Why regulating Google and Facebook would be wrong… and dangerous

The Economist has suggested to regulate the internet giants. The goal would be to limit their control on the data the internet economy is built on. For the good of our society, I hope politicians don’t listen.

On May 6th The Economist published an articles with the suggestive title «The world’s most valuable resource is no longer oil, but data».  The article explains an old mantra: A handful of companies – Google, Amazon, Facebook, Microsoft… – are accumulating extreme wealth by means of the data they get from the users of their products.

The novelty resides, however, in the argumentation of the article. The newspaper defends the need of limiting the hegemony of those internet giants over the data they have worked so hard to access, analyze, refine and utilize. The Economist argues that those very companies should therefore be regulated. Two possibilities are proposed:

  • The break up of the internet giants into smaller companies (mini Googles, mini Facebooks, mini Amazons etc.). Here the precedent is the break up of Standard Oil (and for us that have IT and Telecom at heart, AT&T)
  • To force those companies to open their vaults and give access to third parties to the data they have. The mirror here is the PSD2 directive in the EU. Starting in 2018, this directive will force European banks to open the bank accounts of their customers to third party payment services, in theory stimulating competition and a more efficient market for financial services.

I deeply disagree with the need of regulating or breaking up the masters of the internet economy in the ways proposed by The Economist.

First of all, I consider it immoral. The natural ambition of establishing Over The Top (OTT) companies is by definition global. As an example, the mission of Google is «to organize the world’s information and make it universally accessible and useful». Facebook has a mission with global ambitions too: «to give people the power to share and make the world more open and connected.»  Throughout the years, these companies have consistently done exactly what they have said they would do. They have executed brilliantly. Why should regulatory third parties punish them for their success? In addition, the shareholder base of those giants have relied on their vision, mission, business model and competitive advantage in order to secure the return of their investment. The Norwegian Government Pension Fund is a heavy shareholder of these companies, with the intention of securing a fair income for the elderly in the country. Why should any regulatory force put the retirements of Norwegians in jeopardy in the name of hypothetical and unproven threats?

Second, it won’t work. It never has. The breakup of AT&T is a good example. When telephony titan AT&T was split into eight different companies in 1982, regulators congratulated themselves. They chose to ignore the fundamentals of market dynamics and the economies of scale necessary to operate and upgrade telecom infrastructure. The result? A long series of re-mergers and restructuring processes has lead to the AT&T and Verizon quasi-duopoly that exists today in USA.

The futile breakup of AT&T – source: The Wall Street Journal

As Nilay Patel, a journalist of The Verge wrote:

«How many dollars of value and hours of effort have been sucked up inside these ill-fated remixes of content and infrastructure giants? How many good ideas died because these companies were spending time and money chasing these doomed integrations instead?»

In the internet economy, scale and/ or network effects are essential to win and even to survive. Search, social media, cloud, even e-commerce are natural monopolies. Political decisions cannot alter market reality. Splitting the internet giants would have the same effect as splitting AT&T: None.  The costs for society would be, on the other hand, huge.

To force Google et al to give access to their data to third parties is also an exercise in ideological blindness. We can look back in time again and see how this kind of exercise lead to severe consequences in the long run. In the 90s, European regulators forced the national telecommunication companies to open their cellular infrastructure to third parties – the so called Mobil Virtual Network Operators or MVNOs. Immediately, hundreds of new mobile companies appeared everywhere in Europe. The Chess and Teletopia of the world forced the price of mobile communications rapidly down, as the plot was designed to achieve. However, once again market realities became impossible to beat. The ruthless law of economies of scale eventually won. Today, there are hardly any relevant MVNOs left. They have gone bankrupt or have been acquired by the incumbents.

The consequences of this regulatory experiment have nonetheless been a disaster for the old continent. Lower prices forced by the artificial introduction of the MVNOs, combined with few possibilities of mergers within state borders, have exhausted the balance sheets of European telecoms. This has badly limited the investment capacity in new infrastructure. As a result, Europe has gone from having a leading telecom infrastructure in the 90s to lagging behind USA and developed Asia countries. A serious collateral casualty has been the fall of the European telco equipment manufacturers. Specially Ericsson has been brutally hit. Its credit rating has recently been cut to «junk» by Moody’s.

Which would be the consequences of allowing third parties to feast on data today owned by Google, Facebook and Amazon? How would it affect the appetite of those tech titans for investments in Artificial Intelligence and other technologies that may be key for the development of our society ?

I really hope our politicians never fall to the temptation of trading the progress of humanity for an instant and temporary ideological satisfaction.

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Snapchat – The pigs get slaughtered

The Snap IPO looked like designed for luring incautious retail investors and speculators. If it was, it definitely worked. It took only three trading days to rip them off their money.

Last Thursday we witnessed the IPO of Snap and its tremendous share price increase during the day. Snap shares ended more than 4o % up, putting the value of the company at the astonishing level of 33 bn USD.

From a rational point of view and based on the facts that we know from the company, this was nothing short than an exercise in lunacy drowning in a sea of ZIRP. Snap is indeed a company that, from the fundamentals point of view, is a gigantic operational and financial bet.

First of all, the operational model is almost designed for never earning money. The company doesn’t´t have its own data centers, making it difficult to achieve the economies of scale that Facebook, Google or even Twitter pursue. As a result, more that 100% of all revenues went to Google Cloud in 2016.

Secondly, the company faces stiff competition from, at least, Instagram, owned by Facebook. Since the launch of Instagram Stories, the growth of the Snapchat app has indeed come almost to a halt.

Taking these two factors into account only (there are more), it is not strange at all that the company lost 514 million USD in 2016. Even worse: The more the company has achieved in revenues, the more money it has been capable of losing. Completing the surrealistic joke of what an IPO should be, we can read a statement in the IPO filings explaining that the company “may never achieve or maintain profitability”.

As I explained in a comment published by the Norwegian financial news site E24.no, there could be three reasons for this bizarre market behavior.

  • The market was expecting the Average Revenue per User (or ARPU) to explode somehow. A true exercise in faith.
  • The current ultra-low interest rates environment is still luring investors into taking irrational risks.
  • Institutional and big investors were selling their shares acquired at IPO price to less informed retail investors, desperate for owning the stock. This was of course the most cynical hypothesis. However, we should take into account that the new shareholders will not have voting rights, which is difficult to accept or any institutional or long-term investor. This IPO seemed indeed designed for misinformed retail investors and speculators.

The hypothesis in my comment was that if the cause of this irrational first trading day was the latter, we should see an abrupt fall of the share price in a matter of days or weeks.

It has taken 96 hours.

Today Snap Inc. erased all the gains from the IPO opening. And as the analytics of the online brokerage platform Robinhood confirm, the median age among Snap buyers at the IPO on Thursday was 26, hardly a group of seasoned investors capable of assessing the high risk of a complicated case like Snap.

Snap gave up all post IPO gains on Monday

The fact is that, once again, hype seems to have chosen to ignore fundamentals, and the retail investors have paid the price of their naiveté and recklessness. As Gordon Gecko said: “Bulls make money, bears make money. Pigs? They get slaughtered.”

Expect a bumpy ride for Snap shareholders in the future. The share price may go up and down like a yo-yo based on rumors and promises of new products and new growth, even if the company eventually becomes profitable. Investors may end up praying for an acquisition, like Twitter already has tried and failed.

This course of events may also have profound implications for other mass-losses Unicorns like Uber or Spotify. They have been waiting for their own pig-slaughtering IPO and may not try it now. It will definitely complicate their financials and/ or growth ambitions and thus their value as private companies.

With a FED rate rise coming soon, we may soon learn what Unicorn blood looks like.

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Which is your competitive advantage? (II)

There are six types of competitive advantage. Previously I have focused on proprietary technologies, access to resources and switching cost. This post covers economies of scale, economies of scope and regulatory influence.

In the previous post on this subject I explained how the term «competitive advantage» has been diluted in many ways both by entrepreneurs and by innovation teams at established corporations. I listed the six types of competitive advantage I have both studied and worked with in practice.

The six types of competitive advantage that I assess in front of a new or established venture are: Proprietary technology, privileged access to resources, switching cost, economies of scale, economies of scope and regulatory influence.

In the previous post I described the first three of these advantages. In this post I will describe how the last three can protect or grow your business.

Economies of scale: This type of competitive advantage is created when the players in the industry only can achieve profit after passing considerably high production volumes. However, when production volumes grow beyond a critical volume, the profits per unit sold increase dramatically, often exponentially. Indeed, the massive scale and installed base that some players in certain  industries enjoy have given them an advantage that goes beyond production: It spills over to marketing, distribution, purchasing power vs. suppliers, R&I etc. This not only applies to physical product like mobile phones, digital cameras or, maybe the best example, mainstream automobiles. It also applies merciless to retail (like Walmart), consumer goods, telecom operators and pure internet players. Telecom operators are indeed absolutely dependent on achieving a massive critical number of customers in order to deliver a profit out of ever cheaper communication prices. On the other hand, internet-heroes like Spotify and Uber are still bleeding money. Why? Among other factors, because they still haven’t achieved big enough international scale and number of paying customers to cover their investments and operations. Economies of scale are an extremely powerful entry barrier against newcomers and they are specially effective when the company pursuits a strategy of organic innovation.

The race for economies of scale: Only 10 companies control almost all consumer goods in the world. Most of them have dominated their markets for over 100 years.  Source: convergencealimentaire.info

However, companies making use of or planning to achieve this kind of competitive advantage must be wary.

First of all, it is extremely capital-intensive and can make the corporation very vulnerable to macroeconomic downturns, when sales may diminish dramatically. Those are the typical occasions when a wave of consolidation usually reduce the number of players even more and make them even more dominating. After the financial crises in 2008, the few «too big to fail» banks have become even fewer and even bigger.

Secondly, economies of scale imply a large balance sheet and massive investments and installed base. They usually imply rigid processes and business models. Therefore, a disrupting technology or a new player exhibiting a more nimble and effective business model can rapidly destroy them. The tragedy of Nokia or the struggles of Walmart against Amazon are good examples of this. A company or startup pursuing economies of scale should make sure that either their operations and business model are resilient to technological changes or dare to lead them. 

Economies of scope arise when the value of the products and services it sells increases in function of the number of business that the firm operates in. It is often associated to the same companies that make use of economies of scale. The main economies of scope are operational and financial.

Operational: This is the case when different business units of the same company share activities  -like R&I – or when the competencies from a particular business unit can be transferred to another. For instance, a single sales force can be used by the parent company to sell several brands to the same client. The same sale agents can «bundle» products and services together and achieve status of «single point of contact» for the customers, thus reducing their search and transaction costs. Telecom companies have done this for decades, combining TV, telephony and data access as an integrated offer to their customers.

Financial: This type of economy of scope arise when capital can be allocated among business units across the  company for the purpose of financial or taxation efficiency (read «pay less taxes»). Some companies buy other firms in financial distress in order to profit from tax reductions due to the accumulated losses of the acquisition target. When I worked as an Investment manager at Telenor New Business, it happened that entrepreneurs with failed startups came to us  with the purpose of being acquired. Their argument towards Telenor was precisely their accumulated losses and the tax efficiency that those could mean for Telenor.

In my opinion, Facebook has mastered economies of scope like few other technology companies have. The social giant has  seemingly done everything right. It has several services – messenger, Facebook, whatApp, instagram etc. Their users flow from one service to another thanks to the fact that those services are de facto «bundled», consuming advertising in the process. At the same time, the core operations infrastructure (sales, servers, data rooms, analytics…) is common for all of those services.

Is your new corporate venture capable of creating economies of scope? How could the new services be bundled with current ones? Will other business units acknowledge the value increase that the new venture represents for them or will they just ignore it and kill it in silence? Which incentives will you use in order to avoid such fate? 

Regulatory influence (or lobbying): Technology giants like Google, Microsoft and Apple dedicate huge amounts of money to lobby for their own interests vs. regulatory agencies. Telecom operators have lobbied (and still do) protecting their interests through organizations like ETNO (European Telecommunications Network Operators). Microsoft fought many years against making office documents compatible across productivity programs. Each fiscal year that compatibility was avoided,  the shareholders of Microsoft were rewarded with billions from the MS Office cash cow. The dominant manufacturers of electromechanical contactors  have avoided the introduction of cheaper, electronic ones in Europe thanks to their influence on European standards.

Is your company present in the right lobbying organizations? If you are a startup or small entreprise, are your much bigger partners doing it? What are those partners lobbying for? Are you at least following the standards and regulatory frameworks that may transform your competitive landscape?

Even in these turbulent times, it is possible to develop and sustain a competitive advantage. Both Google and Amazon  are over 20 years old already. Microsoft is over 40 years old. Toyota is over 80 years old and has consistently been a dominant player in the automotive industry. The Norwegian painting producer Jotun is 90 years old and enjoys healthy growth. All these companies have built and maintained competitive advantages that have secured their dominance for several decades

Either you are an established company, a new venture inside a parent corporation or a startup, to chose a competitive advantage is crucial. In a world subject to permanent changes, it is the responsibility of the management to develop the right resources and skills to build, change, and defend them.

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Which is your competitive advantage? (I)

Which competitive advantage is your business built on? Do you have one at all? There are only six types of competitive advantage. Decide which one will be yours and you can dominate your market.

In most of cases, when a startup or an innovation team at an stablished company present a new venture, they will be asked a crucial question: «Where is your competitive advantage?» The answers may not always be neither clear or specially convincing. The term «competitive advantage» is used and abused by entrepreneurs at startups when defending their business idea in front of investors on a daily basis. The same can be said about innovation teams at established companies.

In fact, there are only six types of competitive advantage that I judge credible beyond deciding whether a company should build on differentiation, cost leadership or focus. It is crucial for innovators to precisely identify which of those they are intending to create in order to build a lasting business.

The six types of competitive advantage that I assess in front of a new or established venture are:  Proprietary technology, privileged access to resources, switching cost, economies of scale, economies of scope and regulatory influence.

This post will cover the first three. The next and final three types are covered in this post.

Proprietary technology: A company or startup that has developed a superior proprietary technology can enjoy market dominance for a long time. Google is an excellent example of this. When Google appeared, its proprietary PageRank algorithm was vastly superior to any of the competitors in the market. From Altavista to the Norwegian player Sesam, all competitors had to surrender eventually. Today, Google has 90% of the desktop internet search market. On another level, today we see a frenetic race among technology giants like Apple or Amazon in order to acquire much smaller companies with superior products within Artificial Intelligence. Their purpose is of course to secure the best possible AI technology to embed in their current and future offerings. Is your new product or service backed by a superior technology vs. your competitors, and how long do you think that superiority can last? Based on what? If not, which technology should you develop or acquire?

Privileged access to resources: When some resources are scarce and/ or vital for an industry, the player that controls them enjoys a tremendous and lasting advantage. A resource can be physical assets (like raw materials or factories), intellectual (like customer data), human or financial. A key resource to examine in detail is distribution, physical or virtual. For instance, the IBM personal computer was not necessarily the best of its breed when it first was launched. However, the most attractive market for PCs was the enterprise market and IBM had a total dominance in it through its sales channel. The rest is history. Another critical resource is customer base. A dominant customer base makes the company a much attractive player for partnerships and acquisitions because of market access. When it comes to social media, the customer base, measured in MAUs (Monthly Active Unsers) or DAUs (Daily Active Unsers), is one of the most significant drivers of the enterprise value.  Which are the resources that your enterprise controls? Are they relevant enough to secure a durable competitive advantage? Are they valuable, rare and/ or difficult to imitate? 

Switching cost: It refers to the cost a current customer or user incurs when trying to replace your product with another one from a competitor. It is probably one of the most powerful competitive advantages, specially when it comes to platform-based businesses. It is very difficult for a business customer that has invested significant amounts of money and resources in a given platform to abandon it. There are not only financial reasons behind this. Installed systems talk to each other thanks to previous integrations between them that are difficult to remove or suspend because they may be business critical. Banks have suffered under this reality for decades. In some cases, they only decide to revisit their IT systems (and thus their vendors) when the employees in charge of maintaining them retire or simply die. Switching cost is also essentially what makes Facebook so difficult to defeat: For a user, to move into another similar social medial platform implies the cost of building up a new «friends» base without any guarantees that his or her friends will do the same. The Google+ debacle is a powerful reminder of how resilient switching cost may be, even for the giant of Mountain View. Is your product or service built around a switching cost? How can you quantify that switching cost? Is it greater than the one from your competitors? 

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Den dyreste feilen en gründer kan gjøre

For en gründer kan en ny medeier bety en ny vekstfase og inngangsbilletten til rikdom. Det kan også bety en ufortjent og brå slutt på drømmen.

Alle som er eller har vært gründer vet hvor krevende den oppgaven er. Hverdagen består for det meste av en berg-og-dal-bane. Håp om å kapre en kunde utløser bølger av entusiasme, som fort kan gi etter for nok en skuffelse når håpet ikke krystalliseres.

Noen gründere får imidlertid mulighet til å lykkes! De kaprer noen gode kunder og setter kurs mot suksess, kanskje til og med internasjonalt. Plutselig trenges det mer kapital til veksten i neste fase og man forstår at man har behov for en ny medeier utover de som hittil har hjulpet på veien. Man står da overfor to valg: Denne nye medeieren kan være enten en industriell investor, eller en ren finansiell investor.

En industriell investor vil typisk tilføre verdi ved å distribuere gründerbedriftens produkter til en mye større kundemasse gjennom egne kanaler, gjerne på eksklusivt grunnlag. En finansiell investor vil derimot maksimere den finansielle verdien av selskapet og sikter mot en kortsiktig men substansiell gevinst. Begge scenarier virker på overflaten nesten uimotståelige i sin logikk.

Likevel er det akkurat i salgets øyeblikk at en gründer kan begå sitt livs største tabbe. Hennes signatur i kontrakten kan overføre mye større verdier til den nye medeieren enn avtalen mellom partene kan gi inntrykk av. Hvordan er det mulig?

Svaret ligger i selve mekanismen de nye medeierne er nødt til å følge for å eksekvere deres egen forretningsmodell. Disse mekanismene er svært ulike avhengig av hvilken type investor som har kjøpt seg inn i selskapet, industriell eller finansiell. En gründer i denne situasjonen bør forstå disse mekanismene godt og være på vakt i forhandlingsprosessen.

En industriell medeier vil alltid prøve å maksimere kontantstrømmen fra kjernevirksomheten til sine egne aksjonærer. Følgelig vil denne typen eier prøve å redusere andelen av overskuddet til de resterende medeierne i gründerbedriften ned til null og kapre all verdiskapning. Ved første øyekast kan dette virke umulig. Fordelingen av overskuddet skal jo skje etter aksjefordelingen i selskapet, ikke sant?

Sannheten er at en industriell medeier kan enkelt ta all verdien fra gründerbedriften, selv med en liten minoritetspost. Som den eksklusive  eller desidert viktigste distribusjonskanalen for produktet kan faktisk den nye medeieren tvinge innkjøpsprisene fra gründerbedriften ned til et nivå som gjør overskuddet nesten umulig. Disse lave innkjøpsprisene øker derimot profitten til aksjonærene i den distribuerende virksomheten. I praksis kan den nye industrielle eieren gjøre gründerbedriften dermed verdiløs for de resterende aksjonærene.

I en sånn situasjon kan gründeren ikke engang prøve å selge sin andel i selskapet til noen andre: Bedriften vil aldri levere overskudd og er dermed helt uinteressant som investeringsobjekt. Gründeren kan kanskje ikke engang forlate bedriften fordi hun har signert en langvarig bindende arbeidskontrakt knyttet til delsalget «for å sikre kontinuiteten av kompetansen i bedriften». I så fall er tragedien komplett.

En finansiell investor har andre mekanismer til disposisjon for å kapre mesteparten av profitten ved et eventuelt salg eller til og med børsnotering av gründerbedriften. Noen av de aller farligste for suksessfulle gründerne er de såkalte «ratchets» og de såkalte «liquidation preferences».

Ratches er tenkt i tilfelle prisen til selskapet faller ved en senere investeringsrunde eller en børsnotering. Investorene som er beskyttet av en «ratchet» får tildelt et nytt antall aksjer i selskapet tilsvarende prisfallet. I praksis betyr det at disse investorene får beholde verdien av sin investering i selskapet på bekostning av de resterende aksjonærene som ser sin aksjepost utvannet. Effekten av denne mekanismen kan være dramatisk for gründeren, som er den første aksjonæren i selskapet og dermed kan ha sett sin aksjepost sterkt utvannet i løpet av flere tidligere investeringsrunder.

Potensielt er Liquidation Preferences enda mer skadelige. Investorene beskyttet under denne ordningen blir garantert en viss avkasting på investeringen, typisk ved en børsnotering. Den garanterte avkastingen kan være så stor som to eller tre ganger deres opprinnelige investering. Disse investorene blir i tillegg betalt først, også foran gründerne. Ved en exit eller børsnotering som ikke klarer å levere så enorme avkastinger vil dermed investorene med liquidation preferences tilegne seg en mye større verdi enn deres andel i selskapet skulle tilsi.

Du kan lese flere tips til gründere som vurderer salg av virksomheten sin i posten: «Salvador, jeg håper at Telenor kjøper oss».

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«Salvador, jeg håper at Telenor kjøper oss»

Jeg utviklet en viktig del av min karriere innen innovasjon og forretningsutvikling som Investment Manager i Telenor New Business. Denne enheten i Telenor hadde som mandat å utvikle nye forretningsområder for telekomgiganten over hele verden. Som en del av vårt mandat måtte vi i mange tilfeller kjøpe en mindre aktør med «best of breed» teknologi for å kunne utvikle de tjenestene som vi skulle lansere.

Ved en av disse anledningene var vi i seriøse forhandlinger med en plattform-leverandør. Deres CEO og jeg ble alene etter et møte. Så sa han rett ut: «Salvador, jeg håper virkelig at Telenor kjøper oss». Deretter kom en hjerteskjærende historie om hvor tøft livet som gründer var og om hvor vanskelig det var å vokse utover en viss omsetning.

Mange gründere oppfatter et oppkjøp som et lys i tunnelen etter mange harde år. Problemet er at de fleste oppkjøpene enten blir kansellert underveis eller ender opp med at den nye eieren mister interessen. Gründerselskapet blir glemt i corporate-limbo, sammen med bonusen selgerne ble lovet da oppkjøpet ble formalisert.

Disse er de vanligste fellene en gründer bør unngå ved et oppkjøp. 

  • Motparten har verken budsjett eller myndighet. Dette er veldig typisk i større konserner, der en haug med ansatte kan vise til en direktørstilling uten reell kapasitet til å eksekvere en forhandling. Alle titler under «Executive Vice President» (altså de som rapporterer direkte til konsernsjefen) må ansees prinsipielt som lite troverdige. En gründer må spørre motparten om det er han eller hun som kommer til å signere oppkjøpskontrakten. Hvis ikke, hvem er vedkommende og hvorfor er han eller hun  ikke i samme møte? Svarene vil avsløre om prosessen er seriøs eller om det bare dreier seg om ønsketenking fra noen forretningsutviklere.
  • Det finnes ingen strategisk match. Store bedrifter som satser reelt og profesjonelt på innovasjon har identifisert det som kalles «Fokusområder». Innovasjonsavdelingen har dermed mandat til å utvikle selskapet videre innenfor disse områdene. Gründere bør spørre innen hvilket fokusområde oppkjøpet (eller prosjektet) er klassifisert. Dersom svaret er vagt eller er «andre satsinger», bør gründeren stille spørsmål rundt hvem som er «Champion» for prosessen. Alle andre champions enn en Executive Vice President er nesten en garanti for kansellering av oppkjøpet underveis. Hadde et partnerskap vært en bedre løsning?
  • Det finnes ingen klare planer for skalering. Noen ganger blir selskaper kjøpt opp som en del av en lukket prosess i en viss avdeling. Målet kan være å eventuelt videreføre forretningskonseptet over til en annen avdeling eller forretningsenhet (Business Unit). Dette kan fort bli siste stopp og kirkegården for prosjektet og det nylig kjøpte selskapet. Gründeren bør alltid spørre hva slags planer kjøperen har for skalering av selskapet etter oppkjøpet og hvordan en eventuell overgang til andre deler i konsernet (mottaksapparatet) er planlagt. Det er dessuten livsviktig å vite om de ansatte i mottaksapparatet allerede har et konkurrerende produkt. Hvis selgerne i mottaksapparatet blir målt og insentivert på det gamle produktet men ikke det nye, blir det «game over» allerede fra øyeblikket selskapet blir kjøpt opp.
  • Kjøperen har en historikk full med hyppige omorganiseringer. En kjøper som er i kontinuerlig forandring bare kan bety to ting: Enten har selskapet ingen klar strategi eller det befinner seg i en horribel konkurranseutsatt industri som krever kontinuerlige nedskjæringer. Ingen av disse scenarioene er godt grunnlag for oppkjøp.
  • Aldri glem å gjennomføre en egen Due Diligence. Det er vanlig at en kjøper gjennomfører en såkalt Due Diligence, der kjøperen går oppkjøpsobjektet i sømmene med målet å finne feil eller uforventede elementer i områder som teknologi, finansielle tall, kontrakter osv. Som gründer må man også være på vakt og gjøre leksene, selv om det blir gjort med offentlig informasjon (proff.no), google eller ved å snakke med tidligere ansatte. Hva slags kultur har kjøperen? Hvordan har det gått med tidligere oppkjøp? Hvilken erfaring har kunder og leverandører med selskapet? Hva oppfattes som sterke og svake sider?
  • Vær veldig skeptisk overfor prestasjons-baserte kompensasjonsskjemaer. I prinsipp høres det logisk ut at kjøperen vil sikre at ledelsen i oppkjøpsobjektet presterer også etter transaksjonen er gjennomført. Dessverre glemmer i mange tilfeller kjøperen og selgeren at alle innovasjons- og vekstprosjekter innebærer et sterkt komponent av uvisshet om fremtiden. Investeringer som man regnet med for å videreutvikle oppkjøpsobjektet kan bli plutselig stoppet av styret. Flotte markedsundersøkelser kan vise seg å være verdiløse. Bare å tilpasse seg til oppkjøperens legacy IT plattformer kan bety en tidssluk for begge parter. Det er essensielt at gründeren insisterer på at kompensasjonen i kontrakten blir så enkel som mulig.

Å være gründer er tøft. Å selge livsverket til et større selskap kan bety et nytt og bedre liv. Ved å passe seg for disse fellene kan en potensiell transaksjon ha en mye bedre sjanse til å lykkes… eller stoppes før det er altfor sent.

Interessant? Del gjerne!

Blodig oppgjør på teknologifronten

Spillereglene i internettøkonomien har endret seg. Snart vil vi se hvilke norske teknologiselskaper som har hatt en strategisk orientert ledelse med ekte forretningsforståelse og hvilke som har lurt sine investorer inni i en blindvei. 

Dette innlegget ble publisert først i E24.no.

Mandag 8. august kunngjorde Walmart oppkjøpet av Amazon-rivalen jet.com for 3,3 milliarder dollar. Dette er uten tvil en bemerkelsesverdig hendelse. Likevel viser det seg at denne transaksjonen bare er toppen av isfjellet. Dynamikken rundt internettøkonomien fortsetter nemlig med uforminsket styrke. Aktører fra alle vertikaler innen teknologi, fra telekom til mikroprosessorprodusenter, har de siste ukene vært involvert i en nådeløs kamp for posisjon og verdier.

Likevel kan ikke denne transaksjonsbølgen komme som en overraskelse for informerte investorer. I vår kommentar ”Dette kan riste internettøkonomien i 2016” konkluderte vi med at tre hovedfaktorer var i ferd med å skape den perfekte stormen for teknologiselskaper. Det er disse faktorene som er ansvarlige for oppkjøpsbølgen vi vitner nå.

Den første faktoren vi nevnte var at avviklingen av den ekspansive pengepolitikken i USA ville føre til en bølge av oppkjøp og konkurser i teknologisektoren. Vi begynner å se hvordan innstrammingen i pengepolitikken i USA utøver sin nådeløse påvirkning. Overprisede teknologiselskaper finner det stadig vanskeligere å overtale investorer til å finansiere nye vekstrunder, spesielt hvis de ikke kan vise til sorte tall i regnskapet. De har dermed blitt lett bytte for konservative selskaper med sunne balanser og/ eller tillit fra investorene. Giganter som Verizon, Walmart og Softbank ser i disse oppkjøpene muligheten til å skaffe seg posisjon og kunder i internettøkonomien for en relativt billig penge.

Vi nevnte også de enorme regulatoriske og markedsmessige utfordringene som vestlige -amerikanske- internettgiganter ville møte i Kina og India. Allmektige Uber har nå smakt på denne realiteten, og har sett seg nødt til å dra tilbake hjem med halen mellom beina. Flere vil sannsynligvis oppleve samme skjebne.

Endelig varslet vi at globale økosystemer som Facebook, Apple og Google er i ferd med å kontrollere reklamemengden, plasseringene og prisene på bekostning av tradisjonelle medieaktører. Mediegiganten Time Warner har skjønt alvoret og har kjøpt Hulu for å ruste seg opp til desperat krig mot disse økosystemene.

Maktbalansen har endret seg. Nye helter i internettøkonomien begynner å nå grensen for sin egen ufeilbarlighet og er i ferd med å gå tomme for ressurser. Globale økosystemer og etablerte giganter fra den ”gamle økonomien” bruker derimot deres sterke finansielle posisjon til å kjøpe opp kun de mest attraktive av dem og gradvis øke kontrollen over internett. Maktkonsentrasjonen i internettøkonomien blir stadig større.

En ny makroøkonomisk faktor vil dessuten gjøre denne trenden enda mer tydelig og brutal. Sentralbankene i EU, Japan og England har startet hver sitt program for kjøp av selskapsobligasjoner med topp kredittvurdering. Massive pengestrømmer vil dermed havne hos selskaper innen telekom, energi, og andre finansielt solide bransjer. Det vil gjøre disse aktørene enda bedre rustet for kampen om internettdominans.

Dette har konsekvenser for Norge også. Ureflekterte nordiske og norske investorer, IT-bedrifter og gründere har lenge trodd at å kopiere Silicon Valley sin formel basert på vekst til enhver pris var en garanti for suksess. De valgte å ignorere det makroøkonomiske og markedsmessige bakgrunnsteppet som gjorde det mulig. Disse vil snart våkne til en ny nådeløs hverdag.

Snart vil vi se hvilke av de norske selskapene i internettøkonomien som har hatt en strategisk orientert ledelse med ekte forretningsforståelse og hvilke som har lurt sine investorer inni i en blindvei. Aktører som bevisst har bygget opp markedsmessige og teknologiske konkurransefortrinn og med finansene i orden vil kunne kreve en premiumpris på vegne av sine investorer i en oppkjøpssituasjon. Teknologiselskaper som derimot har underestimert verdien av en solid forretningsstrategi og overvurdert betydningen av sitt produkt, som gjerne har gitt bort gratis, kan fort bli ti en aksjonærfelle.

De bør vurdere å selge så fort som mulig. Mulighetsvinduet er sannsynligvis i ferd med å lukkes for dem.

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