MALTAway and FUZE, Communications is one of the last really big market opportunities

Why Boston Startup ThinkingPhones Renamed Itself Fuze After Raising $112 Million

MALTA way is proud of the technological partnership with FUZE the ex ThinkingPhones (USA) to promote a fully cloud and unified communication platform

Steve Kokinos says renaming a startup after eleven years isn’t as hard as it might seem. His startup ThinkingPhones has spent a decade growing into one of the largest startupsin the Boston tech scene, with more than 700 employees worldwide. But as ThinkingPhones updates its communications focus beyond just the phone part, the name no longer fit. “We’ve been ThinkingPhones for a longtime, so there is obviously some emotional attachment, but overall we’re just excited,” Kokinos says. A major new fundraise to go with the name probably helps.

The startup formerly known as ThinkingPhones has raised $112 million in a new Series E funding round from Summit Partners and existing investors Bessemer Venture Partners and Technology Crossover Ventures. The round brings Fuze’s total funding to $200 million to date as it’s found a fit in the market providing Internet-connected communications to big businesses.

The ThinkingPhones story started more sleepily. Kokinos and cofounder Derek Yoo bootstrapped the startup in Cambridge, Massachusetts, one of several tackling the opportunity of improving voice communications by using the Internet. At first, progress was slow. But as more companies moved their computing to the cloud, the idea of doing the same with their voice and messaging tools became an easier sell. ThinkingPhones began to pick up more traction in 2012, when it raised its first outside dollars, and has experienced 100% or better growth each year since.

How ThinkingPhones became Fuze happened more quickly. As ThinkingPhones expanded to the West Coast and Europe, it came across a startup with its own significant venture backing that had also shifted its focus, but to video conferencing for businesses. The startup, Fuze, was also attracting the same type of customers as ThinkingPhones. In November 2015, ThinkingPhones acquired Fuze. And in February, the combined company took the acquired one’s name.

The market is still early, Kokinos says, with 400 million enterprise-class businesses using voice tools and only 5% of their employees doing so over the Internet. “Communications is one of the last really big market opportunities,” the cofounder says.

The combined Fuze plans to use the funding round to hire aggressively in sales and marketing as well as product. Kokinos notes the company of 700 had just 200 people a year ago. Much of that expansion will be outside the U.S. as Fuze boosts its presence in its European offices and looks to new markets.

Fuze is by no means the only company tackling the young “unified communications” market. Startups like Switch have raised funding and acquired major customers of their own, while the legacy providers like Cisco aren’t exactly sitting around idly as their market share as the upstarts attack their market share. New board member Bruce Evans of Summit says his firm made such a big bet on Fuze particularly because of its focus on the large enterprise customer while competitors fight for small and medium-sized businesses. “I think this is headed to a $40 billion-plus market in the next few years,” Evans says.

The funding likely values ThinkingPhones in the hundreds of millions, if not close or at the billion-dollar “unicorn” status so popular in 2015 but rapidly falling out of fashion in the new year as some later-stage startups struggle to grow into their price tags. Fuze declined to comment on its new valuation. “Our view is that the whole unicorn thing is overdone at this point,” Kokinos says. “We’re one of the fastest growing businesses in Boston, we’ve raised a lot of capital and we feel good about the business. It’s okay for people to wonder.”

Fuze’s CEO does hope that the company’s raised enough money to get the company to profitability without needing a new raise—or a third name. “We may have an IPO on the horizon,” he says. “But we’re not in any rush there.”

MALTA 4 ICT business and Jobs,  Mobility crucial to solving technology-led jobs crisis

MALTA 4 ICT business and Jobs,  Mobility crucial to solving technology-led jobs crisis

Millions of jobs stand to be lost thanks to advances in technology such as robotics, artificial intelligence and 3D printing, according to the World Economic Forum (WEF), but mobility is one of the key solutions to the growing problem.

To Relocate you or your business in Malta, MALTAway is the way

The WEF’s Future of Jobs report, released alongside the organisation’s annual meeting in Davos, says that more than seven million jobs are at risk from redundancy, automation or disintermediation thanks to technological change.

The report, which covers 15 of the world’s largest economies including Australia, Brazil, China, France, Germany, India, Italy, Japan, Mexico, South Africa, Turkey, the United Kingdom and the United States, predicts that the losses will occur by 2020.

White collar office and administrative roles will be worst hit. The losses will be offset somewhat by the creation of 2.1 million new jobs in fields such at computing, architecture and engineering.

“These predictions are likely to be relatively conservative and leave no room for complacency,” the WEF said in its announcement.

Women will fare worse than men, the WEF said. While the burden of job losses from the so-called ‘fourth industrial revolution’ will hit men and women roughly equally (52 per cent and 48 per cent respectively), the WEF adds that, “the fact that women make up a smaller share of the workforce means that today’s economic gender gap may widen even further than the current 40per cent.”

Women will lose five jobs for every job gained, compared to men losing three jobs for every job gained.

This can be partly explained by the fact that some of the roles at risk from automation and disintermediation, such as office and admin positions, are disproportianately performed by women.

Women are also under-represented in the job growth areas, however, with the lack of women in science, technology, engineering and maths (STEM) fields an ongoing issue.

There was some cause for optimism, though. The WEF said that “According to our survey, while traditionally employers have struggled to retain women colleagues beyond the junior level, respondents expect to see an increase of 7-9 percentage points in the share of women in mid-level positions by 2020 and an 8-13 percentage point rise in the number of senior positions being held by women as retention becomes ever more important in the face of key global talent shortages.”

The three sectors that will see the strongest increases in numbers of female workers between now and 2020 are energy (22 per cent – 30 per cent); basic industries and infrastructure (20 per cent – 27 per cent) and healthcare (41 per cent – 48 per cent).

Healthcare, however, also falls into the category of worst-hit sectors in for jobs thanks to technological disruption. The healthcare industry is likely to see the greatest negative impact in terms of jobs over the next five years, followed jointly by energy and financial services.

Unsurprisingly, the sector expected to create the most new jobs over the next five years is information and communications technology, followed by professional services and media.

“Without urgent and targeted action today to manage the near-term transition and build a workforce with futureproof skills, governments will have to cope with ever-growing unemployment and inequality, and businesses with a shrinking consumer base,” said Klaus Schwab, founder and executive chairman of the World Economic Forum.

Supporting mobility was listed as one of the most popular practices for dealing with the huge changes. Employers also said that re-skilling workforces, job rotation, attracting female and foreign talent and offering apprenticeships were key strategies. Hiring more short-term or virtual workers are much less popular responses.

Furthermore, companies that report satisfaction in their future workforce strategy are twice as likely to be targeting female talent and significantly less likely to be planning to hire more short-term workers.

The biggest driver of change across all industries is the changing nature of work itself, specifically in terms of ‘anytime, anywhere’ work leading to companies breaking up tasks in new ways and fragmenting jobs, as well the spread of internet-based service models. The so-called ‘gig economy’ is the most visible manifestation of this change.

There are causes for optimism, however, as fields such as big data, mobile internet, robotics and the ‘Internet of Things’ create new employment opportunities. The biggest expected drivers of employment creation, however, are socio-economic and demographic. Specifically, survey respondants said that young demographics and rising middle classes in emerging markets as well as the growing economic power and aspirations of women in developing countries present opportunities for job creation.

Are US Stocks Overvalued?

Are US Stocks Overvalued?

US stock prices rose for seven years in a row through late last year. During that time, the US economy repeatedly underperformed expectations. Popular indicators of stock valuation are above historical norms, even after the declines of the past few weeks. It is therefore no surprise to hear some analysts say stocks are overvalued and we are due for a substantial adjustment. (Somewhat ironically: One of the websites that give (reliable) data on current and past earnings, stock prices, and interest rates, has an ad banner that reads: “Dow to drop 80% in 2016.”)

Are stocks obviously overvalued? The answer is no, and the reason is straightforward. While growth has indeed been weaker than forecast, the rate of return on bonds has also been revised downwards. And what matters for the valuation of stocks is the relation between future growth and future interest rates. Put another way, the equity premium, the difference between the expected rate of return on stocks and the expected rate of return on bonds, has if anything increased relative to where it was before the crisis.

Let’s start with what fuels the fears of some analysts. Perhaps the most widely used gauge of stock valuation is the price-earnings (P/E) ratio, the ratio of a stock’s price to the annual corporate earnings associated with that stock. Figure 1 displays two measures of the average P/E ratio for the firms in the S&P 500 composite equity index. The dotted line is the standard P/E ratio based on reported earnings over the previous four quarters. Because of the unprecedented collapse in earnings during the Great Recession, this P/E measure soared to more than 100 in 2009, literally off the chart. The standard P/E measure reached nearly 22 late last year and is currently around 20, a bit higher than its 60-year average of 19.

A popular alternative measure proposed by Robert Shiller of Yale University uses a 10-year average of past earnings (adjusted for inflation) in order to smooth out temporary fluctuations (the solid line in figure 1). The Shiller P/E measure eliminates the massive spike in 2009 and allows the fall in stock prices that year to show through. Although the two P/E measures were often close to each other in the past, the Shiller measure has been consistently higher than the standard measure since 2010.1 The Shiller P/E ratio reached 26 late last year and is currently around 24, compared with a 60-year average of 20. This elevated Shiller P/E measure is commonly cited as an indicator that stocks may be overpriced,including by Shiller himself.

Figure 1

Note: The Shiller measure adjusts lagged earnings for inflation. The standard measure peaked at 122 in 2009Q2.

Source: Haver Analytics. 2016Q1 is based on January only.

As figure 1 shows, the deviations of the P/E from its historical average are in fact quite modest. But suppose that we see them as significant, that we believe they indicate the expected return on stocks is unusually low relative to history. Is it low with respect to the expected return on other assets? A central aspect of the crisis has been the decrease in the interest rate on bonds, short and long. According to the yield curve, interest rates are expected to remain quite low for the foreseeable future. The expected return on stocks may be lower than it used to be, but so is the expected return on bonds.

The way to make progress is to compute expected returns on stocks and bonds, and look at the equity premium, pre- and post-crisis. With this in mind, table 1 compares expected real returns on stocks, constructed in three different ways, with expected real returns on bonds, constructed in two different ways. To smooth out temporary fluctuations, the measures are based on averages of four quarterly values in each year. We compare expected returns as of 2015 with those of 2005, a time when there was little concern about overvaluation in stock prices. Our results would be similar if we had compared with any year in the mid-2000s.

Table 1. Measures of expected real returns on stocks and bonds

2005 2015

Real equity (S&P 500) returns
Standard E/P 5.4 4.7
Shiller E/P 3.8 3.9
Dividend Yield + Growth 1.8 + 3.1 = 4.9 2.1 + 2.2 = 4.3
Real 10-year bond returns
Nominal – Survey (I10– infe10) 1.8 0.0
TIPS 1.8 0.5
Equity premium over nominal bond
Standard E/P – (I10– infe10) 3.6 4.7
Shiller E/P – (I10– infe10) 2.0 3.9
Yield + Growth – (I10– infe10) 3.1 4.3
Equity premium over indexed bond
Standard E/P – TIPS 3.6 4.2
Shiller E/P – TIPS 2.0 3.4
Dividend Yield + Growth – 3.1 3.8

Note: Data are averages over the four quarters in each year. “Survey” is the projected inflation rate over the next 10 years from the Survey of Professional Forecasters. TIPS refers to Treasury Inflation-Protected Securities. Dividend growth rate refers to the long-term GDP growth forecast.Sources: Haver Analytics, Consensus Forecasts surveys, and authors’ calculations.

The first measure is the earnings-price (E/P) ratio, i.e., the reciprocal of the P/E ratio. E/P reflects the real, or inflation-adjusted, rate of return an investor can expect on holding stocks over a long period of time under the assumptions that (1) stock prices rise with overall inflation (reflecting the “real” nature of corporate assets) plus any earnings that are not passed on to investors as dividends, and (2) earnings grow in proportion to the value of corporate assets.2 The first line reports the standard E/P ratio, the second line the Shiller adjusted E/P ratio. The measure in the third line focuses on dividends, and uses the Gordon formula, which states that the expected return on a stock is equal to the dividend yield plus a weighted average of future growth of dividends per share. The computation in the table assumes that dividends per share will grow at the same rate as GDP, and uses long-term GDP growth forecasts fromConsensus Forecasts surveys.3

We measure the real return to holding a bond in two ways. The first is the nominal yield to maturity minus expected inflation. We look at a 10-year bond, but the results would be similar if longer maturity bonds were used. We use as a measure of expected inflation the 10-year projection from the Survey of Professional Forecasters conducted quarterly by the Federal Reserve Bank of Philadelphia. The second is the yield to maturity on a 10-year inflation-indexed bond, or TIPS.

The last two sets of rows give the equity premium, defined as the difference between the expected rate of return on stocks and the expected rate of return on bonds. In all six cases, the equity premium is higher in 2015 than in 2005. Put another way, stock prices were more undervalued in 2015 than they were in 2005, and after the decline of the past few weeks, even more so.4

You may disagree with the assumptions about dividend growth, and find them wildly optimistic. Or you may disagree with expectations embodied in the yield curve, and believe that real interest rates will be much higher in the future, reflecting higher real rates or higher term premiums.5 But, if you accept current forecasts, and you accept the notion that stocks were not overvalued in the mid-2000s, then you have to conclude that stocks are not overvalued today. If anything, the evidence from 150 years of data is that the equity premium tends to be high after a financial crisis, and then to slowly decline over the following decades, presumably as memories of the crisis gradually dissipate. If this is the case, then stocks look quite attractive for the long run. Obviously, anything can happen, be it further bad news on growth or sharp increases in real interest rates. But, in terms of their expected value, stocks are not overpriced today.


1. The Shiller measure is currently higher than the standard measure mainly because the earnings collapse of 2009 is holding down its denominator. The earnings collapse of 2009 was so large and so unusual that, even when averaged over a period of 10 years, it may provide a distorted view of trend earnings.

2. Of course, stock prices are volatile and can rise by much more or less than implied by these assumptions over periods as long as five or ten years, but in the long run any deviation from these assumptions is not sustainable.

3. We have explored more sophisticated constructions for expected dividend growth, based on the time series behavior of dividends and GDP. Results are very similar to those used in the table.

4. We note that anyone who bought stocks in 2005 and held them to 2015 would have earned an average annual return more than 3 percentage points higher than that on holding a 10-year nominal bond.

5. There is evidence that the Federal Reserve’s bond-buying programs have lowered term premiums in bonds, but not so much as to lower expected returns in long-term bonds below those of short-term bonds. (This estimate of the 10-year term premium is close to zero.) The Fed plans to reduce its bond holdings slowly over many years, so any future rise in term premiums is likely to be gradual.