July 26, 2020

Welcome to our inaugural edition of what we’ve been reading in technology & ESG related investing this week. You are receiving this email, because you’ve previously worked with Sophic Capital or we’ve discussed tech or ESG investing.

Sangoma Technologies Corporation (STC-TSXV) announces upsized underwritten public offering to $70 million. https://bit.ly/3jtStHP

Converge Technology Solutions Corp. (CTS-TSXV) announces increase to previously announced bought deal financing. Under the amended terms of the offering, Underwriters have agreed to purchase, on a “bought deal basis”, 10,800,000 common shares at a price of $1.62 per Offered Share for gross proceeds to the Company of $17.5 million. In addition, Converge has granted the Underwriters an option, exercisable at any time, in whole or in part, until the date that is 30 days following the closing of the financing, to purchase up to an additional 1,620,000 common shares of the Company solely to cover over-allotments, if any, and for market stabilization purposes. In the event the over-allotment option is exercised in full, the aggregate gross proceeds of the Offering will be $20.1 million. https://bit.ly/30MEWT9

Vision Critical secures US$20 million in growth funding from Vistara Capital Partners. The debt investment will expedite Vision Critical’s growth strategy and ambitious roadmap centered around delivering a market-leading Customer Experience Management (CXM) and insights platform. https://bit.ly/39lJnbk

Scale AI, partners invest $29 million into five artificial intelligence projects. Five projects have received $29 million in funding from Scale AI and a number of partner companies to support the implementation of artificial intelligence (AI). Scale AI invested $9 million, with other partners investing $20 million. Scale AI invested $9 million in the projects and partners invested $20 million. Scale AI is an investment and innovation hub that aims to accelerate the adoption and integration of AI technology. Overall, 40 partners, including companies, consultancies, research partners, and business partners, are taking part in each of the five projects. “The new partnerships are a testament to the supercluster’s convening power,” said Navdeep Bains, Canada’s minister of innovation, science, and industry. “These collaborations are sustaining SCALE AI’s momentum, driving innovation and contributing to Canada’s leadership and growth in the emerging field of artificial intelligence.” https://bit.ly/30FiRpD

Quebec RDA invests nearly $13 million in 30 cleantech projects across the province. The federal investment, which totals $12,545,298, comes in the form of repayable contributions, non-repayable contributions, and grants distributed by Canada Economic Development for Quebec Regions (CED). CED is one of the country’s six regional development agencies (RDAs). Through this funding, the Canadian government aims to help establish “a culture of innovation throughout the province,” and contribute to the adoption and marketing of technologies that reduce environmental impacts. https://bit.ly/2OZk85b

Opportunity Calgary Investment Fund invests collective $7.25 million in AltaML, Harvest Builders. https://bit.ly/2OQhkr7

Clutch raises $7 million to continue building Canada’s first online car retailer. Clutch, Canada’s first online car retailing platform, has raised $7 million in Seed financing with their recent round led by Real Ventures. BrandProject, FJ Labs, Azure Capital Partners, and Global Founders Capital also participated in the round. https://bit.ly/2ZUvhun

FedDev invests $4.8 million to open cleantech accelerator at Trent University. The accelerator is part of Trent’s plan to stimulate cleantech sector growth and position the Greater Peterborough region as an emerging cleantech hub. The federal government’s non-repayable contribution comes in addition to $5.2 million in private sector investment. The TEC, in partnership with the Peterborough Innovation Cluster, plans to serve as an accelerator and tech demonstration space for cleantech-focused companies. The new accelerator aims to help cleantech companies commercialize their ideas and accelerate their growth. Created in partnership with the Peterborough Innovation Cluster, the federal government expects the TEC to support 70 companies via business advisory and mentoring services, and lead to the creation of 300 jobs in the Peterborough region. https://bit.ly/3f2XNOW

Knockri raises $3 million seed round to eliminate job interview bias through AI. Toronto-based Knockri, which has developed an artificial intelligence-based (AI) video recruiting tool aimed to enable fairer hiring processes, has closed $3 million in seed funding. This round brings the startup’s total funding to date to $3.4 million. The round was led by Differential Ventures, with participation from Bertelsmann Investments, Amplify Capital, and MaRS Investment Accelerator Fund. Grand Ventures, Stout Street Capital, and Green Egg also participated. https://bit.ly/39nNtjn

Toronto’s Cryptonumerics acquired by Snowflake. Toronto-based enterprise software startup Cryptonumerics has been acquired by Snowflake Inc., the California-based cloud-based data-warehousing startup that is anticipated to go public on the Nasdaq later this year. Cryptonumerics is an enterprise software company that was founded in 2018 by a group of five entrepreneurs, with the goal of ensuring that data is useful and relevant to businesses, while also ensuring consumer privacy is not compromised. In September, CryptoNumerics was named one of Canadian Innovation Exchange’s top 20 most innovative startups in the country and in March raised a $3.5 million seed round with 11.2 Capital, an early-stage VC firm based in San Francisco focused on investing in enterprise software security. https://bit.ly/3hqBlkp

Shopify inks deal with Affirm, a buy-now-pay-later financing service for credit-card users. Shopify on Wednesday said it has selected Affirm, a buy-now-pay-later (BNPL) financing service for credit-card users, to exclusively power Shop Pay Installments when it launches later this year. Terms were not disclosed. Affirm, founded by PayPal Holdings co-founder Max Levchin, has seen a 40% increase in merchant signings from March 1 to April 30, compared to the first two months of the year. Among the 6,000 merchants who use it are Walmart and Peloton. “This is one giant leap to make our service ubiquitous,” Levchin told MarketWatch in a phone interview Wednesday. “This has changed the game. The BNPL market is on a tear.” https://on.mktw.net/32PD9PM

Wattpad investigating reported massive data breach of user records. Toronto-based startup Wattpad has confirmed it is investigating a massive breach of user data, following claims made by cybersecurity intelligence firms and “credible threat actors” on online forums. Cyble, a cybersecurity intelligence firm based in Georgia, noted in a July 15 post that it detected claims of a breach in the first week of July and received information of approximately 270 million user records being sold for 10 bitcoins, or approximately $100,000 at the time. Cyble noted that the data was later being offered for free. Cyble claimed that based on assessing forum posts, the 271 million users’ records included login credentials, full names, contact numbers, and dates of birth. The cybersecurity firm noted that based on its sources and a post on an online hacking forum, it believes the breach occurred in June 2020. The firm also claims to have verified a sampling of the leaked user accounts. https://bit.ly/2WGB7xH

2020 is on track to see the fewest startup exits since 2011, which could spell trouble for the VC ecosystem. This year, VC-backed startups could see the lowest number of exits since 2011, according to Pitchbook. As the number of IPOs and acquisitions decline, startups might start pursuing alternative exits, such as acquisitions by blank-check companies. The VC ecosystem depends on company exits to reward investors and provide liquidity for employees with stock options. With fewer companies filing to go public or successfully seeking out acquisitions, the pool of capital could start to dry up. With less capital to go around, unprofitable, growth-driven startups will continue to make tough decisions about slashing costs in order to extend their runways. https://bit.ly/30GMfeT

Jamf opens IPO and shares rise as high as 92% on strong Apple enterprise demand. Anyone that works with Apple in the enterprise is familiar with Jamf. Jamf opened its IPO to become a publicly traded company under the symbol JAMF. The Jamf IPO price opened at US$26 per share with 18 million being offered for sale. It closed the day at US$39.20 after hitting a high of US$51 per share. It’s interesting timing for Jamf to go public as it comes on the heels of Apple purchasing Fleetsmith. https://bit.ly/3eUQCZ3

Amazon reportedly in talks to buy a 9.9% stake in India’s Reliance Retail. Amazon may join its global rivals Google and Facebook in backing one of Indian billionaire Mukesh Ambani’s ventures. The American e-commerce giant is in preliminary talks to acquire a 9.9% stake in Reliance Retail, local TV news channel ET Now reported Thursday afternoon, citing unnamed sources. The reported talks between Amazon and Reliance Retail comes days after Ambani, who is India’s richest man, said several firms had expressed interest in backing the retail chain. Ambani’s other venture, Reliance Jio Platforms, has secured over US$20 billion by selling 33% stake to more than a dozen investors including Facebook, Google, Silver Lake, and General Atlantic since April this year. https://tcrn.ch/30VziOL

TikTok launches US$200 million creators fund. TikTok is launching a US$200 million “Creator Fund” in the U.S. to encourage its most popular users to make careers out of posting content on the video app. The social media app owned by China’s ByteDance announced on Wednesday that the fund will “support ambitious creators who are seeking opportunities to foster a livelihood through their innovative content.” Applications will open in August for users who are at least 18 years old, meet a baseline number of followers, and consistently post original content, the company said. TikTok’s announcement to finance creators comes as the app faces threats of a ban in the U.S., opening the possibility it could get sold. https://bit.ly/39okBau

Alibaba affiliate Ant Group starts IPO process in Hong Kong and Shanghai. Fintech giant Ant Group, which operates China’s biggest digital payment service Alipay, said it has begun the discussions for a concurrent listing of its shares in both Hong Kong and Shanghai, in what is expected to be one of the world’s biggest-ever initial public offerings. Ant, an affiliate of Chinese e-commerce company Alibaba, didn’t disclose the timetable or potential size of its listing in its statement Monday. A person familiar with the IPO discussions said that the company still is in the very early stage of the process. Bankers expect the listing to value Ant at more than US$200 billion. In its 2018 fundraising round, the company was valued at US$150 billion. https://bit.ly/2CRiz6N

Chinese electric car maker Xpeng Motors raises US$500 million. Chinese electric car maker Xpeng Motors said it has secured about US$500 million in its latest fundraising from investors including Aspex, Coatue, Hillhouse Capital and Sequoia Capital China. The company didn’t disclose its valuation. Xpeng’s fundraising comes after some Chinese media outlets last month reported that the startup was considering an initial public offering this year. Investors are watching electric car startups closely as Tesla’s stock, a benchmark for the industry, has quadrupled in the past four months. Guangzhou-based Xpeng, whose existing investors include Alibaba, Xiaomi and GGV Capital, is one of China’s biggest homegrown competitors to Tesla. Investors are betting on Xpeng even though China’s electric car makers are grappling with weaker demand since the government last year cut its subsidies for consumers purchasing such vehicles. In June, China’s electric car sales declined 38% from a year earlier, according to China Association of Automobile Manufacturers. https://bit.ly/3hfgVe3

Chinese media says Didi Chuxing preparing for Hong Kong IPO. Chinese ride-hailing giant Didi Chuxing is preparing for an initial public offering in Hong Kong, Chinese media outlet Caixin reported, citing growing pressure from investors who want to cash out. A Didi spokesperson didn’t immediately respond to a request for comment. Didi, which acquired Uber’s China business in 2016, became one of the world’s most highly valued startups in 2017 when its valuation rose to US$56 billion. But in the past two years, the company, whose major investors include SoftBank, Alibaba and Tencent, has struggled to cope with tighter regulations that have limited the supply of its drivers and vehicles. Last year, The Information reported that some investors were selling Didi’s shares in the secondary market at valuations as low as US$40 billion. This year, Didi, like other ride-hailing services, has faced new challenges due to the coronavirus pandemic. The company is ramping up its effort to create a new source of growth. In the first half of this year, Didi raised money from outside investors for its autonomous driving and bike-sharing units. The company has also launched a number of new businesses including an on-demand delivery service. https://bit.ly/3hli6II

Apple held ‘preliminary’ talks with Arm about an acquisition, but not planning a bid. SoftBank is looking for opportunities to sell some or all of its Arm Holdings operations as reported last week. A new report from Bloomberg today revealed more details about this potential sale, including preliminary negotiations with Apple and Nvidia. Arm Holdings is a semiconductor company that licenses its technologies to several companies like Apple, which uses ARM architecture to build “Apple Silicon” processors for iPhone, iPad, and more. According to Bloomberg, the acquisition of Arm may be the largest in the chip industry to date. The Japanese group behind SoftBank bought Arm in 2016 for about US$32 billion, which is now part of a US$100 billion Vision Fund. Citing sources familiar with the matter, Bloomberg says SoftBank was in talks with Apple to sell Arm Holdings to the Cupertino-based company. Nearly all the chips made by Apple are based on the ARM architecture, including the A-series chip that powers the iPhone and iPad, Apple Watch SoCs, and now Apple Silicon processors that are part of the transition from Intel to ARM on the Mac. Apple gave up on bidding as owning Arm’s licensing operations could raise concerns about how the company would deal with its competitors who also depend on Arm’s technologies. Even so, Apple definitely has an interest in Arm’s future since the company has shipped more than 2 billion custom ARM chips within iOS devices in the last 13 years. https://bit.ly/39kLBI7

SoftBank’s chip company Arm said to attract Nvidia interest. Arm Ltd., the semiconductor designer owned by SoftBank Group Corp., is attracting takeover interest from graphics chipmaker Nvidia Corp., people with knowledge of the matter said. Nvidia made an approach in recent weeks about a potential deal for Cambridge, England-based Arm, according to the people. Other potential bidders could also emerge, the people said, asking not to be identified because the information is private. https://bloom.bg/3ePUBpP

Only four states plan to use Apple/Google coronavirus API; none yet in use. An analyst of the US contact tracing landscape paints a depressing picture. Not a single US state currently offers an app that uses the Apple/Google coronavirus contact tracing API — and only four states plan to do so. Others have launched GPS-based apps that raise immediate privacy concerns and are unlikely to see significant adoption, while the majority of states who responded plan to offer nothing at all. Despite Apple and Google encouraging each country to build only a single contact-tracing app, the US has developed a patchwork of apps. https://bit.ly/2ZXG72R

Increased consumer interest in May correlates with COVID-19 hot spots in June, according to the Yelp economic average. Yelp’s latest Local Economic Impact Report, published in June, showed a decrease of business closures compared to April and an increase in consumers getting back to their normal activities – such as dining in at restaurants, heading back into shopping malls and planning weddings. We’re now beginning to uncover longer term trends including a correlation between interest in restaurants, bars and nightlife, and gyms to a spike in COVID-19 cases across hotspot states. The report also measures business closure data that reflects an unstable economy; slower, but still consistent changes in consumers getting back to pre-pandemic activities; and sustained interest in supporting Black-owned businesses. https://bit.ly/2OPOmaN