Latest collection of things we (Atomico) found interesting and important in tech and VC land, but that didn’t necessarily get the attention they deserve. We think of them as our hidden little gems. We’ll add to the collection over time, so bookmark the page and keep coming back for updates or to dig into the archive.

1. 12 February 2018
1
Atomico Need-to-Know

2. This is a regularly-updated collection of things we
(@atomico) found interesting and important in tech and VC
land, but that didn’t necessarily get the attention they
deserve. We think of them as our hidden little gems. We’ll
add to the collection over time, so bookmark the page and
keep coming back for updates or to dig into the archive.
2

3. Top 3 Key Points
● Volatility is back: Volatility spiked, triggering a sell-off from volatility-linked
funds. Initial spark was report of accelerating wage growth in US, bringing
with it fears of inflation & acceleration of adjustments to a decade of loose
monetary policy. Builds on record period of declining unemployment in US,
ECB ending bond purchases, interest rate hikes in US/UK, etc. Also seen
spike in (US, 2-yr) treasury bond yields above S&P Dividend Yield -
cementing view that capital reallocations could be around the corner (e.g.
from equities back in to fixed income
● Delicate monetary & fiscal balancing act to preserve growth:
Underlying fundamentals of global economy are strong (GDP growth,
corporate earnings growth), but as fears shift to inflation, focus will shift to
reduced bond-buying & more aggressive interest rate hikes. Question now
if and when equity prices move from pricing in a so-called ‘sugar high’ to
baselining around real fundamentals of companies. Big US fiscal stimulus
is another factor that provides more uncertainty of economic response
● Potential implications for venture capital: Too early to tell, but potential
implications could include: 1) compression of private market multiples if
asset prices reset 2) increased cost of borrowing cost impact debt-financed
transactional/M&A activity as flows of capital constrict 3) reallocation of
institutional capital to higher-yielding bond market, away from alternatives
3
Making sense of February’s equity markets turmoil
Source: twitter.com/realdonaldtrump, S&P Global Market Intelligence Platform, FT, Bloomberg, WSJ
The Takeaway
$5T in value lost from global equity markets in a near 10% correction
amid a spike in volatility and increasingly divergent views on what’s
happening now and, more importantly, next. As US & global
economies strengthen, signs point to a fundamental shift in monetary
policy after a 10-year run of “ultra-loose” policies and cheap money
Points of Debate / Next Steps
● Will Trump gamble of fiscal stimulus sustain US econ growth?
● If we enter a new cycle, how will it impact VC asset class?
Trump points to paradox of falling equities despite
strengthening US economy
“In the “old days,” when good news was reported, the Stock Market
would go up. Today, when good news is reported, the Stock Market
goes down. Big mistake, and we have so much good (great) news
about the economy!”
- Donald Trump, via Twitter, 7 February 2018
Volatility reflects diverging views on what’s around the corner
What is the VIX?: The Cboe Volatility Index® (VIX)® is based on the S&P 500® Index
(SPX), the core index for U.S. equities, and estimates expected volatility by averaging
the weighted prices of SPX puts and calls over a wide range of strike prices.

4. S&P 500 + Tech: Price/Normalised EPS, last 10 years
4
Source: S&P Global Market Intelligence

5. Top 3 Key Points
● Digiceuticals work by gathering data, either by asking patients for
information or by using sensors, and provide real-time guidance. For
example, diabetes apps work with connected monitors and use the
information to manage symptoms
● For insurers, digiceuticals provide the attractive proposition of being able
to provide treatment at scale and low cost as well as the ability to acquire
data for customer acquisition & risk assessment. This has led to
investment by insurers (eg. Cigna led Omada Health’s Series C round.
Omada diabetes program is also insured under Medicare)
● While some digiceuticals are ‘medicine replacement’, some are ‘medicine
augmentation’, opening up opportunities for partnerships between
pharma and tech firms (eg. Propeller Health has partnered with GSK to
create a digital therapy for people using GSK’s asthma medications)
5
Digital therapeutics are replacing pills with your smartphone
Source:
https://www.economist.com/news/business/21736197-smartphones-are-increasingly-delivering-verifie
d-treatments-diabetes-addictions-and-adhd
https://www.technologyreview.com/s/604053/can-digital-therapeutics-be-as-good-as-drugs/
https://www.forbes.com/forbes/welcome/?toURL=https://www.forbes.com/sites/eladnatanson/2017/07
/24/digital-therapeutics-the-future-of-health-care-will-be-app-based/&refURL=https://www.google.co.u
k/&referrer=https://www.google.co.uk/
The Takeaway
Rise of ‘digital therapeutic’ app companies which enable people to improve
chronic conditions (eg. diabetes, insomnia). Unlike other sorts of digital health
apps, digiceuticals have often been tested for efficacy, approved by regulatory
agencies such as the FDA and are prescribed by a doctor
Points of Debate / Next Steps
● Will many of the leading ‘digitceuticals’ have separate hardware
elements? (eg. Omada Health’s connected scale)
● How will the prescribing and paying for these apps evolve? Will
most be covered by insurance?
● What will be the key defensive moat for these companies? (eg.
technology, data, partnerships, etc?)
“Many apps will compete to treat the same disease,
which should spark very rapid innovation—a rare
phenomenon in medicine—and perhaps even to
lower prices, a rarer one still”
- The Economist

6. 6
Source: https://www.cnbc.com/2017/12/14/bitcoin-keeps-soaring-but-big-crypto-deals-are-scarce.html
The Takeaway
M&A in this space is still small but increasingly frequent; shows
increasing interest in the space from incumbent and traditional tech
co’s, as well as crypto moving into more parts of the everyday
economy and a blurring of a definitive distinction between the old,
centralised model and new, decentralised approaches
Points of Debate / Next Steps
● Will the most successful attempts to use blockchain across
verticals come from incumbents, established tech companies,
or ‘crypto-native’ entrants?
● Most activity remains in financial services - when will see more
of the promised activity in other areas?
The Story
Target Acquiror Desc
Korbit Nexon Listed Korean games co
buys second largest
Korean exchange
Keep Key Shapeshift Large European crypto
exchange buys hardware
wallet co
TransferZero BitPesa Crypto cross-border
payments co acquires
online payments co
Kingdom Trust BitGo Crypto security co buys
asset custodian
Pacific Private Bank Bankera Crypto-based online bank
acquires private wealth
mgmt firm
Top 3 Key Points
● 2017 saw relatively little M&A in space compared to the
sizeable mkt cap of crypto. 2018 has seen number o
transactions involving blockchain companies has increased -
notably with blockchain companies both as acquirer and target
● Types of M&A include
○ Crypto buying crypto; crypto buying tech; crypto buying
financial services; tech buying crypto
● Most of the transactions have involved financial services
companies (e.g. payment companies, banks), though some
have included other tech verticals (e.g. games co buying
nexon)
"The question is, can I build it, or do I need to buy it?" … "Talent
is scarce, time to development is long, and if your board is
breathing down your neck acquisition may be the best strategy."
- Meltem Demirors, director of development for Digital
Currency Group
M&A is driving integration of crypto & non-crypto worlds

7. Top 3 Key Points
● Size doesn’t matter. Shazam last reported revenue of $56M, well below
usual threshold levels of €100M for automatic review for EC competition
probes. At levels below that, however, countries can refer a transaction for
referral. Austria did this and was joined by 6 other EU countries.
● Data assets are now a key area of investigation in competition law.
Big tech companies have made numerous data-centric acquisitions (e.g.
Google/Waze, Facebook/Instagram) that have not been subject to deep
competition reviews as they didn’t pass the revenue thresholds. But it’s
clear that there is now greater awareness that data is key to driving the
competitive dominance of large players and should factor in to analyses,
even if the revenue levels of target companies are minimal
● Europe continues to aggressively target US tech. This will be perceived
as simply the latest in a long line of attacks by European authorities to seek
to address the dominance of US tech giants. Margrethe Vestager, the
Competition Commissioners, is outspoken of the need to address this
issue.
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Margrethe Vestager walking the walk on data & competition
Source: https://www.theguardian.com/technology/2018/feb/07/apple-shazam-eu-review-purchase-music-app, http://fortune.com/2018/02/07/eu-antitrust-apple-shazam/
The Takeaway
European Commission’s decision to review Apple’s proposed $400M
acquisition of Shazam draws a new line in how M&A transactions will
be reviewed in Europe with data assets now a critical area of focus
Points of Debate / Next Steps
● How will EC set about proving adverse competition effects?
● Will Apple have to make concessions to push it through?
● Is this a new norm, and will it impact M&A volumes in Europe?
Margrethe Vestager talks the talk AND walks the walk:
“Companies need to make sure they don’t use data in a way that
stops others competing. It’s possible that…data could be an
important factor in how a merger affects competition. A company
might even buy up a rival just to get hold of its data, even though it
hasn’t yet managed to turn that data into money. We are therefore
exploring whether we need to start looking at mergers with valuable
data involved, even though the company that owns it doesn’t have a
large turnover” - Margrethe Vestager in 2016
”
EU will review Apple’s $400M acquisition of Shazam

8. In case you missed it
8
Footnotes
Companies What happened?
Canyon Bridge Capital
A Chinese-backed, California-based PE firm behind failed acquisition of Lattice Semiconductors (blocked by
CFIUS) has announced it is shifting focus from the US to Europe, where it will be focused on investing in
European tech companies. Fund sees Europe is more open and welcome to Chinese PE capital than US
JD.com
Chinese tech giant (~$65B market cap) is doubling down on Europe, where it aims to achieve ‘ubiquity’ by
2019. Opening an AI research centre in Cambridge (UK) in 2019 and investing €1B over two years to build a
logistics network in France. It will first launch its ecommerce platform and delivery services in France, then the
UK and Germany.
Uber/Waymo
Waymo and Uber have settled their dispute over Uber’s acquisition of Otto and the associated IP for self-driving
vehicles. The settlement is worth $245M, paid in shares in Uber.
Apple Apple announced it is intending to reduce its cash pile from $163B to $0.
Sequoia Capital Sequoia’s growth fund is now rumoured to hit $8B (last reported at $5-6B) and will be a global fund
Intel
Intel announced a new pair of smart glasses (Vaunt) that are the closest yet to look indistinguishable from
normal glasses. From the Verge: Vaunt is simply a system for displaying a small heads-up style display in your
peripheral vision. It can show you simple messages like directions or notifications. It works over Bluetooth with
either an Android phone or an iPhone much in the same way your smartwatch does, taking commands from an
app that runs in the background to control it.
Deliveroo
Deliveroo reported to have appointed advisors (PWC) to evaluate its strategic options and is said to be
considering an IPO (London or New York) for 2019
Softbank Vision Fund
Latest numbers disclosed by Softbank shows the SVF had deployed $27.5B as of 1 January. This excluded
$860M invested in Wag ($300M) and Auto1 ($560M). Investments are being held at fair value of $29.8B, or
1.08 MoM, driven almost entirely by the stake in NVIDIA.

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