Daily Tech Snippet: Thursday, June 2

• Uber Turns to Saudi Arabia for $3.5 Billion Cash Infusion: In its quest to build a global empire, Uber has turned to the Middle East for its biggest infusion of cash from a single investor. Uber said on Wednesday that it had raised $3.5 billion from Saudi Arabia’s Public Investment Fund, the kingdom’s main investment fund. The money was part of the ride-hailing giant’s most recent financing round and continued to value the company at $62.5 billion. The investment does not cash out any of Uber’s existing investors.Uber, which has viewed the Middle East as an important area in its expansion, said the investment further aligned the company with Saudi Arabia as the kingdom planned to transform its economy, reducing its dependence on oil and improving employment. The investment from Saudi Arabia is one of the biggest single investments collected by the technology world’s top privately held companies. Uber, whose valuation makes it Silicon Valley’s most valuable private business, has collected billions at a rapid clip over the last three years. Uber has drawn from a wide variety of investors, including traditional venture capital firms, mutual fund giants like BlackRock and wealthy clients of firms like Goldman Sachs and Morgan Stanley. Other sovereign wealth funds like that of Qatar have also invested. Other smaller tech companies have not fared as well in raising money over the last several months. Some so-called unicorns, the term used to refer to businesses valued at more than $1 billion, have struggled to collect new investments, and some, like Jawbone, have had to raise money at lower valuations. Uber is racing to defend its territory — which covers 460 cities in more than 69 countries — against incumbents in other regions like Southeast Asia and Europe. China, in particular, is a difficult battleground, as Uber is spending millions in a subsidy war with Didi Chuxing, the dominant ride-hailing start-up in the country. Both companies have made no indications that they will back down. Though Uber dominates the American market for ride-hailing, it has increasingly seen overseas markets as crucial to its growth. Among Uber’s increasingly important overseas markets is the Middle East, where the company has already said it plans to invest $250 million. The service operates in 15 cities and nine countries in the region, including Saudi Arabia.

• No Venture Capital Needed, or Wanted: The business world is filled with starry-eyed entrepreneurs who hope that the blessings of angel investors and venture capitalists will transform their start-up dreams into companies with billion-dollar valuations. But some successful start-ups have been bucking the trend by growing and expanding without taking a dime from major outside equity investors.Those who buck the odds by “bootstrapping” their own enterprises are rare, experts say. “It’s a huge anomaly,” said Mark Walsh, head of innovation and investment at the Small Business Administration He estimated that as few as one in 50 brick-and-mortar companies and one in 10 online companies could build their businesses into $50 million or $100 million enterprises on their own. But taking venture capital can be risky. In their haste to get financing, start-up founders often fail to read the fine print and later discover that they have signed away huge shares of the profits. In some cases, founders may be removed by the board of their own companies by the time the businesses are rapidly growing or plan to go public. For these reasons, some founders opt to take debt capital from banks and investors instead of giving away equity.

• Internet Boom Times Are Over, Says Mary Meeker’s Influential Report: Global internet and smartphone user growth are slowing dramatically, but at least things are looking up in India.  Growth of internet users worldwide is essentially flat, and smartphone growth is slowing, too. Those sobering insights were among the hundreds packed into the much-awaited Internet Trends report, an annual tech industry ritual led by Mary Meeker, a general partner at Kleiner Perkins Caufield & Byers. Developing countries have proven harder to capture than expected because internet access remains inaccessible or unaffordable for many, the report said. Here are some other highlights from the report: India is the one country where internet usage is growing, up 40 percent compared with 33 percent a year ago. India passed the U.S. to become the No. 2 global market behind China in 2015. The Asia Pacific region represented 52 percent of smartphone users globally in 2015. The rapid growth in recent years has begun to slow, dropping to 23 percent in 2015 from 35 percent in 2014. North America, Europe, and Japan represented 63 percent of global GDP in 1985. By 2015, their contribution dropped to 29 percent. China and emerging markets in Asia represented 63 percent of global GDP last year. Online advertising is still not very effective. Advertisers are spending an outsize amount on legacy media. Global birth rates are down 39 percent since 1960. So where will technology growth come from? Who knows, but at least there's this: Global life expectancy is up 36 percent since 1960.

• Elizabeth Holmes, Founder of Theranos, Falls From Highest Perch Off Forbes List: Elizabeth Holmes, the founder of the blood testing company Theranos, was a rare breed, something more rare than even the Silicon Valley unicorn she created: a self-made female billionaire. Forbes, the business publication that has made a franchise of cataloging the rich, had put Ms. Holmes on the top of its list last year of America’s richest self-made women.The magazine’s new estimated tally of her wealth? It went from $4.5 billion to $0. Ms. Holmes’s unusual status, as a young woman who created and controlled a company seemingly valued at about $9 billion, captivated the media: She graced countless magazine covers, including T: The New York Times Style Magazine. Theranos, she said, would revolutionize the lab industry by offering blood tests from a single finger prick at a fraction of the cost of traditional testing. But over the last year, Theranos became the subject of a series of hard-hitting Wall Street Journal articles and intense regulatory scrutiny from an array of federal agencies. The media is now mesmerized by Ms. Holmes’s fall. Truth be told, the half of the $9 billion valuation ascribed to Theranos and previously listed as Ms. Holmes’s wealth was nothing more than an estimate based on investors’ best guesses. Taking into account all the controversy and uncertainty surrounding the value of the company’s top-secret technology, Forbes is now guessing that the company is worth more like $800 million. While Ms. Holmes still owns at least half of the company, much of that value would be tied up with outside investors.Not surprisingly, Theranos refused to shed any light on the matter, except to dispute Forbes’s analysis.

• Early days, but Apple Pay struggles outside U.S.: More than 18 months after Apple Pay took the United States by storm, the smartphone giant has made only a small dent in the global payments market, snagged by technical challenges, low consumer take-up and resistance from banks. The service is available in six countries and among a limited range of banks, though in recent weeks Apple has added four banks to its sole Singapore partner American Express; Australia and New Zealand Banking Group in Australia; and Canada's five big banks. Apple Pay usage totaled $10.9 billion last year, the vast majority of that in the United States. That is less than the annual volume of transactions in Kenya, a mobile payments pioneer, according to research firm Timetric. And its global turnover is a drop in the bucket in China, where Internet giants Alibaba and Tencent dominate the world's biggest mobile payments market - with an estimated $1 trillion worth of mobile transactions last year, according to iResearch data. Anecdotal evidence from Britain, China and Australia suggests Apple Pay is popular with core Apple followers, but the quality of service, and interest in it, varies significantly. To use Apple Pay, consumers tap their iPhone over payment terminals to buy coffee, train tickets and other services. It can be also used at vending machines that accept contactless payments. Apple Pay transactions were a fraction of the $84.5 billion in iPhone sales for the six months to March, which accounted for two-thirds of Apple's total revenue.

• Singapore buys $1 billion in Alibaba stock in SoftBank sale: Singapore sovereign wealth funds bought $1 billion of Chinese e-commerce company Alibaba Group Holding Ltd's shares as part of an $8.9 billion sale by Japan's SoftBank Group Corp, Alibaba's biggest shareholder, the company said on Wednesday. Singapore's GIC Private, Ltd and Temasek Holdings each purchased $500 million of Alibaba shares at $74.00 apiece through subsidiaries, Alibaba said, offering details of the SoftBank sale announced on Tuesday. Alibaba purchased $2 billion of its own stock at the same price, in a move which would add to earnings, Executive Vice Chairman Joe Tsai told analysts on a call. Members of the Alibaba Partnership of senior executives and founders purchased another $400 million, as expected, at the $74 per share price, he added. SoftBank also offered $5.5 billion in debt securities, which can be exchanged for Alibaba stock in three years, Tsai said. SoftBank Group said on Tuesday it would sell at least $7.9 billion of shares in Alibaba to cut the Japanese company's debt. It said it would remain Alibaba's largest shareholder after the sale. Shares of Alibaba fell about 6.5 percent to close at $76.69.

• Salesforce takes aim at e-commerce with $2.8 billion Demandware buy: Cloud-based software maker Salesforce.com Inc (CRM.N) said on Wednesday it would buy Demandware Inc (DWRE.N), whose software is used by businesses to run e-commerce websites, for about $2.8 billion. The deal would help Salesforce open a new front as it seeks to take more market share from traditional software providers such as Oracle Corp (ORCL.N) and SAP AG (SAPG.DE), both of which already offer cloud-based e-commerce services. The e-commerce market has been growing at a blistering pace as retailers expand their online presence, boosting demand for software that helps manage functions such as payment processing and inventory management. Salesforce's cash offer of $75.00 per share represents a 56.3 percent premium to Demandware's Tuesday closing. The lofty premium indicates that multiple bidders were likely at the table for Demandware, Stifel Nicolaus & Co analyst Thomas Roderick said, naming Adobe Systems Inc ABDE.O and Oracle as the other possible contenders. Demandware's shares, which have fallen about 21 percent in the past year, rose 55.9 percent to $74.81 on Wednesday. Shares of Salesforce, considered a barometer for the cloud-computing industry, edged down 0.3 percent.

• Amazon sues sellers for buying fake reviews: Seller beware — if you buy reviews for your products on Amazon, the company might sue you. As part of its effort to combat fake reviews on its platform, Amazon sued three of its sellers today for using sock puppet accounts to post fake reviews about their products. Amazon has been aggressively pursuing reviewers it does not consider genuine over the last year, often using lawsuits to discourage the buying and selling of reviews, but this is the first time it has sued the sellers themselves. Today’s suits are against sellers who Amazon claims used fake accounts to leave positive reviews on their own products. The fake reviews spanned from 30 to 45 percent of the sellers’ total reviews. The defendants are Michael Abbara of California, Kurt Bauer of Pennsylvania, and a Chinese company called CCBetter Direct. Amazon is asking for the defendants to be banned from selling products on any of its sites or accessing its services. The suits also ask for the profits the sellers made on Amazon, attorneys’ fees, and damages exceeding $25,000. Amazon says that, since early 2015, it has sued over 1,000 people who posted fake reviews for cash. Now, the company is going after the retailers themselves. Amazon said that it intends to eliminate incentives for sellers to buy fake reviews for their products. “Our goal is to eliminate the incentives for sellers to engage in review abuse and shut down this ecosystem around fraudulent reviews in exchange for compensation,” an Amazon spokesperson said.