March in Africa: Uber on motorcycles, Spotify’s arrival, and solar panels

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It’s been on the cards for a while, and now it is finally here. Introducing “Uber for motorcycle taxis” in Africa. Yes, Uber has finally introduced a ride-hailing service for motorbike taxis — locally called “boda bodas” — in Uganda. Uber has company, however, in the form of rival Taxify, which has rolled out its own boda boda service in Kampala, with both apps going head-to-head with local alternative SafeBoda. Uber, meanwhile, is appealing the ban on its services in Egypt and has expanded its UberEATS service to a host of new African countries. In other major global company news…

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Here’s why Spotify’s direct listing is an inflection point in the Wall Street-Silicon Valley relationship

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You should care what happens on Tuesday — even if you don’t care about Spotify.

Tuesday will be an abnormal day in the history of the IPO.

“Normally, companies ring bells. Normally, companies spend their day doing interviews on the trading floor touting why their stock is a good investment. Normally, companies don’t pursue a direct listing,” Spotify’s CEO, Daniel Ek, said on Monday in a blog post titled, “Tomorrow.”

“While I appreciate that this path makes sense for most, Spotify has never been a normal kind of company.”

On Tuesday, Ek’s Spotify will pioneer a new way for companies to go public, volunteering itself as a guinea pig for the venture-backed economy by eschewing the traditional help of investment bankers. Rather than selling shares to institutional investors in advance of the first day of trading — as is normally done in an IPO — Spotify isn’t selling any new shares, and is instead allowing its existing shareholders to directly offer their holdings to the market.

Here’s why that matters — even if you don’t care about Spotify: If the direct listing is successful, then the push-and-pull power struggle between Silicon Valley and Wall Street would shift more toward the former. More and more highly-valued startups could think that they, too, do not need Wall Street’s usual fare in order to become a public company, and investment bankers could have a tougher time pitching their services to CEOs.

Starry-eyed entrepreneurs and deal-chasing bankers are cut from culturally different cloths, but they’ve needed each other for decades: Founders need the wisdom of bankers to turn their private companies into public behemoths; bankers need the consistent revenue stream. It’s a professional alliance that has worked, and that’s probably why there hasn’t been that much innovation in the IPO process despite the tech sector’s love of disrupting the old business model.

So, what if founders are no longer dependent on bankers’ full suite of services to go public? That’s what Spotify is testing.

It’s not as if bankers are totally cut out of the process. They’ll still make tens of millions of dollars in advisory fees for what is, in some ways, a more challenging task.

Morgan Stanley, for instance, reached out to almost all Spotify shareholders over the last month or so to gauge their interest in selling stock, according to people familiar with the process, and more recently began the same conversations with institutions interested in buying Spotify shares. That work theoretically will help Spotify know what will happen to the company’s stock at various price levels.

The other objective of bankers advising the deal, the people say, is to make sure there is a high enough volume of shares traded to insulate the company against extreme volatility. Because Spotify isn’t being expertly “priced” the day before trading, its shares could move around wildly in the opening hours of trading — which is expected to begin midday on Tuesday.

One reason that banks like Morgan Stanley have their work cut out for them: Spotify investors and employees have had tons of opportunities over the last decade to sell their stock. The company has been tolerant of private stock sales to an unusual degree, meaning that Tuesday is not the release valve for shareholders who long felt shackled — that’s expected to temper the sell-off. The direct listing is another opportunity to do what they’ve always been free to do.

In fact, about $ 500 million in Spotify shares have been traded over the last few weeks in the lead-up to the direct listing, the people familiar with the process say. Those trades happened at share prices that valued the company between about $ 22 billion and $ 25 billion.

That openness to private trades is one of several unique circumstances that allows Spotify to do what other private companies haven’t been able to do. Spotify says it doesn’t need to create and sell new shares to finance the company, which most companies cannot similarly say. It has a huge, popular consumer brand that will appeal to mom-and-pop retail buyers. And the aforementioned stock trades makes it easier to estimate how the company will price.

So that’s why some naysayers posit that even if Spotify’s direct listing succeeds, it will not usher in a sea change in how the standard IPO unfolds. It’s a perfect storm of circumstances that makes it possible — for one particular company at one particular time.

But startups will at least now consider other options — in fact, that’s true even if Spotify’s direct listing isn’t judged by history to be successful. Companies now know that there is room for restructuring in the IPO, and that’s already a setback for the incumbent, the banking industry.

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Meet Barry McCarthy, the man behind Spotify’s daring public offering

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Spotify’s CFO pushed for this week’s direct listing, which could change life for Wall Street and for big tech startups.

When Spotify goes public Tuesday, the spotlight will shine on 35-year-old CEO Daniel Ek, who has built a $ 20 billion company and helped revive the music industry along the way.

But if Spotify’s unusual “direct listing” offering — done without the traditional assistance from investment banks — is successful, credit will go to a Spotify executive thirty years Ek’s senior, who doesn’t want any attention: Barry McCarthy, the company’s chief financial officer, who is acknowledged as the architect of the unorthodox, and to some, controversial public offering.

If the direct listing works, it could pave the way for other tech startups to follow suit. That could potentially cut out Wall Street banks and their clients from a lucrative revenue stream, and would roil the financial services industry.

But people who know McCarthy say he does not care about the broader implications of his plan — he isn’t motivated by some ideological crusade to stick it to Wall Street, nor by some high-minded attempt to chart a new future for the technology sector.

“I don’t think it’s a middle finger to Wall Street because he comes from Wall Street,” says Reed Hastings, the CEO of Netflix, where McCarthy was its CFO for eight years. “He’s as Wall Street as it gets.”

In a traditional offering, a startup hires bankers to find investors to buy its stock, a pre-qualified group willing to take the risk of taking on shares in a company that hasn’t trade openly. The bankers sort out the right price for these shares by wrangling and haggling with these investors, who then sell those shares the following day on an open exchange like the NASDAQ or the NYSE.

In the direct listing that Spotify is attempting, there will be no bankers to find qualified pre-buyers and set a price for the initial stock sale. The shares of SPOT will just open on the NYSE exchange on Tuesday.

Some spurned bankers are quietly rooting for Spotify and McCarthy to fail. Their argument: The strategy has real risk, because they haven’t been able to help the company guarantee an appetite for its shares, and they won’t step in to stabilize the stock if something goes wrong. Its stock value could swing frantically.

So if Spotify stock trades wildly in its opening days, or tanks in its opening months, McCarthy could end up as the poster child for Silicon Valley arrogance. Some bankers will see it as comeuppance for an executive who tried to fix a system that in their eyes wasn’t broken.

McCarthy first joined Spotify in 2014 as a member of its board, and moved to the CFO role a year later. As the company started edging toward a long-awaited IPO, he started selling Ek on the direct listing.

McCarthy presented the entrepreneur and his board with a clinical, “brutally logical” diagnosis of why Spotify shouldn’t sell shares to institutional investors right before trading begins.

Spotify, he argued, could avoid the regulations, fees and distractions since it didn’t need to raise money, already had a well-known consumer brand and had a good idea of how much it was worth from all the private trades done for years by existing investors.

“It’s not like Barry’s wanted to do this forever and this was the opportunity,” said one person close to the company. “Barry does not care about how history remembers him or doesn’t remember him.”

McCarthy is an unlikely iconoclast. He started his career at Credit Suisse First Boston in the 1980s, trading mortgage-backed securities when that industry first took off. He headed to his first CFO role at a different music company, Music Choice. And then at Netflix, he executed a traditional IPO under Hastings.

McCarthy helped Hastings create a fast-growing DVD-by-mail business, with a high-flying stock price — and then helped Hastings pull the company back from the abyss in 2011, when a bungled price hike, a disastrous plan to split the company into two, and the loss of crucial content from two Hollywood studios pushed the company’s stock down 77 percent in four months.

But as Hastings recalled, McCarthy wanted to be a CEO or a COO. It took him three years after leaving Netflix to find it, but he did — at Clinkle, a much-hyped payments company that raised money from A-list backers and then flamed out in spectacular fashion.

McCarthy lasted six months as COO, but avoided career disaster.

“It’s the classic tension: You can get the bigger job at the smaller company, like a Clinkle kind of thing,” Hastings said, adding with some understatement: “I’m sure he’s found Spotify much more satisfying than Clinkle.”

But his time at Netflix made him well-suited to serve as Ek’s de facto Sheryl Sandberg or Eric Schmidt — a voice of experience that carries a lot of weight for the young chief executive. Though in this case, it is the older wise man pushing the more radical idea.

His Netflix pedigree, coupled with Spotify’s Netflix-like grow-fast-now, worry-about-profits later strategy, conveys an implicit promise to would-be Spotify investors: This is another consumer growth rocket ship.

McCarthy made that connection explicit at Spotify’s Investor Day last month.

“This reminds me of my first ten years of Netflix,” he told investors, in what he said was his first public speaking event in eight years.

McCarthy isn’t cutting out banks entirely from Spotify’s public offering. The company will spend up to $ 50 million in advisory and other fees — an out-of-pocket expense it will pay for immediately. (If Spotify had done a traditional IPO, its bankers would have made most of their money by reselling an allotment of Spotify equity.)

That’s real money, even for banks the size of Goldman Sachs. David Solomon, Goldman’s CEO heir apparent, made a personal plea in Goldman’s pitch to Spotify, playing up his now well-publicized side-job as DJ D-Sol, according to two people with knowledge of the pitch. It worked.

Spotify has considered other alternative paths to going public. Ek and venture capitalist Chamath Palihapitiya had some very early conversations about using Social Capital Hedosophia, Palihapitiya’s planned special purpose acquisition vehicle, to acquire Spotify and “back in” to public status that way, according to multiple people with knowledge of the conversations. Social Capital declined to comment.

And even once a direct listing was chosen as the play, the company confronted hiccups.

Spotify had to spend months walking regulators at the Securities and Exchange Commission through the details of the plan. And late last year, Spotify had to hammer out a way to mollify a pair of investors who had issued debt to Spotify that would only convert to equity when the company officially IPO’d. McCarthy and Ek found a way to soothe what at one point appeared to be a sticking point in the negotiations.

That has all led to to Tuesday, when Spotify shares will trade freely for the first time. It will be a big deal for Spotify, and it may be a big deal for future startups and the bankers who want to work with them.

Good luck getting McCarthy to say it’s a big deal to him. “I don’t think he’s trying to be the hero,” said one person close to the process. “He’s not an evangelist. He’s not really trying to change the world.”

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Spotify’s experimental voice control feature is an excellent end run around Siri

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Spotify is testing a voice search feature that lets users more quickly access their favorite artists, tracks, albums, and playlists. The feature, which appears based on a 2017 experiment involving a “driving mode,” has begun appearing inside the iOS app for a small number of users. I got early access to the test and tested out the feature set. In short, it’s an excellent step forward for navigation in app that has historically required too much tapping and typing to get where you’re going.

Spotify confirmed the test but didn’t want to talk about it. “We’re always working on improving the Spotify experience for our users, but we don’t have any information to share at this time,” the company said.

To access the new voice search feature,…

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Spotify’s newest podcast is about mental health and startup life

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Spotify has launched a new podcast, Killing It, which tells the stories of those who have attained success in the cut-throat startup world while simultaneously battling mental health issues. The show is hosted by veteran tech journalist Aleks Krotoski, alongside therapist Petra Velzeboer and “mental health gym” owner James Routledge. Each episode focuses on the story of one individual entrepreneur, and examines how the stress and frantic pace of startup life can result in depression, anxiety, and burnout. The first episode in the six-part series focuses on Alex Depledge, founder of on-demand cleaning startup Hassle (now Helpling) and “proptech” company…

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Spotify’s public filing reveals key stats about the streaming giant

Spotify quietly signaled its intention to become a publicly traded company in December of last year, even though several lawsuits over licensing were looming. Now the streaming service has filed for a direct listing on the New York Stock Exchange, an…
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Going public pits Spotify’s suggestions versus everyone

The Best Guide To Selling Your Old Phones With High Profit

 The secret to Spotify’s public market debut is actually an acquisition it made in 2014. The Echo Nest was powering music recommendations for Beats Music, Rdio, Vevo and iHeartRadio before Spotify pulled it out from under them by buying it for a reported $ 100 million — 90 percent in Spotify equity. That deal paid off big time. Read More
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Spotify’s hardware ambitions seem like a risky distraction

Look, it's no secret that Spotify is out to make its own hardware. As of last April, Spotify was already looking for people to help craft "a category defining product akin to Pebble Watch, Amazon Echo and Snap Spectacles." (In hindsight, Spotify's HR…
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Spotify’s latest job listings show it’s ramping up efforts to produce hardware

Rumors have swirled for a while about Spotify working on its own music hardware. Now, the company seems to be ramping up efforts, as indicated by three new job listings for its hardware division. As spotted by MusicAlly, one job description states that Spotify is “on its way to creating its first physical products,” and the company is currently setting up its operational organization for “manufacturing, supply chain, sales, and marketing.”

The jobs posted are for a Project Manager, Senior Project Manager, and an Operations Manager in Hardware Production. Spotify notes that the roles will contribute to “creating innovative Spotify experiences” via connected hardware.

Previous job…

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Spotify’s new app is a Pandora copycat

Spotify is testing a new tool to up the competition with Apple Music by stealing a key feature from one of the oldest companies in the streaming game: Pandora. Stations, a new stand-alone app from Spotify, launched on the Google Play Store in Australia this week allowing users to listen to curated stations without any […]

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