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Here’s a snapshot of just how easy it is for tech companies to raise money right now

REUTERS/Steve Marcus

There’s a debate raging about whether we’re in a technology bubble at the moment, with sky-high valuations for businesses like Uber and Airbnb.

Are investors overpaying for businesses that aren’t really worth it?

I asked a top European venture capitalist (VC) the question this week and he admitted to me, on the condition of anonymity, that the funding market right now is completely nuts.

Money is as cheap as it’s ever been and his firm is “making hay while the sun shines”, raising new money for as many of the companies it has invested in as possible. He told me an anecdote that sums up pretty well just how mad things are right now.

A company he invested in was out to raise more money. Seven investors were at the table. Four made formal investment offers, each bidding up the other one.

Then, out of nowhere, an eighth investor came to the table and doubled the highest bid.

In other words, an investor turned up offering the same amount of cash, but saying the deal would double the value of the company. Let’s say startup “X” was worth $100 million — now, all of a sudden, it’s got a $200 million price tag. While the previous bidders had said “I’ll give you £10 million for 10% of the company,” valuing it at £100 million, the eighth bidder came in and said. “I’ll give you £10 million for 5%, valuing it at £200 million.” (Those numbers are hypotheticals, just to illustrate the point.)

The VC didn’t say anything about the fundamentals of the business or what industry it’s in. But any market where participants can have such a huge disparity in valuations is a warped one. It’s a market that favours startups.

The VC blames all this on the flood of hedge fund and foreign billionaire money coming into tech, skewing the numbers. These investors aren’t so hot on the mechanics of tech venture capital — they simply see it as a gravy train worth hitching their wagons to.

The tech worlds is one of the few places where people can find returns right now — interest rates globally are at record lows and stock markets aren’t up to much.

But while the VC admits valuations are going crazy, he doesn’t think we’re in a bubble. 

So many industries are undergoing fundamental changes because of technology right now — from the taxi industry to finance. And, says the VC, whoever gets it right in each field will be huge. I’ve heard this argument before, from Gerald Brady, head of relationship banking at Silicon Valley Bank in the UK.

That’s why unsophisticated money is flooding into tech right now, because they can see the opportunity and don’t want to miss out before it’s too late. As a result, money is easy and cheap to raise for tech companies.

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Goldman Sachs' former technology chief is doing great business at his new payments company

(Earthport) Earthport CEO Hank Uberoi, who is Goldman Sachs’ former co-COO for technology.

Earthport, the cloud-based payment platform run by Goldman Sachs’ former co-COO of technology, Hank Uberoi, put out unaudited results for the year to June on Wednesday — and they’re pretty good.

The London-based company’s revenue jumped 78% last year to £19.25 million ($30 million). The dollar value of payments made on Earthport’s cloud-platform rose by 75%, and the company is on track to process $10 billion (£6.4 billion) worth of transactions by the end of the year.

Earthport is trying to build a faster, more tech savvy, international payments network, built on the cloud. The current systems of so-called payment “rails” were built decades ago, and are slow and costly.

Thirty-one new customers signed up to the platform last year and big names like HSBC, Santander, and Standard Chartered all started routing payments through Earthport’s system.

Uberoi said in today’s statement: “We are pleased and enthusiastic about the acceptance of the Earthport payment network as a truly valuable and innovative solution in the massive payments market.”

He said the medium- to long-term potential for Earthport’s technology is “significant.” Investors are clearly buying in to that theory. Earthport’s shares, which are listed on London’s market for growing companies AIM, are up 6% at a one-month high.

(Investing.com) Earthport shares are jumping.

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EXCLUSIVE: Uber’s enemies say the company uses ‘tax avoidance on an industrial scale’ and they want the government to investigate

Steve Jennings / Getty Images

Uber CEO and founder Travis Kalanick.

An alliance of London minicab drivers is calling for the EU to probe Uber’s tax arrangements and grill founder Travis Kalanick personally on the issue.

Business Insider has seen a copy of a letter sent by the London Private Hire Car Association (LPHCA) to the chair of the European Parliament’s tax committee calling for it to probe what it alleges to be “tax avoidance on an industrial scale.” The LPHCA represents 15,000 minicab drivers in the capital who are, obviously, biased against Uber. (Uber generally offers rides much cheaper than private-hire cars.)

The letter, written by LPHCA chair Steve Wright, says: “Uber pays no tax to speak of in the UK – nor indeed in many, if not most, of the Member States in which it operates — with the exception of the Netherlands where its European operations are domiciled for (highly reduced) tax purposes.”

A spokesperson for Uber told Business Insider over email: “Uber complies with all applicable tax laws, and pays taxes in all the jurisdictions it operates in, including the UK.”

If you look at any receipt for an Uber ride in the UK, you’ll see Uber processes its jobs through its Dutch subsidiary, Uber BV. This means revenues that could be hit with UK corporation tax end up in Uber’s Dutch subsidiary and also allows Uber to charge a lower VAT rate.

Dutch VAT is 0% for entrepreneurs conducting foreign business from the Netherlands, compared to the UK’s 20% rate. While it’s customers who pay VAT, not Uber, it means Uber can offer lower prices to the public.

Here’s a recent invoice from a ride I took with them:

Oscar Williams-Grut

And here’s the small print at the bottom, showing it’s clearly a Dutch company that’s issued the invoice:

Oscar Williams-Grut

The LPHCA argue that this set up is unfair. The letter from LPHCA, dated July 26, continues (emphasis ours):

These [Uber’s] prices are subsidised however by highly aggressive tax avoidance arrangements which have recently been condemned by the UK Government.

We call upon your Committee to summon Uber’s Chief Executive Travis Kalanik to explain his company’s commercial practices and why he feels that is acceptable that reputable PHV and VTC companies across Europe should pay corporation tax, VAT and other obligations while his company should not.

The condemnation Wright is talking about is from MP Margaret Hodge, the chair of the influential Public Accounts Committee. Last year she criticised Uber for “opting out of the UK tax regime.” Transport for London (TFL) has also referred Uber’s tax set up to HMRC, the UK’s tax authority. That probe is ongoing.

The LPHCA has been fighting Uber since it launched in London in 2012 and made a similar complaint to HMRC about its tax arrangements at the start of the year.

REUTERS/Charles Platiau

French riot police secure the Porte Maillot during a demonstration by French taxi drivers, who are on strike, to block the traffic on the Paris ring road during a national protest against car-sharing service Uber, in Paris, France, June 25, 2015.

Taxi drivers across Europe have been fighting the rising tide of Uber — Paris was paralyzed by riots and protests against Uber last month.

A spokesperson for the LPHCA told Business Insider: “This is ultimately about whether the UK minicab industry is a level playing field. Uber’s app is pretty slick and ostensibly it should be a good thing for consumers. The question is why is it so cheap, how can it be so cheap? Once you look under the hood of the Uber business model you find all kinds of corners being cut.

“All of the big players in the UK — Addison Lee, Tristar, Keen Group — are all UK limited companies that pay corporation tax in the UK. Uber on the other hand is built from the ground up to pay as little tax as possible in as few places as it can.”

Uber has two UK registered companies it conducts some operations through here. But the latest accounts for its London office reveal little about the fundamentals of the business — they’re abbreviated accounts for small companies, which HMRC allows for businesses with a turnover under £6.5 million a year.

Uber’s Manchester-based subsidiary was only set up at the end of 2013 and has yet to file accounts with Companies House.

Business Insider has reached out to Alain Lamassoure MEP, the chair of the tax committee whom the LPHCA letter was addressed to, but haven’t heard back. European Parliament is currently on summer recess but if we hear back we’ll update this post.

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Klimduin

Het blijft voor mij een mooi Noordhollands duindorp. Vanmiddag ben ik in Schoorl geweest. Dan kiek je natuurlijk de top van het ‘Klimduin’. Om er te komen, heb ik gebruik gemaakt van het Torenpad. Het is even door het bos lopen en mijn angsten over onzekerheid verder te overwinnen. Ik heb genoten van de tafereeltjes op het klimduin waar het eigenwijze grut hun ouders de wil proberen op te leggen. Zandvoort is leuk, maar Schoorl ook!

Goldman Sachs' former technology chief is doing great business at his new payments company

(Earthport) Earthport CEO Hank Uberoi, who is Goldman Sachs’ former co-COO for technology.

Earthport, the cloud-based payment platform run by Goldman Sachs’ former co-COO of technology, Hank Uberoi, put out unaudited results for the year to June on Wednesday — and they’re pretty good.

The London-based company’s revenue jumped 78% last year to £19.25 million ($30 million). The dollar value of payments made on Earthport’s cloud-platform rose by 75%, and the company is on track to process $10 billion (£6.4 billion) worth of transactions by the end of the year.

Earthport is trying to build a faster, more tech savvy, international payments network, built on the cloud. The current systems of so-called payment “rails” were built decades ago, and are slow and costly.

Thirty-one new customers signed up to the platform last year and big names like HSBC, Santander, and Standard Chartered all started routing payments through Earthport’s system.

Uberoi said in today’s statement: “We are pleased and enthusiastic about the acceptance of the Earthport payment network as a truly valuable and innovative solution in the massive payments market.”

He said the medium- to long-term potential for Earthport’s technology is “significant.” Investors are clearly buying in to that theory. Earthport’s shares, which are listed on London’s market for growing companies AIM, are up 6% at a one-month high.

(Investing.com) Earthport shares are jumping.

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Greece is turning into a 'zombie' state that exists solely to pay off debts

(IMDB)
Greece last week managed to swing €7.16 billion (£4.9 billion, $7.7 billion) in emergency funding from Europe after it agreed to harsh austerity measures and a sweeping privatisation programme.

In short, Prime Minister Alexis Tsipras folded to the Eurogroup’s demands, just to keep the lights on.

But the massive concessions look futile just days later — and it underlines just how desperately Greece needs debt restructuring.

The emergency “bridging financing” from the European Financial Stability Mechanism (EFSM) was supposed to last Greece until at least the end of the month. But less than a week later, it’s pretty much all gone.

Reuters is reporting that Greece has begun repayments to the International Monetary Fund, the European Central Bank, and the Bank of Greece totalling €6.25 billion (£4.35 billion, $6.7 billion).

The ECB is due a payment of €3.5 billion (£2.4 billion, $3.78 billion) on Monday, while Greece is in arrears to the IMF for €1.6 billion (£1.1 billion, $1.7 billion). The interest on both takes the totals up to €4.2 billion (£2.9 billion, $4.5 billion) for the ECB group and €2.05 billion (£1.4 billion, $2.22 billion) to the IMF.

So of the €7.16 billion it’s got today, it only has €910 million (£634 million, $989 million) left.

This is the starkest example we’ve seen yet of just why Greece needs massive debt restructuring — the country is effectively an economic zombie existing solely to pay off debts. Its economy is flatlining, and any funding that comes in goes straight back out again. (Both The New York Times and Bloomberg have used the term “zombie” recently to refer to Greece’s economy.)

Greece’s creditors are starting to realise something has to change. The IMF has called these debts “unsustainable,” and German finance minister Wolfgang Schaeuble says Greece should perhaps leave the euro temporarily.

It clearly doesn’t make sense for Europe to pay out €7.1 billion to ensure “financial stability” when €4.2 billion simply returns to another European funding pot and much of the rest goes to other creditors.

What Greece wants — and what the IMF has suggested — is a debt repayment and interest holiday while it gets its economy back to growth. Once gross-domestic-product growth outstrips interest payments, Greece can begin to chip away at its debt pile without resorting to a fire sale of assets and crippling taxes, as it is now.

But German Chancellor Angela Merkel, the powerhouse in Europe’s negotiations, is holding firm. Germany is Greece’s biggest creditor, and Merkel is insisting that Greece cannot get off that easily — it must pay off its debts and suffer the consequences of running them up in the first place.

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