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Tax alert: Fiscal update includes tax changes for Netflix, stock options and working from home

December 1, 2020

The Globe and Mail | Matt Lundy and Mark Rendell | Nov 30, 2020 The federal government’s fall economic update included a series of tax proposals that carry implications for businesses and households. If enacted, the measures will cost you more to watch The Crown, but allow simpler deductions for the many Canadians currently working from home. Ottawa is looking to raise revenue in the coming years via the digital economy. Through a series of proposed taxes on digital goods and services, the federal government aims to raise $6.5-billion over the next five fiscal years (ending in 2025-26). Some of that would come from adding sales taxes to digital services such as Netflix, which currently doesn’t charge such taxes at the federal level. The bulk would come from a corporate tax on Big Tech companies, although details are coming next year. Canada, like many other countries, is working with the Organization for Economic Co-operation and Development on a multilateral plan. However, Ottawa is “concerned about the delay in arriving at consensus” – hence the reason it’s prepared to go alone. Digital taxes Ottawa is looking to raise around $2.8-billion over the next five years by forcing foreign digital companies and e-commerce ...
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ServiceNow is acquiring Element AI, the Canadian startup building AI services for enterprises

December 1, 2020

TechCrunch | Ingrid Lunden | Nov 30, 2020 ServiceNow, the cloud-based IT services company, is making a significant acquisition today to fill out its longer-term strategy to be a big player in the worlds of automation and artificial intelligence for enterprises. It is acquiring Element AI, a startup out of Canada. Founded by AI pioneers and backed by some of the world’s biggest AI companies — it raised hundreds of millions of dollars from the likes of Microsoft, Intel, Nvidia and Tencent, among others — Element AI’s aim was to build and provision AI-based IT services for enterprises, in many cases organizations that are not technology companies by nature. Terms of the deal are not being disclosed, a spokesperson told TechCrunch, but we now have multiple sources telling us the price was around $500 million. For some context, Element AI was valued at between $600 million and $700 million when it last raised money, $151 million (or C$200 million at the time) in September 2019. See:  Element AI: The market is still figuring out how to share data with enterprise AI startups Even at $500 million, this deal would be ServiceNow’s biggest acquisition, although it would be a sizeable devaluation ...
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The future of European payments: Strategic choices for banks

December 1, 2020

McKinsey & Company and Euro Banking Association | Nov 24, 2020 Payments and accounts services are at the core of banks’ offering to customers. They contributed about a third of European banks’ total revenues in 2019 (Exhibit 1), and represent banks’ leading source of customer interactions. Banks’ payments revenues have grown steadily at about 3 percent per year over the past six years. However, some specialist payments providers—processors, acquirers, schemes, and others—have achieved double-digit growth rates over the same period (Exhibit 2). This suggests that banks’ traditional role at the centre of the payments ecosystem may be coming under challenge. High ambitions, significant challenges Almost two-thirds of the executives and experts who were surveyed as part of a joint effort undertaken by McKinsey & Company and the Euro Banking Association between November 2019 and November 2020, believe that banks will continue to be the leading players in European payments over the next five years. See:  Fintech Fridays EP46: Making Business Borderless: International Payments and Partnerships However, survey respondents and interviewees identified a number of challenges faced by banks. These included increasing competition (especially from tech companies and fintechs), the rise of technologies that could allow other payments providers to come ...
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The EU is hoping to create one of the most innovation-friendly regulatory regimes for blockchain technology globally

November 30, 2020

Lakestar | Insights | Nov 30, 2020 In September 2020, the European Commission proposed a comprehensive legislative package for crypto assets and blockchain technology as part of its broader European Digital Finance Strategy. Pēteris Zilgalvis, one of the key contributors to the proposal, provides insightful context to the current draft and makes a bold invitation for industry participants to contribute and provide feedback. Lakestar Partner Nicolas Brand in conversation with Pēteris Zilgalvis, Head of the Digital Innovation and Blockchain Unit at DG Connect within the European Commission. Pēteris has been working for over 25 years at the European Commission, the Council of Europe and the World Bank. Originally with a background in environmental law, he started covering financial markets, cryptocurrencies and blockchain innovation in 2013, when he was a Visiting Fellow at the University of Oxford. He is also co-chair of the European Commission’s Fintech task force. Today we want to talk about two legislative packages recently proposed by the European Commission. First, regulation on Markets in Crypto Assets – or MiCA – and second, a pilot regime for market infrastructures based on distributed ledger technology. Both proposals together are 206 PDF pages full of content and thought leadership. Can ...
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We’re the first neo-bank to break-even, says Starling Bank

November 26, 2020

AltFi | Daniel Lanyon | Nov 20, 2020 A boom in business banking has helped boost Starling Bank’s coffers. Strong momentum in new customer accounts and increasing revenues have prompted digital bank Starling to break even, according to a trading update for the three months to 31 October. Starling Bank, which was launched by Anne Boden five years ago, is the first ‘neo-bank’ to reach this milestone, the company said. In October Starling hit 1.42 million retail accounts compared to 827k, an increase of 71.7 per cent. Over the same period business accounts were the standout growth area with an increase of 245 per cent, from 74,000 to 256,000. Business accounts saw a 500 per cent increase in total deposits with the average amount held by SMEs also going up. Starling now has total customer deposits of c.£4bn. This has all helped Starling generate a positive operating profit of £0.8m for the month of October 2020, which represents £10.1m on an annualised basis. See:  Neobanks Can’t Fight the COVID-19 “Flight to Quality” Investment Crowdfunding Advocates Join to Launch New Fintech Startup GUARDD in Move to Boost Secondary Markets for Exempt Securities In total Starling generated total operating income of £9m for the month of October 2020. This, it adds, translates to an annualised revenue ...
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Investment Crowdfunding Advocates Join to Launch New Fintech Startup GUARDD in Move to Boost Secondary Markets for Exempt Securities

November 25, 2020

Crowdfund Insider | JD Alois | Nov 24, 2020 The exempt securities marketplace can be arcane and challenging to manage for entrepreneurs seeking to raise capital. The advent of online capital formation has helped to democratize access to capital as well as streamline securities offerings but hurdles do remain. A new startup co-founded by several prominent names in the investment crowdfunding industry seeks to facilitate secondary transactions for private securities. Sherwood “Woodie” Neiss, co-founder of Crowdfund Capital Advisors, Doug Ellenoff, Managing Partner of Manhattan law firm of Ellenoff, Grossman, and Schole, and Jim Dowd, founder and CEO of North Capital Private Securities, have joined to launch GUARDD:  A Fintech designed to support secondary market trading for private company securities, including digital assets/tokens to facilitate compliance with both federal transparency requirements and state blue sky laws. According to a note from the company, GUARDD enables the necessary disclosure and dissemination of private company information for investors, regulators, and market participants.  This allows issuers to comply with federal and state financial disclosure requirements related to the trading of private company securities in secondary markets, thus addressing a challenge regarding exempt securities that tend to be illiquid. Overall, more liquidity can help price discovery ...
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China’s Draft Anti-Monopoly Guidelines on Platform Economy

November 25, 2020

Paul | Weiss | Nov 18, 2020 China’s competition regulator, the State Administration for Market Regulation (“SAMR”), issued a consultation draft of the Anti-Monopoly Guidelines on the Sector of Platform Economies (the “Draft Guidelines”) on November 10, 2020. This marks China’s first major step in formulating a comprehensive regime to regulate competition among platform businesses operated on the Internet (the “Platform Economy”) and signals SAMR’s changed regulatory priorities with a focus on anti-competitive behavior in the Platform Economy. The Draft Guidelines attempt to address perceived shortcomings in applying traditional antitrust analysis to the Platform Economy. SAMR has drawn upon the experience of regulators and academics in this emerging area and attempted to consolidate the lessons learnt in various jurisdictions. The Draft Guidelines set out in detail the considerations that may be taken into account and the defenses that may be available, providing some guidance to platform businesses on how to achieve compliance. See:  China Stops Jack Ma’s $35 Billion Ant IPO From Going Ahead DOJ files antitrust lawesuit challenging Visa’s $5.3 billion acquisition of Plaid While the Draft Guidelines are brief in length, only 23 provisions in total, they are wide‑ranging in their scope. Rather than an exhaustive review of ...
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China Says It Remains Open to the World, but Wants to Dictate Terms

November 25, 2020

The New York Times | Steven Lee Myers and Keith Bradsher | Nov 24, 2020 China’s leader, Xi Jinping, is pursuing a strategy to make the country’s economy more self-sufficient, while making other places more dependent on it than ever. After Australia dared last spring to call for an investigation into the origins of the coronavirus, China began quietly blocking one import after another from Australia — coal, wine, barley and cotton — in violation of free-trade norms. Then this month, with no clear explanation, China left $3 million worth of Australian rock lobsters dying in Shanghai customs. Australia nonetheless joined 14 Asian nations and just signed a new regional free-trade deal brokered by China. The agreement covers nearly a third of the world’s population and output, reinforcing China’s position as the dominant economic and diplomatic power in Asia. See:  What to expect from Biden-Harris on tech policy, platform regulation, and China It’s globalization with Communist characteristics: The Chinese government promotes the country’s openness to the world, even as it adopts increasingly aggressive and at times punitive policies that force countries to play by its rules. With the United States and others wary of its growing dominance in areas like ...
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Top 5 legal considerations every tech entrepreneur should know

November 25, 2020

Gowling WLG | Tara Amiri-Khaledi | Nov 24, 2020 As an entrepreneur trying to get your business off the ground, there are many factors to think about and the legal "stuff" may easily be forgotten. In this article, we touch on the top 5 considerations entrepreneurs need to think about when starting out. Term Sheets Once you have structured your business, you will have your idea tested (hopefully) and you will need capital. One typical way is to look for parties that will invest in start-ups such as angel or venture capital investors ("VC"). At this point, you will hear the term "Term Sheet" a lot. See:  Debt vs. Equity Financing: Pros And Cons For Entrepreneurs 7 Types of Investors to Avoid Like The Plague When Trying To Raise Capital For Your Startup Convertible Debt vs. Equity: Which Is Right for Your Startup? At its simplest form a term sheet is a summary big picture document of key terms agreed upon between the entrepreneur and the VC in contemplation of a financing and will cover, at a minimum, "economics issues" (valuation of the company, i.e. how much money for what percentage of the company) and "control issues" (who will run ...
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Payments Startup Stripe in Talks for Funding at $70 Billion Valuation or More

November 25, 2020

Bloomberg | Katie Roof and Scott Deveau | Nov 24, 2020 Private financial technology business Stripe Inc. is in talks to raise a new funding round valuing it higher than its last private valuation of $36 billion, according to people familiar with the matter. The valuation being discussed could be more than $70 billion or significantly higher, at as much as $100 billion, said one of the people, who asked not be identified because the matter is private. That would make it currently the most valuable venture-backed startup in the U.S., according to CB Insights. Stripe’s software, which competes with Square Inc. and Paypal Holdings Inc., is used by businesses to accept payments. According to its website, Stripe’s customers include Amazon.com Inc., Salesforce.com Inc., Lyft Inc. and Instacart Inc. See:  Lightspeed and Stripe Partner to Launch New Payments Feature Stripe, the world’s most valuable private fintech company, is getting into lending The company has benefited during the pandemic with more shoppers turning to e-commerce. It’s gone on offense during the downturn this year, starting a card-issuing service for U.S. clients and agreeing to acquire a Nigerian startup to expand in Africa. Brother Founders Irish brothers John and Patrick Collison founded Stripe ...
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