Technology

Reporting the news isn&t illegal, unless you&re in Myanmar. The Southeast Asian country this week sentenced two reporters from Reuters to seven years in jail in response to an investigative report that uncovered atrocities committed againstRohingya Muslims by the army.

Wa Lone and Kyaw Soe Oo, the two Reuters staffers, have been in custody since December. They were arrested for possession of official government documents which had been given to them by a member of the police force as part of the investigation. That puts them in violation of the colonial-time Official Secrets Act which bars civilians from accessing government information.

The landmark decision has been derided worldwide. Critics argue that the Reuters reporters are being made an example of because they surfaced the untold story of an atrocity that involvedthe military, which controlled Myanmar for nearly 50 years until general elections were introduced in 2015.

The ethnic tension for theRohingya in Myanmar has gainedglobal awareness in recent years, but less is known about the role that the military has played in both escalated tensions and also through outright atrocities. The Reuters report which the duo contributed to detailed how members of the army, alongside Buddhist villagers, killed10 Rohingya men in acoastal village.

&Todayappalling verdict has condemned two innocent men to years behind bars. Wa Lone and Kyaw Soe Oo face lengthy jail terms simply because they dared to ask uncomfortable questions about military atrocities in Rakhine State. These convictions must be quashed, and both men immediately and unconditionally released,&Tirana Hassan, Amnesty InternationalDirector of Crisis Response, said in a statement.

&The outrageous convictions of the Reuters journalists show Myanmar courts& willingness to muzzle those reporting on military atrocities. These sentences mark a new low for press freedom and further backsliding on rights under Aung San Suu Kyigovernment,& said Bill Adams, Human Rights WatchAsia director.

Latin American small businesses just got a big boost with a new commitment for a $200 million lending joint venture between the Bogota-based startup Portal Finance and Latin Americalargest financial services institution, BTG Pactual.

For Portal Finance, the deal with BTG caps a meteoric rise, which has seen the company raise $1.5 million at a $60 million valuation and move from a small $5 million lending pilot to a $200 million deal in the span of two years.

&A year ago we were four guys in a closet. Now we&re 70 people,& says Diego Caicedo, the companychief executive and co-founder.

The companysuccess is a testament to the changing fortunes of many Latin American economies and the role that venture capital is playing. For the last several years Colombiaeconomic fortunes have been rising since the successful conclusion of peace talks with the countrylargest rebel group, the Revolutionary Armed Forces of Colombia, brought an end to 50 years of civil war.

Meanwhile, investment firms like Magma Partners, which led the pre-seed and seed rounds for Portal Finance are linking innovative companies in places like Buenos Aires, Bogota, and Lima with Chilestable economic base to provide a market where innovative startups can gain traction.

Italso a sign of the significant demand for small business loans across Latin America. In the aftermath of the 2008 global financial crisis small businesses found their credit lines pulled as banks refused to take on the risks associated with lending to small businesses.

That left businesses with only supply chain financing and factoring as the only alternatives. With interest rates that are typically between 20% and 50% annually. These rates are being charged even though invoices can be used as collateral and default rates hover at around 1% per year.

Portal Finance, and other companies like it, solve the problem by giving banks a better window into their borrowers finances by tackling the problem from three ways. The first is by working with factoring firms who were the lenders of last resort to companies who needed cash for operations and improvement and could not take out loans or raise equity financing. Second, the company has a window into the receivables of small businesses through the large corporate customers they supply. Finally, the company has reached out to the small businesses themselves to collect additional data, giving lenders a complete view of the borrowers& financing.

That &full-stack& approach to small business financial statements was the vision that Caicedo had for his company from the moment he and his co-founders Felipe Puntarelli and Nicholas Bohorquez,took their first financing — $50,000 from Magma Partners (a Latin American focused venture capital firm).

The opportunity was so great that he was able to convince his eventual Charlie Cliff, a former defense contractor in the aerospace industry, to come down to Bogota without knowing a single word of Spanish to help jumpstart the business as Chief Technology Officer. Cliff, who was connected to Caicedo through Magma Partners& managing director and co-founder Nathan Lustig, flew down after three phone calls.

Diego Caicedo and Charlie Cliff, the chief executive and chief technical officers for Portal Finance

Caicedo and Cliff first tackled the problem for the factoring firms that would lend money to businesses off of the projected income for accounts receivable. It was the first product that Portal Finance brought to market when it launched in 2016.

By 2017, it expanded its products to include an offering for large corporations to help them manage their payments to small businesses.

With that information in hand, Caicedo reached out to financial services firms to set up a lending operation. BTG Pactual agreed to a pilot in Chile in January, and expanded to the $200 million lending joint venture in July that covers both Chile and Colombia.

Caicedo called the program the largest investment in a fintech startup by a Latin American financial services firm. So far, the company has issued 200 loans in Chile and 500 in Colombia. On the heels of that investment, Caicedo says that the company expects to close an additional $2.5 million in financing soon and will be profitable by the end of November.

2018 has been an incredibly strong year for IPOs, particularly in the technology sector. Among the brand names this year that have made their public debuts are Dropbox, Xiaomi, Spotify (through a direct listing), DocuSign, Carbon Black, Zuora, among many, many others.

Given the strength of these numbers through the first eight months of this year, the key question for the public markets is whether the year will close out just as strongly or die in a whimper.

Ita decidedly mixed picture right now. The positives for the tech industry are an extremely robust pipeline of unicorns and growth-stage companies as well as soaring stock prices and strong economic data encouraging investors to seek additional risk in new issues in order to drive returns.

Yet, there are serious headwinds operating against new issues that could increase friction for startups for the remainder of the year. The first is that there doesn&t look like there will be a marquee startup debuting this fall to drive excitement. China trade tensions could complicate the picture for Chinese tech companies, which have been major drivers of the IPO pipeline this year. And then there is the on-going questions of alternatives — direct listings and potentially wider usage of private investment with new rules being discussed by the SEC.

Lyfting up the IPO picture

One major question hovering over the fall is whether any of the largest private tech companies by valuation will decide to go public. So far, Eventbrite and SurveyMonkey have filed their S-1s with the SEC to debut, but the two are targeting low billions for their market caps.

While companies generally demur on questions around their IPO schedules, both Uber and Airbnb look ill-prepared to do a public debut in the short run. Uber just hired a CFO — itfirst in years — a little more than a week ago. Airbnb has been more blunt, commenting that it is targeting 2019 or 2020 for a public launch. Other highly-valued companies like SpaceX, WeWork, and Palantir also don&t look set to IPO in the short term. Lyft has recently hired a new advisor, and could target a launch early in 2019, beating Uber in the process.

This is all a bit shocking considering the robust economic picture of the public markets. These advantageous windows don&t stay open for long, and ita bit surprising how few of these large companies are prepared to take advantage of the environment. That could leave companies like Dropbox in March and Xiaomi in June as the largest tech issues of 2018.

Itcertainly been received wisdom in the Valley for the past decade that tech startups should delay going public as much as private investors will allow it. But the fact that executive teams haven&t been rounded out and revenues and expenses aren&t ready for scrutiny should be a note of caution for startup founders and venture capitalists to work harder to better prepare their companies.

The China challenge

Chinese IPOs are facing tough policy challenges. Photo by ANTHONY WALLACE / AFP/Getty Images

Chinese IPOs had been expected to be a major force in the IPO pipeline all year. Now, with trade tensions flaring and the Chinese Communist Party changing its policies, that robust pipeline is staring to look significantly less rosy.

The tariffs are easy to understand. The Trump administration has said recently that it intends to put tariffs on another $200 billion of Chinese goods. Given the constantly changing scale and scope of these tariffs, the resulting uncertainty has clouded Chinese capital markets and made public debuts much more complicated.

The debut of Chinese Depository Receipts (CDRs) earlier this year was also expected to drive attention to Chinese tech stocks by allowing mainland Chinese investors to invest in companies traded on overseas exchanges like NASDAQ.

Yet, policy shifts by Beijing have undermined that surge of interest. The country is in the midst of a video game and entertainment crackdown, causing Tencent to face a profit drop for the first time in more than a decade, and creating a cascade of concern for other high-flying Chinese consumer tech companies. Other policies around corporate control and governance are complicating the picture as well.

We will quickly learn how the markets perceive these challenges when NIO, a Chinese automotive startup, and Meituan-Dianping, a consumer Yelp and Groupon-like platform, go public in the next few weeks. NIO is targeting a valuation of $8 billion, and Meituan is targeting a whopping $55 billion in its debut.

Given the rout around XiaomiIPO earlier this summer, a strong performance by either one of these companies would put some wind in the sails of other Chinese unicorns and could help them overcome some of the policy changes that are dampening the enthusiasm in the equity markets.

Further public delays

The last macro wrinkle for the fall is around a circulating discussion at the SEC of expanding access to private companies to the general public. SEC chairman Jay Clayton recently asked whether ownership rules could be expanded for later-stage private companies so that retail investors could have access to pre-IPO issues.

Like Spotifydirect listing process earlier this year, expanding the pool of capital that can invest in private companies reduces the need to conduct a classic IPO. It may not literally &kill& the IPO, but it could certainly dampen enthusiasm for the public markets, which are already lacking excitement for many CEOs in the first place.

Any changes to ownership rules would likely take significant time to complete. Nonetheless, rule changes could affect the the major tech companies who are delaying to late 2019 or 2020 and allow them to stave off the public markets for just a bit more.

Altogether, the economic environment couldn&t be more robust for companies to go public, but a diverse set of macro factors are clouding the picture, and that could make the rest of 2018 much less robust for IPOs than the first eight months.