanian has become an advocate for paid paternity leave, partnering with Dove Men+Care to promote The Pledge for Paternity Leave, a program offering grants to working dads to help them care for their newborns full-time.

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With 30k+ pledges for #PaternityLeavePledge, my partner @dovemencare & I launched a NEW @Facebook group to mobilize dads & allies. Join us this #FathersDay to help make paternity leave the new standard for all dads #DoveMenPartner

"With 30k+ pledges for #PaternityLeavePledge, my partner @dovemencare & I launched a NEW @Facebook group to mobilize dads & allies," Ohanian tweeted in June. "Join us this #FathersDay to help make paternity leave the new standard for all dads."

Source: Dove

He's been outspoken about some of the more shocking statistics about the state of paternity leave in the US.

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"Only 15% of dads in the U.S. have access to paid leave to bond with their newborn," Ohanian captioned a photo on Instagram in February. "Let's change that."

"Join me and @dovemencare in pledging for change.  #DoveMenPartner  #PaternityLeavePledge"

Ohanian also uses his platform to praise companies, including Sweetgreen and Target, that offer paid parental leave to their employees.

Tweet Embed:
Excited to see this arms race happening right now for #PaidFamilyLeave benefits. @SweetGreen giving employees 5 months (!!) of family leave now + @Target made big moves this week. It's not just tech companies.

"Excited to see this arms race happening right now for #PaidFamilyLeave benefits," Ohanian tweeted. "@SweetGreen giving employees 5 months (!!) of family leave now + @Target made big moves this week. It's not just tech companies."

He's also planning to meet with Congressional leaders to discuss legislation for federally mandated paid leave, he told Fast Company.

"I hope to be meeting with many senators, representatives, plenty of dads, on both sides of the aisle, in both houses of the Legislature, who want this to be the law of the land," Ohanian said on "Good Morning America." "What we are looking for is some minimum number of weeks of leave."

Source: Fast Company

Ohanian is already pretty accomplished in his own right — he cofounded Reddit and launched his own venture capital firm, Initialized Capital, in 2011.

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"2009 (freshfaced) on stage at @ted giving a talk about @reddit," Ohanian captioned a post on Instagram.

"2019 (bearded with many grays) after countless speaking appearances, my toughest crowd is now convincing @olympiaohanian that raspberries alone are not a complete meal.

In between these photos, I left Reddit, started some other companies, wrote a bestselling book, returned to help lead the Reddit turnaround, left again in order to do @initialized full-time, married the incomparable @serenawilliams, and -- my proudest achievement yet -- co-created this little human. Not a bad decade. I cannot wait for the next 10 years. #DadThings"

Source: Initialized Capital

But he says that being a father is the most important role he'll ever have.

Tweet Embed:
Forget @reddit, forget @initialized, the most important job I'll ever have is being a father.

Are you a parent? Add your voice to the @UNICEF parenting poll. #EarlyMomentsMatter

"Forget @reddit, forget @initialized," Ohanian tweeted, "the most important job I'll ever have is being a father. Are you a parent? Add your voice to the @UNICEF parenting poll. #EarlyMomentsMatter"

And, in an essay for Glamour, he noted that paternity leave gave him the opportunity to "show up" for his partner.

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"I see taking leave as one of the most fundamental ways to 'show up' for your partner and your family," Ohanian wrote in an essay for Glamour, "and I cherished all 16 weeks I was able to take."

The inside story at uBiome, disrupting Wall Street from within, and Peloton's prospects

Sun, 06/16/2019 - 9:11am  |  Clusterstock


When the three founders of the "microbial-genomics" startup uBiome began collecting human poop, they kept it in an erstwhile storage closet, inside secondhand freezers from a discount-lab-supply website. It was a far cry from a state-of-the-art facility.

So starts Erin Brodwin's inside story on uBiome, a startup that convinced Silicon Valley it was worth $600 million before the FBI came knocking. Hers is a great report on how a citizen science project became a clinical-testing company with big-name backers, and the corners some say it cut along the way. You can read the full story here

Erin's story is a reminder of the risks when the Silicon Valley tech ethos of "move fast and break things" runs into the healthcare principal of "do no harm."

She worked on another story, with colleague Shana Lebowitz, on the VC's ultimate guide to sniffing out risky healthcare startups — and not getting tricked into backing them. Emma Court had a story on the four slides from Mary Meeker's Internet Trends reports that should be a warning for tech companies that want to disrupt healthcare

And you can read our recent series on how technology is reshaping healthcare here

Separately, if you missed our IGNITION: Transforming Finance event on Monday, you can catch up on what you missed here. You can also check out a few clips from the event:

We'll be hosting more events like it, focused on specific industries, across the US in the coming months. If you have any ideas for live events you'd like to see or feedback from our event on Monday, let me know. 

-- Matt

Quote of the week

"Unicorns are amazingly deflationary vehicles. They're deflating rents, they're deflating driver salaries, they're deflating all kinds of things." — Famed short-seller Jim Chanos explains how Silicon Valley unicorns have pushed prices lower

In conversation Finance and Investing

Meet the JPMorgan banker with no technical expertise who's now in charge of one of the biggest data projects on Wall Street

Rob Casper stands up and takes a piece of laminated paper from behind his desk. Standing in his 39th floor office in JPMorgan's glass-walled midtown Manhattan headquarters, the bank's chief data officer wants to make a point.

Hedge-fund managers are overwhelmed by data, and they're turning to an unlikely source: random people on the internet

Hedge funds are sifting through so much data that they might just turn to random people online to help with it.

Merrill Lynch's 'thundering herd' of advisers are winning over troves of new millionaires, and the growth is coming from a surprising place

The wealth management division at Bank of America Merrill Lynch had an explosive year in 2018, and 2019 is off to a torrid pace as well, adding thousands of new millionaire clients.

Tech, Media, Telecoms

Inside Salesforce's $15.7 billion takeover of Tableau, which came together at Marc Benioff's San Francisco mansion and almost died last week amid wild market swings

Salesforce's $15.7 billion acquisition of Tableau, announced Monday, started with a text, came together over a meeting in a San Francisco mansion, and very nearly fell apart multiple times.

Peloton, the $4 billion fitness startup with a cult-like following is about to IPO. Insiders reveal why it's business is set to explode. 

Michael Duda knew from the first time he met John Foley that he wanted to make a bet on Foley's fitness equipment startup, Peloton.

VaynerMedia CEO Gary Vaynerchuk says his bootstrapped digital media company is generating more than $130 million and is coming for WPP and Omnicom — with no 'meaningful competitor' in sight

As the advertising establishment heads to Cannes for the annual, rosé-soaked ritual of making deals and collecting awards on the French Riviera, Gary Vaynerchuk wants the marketing world to know there's a new type of agency holding company in town.

Healthcare, Retail, Transportation

The biggest health system in New York used to make 80% of its revenue from hospitals. A decade later, that's down to half. 

Out the window of Northwell Health's New Hyde Park, New York, offices sits an expansive 1.4-million-square-foot building.

Investors just launched the first VC dedicated exclusively to psychedelics, which they call the 'next wave' after the cannabis boom

As the legalization of medical cannabis has swept the globe, it's also paved the way for another new health frontier: psychedelic medicine.

Here's the pitch deck Careem used to secure its first round of venture capital, which led its first investors to a 100x return when Uber bought the company this year

Uber has struggled to attain the same dominance in the tricky region of the Middle East that it's built in places like the United States.

Join the conversation about this story »

NOW WATCH: WATCH: The legendary economist who predicted the housing crisis says the US will win the trade war

It's been 100 years since we've seen anybody like Elon Musk — here's why that's so disorienting (TSLA)

Sun, 06/16/2019 - 9:04am  |  Clusterstock

  • Tesla CEO Elon Musk is more like an old-school automotive entrepreneur than a modern-day business manager.
  • His personality is consistent with what it always takes to start a car company, but it's unfamiliar to many because no one has started a major automaker in decades.
  • If we had access to a time machine, we could go back to the early 20th century and find a lot more people who were like Elon Musk.
  • Visit Business Insider's homepage for more stories.

If you had a time machine and could travel back to the turn of the 19th century, you'd find a world that still made great use of the horse — but that was newly captivated by a clattering new contraption, the motor car.

The automobile was the internet of the late 1800s and early 1900s, attracting a frenzied level of entrepreneurship, launching hundreds of new companies, and transforming a shipping center in the upper Midwest into Motown, the center of what would become the auto industry.

The car business is now very different. Ford and General Motors were each founded over 100 years ago. Upstart Toyota has been manufacturing cars since the 1930s. Even dashing Ferrari has been around since 1939, selling road cars since the late 1940s.

Automakers operate at a huge scale, across international time zones, employing hundreds of thousands of people while selling millions of vehicles annually. They can't be run by visionaries anymore because visionaries, while valuable, aren't good at keeping the giant machine humming.

This is why Tesla CEO Elon Musk is such a shock. His personality isn't so different from one of those determined entrepreneurs from the 1900s who wanted to stick a motor on a carriage and get people moving without having to hitch a horse. For grizzled industry veterans, Wall Streeters, and Musk critics, he can be tough to take.

But he's not usual, in the history of people who start car companies. In fact, he's true to type. Here's why:

FOLLOW US: On Facebook for more car and transportation content!

1. You have to be crazy to start a car company. And I mean crazy.

I don't mean literally crazy, of course. But if you intend to enter the auto industry with a new brand, you have to defy the odds, conventional wisdom, and probably the advice of everyone who doesn't want you to lose every dime and the shirt off your back.

It's been over a century since feverish entrepreneurship around the world gave us the first automobiles. Unbridled creativity and risk-taking were the order of the day back then, and hundreds of people wanted in on the action. Imagine a world filled with dozens of Elon Musks.

Nowadays, there are still some serious "car people" in the car business, but the industry is so large and global that the managerial skills needed to run it reward MBA types more so than madmen.

2. Cars really are dream machines.

When Jim Hackett became CEO of Ford a few years ago, he realized that he was coming from a non-automotive background, so he needed to develop a grasp of the business.

He talked to a lot of people, and one major takeaway stood out for him: people truly love cars and have an emotional investment in them.

Hacket knew that, at some level, but he didn't know how much that love defined his customers' relationship with Ford's products.

That revelation is one that Musk knows well. He set out to produce cars that owners could adore, and he's succeeded. Tesla might have its problems, but building dream machines isn't one of them.

For years before Musk and Tesla came along, people wanted great, widely available electric cars, but the industry wasn't able to make them. They were a dream. Tesla made them a reality.

3. Musk's biggest job is as Tesla's marketer-in-chief.

Musk is one of the more technically knowledgeable CEOs in the auto industry, at least when it comes to electric cars. He also knows about rocketry, given that he's also CEO of SpaceX. I can safely say that no other CEO in the car business can call themself a rocket scientist of any sort.

Musk is also not as operationally disadvantaged as some of his critics think. His problem isn't that he doesn't understand how cars are built and sold; it's that he's too ambitious about improving a manufacturing process that might not need it.

But the truth is his real job, his most important one, is to be a car salesman.

The only other top exec to come along in the past few decades who was as effective as Musk was Lee Iacocca, who ran Chrysler in the 1980s. The business world has sort of forgotten about Iacocca, who was an old-school, cigar-chomping cheerleader for his company.

Much of this is because the type that Iacocca embodied isn't effective at overseeing most big, global carmakers in the 21st century. They need to be futurists and diplomats, leaving the rough-and-tumble of grinding out sales to capable lieutenants.

Musk is certainly a futurist, but he's rarely a diplomat. His driving goal is to sell as many Teslas as possible, to end humanity's dependence on fossil fuels. That requires something more like a field general, or a king.

4. Henry Ford and Enzo Ferrari and Lee Iacocca didn't have to deal with Twitter.

Iacocca didn't tweet. Neither did Henry Ford nor Enzo Ferrari.

In fact, none of the auto industry's great visionaries — with all their faults and flaws — had to worry about 24/7 media or the internet. When Iacocca was running Chrysler, there were basically three network channels on broadcast TV.

When Henry Ford started his car maker, radio was a new thing.

And Enzo Ferrari wasn't called il Commendatore because he spent a lot of time worrying about Twitter trolls.

5. Car companies haven't been truly exciting in a long, long time.

There are exceptions, of course. Lamborghini and Ferrari can still thrill, and newer exotic manufacturers such as Pagani have taken up that torch. But automakers for the past few decades have been far more about processes and management than about raw excitement.

Tesla's cars are all about excitement, even if they aren't particularly outlandish. They're certainly fast — sometimes faster than supercars. And they symbolize the future.

This situation is changing, as Tesla sells more vehicles to less affluent buyers and moves away from cars such as the high-performance original Roadster and embraces stuff like pickup trucks.

But the buzz remains. And Musk is its conductor.

A Wall Street investment chief overseeing $26 billion breaks down why recession fears are overblown, even as the market clamors for Fed relief

Sun, 06/16/2019 - 9:02am  |  Clusterstock

  • Some industry watchers argue that the recent yield-curve inversion is due to low inflation, and therefore not a sign of recession. 
  • "It's hard to make the case that the US economy is heading towards a recession," said Mark Heppenstall, who helps oversee $26 billion as chief investment officer of Penn Mutual Asset Management.
  • Still, the bond market continues to put pressure on the Federal Reserve to cut interest rates, a move usually reserved for a weakening economy.
  • View Markets Insider's homepage for more stories.

Not everyone watching the bond market sees signs of recession looming ahead.

The yield-curve inversion between 10-year Treasurys and 3-month notes is a signal of low inflation, not an imminent recession, according to Mark Heppenstall, who helps oversee $26 billion as chief investment officer of Penn Mutual Asset Management.

Still, Heppenstall told Business Insider in an exclusive interview that "it feels as though the bond market has built in a lot of bad economic news and continued low inflation."

He disagrees, pointing to continued low employment and jobs numbers that — while slowing — have not turned negative. Heppenstall considers that a sign that the US economy is still "chugging along at a reasonable clip."

"It's hard to make the case that the US economy is heading towards a recession," he added.

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From a market perspective, low inflation is a good thing for the purchasing power of bonds over time. High inflation eats into bonds future value, but low inflation makes them more attractive. This could explain the rush of investors into the 10-year, which led to a rally and historically low yields.   

Now, the bond market is putting pressure on the Federal Reserve to cut interest rates to keep the economy moving forward, something chairman Jerome Powell signaled he was open to doing. The equity market has also priced in rate cuts this year, following increased tension from trade with the US and China and Trump's threat of tariffs against Mexico.

"I think it's unlikely that the Federal Reserve would do something that would be so different from market expectations at this point," Heppenstall said.

There are also conflicting signals in other parts of the yield curve, where it's not flat or inverted, Heppenstall said. For instance, the spread between the 5- and 30-year Treasury yields is widening, climbing from 20 basis points last summer to nearly 80 basis points this year. He admits it's tough to get a clear reading from these "mixed signals."

If the entirety of the curve was moving into an inversion, Heppenstall says he would "probably be more cautious on economic growth moving ahead."

To be sure, there are many other insiders that think the bond market is sending a loud and clear signal that recession is on the horizon, or that the stock market is at least in a topping process that warrants caution. While some bond- and stock-market investors have become more aligned in how they are reading signals like the inverted yield curve, they've had opposing views in recent months.

Going forward, it will be important to watch for the political moves that have been driving markets. Over the summer, Heppenstall says he'll be watching what happens at the G20 summit and for signs of a hard Brexit. Both the bond market and the equity market have been susceptible to news about trade talks between the US and China, even though the outcome of the dispute could have binary outcomes for markets, he said.

"For the balance of the year I think that it's unlikely that you're going to make more in significant capital appreciation" in the bond market, Heppenstall said. Still, "it's a time where you have to remain opportunistic. The shift between risk on and risk off is happening pretty quickly."

Heppenstall is also watching currencies, particularly the Chinese yuan and broad dollar strength for signs of global economic health — or signs of deterioration — for the rest of the year.

"Oftentimes you'll see some of the destruction in the currency market before the bond market," Heppenstall said.

Now read more markets coverage on Markets Insider and Business Insider:

Trump's trade war strikes again: Broadcom plummets after cutting its yearly sales forecast, dragging the entire chipmaker industry lower

GOLDMAN SACHS: Buy these 17 'superstar' stocks, which dominate sales in their industries and have been crushing the market

Beware a 'Trump recession': JPMorgan unloads on the president's role in erasing a full year of market progress — and lays out a scenario that could save the day

Join the conversation about this story »

NOW WATCH: Dragons and white walkers aside, you can find some real science in 'Game of Thrones'

This chart shows just how much Facebook, Google, and Amazon dominate the digital economy (FB, GOOG, AMZN)

Sun, 06/16/2019 - 8:15am  |  Clusterstock


  • The chart below shows the amount of power that three of the biggest tech companies have in key sectors of the digital economy.
  • 2 out of every 3 digital ad dollars in the US goes to Facebook, Google or Amazon, according to eMarketer data.
  • Tech companies have long argued that competition is just one click away in the internet market, but the concentration of power in certain markets is now under renewed scrutiny by regulators, politicians and the public. 
  • Visit Business Insider's homepage for more stories.

There's a lot of money to be made in the digital economy. And right now, a lot of that money is flowing into the coffers of three companies in particular. 

Google, Facebook, and Amazon are among the most valuable tech companies in the world. And as shown in this chart, based on data from eMarketer, the three companies utterly dominate certain segments of the online economy in the US. (Axel Springer, Business Insider's parent company, also owns eMarketer.) 

More than two of out every three dollars spent on digital ads in the US goes to one of the three companies., for instance. Facebook, not surprisingly, takes the lion's share of social media advertising, and it's closing the gap with Google on mobile ads. 

With calls to rein in the power of the big tech companies, and some like Senator Elizabeth Warren even saying it's time to break up some of these corporations, the market share figures below represent something of an inconvenient truth — no matter what the companies may say about competition being "just a click away."

Amazon is a growing power in digital advertising, but its real stronghold remains its online retail business, with 37.7% of all e-commerce sales in the US ringing up at the Amazon cash register. Notably, that number is actually the result of a downward revision by eMarketer following new information about Amazon's third-party sales— the research firm had previously estimated Amazon's share of the US e-commerce market was 47%.

As the TV industry gets upended by the internet, Google and Amazon are also positioned to benefit from new revenue streams. Nearly 27% of consumers who watch streaming video on a TV screen in the US watch through Amazon, while nearly 17% watch through a Google service or device.  Note that the estimates for "over-the-top" TV viewers, which refers to video delivered over the internet independent of a traditional TV service, is above 100% due to overlap of consumers using more than one service. 

SEE ALSO: Inside the Alphabet empire: Here are the most important people and teams in Google's vast power structure

Join the conversation about this story »

NOW WATCH: Here's why it's so hard to switch from Apple to Android

Private venture-backed startups like Slack and Airbnb are investing in other startups. Here’s where their money is going.

Sun, 06/16/2019 - 8:00am  |  Clusterstock

  • Privately held companies like Slack and Airbnb have started investing in other venture-backed startups through corporate venture capital funds.
  • Corporate venture capital has been popular with tech companies in the past, with major players like Qualcomm and Google each spinning off at least one venture arm of the business.
  • Together, corporate venture funds from private startups have invested more than $2 billion since 2013.
  • Click here for more BI Prime stories.

Some venture-backed startups don't want to miss out on the next wave of unicorns, so they're turning to an old funding strategy.

Workplace chat app Slack was one of the earliest privately-held startups to use its funds to back other startups in 2013. In the years since, Airbnb, Stripe, and Coinbase have also started corporate venture capital funds of their own. In total, these four funds have invested more than $2 billion across 76 companies, according to Pitchbook data.

Read More: Tech VCs are squabbling over a popular type of funding for startups that one prominent investor calls a 'nightmare' and a 's**t show'

Corporate venture capital isn't a new phenomenon, and tech giants like Google and Qualcomm all have one or more existing corporate venture funds to take big bets on emerging technology.

"Being a part of a large company that has incredibly talented engineers, executives, and a global presence means there's a lot of money and resources that can be delivered to early-stage companies and entrepreneurs that accelerate adoption of the product or service. It also helps them not make mistakes others have made," Valo Ventures founder and former CapitalG founder Scott Tierney told Business Insider. CapitalG was formerly part of Google's corporate venture arm, Google Ventures.

We looked through Pitchbook data to determine the top corporate venture capital funds from privately-held startups. Here are the top four:

SEE ALSO: Peloton, the fitness startup with a cultlike following, could go public at an $8 billion valuation. Insiders reveal why its business seems set to explode.

4. Coinbase

Total invested: $73.28 million

Started investing: 2018

Companies invested in: 10

Portfolio includes: TruStory, Celo, Spacemesh, Abacus

3. Stripe

Total invested: $363.81 million

Started investing: 2017

Companies invested in: 8

Portfolio companies include: Monzo, Paystack, Lamda School

2. Slack

Total invested: $412.33 million

Started investing: 2013

Companies invested in: 53

Portfolio companies include: WorkRamp, Clara Labs, Learnmetrics

1. Airbnb

Total invested: $1.35 billion

Started investing: 2017

Companies invested in: 5

Portfolio companies include: Lyric, The Wing, Resy, OYO Rooms

Beware the 'perfect storm of negative events' one expert says will send stocks crashing

Sun, 06/16/2019 - 6:05am  |  Clusterstock

  • Optimism is creeping back into the stock market amid expectations of trade-war progress, and as analysts across Wall Street prime investors for strong second-half earnings.
  • Vincent Deluard, a macro strategist at INTL FCStone, says investors should avoid being swept up in what could be a strong summer, and instead focus on a troubling combination of factors that could wreak havoc in the fall.
  • He outlines four main headwinds that could strike the market simultaneously.
  • Visit Business Insider's homepage for more stories.

Vincent Deluard doesn't want you to get the wrong idea if stocks rally this summer.

The INTL FCStone macro strategist is staunchly negative on the equity market in the medium term, even if that means his bear forecast has to weather more share gains over the next few months.

Deluard says one way stocks could deliver a bullish fake-out is if the US and China continue their game of chicken around trade. He thinks the posturing could deliver just enough good news to keep stocks climbing, backstopped by a reluctance from both sides to escalate matters much further.

And that's just part of it.

"Rate cuts, a fairly resilient economy, high earnings beat rate, and the recent pullback of valuations will convince some investors to buy the dip," Deluard said in a recent client note. "Good for them."

If Deluard sounds bemused by the entire situation, that's because he is. He's focused on the longer term — a future he sees filled with an unfortunate amalgamation of negative factors.

"Stock market declines will resume in the fall, with a perfect storm of negative events," he said.

So what exactly can stock investors expect to contend with in the fall of 2019? Allow Deluard to outline four main headwinds.

(1) An earnings growth "reality check"

Deluard argues that analysts are setting investors up for disappointment with their expectations for a sharp earnings-growth rebound. He doesn't see this happening, so long as the US-China trade war stays rife with new tariffs.

"If margins fail to expand, companies will need to give much lower guidance as they report second quarter earnings in the summer and/or disappoint analysts in the third and fourth quarter," he said.

As past instances of downward revisions are any indication, the stock prices of the companies involved could take a swift beating.

(2) A buyback blackout

After a company reports earnings, they're prohibited from buying back shares in what's known as a "blackout" period. Deluard notes that one of these spans is set to fall in the first couple weeks of October, after a majority of companies have reported.

Read more: The stock market will soon be without its biggest source of buying power — and its absence will make the next crash even more painful

Deluard has previously harped on the fact that a slowdown in buyback activity would deprive the equity market of its most reliable backstop. Combine that with the fading influence of President Donald Trump's tax plan, and you have a recipe for disaster.

(3) A disappointing Federal Reserve rate-cut schedule

The market is hoping for three rate cuts before year-end. Deluard thinks they'll get two, tops.

That's because he doesn't expect inflation to cooperate and stay low throughout the easing process.

"Inflation (or rather deflation) expectations may have gotten ahead of themselves," Deluard said. "Broad-based indicators, such as wage growth or the New York Fed's underlying inflation gauge have not slowed significantly."

He added: "It will be hard to justify in third cut in the fall if inflation and the economy has not slowed down."

It's safe to say that if the Fed fails to deliver, the market will do what it always does in this situation: throw a fit and sell off. 

(4) A likely escalation of European political risk

When it comes to European politics, Deluard says pick your poison. He thinks all of these issues could come to a head around the same time:

  • European Commission action against Italy's "excessive" deficit
  • Mario Draghi's term as European Central Bank president will expire on Oct. 31, which could increase the "risk of miscommunication"
  • As the Brexit deadline approaches, the fact that it'll likely be spearheaded by someone supporting the "no-deal" platform complicates matters even further

"Brace for some late-night fun at European summits," Deluard said.

SEE ALSO: GOLDMAN SACHS: The music-streaming industry will nearly triple over the next 20 years. Here are the 4 dominant stocks you should buy to ride the wave.

Join the conversation about this story »

NOW WATCH: New York City is getting even more infested with rats. Here's why cities can't get rid of them.

This 28-year-old short seller's hedge fund made a 24% return last year. Now she's eyeing the ballooning US debt pile.

Sun, 06/16/2019 - 3:00am  |  Clusterstock

  • Short seller Fahmi Quadir, who runs the fund Safkhet Capital in New York, made a 24% return last year.
  • In an interview with Business Insider, Quadir said her winning trades come from focusing on shorting companies with "predatory business models." 
  • The 28-year-old is currently eyeing a private company focused on the student debt market, that may eventually IPO. 
  • She said her fund only makes "conviction" bets because it "can't afford to spend time throwing darts."
  • Click here for more BI Prime stories.

Short seller Fahmi Quadir says her Safkhet Capital fund made a 24% return in 2018, an impressive feat for a year that saw hedge fund after hedge fund end up in the red. Her strategy: make big, all-or-nothing bets on companies with what she calls "predatory business models."

The tactic was a winner in her bet on MiMedx, a biopharmaceutical company rocked by whistleblower and accounting scandals that led to a management overhaul and a whopping 93% plunge in the stock. 

While this year's short bet on German payments company Wirecard hasn't yet tracked the success of 2018, she's already plotting her next target. To find it, she said she started eyeing Americans' ballooning US debt pile. 

Quadir said she's lured by companies in that space who have products that are priced higher than those of peers, which "contributes to a debt spiral." 

While declining to name any specific names, Quadir said she's researching a potential short trade of a firm focused on student loan debt, which is currently private and might eventually IPO. 

"It's more the business model itself that attracted us, we're not making a call on the debt market itself," she said in an interview. "But in these companies that are focused on the consumer, the level of bankruptcies and delinquencies have been ticking up in the past year."

According to the Federal Reserve, US outstanding student loan debt has more than doubled to $1.6 trillion in the past decade, while last year US credit card debt hit a record $870 billion.

Read more: A 28-year-old hedge fund star who took on Bill Ackman slammed a 'bizarre' ban on short selling a $14 billion German company

"If you look at these underlying asset-backed sectors, the underlying accounts are certainly deteriorating," she said. "Then you have companies dependent on these markets to access liquidity, so it becomes more difficult when the quality of accounts has deteriorated so much."

She points to the Fed's warning late last year that business-sector debt relative to GDP is worryingly high.

"So they've been able to obtain debt at very cheap terms." she said. "What that's led to is being able to keep the doors open, but not necessarily sustainable. Once they're unable to access the credit markets, it's unclear whether they're able to maintain the business." 

Fahmi Quadir burst onto the seen in a Netflix documentary

Quadir burst onto the scene in a Netflix special called "Dirty Money," where she joined her bearish peers in calling out the drug giant Valeant. With that trade, Quadir took on Bill Ackman, a longtime Valeant bull who lost billions when suspect accounting revelations tanked Valeant's stock and eventually prompted a management overhaul. 

She's followed others' lead on some of her other bets as well (Tesla, Wirecard, South Africa's Capitec Bank).

"Another thing we look at is companies that have been targeted in the past — investigative journalists, short sellers, consistent criticism over a period of time — how odd that these companies have managed to succeed," Quadir said. "Because usually, when there's that kind of consistency, there's something behind that."           

Quadir also wasn't the only one who piled into MiMedx. The short seller Marc Cahodes and Viceroy Research founder Fraser Perring famously pushed the short case on the trade for more than a year. MiMedx replaced its CEO and a key exec after the company found insiders spied on whistleblowers who had called out revenue manipulation. 

It's been a rocky year for some big bets. Wirecard, which Quadir's Safkhet Capital is "significantly" short, has seesawed up and down, even rallying year to date — despite several explosive reports from the Financial Times outlining suspect accounting practices. Wirecard has denied the claims. 

"Generally, we're focused on fraud and exploitative practices, so that's where we'll be looking first," Quadir said. "That's not thematically driven, but you'll see the connection if you look at our portfolio."

Quadir's fund is smaller than most hedge funds. And it only has one analyst, a 33-year-old out of Yale's business school, Christina Clementi.

But that's not the only reason she bets on very few trades: "We can't afford to spend time throwing darts," Quadir said. "We would rather spend that time on our conviction ideas."

SEE ALSO: A 28-year-old hedge fund star who took on Bill Ackman slammed a 'bizarre' ban on short selling a $14 billion German company

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