Month: July 2018

Quartz, the business and tech news organization owned by Atlantic Media, is moving to a new home after publicly listed Japanese business Uzabase acquired it in a deal worth up to $110 million.

The deal is expected to close within a month. Quartz said it won’t be making layoffs and it will maintain its brand and existing editorial leadership team. Co-president and editor-in-chief Kevin Delaney and co-president and publisher Jay Lauf will become Quartz co-CEOs reporting to Uzabase and founder and CEO Yusuke Umeda.

The deal forms part of Atlantic Media chairman and owner David Bradley’s plan to divest his family’s ownership of the organization’s assets. Last year, he sold a majority share of The Atlantic to Laurene Powell Jobs’ Emerson Collective. Quartz was reported to be exploring acquisition options as far back as 2015, but Bradley wrote in a memo to staff that he “thought it would be a few years before we launched the search for a Quartz buyer.”

Launched in 2012, the Quartz vision has been to ‘The Economist of the digital era’ and it has found a niche for thoughtful storytelling. The company claims over 20 million monthly readers, and it has found interesting ways to use distribution methods such as chatbots and newsletters. Indeed, Quartz is reported to have posted a $1 million profit in 2016 on revenue on $30 million thanks to its advertising business.

The company said today that total sales this year are forecast to grow by 25-35 percent. That’s notable because it will affect the price that Uzabase ends up paying. Quartz said in a statement that the deal ranges from $75 and $110 million “depending on achievement of future financial and operating performance in 2018.”

The acquisition has surprised many with Uzabase hardly a household name. Despite that, though, it has a credible track record as a company.

Uzabase went public on the Tokyo Stock Exchange in 2016 and its current market cap is around $870 million. Its services include a business intelligence platform, a b2b marketing platform and, in the consumer space, a news app called NewsPicks.

The latter service is of particular interest in the context of the Quartz deal since it claims 64,000 subscribers who pay $15 per month. That gives NewsPicks nearly half of its revenue from paying users, which the company said is up 80 percent annually. The service is strongest in Japan (where it claims over 3.3 million registered users) but it launched in the U.S. last year in partnership with Dow Jones and is said to be growing rapidly there.

Following the deal, Quartz will pick up the slack for running the English version of NewsPicks but the companies look like they will also work more closely about subscription-based content.

“We’ll quickly be developing paid products for the loyal audience Quartz has accrued over the past six years, building on and learning from the success that NewsPicks has had with community and paid content,” co-CEOs Delaney and Lauf wrote in a memo to staff.

“While high-quality advertising will continue to represent the lion’s share of Quartz’s revenue in the coming years, we expect that the biggest source of growth in Quartz’s next chapter will come from reader revenue,” the duo added.

As for how the deal came about, Bradley — the Atlantic Media chairman and owner — recalled that Uzabase and founder and CEO Umeda met Quartz about a potential partnership last year and that led to further discussions that became an acquisition. Umedia, Bradley said, wants to make Quartz “the leading global business news brand in the world.” (As a measure of his confidence, Bradley said he will take 33-50 percent of his exit in Uzabase stock.)

In fact, the Japanese company’s stock may be a key part of how the deal happened.

While the price is down four percent following the announcement of the Quartz deal, it has risen in value significantly this year. It started the year at 1,588 JPY on January 1 and it closed last week at 3,275 JPY, up more than double. That appreciation made a deal to purchase Quartz increasingly cheaper, particularly with a major chunk done with stock.

There is some precedent for acquisitions of notable U.S. tech companies by Japanese suitors. Back in 2015, The Nikkei bought the Financial Times for $1.3 billion in another unexpected piece of media M&A, while more recently job hunting service Glassdoor was bought by Japan’s Recruit for $1.2 billion.

Perhaps rightly, there has long been a perception that Google-owned Deepmind has been the most aggressive in hoovering up a lot of the U.K.’s best talent in artificial intelligence, but now Facebook appears to be turning its eye to the country.

TechCrunch understands that the social network behemoth is acquiring London-based Bloomsbury AI, a startup that has built natural language processing (NLP) technology to help machines answer questions based on information gleaned from documents. According to sources, Facebook plans to deploy the company’s team and tech to work on combatting fake news and to tackle other content issues.

Bloomsbury is an alumni of Entrepreneur First, the company builder that invests in technical and domain expertise talent and helps those individuals start companies. The startup is also backed by Fly.VC, Seedcamp, IQ Capital, UCL Technology Fund, and the U.K. tax payer-funded London Co-investment Fund.

William Tunstall-Pedoe, who was instrumental in the development of Amazon’s AI-powered digital assistant Alexa, is also an angel investor in Bloomsbury.

Multiple sources say Facebook is paying between $23 million and $30 million to acquire Bloomsbury AI, in a deal that will see a mixture of cash and stock change hands. In one scenario, the startup’s investors will receive around $5.5 million, with Bloomsbury’s founding team in line for the remaining $17.5 million, paid in restricted Facebook stock. Either way, this represents a modest return for the bulk of investors, although EF — given that it invests pre-seed — is likely to have had a larger multiple.

Given the price and the stage Bloomsbury AI were at, the acquisition also has more than a whiff of acqui-hire to it, although there is some IP in the deal. I understand from one source that Bloomsbury AI’s CTO/Head of Research, Sebastian Riedel, was the biggest draw. He is considered to be a leading expert in the area of NLP, and is a professor at UCL. According to his LinkedIn, he also co-founded and is an advisor to Factmata, the U.K. startup that purports to have developed tools to help brands combat “fake news”.

Which brings us to the possible reason for why Facebook is acquiring Bloomsbury AI, a startup that I’m told was phenomenally strong when viewed as a group of researchers, but less so when it comes to getting a commercially viable product out of the door. The company’s sole product is an API called Cape that lets developers add question & answer functionality to websites and other documents.

Indeed, a source who claims to have some knowledge of Facebook’s intentions says the U.S. tech giant may be planning to put the Bloomsbury AI team on the task of helping it develop technology to fight fake news on the platform and solve other aspects of its glaring moderation problem.

Other areas of Facebook’s product that might benefit from the Q&A technology that powers Cape include being used as a workplace tool for companies to discover content in documents, or on Facebook’s consumer offering as a way of significantly improving its search and knowledge-base functionality.

It is also understood that Bloomsbury AI being based in London was a factor, as Facebook aims to have an AI presence in the U.K. capital city and is thought to be sourcing further acquisitions here.

Multiple sources have confirmed the deal to us, although Facebook declined to comment.

Additional reporting by Ingrid Lunden

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