Spotify has a $1 Billion Spotty Debt Deal

Spotify Raises $1 Billion in Debt

Spotify, the music streaming unicorn, is adding more cash to its war-chest to go up against Apple Music and Soundcloud in the form of a whopping $1 billion in convertible debt. Private equity firm TPG, hedge fund Dragoneer Investment Group, as well as clients of Goldman Sachs participated in the funding, which is reported by the WSJ. This money is greatly need as the startup continues to take the model of rapid growth over becoming profitable, that Uber made oh so famous. As of now Spotify has around 30 million paying subscribers to their premium service out of 100 million users, but has seen its competition grown from the likes of Apple’s music streaming service, which launched last summer and has more than 11 million paying subscribers, as well as from the audio platform SoundCloud which announced this week that they will soon have their own on-demand music subscription services.

Convertible Debt?

So before we get into explaining why Spotify decide to raise debt instead of equity we must first understand what kind of debt Spotify is raising. Convertible debt are bonds that can be exchanged for stock, but wait Spotify doesn’t really have stocks in the sense of a public company type stock does it? Well this was part of the agreement between Spotify and its lenders. Spotify is apparently telling its investors that it plans on going public in the next two years, and this deal between Spotify and its debt lenders come with the guarantee that this debt can be converted to equity as 20% discount to the share price of its IPO, and after that year, that discount increases by 2.5 percentage points every six months. Adding to that Spotify is also agreeing to pay annual interest on the debt starting at 5%, increasing 1% every six months until the company goes public or until it hits the cap of 10%.

So why Debt over Equity?

While there can be various reasons on why Spotify decides to take the debt route, one of the main reasons might be the fact that the company just can’t find funding that would top its previous valuation of $8.53 billion. By taking on debt Spotify can avoid a down-round, which means raising at a valuation lower than the previous. By avoiding a down- round Spotify can keep its place holder on its huge valuation in the midst of talks of a tech-bubble, and a volatile market. Preventing a down-round also keeps employee morale high, because no employee in public or private markets wants to hear that the value of their companies’ stock has dropped.

Final Thoughts

As Spotify gears up for an IPO it will face immense pressure from its investors to try and become profitable, as well as try to keep its valuation, in a public market. While many people in the private markets might be indifferent to its sky high valuation the public markets are not as friendly, as seen in the IPO of Square and Box. Good luck Spotify I hope you can figure out a way for me and 80 million other users to pay for your premium services, while you do that I’ll still listen to the next 30 minutes of uninterrupted music after listening to some words from your sponsors.

Around the world in 3 hours in 24 minutes

Boom Technology

A Denver startup called Boom Technology plans to bring supersonic passenger travel back, and to bring it to the masses. Boom unveil its design for a 40-seat plane that can fly 1,451 mph, that’s over twice the speed of sound. At that speed, a New York-to-London flight would take about 3 hours and 24 minutes. Blake Scholl, Boom’s founder and chief executive officer, says round-trip tickets will cost $5,000. “The idea is for a plane that goes faster than any other passenger plane built before, but for the same price as business class,” he says.

 Boom plans on testing their first planes by the end of 2017, and the reason they can test them so fast is because while several other companies, including Boeing and Lockheed Martin, are developing new supersonic jets, Boom’s planes do not require any new technology that would need approval by regulators, Booms team of experienced aerospace engineers will design the planes in a way that makes them meet the goals the company sets out the meet.

Boom has a prominent list of aerospace employees, hailing from the likes of NASA, Lockheed Martin, Boeing, as well as being backed by some of Silicon Valley elites from Y- Combinator, Sam Altman, Seraph Group, 8VC, as well as finishing up deals for the option to buy their planes from Virgin Group (Richard Branson) in a deal valued at $2 billion dollars, and also from an European carrier that declined to be named in a deal valued at $3 billion. While this does not mean that Virgin nor the European carrier bought the plane, it means that they signed a letter of intent in which stating that they intend to buy the planes if everything comes together as planned.

It also seems that Virgin Galactic’s space division is assisting in building and testing the planes, as a Virgin Group spokeswoman confirmed to The Guardian:

“We can confirm that The Spaceship Company will provide engineering, design, and manufacturing services, flight tests and operations and that we have an option on the first 10 airframes. It is still early days and just the start of what you’ll hear about our shared ambitions and efforts”

While they are still in the building and test phase, as a startup it is refreshing that we might be soon getting a product that’s not an app the deletes your pictures after a few seconds, or another new social network, but one that will provide an actual change in our lifestyles and world.

Juno who? Snapchat buys what? Racist AI? Weird Week in Tech

There Is a New Player in Town and its Name is Juno.

Juno the month old, New York-based ride-sharing service is seeking around $30 million in round funding, seeking a “high” valuation. Its CEO Talmon Marco seems to be intent on taking down the all-powerful ride-sharing company Uber. Considering that he sold his last company, Viber for $900 million, it seems like he might just well be able to.

According to Marco he has a wait-list 6 months long full of eager drivers with 4.7-5 star rankings from Uber and Lyft waiting to join his team. Juno also states that it will only take a 10% cut from its driver compare to Uber which takes around 20%. It seems like Juno is trying to be the go to company for all the mad and angry drivers who felt abused by Uber/Lyft.

Snapchat is paying $100 million for an emoji startup

Snapchat has apparently bought Bitstrips, a company that makes personalized emojis. That’s right a 4 year old startup is buying another startup that’s 5 years older than it. Bitstrips started off as a way to make personalized comics, but slowly pivoted to making avatars/emojis that can look eerie similar to the users that create them. There is no mention on what Snapchat is going to do with Bitstrips, but I assume it is going to advance its felts and texts.

Racist AI

You might have heard of Microsoft’s new AI chat bot, hat was short lived, and taken down because of the incredibly racist message it responded to questions over twitter. Microsoft introduced “Tay” on Wednesday, as a bot that responds to users’ questions, and respond in a casual pattern similar to a stereotypical millennial. The aim was to “experiment with and conduct research on conversational understand.” But because of the internet Tay was quickly persuaded to use racial slurs, defending white-supremacist propaganda, and even called out for genocide. As a one highly publicized mentioned “bush did 9/11 and Hitler would have done a better job than the monkey we have now. donald trump is the only hope we've got." In another, responding to a question, she said, "ricky gervais learned totalitarianism from adolf hitler, the inventor of atheism.” Microsoft has now taken Tay offline for some upgrades and deleted many of its terrible tweets. Gives you a perspective doesn’t it? Microsoft wanted to create an AI that mimics the way people speak and act, and in less than 24 hours it becomes like this, what does that say about us as humans?

Apple just announced its new iPhone! So lets talk about Food.....

Obligatory Mention

Because as a tech editor I have to write about Apple right? So in its keynote address, Apple just announced its new software update, an Apple watch price cut and, wait for it, a new iPhone. Surprised? No? As an Apple fan this year just feels a little off and different from the rock party like of previous Apple keynotes I don’t anyone else feels that way?

So here is everything Apple announced that’s news worthy

The base model of Apple Watch which was previously $349; it’s now $299. This might be good news, as it seems that the original announcement of the watch last year brought in less than stellar revenue or hype they expected, so they are hoping to bring in more price consciousness consumers with this price drop.

Here it is the iPhone SE, with months of rumors about a smaller iPhone many expected this, nothing really special this time from the iPhone, except that the 16GB model will go for $399, which is the cheapest priced an iPhone has ever launched at.

IOS 9.3 brings in Night Shift: which change your device’s display from blue to orange in the evening, the reason Apple did this? Because studies suggested that helps you sleep better (I volunteer as tribute! Going to stare at my screen all night.)

Now that that is over… let’s talk food!

Research firm CBinsights announced that food technology startups had a huge uptick in deals and raised nearly $1.25B in those deals in the last quarter of the 2015. So I will name a few startups that is leading the food revolution.

Hampton Creek

While their headquarters is neither in the Hamptons nor near creek, 35 year old CEO Josh Tetrick is leading the charge on changing how we eat with his start up. Hampton Creek wants consumers to introduce egg alternatives in our foods, with their first product Just Mayo proving their point. Just Mayo gets their mayonnaise like flavor from a specific variety of yellow field peas and apparently consumers can’t tell the difference from Just Mayo and egg made mayonnaise. Fighting through lawsuits from Unliver ( owner of ayonassie brands Hellman’s), Hampton Creek is unfazed and is looking to bring more than 43 new products in the following months, with products including salad dressings, pancakes, muffins, brownies, cookies, cakes, Hampton Creek is hoping the world becomes a healthier place, and give chickens a rest from their daily laying of eggs.

Soylent

Charging $34 for 12 bottles, Soylent is introducing a meal replacement for those in a rush, and just don’t have time to make or wait in line for a meal. Soylent 2.0 is a drink that many describe as leftover cereal water that provides all the required nutrients for consumer, without the hassle. Don’t believe it works? Well just google “What happened when I Went 30 days without Food” and be amazed folks. Who needs food when you have Soylent?

Go Cubes

This one does not have as much press as the others and I am a bit surprised, with Americans consuming 400 million cups of coffee per day, this beats the waiting in line, burning your tongue goodness that is coffee. Go Cube is a gummy cube that is actually made out of coffee. Each cube gives 50mg dose of caffeine which is basically half a cup, so you would need 2 to start the day, and because it is made of coffee it will give you the same kick and jitters as coffee does.

HUNGRY HUNGRY FUTURE

What a time to be alive! As a tech and startup enthusiast I’m simply amazed by what the future holds for us. So ladies and gentlemen, wake up, go chew some coffee, go drink a Soylent, and smear that sandwich with some Just Mayo, while staring at your newly attained smaller iPhone, and stay hungry!

$9 for a movie ticket isn’t cool. You know what is cool? $50

He’s Back

Sean Parker the quote on quote “bad boy of Silicon Valley” is back with his new start up, cleverly named Screening Room, which is planning to make movies in theaters available for home viewing, according to a report by Variety.

How does it work?

The start-up plans to allow customers to view movies from home even if the movie is currently in theaters. Brilliant idea right? Why dress up and go to movies when you can stay home and just stream the movies in the comfort of their house. 

Screening Room plans on charging $150 for access to the set-top box that transmits the movie and then charge $50 per view for the movie. Consumers will have a 48 hour time limit to view the movie they selected and would even get hard copy tickets to view the movie at a theater of their choice. The set-top box is to prevent pirating of the movies.

All the participating distributors would get a cut of the $50 charge which is believe to be 20% while exhibitors would get $20 of the fee, finally leaving Screening Room to take its own fee of 10%.

For or Against?

There are many sides for and against Parker’s startup the more well-known directors who support the model are Peter Jackson, J.J. Abrams, Ron Howard, Steven Spielberg, and Martin Scorsese

The ones against are the National Association of Theatre Owners, James Cameron, Jon Landau, and Christopher Nolan.

Final Thoughts?

Although it’s a clever an idea that might have its Netflix takes down cable tv moment in the future, as of now it seems that Screening Room would have a long hill to climb before it meets the vision of Sean Parker. Might I suggest me not paying four times the cost for the movie I want to stream? Who knows maybe one day Screening Room will have the spotlight and a slang of its own. Screening Room and Chill

Even the Almighty Alphabet (GOOGLE) Fears The Terminator

Google is in reportedly in talks of selling off their robotics company Boston Dynamics. You know that company that posts those awesome (and scary) videos of their animal-like and now human-like robots on youtube garnering tens of millions of views.

Brief History

Boston Dynamics builds advanced robots with remarkable behavior: mobility, agility, dexterity and speed. Boston Dynamics began as a spinoff from the Massachusetts Institute of Technology in 1992 and does work with the military. They developed a robot called BigDog and also one called Cheetah which is an animal-like robot developed to run at high speeds.

In December 2013, Google acquired Boston Dynamics. The price and terms of the deal were not disclosed although Google indicated that contracts including a $10.8 million contract with the US Defense Agency Research Projects Agency (DARPA) would be honored.

Why Sell?

There are reports that the purchase of Boston Dynamics by google caused a shift in the leadership structure of the original company, with Boston Dynamics’ engineers and Google’s engineers butting heads, this caused a slow-down of Google’s original plan; to produce and ship affordable robots as quickly as possible.

There is also a recent shift from positivity to negativity on what the robots can actually do, mostly after the recently released video of the Atlas robot. Originally the robot was to make it easier and safer for U.S. military personals to scout dangerous mind-fields, assist in missions, but now it seems that the sentiment is that these robots can take away the jobs of average U.S. citizens, and we all know how much people care about their jobs being mechanized.

So now what?

It seems that the main buyers of Boston Dynamics would be from Auto companies and manufacturing companies, such as Toyota or Amazon, for their manufacturing and warehouse operations, but it seems that Google is not ready (or terrified) that they might being overreaching with this project and this company, and for what it can create, Terminator 6 anyone?

Original Report:

http://www.bloomberg.com/news/articles/2016-03-17/google-is-said-to-put-boston-dynamics-robotics-unit-up-for-sale