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President Bolsonaro should boost Brazil’s entrepreneurial ecosystem

Romero Rodrigues
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Romero Rodrigues is a managing partner at Redpoint eVentures, the Brazilian-focused arm of the Silicon Valley venture firm Redpoint.

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In late October following a significant victory for Jair Bolsonaro in Brazil’s presidential elections, the stock market for Latin America’s largest country shot up. Financial markets reacted favorably to the news because Bolsonaro, a free-market proponent, promises to deliver broad economic reforms, fight corruption and work to reshape Brazil through a pro-business agenda. While some have dubbed him as a far-right “Trump of the Tropics” against a backdrop of many Brazilians feeling that government has failed them, the business outlook is extremely positive.
When President-elect Bolsonaro appointed Santander executive Roberto Campos as new head of Brazil’s central bank in mid-November, Brazil’s stock market cheered again with Sao Paulo’s Bovespa stocks surging as much as 2.65 percent on the day news was announced. According to Reuters, “analysts said Bolsonaro, a former army captain and lawmaker who has admitted to having scant knowledge of economics, was assembling an experienced economic team to implement his plans to slash government spending, simplify Brazil’s complex tax system and sell off state-run companies.”
Admittedly, there are some challenges as well. Most notably, pension-system reform tops the list of priorities to get on the right track quickly. A costly pension system is increasing the country’s debt and contributed to Brazil losing its investment-grade credit rating in 2015. According to the new administration, Brazil’s domestic product could grow by 3.5 percent during 2019 if Congress approves pension reform soon. The other issue that’s cropped up to tarnish the glow of Bolsonaro coming into power are suspect payments made to his son that are being examined by COAF, the financial crimes unit.
While the jury is still out on Bolsonaro’s impact on Brazilian society at large after being portrayed as the Brazilian Trump by the opposition party, he’s come across as less authoritarian during his first days in office. Since the election, his tone is calmer and he’s repeatedly said that he plans to govern for all Brazilians, not just those who voted for him. In his first speech as president, he invited his wife to speak first which has never happened before.
Still, according to The New York Times, “some Brazilians remain deeply divided on the new president, a former army captain who has hailed the country’s military dictators and made disparaging remarks about women and minority groups.”
Others have expressed concern about his environment impact with the “an assault on environmental and Amazon protections” through an executive order within hours of taking office earlier this week. However, some major press outlets have been more upbeat: “With his mix of market-friendly economic policies and social conservativism at home, Mr. Bolsonaro plans to align Brazil more closely with developed nations and particularly the U.S.,” according to the Wall Street Journal this week.
Based on his publicly stated plans, here’s why President Bolsonaro will be good for business and how his administration will help build an even stronger entrepreneurial ecosystem in Brazil:
Bolsonaro’s Ministerial Reform
President Temer leaves office with 29 government ministries. President Bolsonaro plans to reduce the number of ministries to 22, which will reduce spending and make the government smaller and run more efficiently. We expect to see more modern technology implemented to eliminate bureaucratic red tape and government inefficiencies.
Importantly, this will open up more partnerships and contracting of tech startups’ solutions. Government contacts for new technology will be used across nearly all the ministries including mobility, transportation, health, finance, management and legal administration – which will have a positive financial impact especially for the rich and booming SaaS market players in Brazil.
Government Company Privatization
Of Brazil’s 418 government-controlled companies, there are 138 of them on the federal level that could be privatized. In comparison to Brazil’s 418, Chile has 25 government-controlled companies, the U.S. has 12, Australia and Japan each have eight, and Switzerland has four. Together, Brazil-owned companies employ more than 800,000 people today, including about 500,000 federal employees. Some of the largest ones include petroleum company Petrobras, electric utilities company Eletrobras, Banco do Brasil, Latin America’s largest bank in terms of its assets, and Caixa Economica Federal, the largest 100 percent government-owned financial institution in Latin America.
The process of privatizing companies is known to be cumbersome and inefficient, and the transformation from political appointments to professional management will surge the need for better management tools, especially for enterprise SaaS solutions.
STEAM Education to Boost Brazil’s Tech Talent
Based on Bolsonaro’s original plan to move the oversight of university and post-graduate education from the Education Ministry to the Science and Technology Ministry, it’s clear the new presidential administration is favoring more STEAM courses that are focused on Science, Technology, Engineering, the Arts and Mathematics.
Previous administrations threw further support behind humanities-focused education programs. Similar STEAM-focused higher education systems from countries such as Singapore and South Korea have helped to generate a bigger pipeline of qualified engineers and technical talent badly needed by Brazilian startups and larger companies doing business in the country. The additional tech talent boost in the country will help Brazil better compete on the global stage.
The Chicago Boys’ “Super” Ministry
The merger of the Ministry of Economy with the Treasury, Planning and Industry and Foreign Trade and Services ministries will create a super ministry to be run by Dr. Paulo Guedes and his team of Chicago Boys. Trained at the Department of Economics in the University of Chicago under Milton Friedman and Arnold Harberger, the Chicago Boys are a group of prominent Chilean economists who are credited with transforming Chile into Latin America’s best performing economies and one of the world’s most business-friendly jurisdictions. Joaquim Levi, the recently appointed chief of BNDES (Brazilian Development Bank), is also a Chicago Boy and a strong believer in venture capital and startups.
Previously, Guedes was a general partner in Bozano Investimentos, a pioneering private equity firm, before accepting the invitation to take the helm of the world’s eighth-largest economy in Brazil. To have a team of economists who deeply understand the importance of rapid-growth companies is good news for Brazil’s entrepreneurial ecosystem. This group of 30,000 startup companies are responsible for 50 percent of the job openings in Brazil and they’re growing far faster than the country’s GDP.
Bolsonaro’s Pro-Business Cabinet Appointments
President Bolsonaro has appointed a majority of technical experts to be part of his new cabinet. Eight of them have strong technology backgrounds, and this deeper knowledge of the tech sector will better inform decisions and open the way to more funding for innovation.
One of those appointments, Sergio Moro, is the federal judge for the anti-corruption initiative knows as “Operation Car Wash.” With Moro’s nomination to Chief of the Justice Department and his anticipated fight against corruption could generate economic growth and help reduce unemployment in the country. Bolsonaro’s cabinet is also expected to simplify the crazy and overwhelming tax system. More than 40 different taxes could be whittled down to a dozen, making it easier for entrepreneurs to launch new companies.
In general terms, Brazil and Latin America have long suffered from deep inefficiencies. With Bolsonaro’s administration, there’s new promise that there will be an increase in long-term infrastructure investments, reforms to reduce corruption and bureaucratic red tape, and enthusiasm and support for startup investments in entrepreneurs who will lead the country’s fastest-growing companies and make significant technology advancements to “lift all boats.”

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Global VC market sees highest-ever concentration of supergiant dollar volume in Q4 2018

Jason Rowley
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Jason Rowley is a venture capital and technology reporter for Crunchbase News.

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SoftBank’s Vision Fund inches closer to $100B
The top 10 cities for $100M VC rounds in 2018 so far

For the global VC industry, 2018 was a supergiant year. Crunchbase projects that 2018 deal and dollar volume surpassed even the high-water mark left by the dot-com deluge and the drought that followed.
As covered in Crunchbase News’s global VC report reviewing Q4 and the rest of 2018, projected deal volume rose by 32 percent and projected dollar volume jumped 55 percent since 2017. For all of 2018, Crunchbase projects that well over $300 billion was invested in equity funding rounds across all stages of the venture-backed company life cycle. (This figure includes an estimate of transactions that were finalized in 2018, but won’t be publicized or added to Crunchbase until later. More on how Crunchbase projects data can be found at the end of that report.)
Is the market mostly buoyed by the billions raised by the biggest private tech companies, or is a rising tide in this extended aquatic metaphor raising all ships? In other words, is the bulk of the capital going to only a handful of the largest rounds? That’s what the numbers show.
In the global VC pool, capital is definitely sloshing toward rounds totaling $100 million or more. In the chart below, you can see what percent of reported global VC dollar volume was raised in “supergiant” rounds versus deals of smaller size.

In the year, over 56 percent of worldwide dollar volume can be attributed to supergiant rounds. With 61 percent of reported capital coming from supergiants in the final quarter, Q4 2018 has the highest concentration of supergiant dollar volume of any single quarter on record.
Big money weighs on the market
Following that same theme, the calendar year 2018 is the most concentrated year on record. In the chart below, we show how much capital was raised in non-supergiant (<$100 million) venture rounds over the past decade. (It’s basically the bottom part of the first chart, with the data aggregated over a longer period of time.)

For the first time in at least a decade (and likely ever) supergiant, $100 million+ VC rounds accounted for a majority of reported capital raised. So in summary: Q4 2018 had the highest share of supergiant VC dollar volume on record, and 2018 was the most concentrated year on record.

On the one hand, the results are not surprising, considering that the biggest-ever VC round (a preposterously large $14 billion Series C raised by Ant Financial) and several rivals for that top spot were closed last year. That big round made a big splash. It was the year of multi-billion-dollar global growth funds, SoftBank and scooter CEOs worth supergiant sums, at least on paper. But was it good for the smaller players too?
Seed and early-stage deal and dollar volume were both up in 2018, but then again, so is everything toward the end of a bull market cycle. The question is, when the bottom falls out, between supergiant and more normal-sized rounds, which has the farthest to fall?

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How open source software took over the world

Mike Volpi
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Mike Volpi is a general partner at Index Ventures. Before co-founding the firm's San Francisco office with Danny Rimer, Volpi served as the chief strategy officer at Cisco Systems.

It was just 5 years ago that there was an ample dose of skepticism from investors about the viability of open source as a business model. The common thesis was that Redhat was a snowflake and that no other open source company would be significant in the software universe.
Fast forward to today and we’ve witnessed the growing excitement in the space: Redhat is being acquired by IBM for $32 billion (3x times its market cap from 2014); Mulesoft was acquired after going public for $6.5 billion; MongoDB is now worth north of $4 billion; Elastic’s IPO now values the company at $6 billion; and, through the merger of Cloudera and Hortonworks, a new company with a market cap north of $4 billion will emerge. In addition, there’s a growing cohort of impressive OSS companies working their way through the growth stages of their evolution: Confluent, HashiCorp, DataBricks, Kong, Cockroach Labs and many others. Given the relative multiples that Wall Street and private investors are assigning to these open source companies, it seems pretty clear that something special is happening.
So, why did this movement that once represented the bleeding edge of software become the hot place to be? There are a number of fundamental changes that have advanced open source businesses and their prospects in the market.
David Paul Morris/Bloomberg via Getty Images
From Open Source to Open Core to SaaS
The original open source projects were not really businesses, they were revolutions against the unfair profits that closed-source software companies were reaping. Microsoft, Oracle, SAP and others were extracting monopoly-like “rents” for software, which the top developers of the time didn’t believe was world class. So, beginning with the most broadly used components of software – operating systems and databases – progressive developers collaborated, often asynchronously, to author great pieces of software. Everyone could not only see the software in the open, but through a loosely-knit governance model, they added, improved and enhanced it.
The software was originally created by and for developers, which meant that at first it wasn’t the most user-friendly. But it was performant, robust and flexible. These merits gradually percolated across the software world and, over a decade, Linux became the second most popular OS for servers (next to Windows); MySQL mirrored that feat by eating away at Oracle’s dominance.
The first entrepreneurial ventures attempted to capitalize on this adoption by offering “enterprise-grade” support subscriptions for these software distributions. Redhat emerged the winner in the Linux race and MySQL (thecompany) for databases. These businesses had some obvious limitations – it was harder to monetize software with just support services, but the market size for OS’s and databases was so large that, in spite of more challenged business models, sizeable companies could be built.
The successful adoption of Linux and MySQL laid the foundation for the second generation of Open Source companies – the poster children of this generation were Cloudera and Hortonworks. These open source projects and businesses were fundamentally different from the first generation on two dimensions. First, the software was principally developed within an existing company and not by a broad, unaffiliated community (in the case of Hadoop, the software took shape within Yahoo!) . Second, these businesses were based on the model that only parts of software in the project were licensed for free, so they could charge customers for use of some of the software under a commercial license. The commercial aspects were specifically built for enterprise production use and thus easier to monetize. These companies, therefore, had the ability to capture more revenue even if the market for their product didn’t have quite as much appeal as operating systems and databases.
However, there were downsides to this second generation model of open source business. The first was that no company singularly held ‘moral authority’ over the software – and therefore the contenders competed for profits by offering increasing parts of their software for free. Second, these companies often balkanized the evolution of the software in an attempt to differentiate themselves. To make matters more difficult, these businesses were not built with a cloud service in mind. Therefore, cloud providers were able to use the open source software to create SaaS businesses of the same software base. Amazon’s EMR is a great example of this.
The latest evolution came when entrepreneurial developers grasped the business model challenges existent in the first two generations – Gen 1 and Gen 2 – of open source companies, and evolved the projects with two important elements. The first is that the open source software is now developed largely within the confines of businesses. Often, more than 90% of the lines of code in these projects are written by the employees of the company that commercialized the software. Second, these businesses offer their own software as a cloud service from very early on. In a sense, these are Open Core / Cloud service hybrid businesses with multiple pathways to monetize their product. By offering the products as SaaS, these businesses can interweave open source software with commercial software so customers no longer have to worry about which license they should be taking. Companies like Elastic, Mongo, and Confluent with services like Elastic Cloud, Confluent Cloud, and MongoDB Atlas are examples of this Gen 3. The implications of this evolution are that open source software companies now have the opportunity to become the dominant business model for software infrastructure.

The Role of the Community
While the products of these Gen 3 companies are definitely more tightly controlled by the host companies, the open source community still plays a pivotal role in the creation and development of the open source projects. For one, the community still discovers the most innovative and relevant projects. They star the projects on Github, download the software in order to try it, and evangelize what they perceive to be the better project so that others can benefit from great software. Much like how a good blog post or a tweet spreads virally, great open source software leverages network effects. It is the community that is the source of promotion for that virality.
The community also ends up effectively being the “product manager” for these projects. It asks for enhancements and improvements; it points out the shortcomings of the software. The feature requests are not in a product requirements document, but on Github, comments threads and Hacker News. And, if an open source project diligently responds to the community, it will shape itself to the features and capabilities that developers want.
The community also acts as the QA department for open source software. It will identify bugs and shortcomings in the software; test 0.x versions diligently; and give the companies feedback on what is working or what is not. The community will also reward great software with positive feedback, which will encourage broader use.
What has changed though, is that the community is not as involved as it used to be in the actual coding of the software projects. While that is a drawback relative to Gen 1 and Gen 2 companies, it is also one of the inevitable realities of the evolving business model.
Linus Torvalds was the designer of the open-source operating system Linux.
Rise of the Developer
It is also important to realize the increasing importance of the developer for these open source projects. The traditional go-to-market model of closed source software targeted IT as the purchasing center of software. While IT still plays a role, the real customers of open source are the developers who often discover the software, and then download and integrate it into the prototype versions of the projects that they are working on. Once “infected”by open source software, these projects work their way through the development cycles of organizations from design, to prototyping, to development, to integration and testing, to staging, and finally to production. By the time the open source software gets to production it is rarely, if ever, displaced. Fundamentally, the software is never “sold”; it is adopted by the developers who appreciate the software more because they can see it and use it themselves rather than being subject to it based on executive decisions.
In other words, open source software permeates itself through the true experts, and makes the selection process much more grassroots than it has ever been historically. The developers basically vote with their feet. This is in stark contrast to how software has traditionally been sold.

Virtues of the Open Source Business Model
The resulting business model of an open source company looks quite different than a traditional software business. First of all, the revenue line is different. Side-by-side, a closed source software company will generally be able to charge more per unit than an open source company. Even today, customers do have some level of resistance to paying a high price per unit for software that is theoretically “free.” But, even though open source software is lower cost per unit, it makes up the total market size by leveraging the elasticity in the market. When something is cheaper, more people buy it. That’s why open source companies have such massive and rapid adoption when they achieve product-market fit.
Another great advantage of open source companies is their far more efficient and viral go-to-market motion. The first and most obvious benefit is that a user is already a “customer” before she even pays for it. Because so much of the initial adoption of open source software comes from developers organically downloading and using the software, the companies themselves can often bypass both the marketing pitch and the proof-of-concept stage of the sales cycle. The sales pitch is more along the lines of, “you already use 500 instances of our software in your environment, wouldn’t you like to upgrade to the enterprise edition and get these additional features?” This translates to much shorter sales cycles, the need for far fewer sales engineers per account executive, and much quicker payback periods of the cost of selling. In fact, in an ideal situation, open source companies can operate with favorable Account Executives to Systems Engineer ratios and can go from sales qualified lead (SQL) to closed sales within one quarter.
This virality allows for open source software businesses to be far more efficient than traditional software businesses from a cash consumption basis. Some of the best open source companies have been able to grow their business at triple-digit growth rates well into their life while maintaining moderate of burn rates of cash. This is hard to imagine in a traditional software company. Needless to say, less cash consumption equals less dilution for the founders.
Photo courtesy of Getty Images
Open Source to Freemium
One last aspect of the changing open source business that is worth elaborating on is the gradual movement from true open source to community-assisted freemium. As mentioned above, the early open source projects leveraged the community as key contributors to the software base. In addition, even for slight elements of commercially-licensed software, there was significant pushback from the community. These days the community and the customer base are much more knowledgeable about the open source business model, and there is an appreciation for the fact that open source companies deserve to have a “paywall” so that they can continue to build and innovate.
In fact, from a customer perspective the two value propositions of open source software are that you a) read the code; b) treat it as freemium. The notion of freemium is that you can basically use it for free until it’s deployed in production or in some degree of scale. Companies like Elastic and Cockroach Labs have gone as far as actually open sourcing all their software but applying a commercial license to parts of the software base. The rationale being that real enterprise customers would pay whether the software is open or closed, and they are more incentivized to use commercial software if they can actually read the code. Indeed, there is a risk that someone could read the code, modify it slightly, and fork the distribution. But in developed economies – where much of the rents exist anyway, it’s unlikely that enterprise companies will elect the copycat as a supplier.
A key enabler to this movement has been the more modern software licenses that companies have either originally embraced or migrated to over time. Mongo’s new license, as well as those of Elastic and Cockroach are good examples of these. Unlike the Apache incubated license – which was often the starting point for open source projects a decade ago, these licenses are far more business-friendly and most model open source businesses are adopting them.

MongoDB switches up its open-source license

The Future
When we originally penned this article on open source four years ago, we aspirationally hoped that we would see the birth of iconic open source companies. At a time where there was only one model – Redhat – we believed that there would be many more. Today, we see a healthy cohort of open source businesses, which is quite exciting. I believe we are just scratching the surface of the kind of iconic companies that we will see emerge from the open source gene pool. From one perspective, these companies valued in the billions are a testament to the power of the model. What is clear is that open source is no longer a fringe approach to software. When top companies around the world are polled, few of them intend to have their core software systems be anything but open source. And if the Fortune 5000 migrate their spend on closed source software to open source, we will see the emergence of a whole new landscape of software companies, with the leaders of this new cohort valued in the tens of billions of dollars.
Clearly, that day is not tomorrow. These open source companies will need to grow and mature and develop their products and organization in the coming decade. But the trend is undeniable and here at Index we’re honored to have been here for the early days of this journey.

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Lime halts scooter service in Switzerland after possible software glitch throws users off mid-ride

Just as on-demand electric scooters are trying to pick up speed in Europe, one of the scooter market’s most ambitious startups has halted operations in one country after its e-scooters started halting mid-ride, throwing off and injuring passengers.
Lime, the Uber-backed bike and scooter rental company that is reportedly raising money at between a $2 billion and $3 billion valuation, has pulled its full fleet of scooters in Switzerland, in the cities of Basel and Zurich, for safety checks after multiple reports of people injuring themselves after their scooters braked abruptly while in use.
The company sent out a notice to users — presented in screenshots below, in German, with the full text translated underneath that — noting that it is currently investigating whether the malfunction is due to a software fault, where an update of the software causes a scooter inadvertently to reboot during a ride, thus engaging the anti-theft immobilization system.
To make up for the disruption in service, it’s offering users a 15-minute credit that they can use when the service is restored, but it doesn’t give an indication of when that might be.
[gallery ids="1768613,1768614,1768615"]
The text reads as follows:

By now you surely have heard from the media that we have taken all Lime scooters into our workshops and have temporarily paused the service.

We have been made aware of cases in which users report that during their rides, sudden brake maneuvers take place, leading to crashes. The security of our users is our top priority and this is why we decided at the start of this week to pull in all devices and do a thorough security and quality check on them.

The investigation is ongoing. After first hints, we are currently examining whether a software update could be causing a reboot during the ride, triggering the theft protection. We have already taken measures to ensure this will never happen again. Nonetheless, we are testing each device thoroughly to ensure that no software or hardware issues remain.

We are optimistic that we will soon again be operating on the streets of Zurich and Basel and apologize for the disruption of the service. To make up for it, we offer you a free 15 minute ride with code “LIME-ON-SCHWEIZ”. As soon as we are back again.

We will keep you updated about the developments. Thank you for your understanding.
With lime green greetings
Your Lime Switzerland Team

We have reached out to Lime for more details and will update this post as we learn more.
The cessation of service comes after reports over the past several months detailed how users have been injured after their Lime scooters stopped abruptly. In November, a doctor broke his elbow after the speedometer on his vehicle failed, the brakes kicked in, and he was thrown into the air. (Fortunately, this happened in front of the hospital, where he also worked.)
Another rider dislocated his shoulder after falling over his Lime scooter’s handle bars when travelling at about 25 km/h (about 15 mph). A third suffered cuts and bruises in a similar incident to the other two: abrupt braking while travelling.
Lime launched e-scooter services in several cities across Europe last summer, starting in Paris with aggressive ambitions to expand its business to 25 cities in Europe by the end of 2018.
In Switzerland Lime has (had?) about 550 scooters in operation. But overall, Lime hasn’t quite hit its wider regional target. It is currently live in 18 cities in Europe, and not all of those have electric scooters.
In the UK, for example, Lime has had a limited roll out of electric bikes and there are no plans at the moment to add scooters.
Part of the reason in the UK is because that particular mode of transportation is facing some regulatory hurdles: technically they are classified as vehicles, and therefore illegal to drive without licenses on public roads. On the other hand, there are plenty being sold and in use by private individuals who may or may not have the right credentials to use them, and regulations may get revisited.
One of Lime’s biggest competitors, Bird, launched e-scooters in London last year, but it has been a very limited roll out, on private land on the Olympic campus.
In other markets, Lime originally launched scooters but has since had to halt its business. In December, Lime, along with rivals Wind and Voi, were all ordered to halt e-scooter operations in Madrid, after the city determined that they were posing a safety hazard after a series of accidents, including a death, amid other safety concerns.
We’ll update this post as we learn more. Overall, however, the development does not paint a very positive picture.
Even before we’ve seen a mass launch of actual services, the e-scooter market in Europe is already very crowded with hopeful players. Alongside Lime and Bird flying over from the US, there are also homegrown startups like Taxify, Dott, Wind and Voi, as well as transportation behemoths like VW, all entering the fray.
All fine and well, I suppose — let the best man win and all that — but seeing early versions of these services getting banned by authorities or halted by the companies themselves over accidents does make one wonder if safety is getting compromised in the name of aggressive competition in new, unchartered areas of “disruptive” tech.

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Startups Weekly: Will Trump ruin the unicorn IPOs of our dreams?

The government shutdown entered its 21st day on Friday, upping concerns of potentially long-lasting impacts on the U.S. stock market. Private market investors around the country applauded when Uber finally filed documents with the SEC to go public. Others were giddy to hear Lyft, Pinterest, Postmates and Slack (via a direct listing, according to the latest reports) were likely to IPO in 2019, too.
Unfortunately, floats that seemed imminent may not actually surface until the second half of 2019 — that is unless President Donald Trump and other political leaders are able to reach an agreement on the federal budget ASAP. This week, we explored the government’s shutdown’s connection to tech IPOs, recounted the demise of a well-funded AR project and introduced readers to an AI-enabled self-checkout shopping cart.
1. Postmates gets pre-IPO cash
The company, an early entrant to the billion-dollar food delivery wars, raised what will likely be its last round of private capital. The $100 million cash infusion was led by BlackRock and valued Postmates at $1.85 billion, up from the $1.2 billion valuation it garnered with its unicorn round in 2018.
2. Uber’s IPO may not be as eye-popping as we expected
To be fair, I don’t think many of us really believed the ride-hailing giant could debut with a $120 billion initial market cap. And can speculate on Uber’s valuation for days (the latest reports estimate a $90 billion IPO), but ultimately Wall Street will determine just how high Uber will fly. For now, all we can do is sit and wait for the company to relinquish its S-1 to the masses.
3. Deal of the week
N26, a German fintech startup, raised $300 million in a round led by Insight Venture Partners at a $2.7 billion valuation. TechCrunch’s Romain Dillet spoke with co-founder and CEO Valentin Stalf about the company’s global investors, financials and what the future holds for N26.

4. On the market
Bird is in the process of raising an additional $300 million on a flat pre-money valuation of $2 billion. The e-scooter startup has already raised a ton of capital in a very short time and a fresh financing would come at a time when many investors are losing faith in scooter startups’ claims to be the solution to the problem of last-mile transportation, as companies in the space display poor unit economics, faulty batteries and a general air of undependability. Plus, Aurora, the developer of a full-stack self-driving software system for automobile manufacturers, is raising at least $500 million in equity funding at more than a $2 billion valuation in a round expected to be led by new investor Sequoia Capital.

Here’s your weekly reminder to send me tips, suggestions and more to kate.clark@techcrunch.com or @KateClarkTweets.

5. A unicorn’s deal downsizes
WeWork, a co-working giant backed with billions, had planned on securing a $16 billion investment from existing backer SoftBank . Well, that’s not exactly what happened. And, oh yeah, they rebranded.
6. A startup collapses
After 20 long years, augmented reality glasses pioneer ODG has been left with just a skeleton crew after acquisition deals from Facebook and Magic Leap fell through. Here’s a story of a startup with $58 million in venture capital backing that failed to deliver on its promises.
7. Data point
Seed activity for U.S. startups has declined for the fourth straight year, as median deal sizes increased at every stage of venture capital.

Key takeaways: 1. Seed activity for U.S. startups declined for the fourth straight year2. Median U.S. seed deal was the highest on record in Q4 at $2.1M3. Seed activity as a % of deals shrunk to 25% 4. Companies securing seed deals are older than ever https://t.co/exr8DRQRAF
— Kate Clark (@KateClarkTweets) January 9, 2019

8. Meanwhile, in startup land…
This week edtech startup Emeritus, a U.S.-Indian company that partners with universities to offer digital courses, landed a $40 million Series C round led by Sequoia India. Badi, which uses an algorithm to help millennials find roommates, brought in a $30 million Series B led by Goodwater Capital. And Mr Jeff, an on-demand laundry service startup, bagged a $12 million Series A.
9. Finally, Meet Caper, the AI self-checkout shopping cart
The startup, which makes a shopping cart with a built-in barcode scanner and credit card swiper, has revealed a total of $3 million, including a $2.15 million seed round led by First Round Capital .
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Mental well-being took center stage at CES 2019

This week, the Las Vegas Convention Center was packed with many of the year’s biggest new devices. But over the last several years, The Sands has become the place where the real magic happens. The segment of the show known as Eureka Park is where the startups and accelerators congregate, often times showing off products that are still years away.
A quick walk around the floor (insofar as someone can walk quickly with that much humanity slowly shuffling through the halls) sheds a lot of light on the industry’s biggest trends. Plenty are holdovers from previous years — smart home and wearables continue to dominate — but others offer insight into where the next several years of technology may be going.
One key trend that absolutely exploded this past year is mental well-being. Between the sleep, relaxation, concentration and meditation products on display, you couldn’t walk five feet without encountering another pitch. The list includes some familiar faces (to us, at least) like the Muse meditation and sleep headsets and a whole slew of new entrants.
The trajectory tracks if you consider many of these products a kind of extension of the fitness trackers that were all the rage a few years back. First startups pushed to keep our bodies in shape, moving on to sleep tracking and, eventually, our minds. The accessibility of sensors that can track things like basic brain activity have helped push the concept along.
It’s a worthy cause, of course. The proliferation of many technologies has done some pretty rough stuff to our bodies and brains over the years. Wouldn’t it be great if tech could also turn that around.
In many cases, the use is clear. Decades of scientific studies have demonstrated the value simply sitting quietly during meditation practice can have on your stress levels and mental health. If a product can help you get into a routine, great. But there’s an even larger opportunity for snake oil salespeople than we saw on the fitness side.
Certainly the FDA has a role to play, ensuring that companies can’t make untested medical claims for their products, but much of the burden here will ultimately be placed on journalist and consumer alike. When it comes to this category, the placebo effect is very real.

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Anker’s PowerPort Atom is my permanent new travel companion

I had to fight a couple of coworkers for this thing. It’s a strange thing to fight over, I realize, but we are strange people with a strange job. And more importantly, I won. I’m plugged into the PowerPort Atom as I write this. It’s keeping my 13-inch MacBook Pro alive via the plane power outlet tightly squeezed behind my legs.
I travel a lot, and I try to travel light. Determining what goes into and what stays out of my carryon feels a bit like stocking delivery rockets for the International Space Station sometimes. But I feel pretty confident in saying that this tiny little plug just scored a permanent spot. Well, until the PowerPort Quark comes along, I guess.

One of the beauties of Apple’s switch to Thunderbolt 3/USB-C is the modularity of it all. I’m sure Apple will tell you to stick to official and officially licensed products, but the ability to mix and match these things has given us some solid options, and Anker’s right there to reap the benefit. The products the company makes are rarely flash or sexy, but they’re often genuinely useful in a way few accessory manufacturers can claim.
As someone who has owned a lot of Apple Chargers over the years, it’s pretty remarkable what Anker has done here. I’d recently switched to Google’s PixelBook charger for travel, but that has nothing on this. Hell, the Atom is smaller than some phone chargers I’ve used over the year.
It’s small and white, with a single USB-C port. It’s not quite as slim as, say, a standard iPhone charger, so it can get a bit tight with alongside some larger chargers (RavPower’s dual-USB charger, for instance), but it frees up a lot of space. And in scenarios like the plane I’m typing this from, you’re a lot less likely to accidentally knock it out with your leg, leaving you fumbling blindly to plug it back in.

It’s not a perfect thing, of course. It can get quite hot to the touch when charging something large. And don’t even think about charging up, say, your 15-inch Pro. With certain outlets in certain scenarios, the charging process could be downright sluggish. I can’t remember ever seeing “Estimated Charging Time: 10 hours” before.
For the most part, I’d recommend the Atom for those instances when you want to maintain a charge, rather than filling the battery up quickly. I full expect to continue to bring the full-size charger along with me for when I get back to the hotel and need to fill it back up for the night.
In an ideal world, Anker would have somehow squeezed in an additional USB-C or full-size USB port to charge two devices at once, but that kind of request is probably flying too close to the sun here. And hell, at $30, one is still an excellent deal.

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SpaceX will lay off hundreds to ‘become a leaner company’

SpaceX plans to lay off approximately 10 percent of its workforce in order to manage its costs, the company confirmed to TechCrunch today. First reported by Ars Technica’s Eric Berger, the news comes as the company embarks on an ambitious plan to develop and test an interplanetary spacecraft while simultaneously performing frequent orbital launches.
In a statement provided to TechCrunch, SpaceX explained that the layoffs are in pursuit of becoming a “leaner company” and that they were only necessary due to “the extraordinarily difficult challenges ahead.”
To continue delivering for our customers and to succeed in developing interplanetary spacecraft and a global space-based Internet, SpaceX must become a leaner company. Either of these developments, even when attempted separately, have bankrupted other organizations. This means we must part ways with some talented and hardworking members of our team. We are grateful for everything they have accomplished and their commitment to SpaceX’s mission. This action is taken only due to the extraordinarily difficult challenges ahead and would not otherwise be necessary.
The company employed at least 7,000 people in late 2017 when COO Gwynne Shotwell last gave a number — which means around 700 will lose their jobs.
I asked SpaceX for more information on where these jobs might come from — engineering, manufacturing, sales, certain projects, etc — but apart from the statement the company did not offer any answers.
Layoffs of this scale ring alarm bells pretty much across the board, but the company has insisted that it is solvent and successful. And indeed even if it were not, it is hard to imagine that its extremely successful and increasingly reliable Falcon 9 launch vehicle would cease operations any time soon. In fact one might expect launch numbers to increase with financial difficulties in order to increase revenue.

18 new details about Elon Musk’s redesigned, moon-bound ‘Big F*ing Rocket’

Why such a major reduction in workforce, and why now? The company’s excuse of wanting to be lean doesn’t explain much; SpaceX can hardly have any fat to trim off it considering how young and small it is compared with other aerospace concerns, as well as the breadth of its services and research. It seems unlikely that there are hundreds of middle managers loafing their way to a paycheck. It’s far more likely SpaceX barely has enough employees to do what it already does.
But mounting costs may simply have caught up with SpaceX’s ambitions; it has, after all, been forging forward on multiple fronts, any single one of which would be more than enough for a single company.
It has been building and actively improving its Falcon 9 and Falcon Heavy launch vehicles for years, with the former now more or less in a final state but the latter far from it. It has been researching and prototyping an interplanetary spacecraft, formerly known as the BFR and now Starship. It is building and testing a crewed capsule intended to bring astronauts to the International Space Station. And it is planning a 400-strong constellation of satellites to deliver high speed internet connectivity at a global scale.

SpaceX said to be raising $500M to help fund internet service

So it is perhaps understandable that despite raising $450 million in 2017 and having another round of a similar size rumored to be in negotiation right now, the money is pouring out just about as fast as investors can pour it in. Hundreds of millions in contracts help as well, but they bring costs and responsibilities with them. Its many projects hold the promise of riches, but require years of incubation and investment.
The most logical place to cut from would perhaps be the Falcon 9 development team; CEO Elon Musk indicated that large scale R&D on the platform was ending and being reallocated to the Falcon Heavy and Starship projects. Therefore there may well be designers and engineers who are more easy to part with than others. But that is merely speculation.
All this is just to say that SpaceX’s financials and operations are too complicated to write off major layoffs as simply due to revenue shortfalls or overzealous hiring. I have asked SpaceX for more details and will update this post if I hear back; in the meantime we are very likely to hear more from the company, or the talkative Musk, in the next few days.

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Scooter startup Bird tried to silence a journalist. It did not go well.

Cory Doctorow doesn’t like censorship. He especially doesn’t like his own work being censored.
Anyone who knows Doctorow knows his popular tech and culture blog, Boing Boing, and anyone who reads Boing Boing knows Doctorow and his cohort of bloggers. The part-blogger, part special advisor at the online rights group Electronic Frontier Foundation has written for years on topics of technology, hacking, security research, online digital rights and censorship and its intersection with free speech and expression.
Yet, this week it looked like his own free speech and expression could have been under threat.
Doctorow revealed in a blog post on Friday that scooter startup Bird sent him a legal threat, accusing him of copyright infringement and that his blog post encourages “illegal conduct.”
In its letter to Doctorow, Bird demanded that he “immediately take[s] down this offensive blog.”
Doctorow declined, published the legal threat and fired back with a rebuttal letter from the EFF accusing the scooter startup of making “baseless legal threats” in an attempt to “suppress coverage that it dislikes.”
The whole debacle started after Doctorow wrote about how Bird’s many abandoned scooters can be easily converted into a “personal scooter” by swapping out its innards with a plug-and-play converter kit. Citing an initial write-up by Hackaday, these scooters can have “all recovery and payment components permanently disabled” using the converter kit, available for purchase from China on eBay for about $30.
In fact, Doctorow’s blog post was only two paragraphs long and, though didn’t link to the eBay listing directly, did cite the hacker who wrote about it in the first place — bringing interesting things to the masses in bite-size form in true Boing Boing fashion.
Bird didn’t like this much, and senior counsel Linda Kwak sent the letter — which the EFF published today — claiming that Doctorow’s blog post was “promoting the sale/use of an illegal product that is solely designed to circumvent the copyright protections of Bird’s proprietary technology, as described in greater detail below, as well as promoting illegal activity in general by encouraging the vandalism and misappropriation of Bird property.” The letter also falsely stated that Doctorow’s blog post “provides links to a website where such Infringing Product may be purchased,” given that the post at no point links to the purchasable eBay converter kit.
EFF senior attorney Kit Walsh fired back. “Our client has no obligation to, and will not, comply with your request to remove the article,” she wrote. “Bird may not be pleased that the technology exists to modify the scooters that it deploys, but it should not make baseless legal threats to silence reporting on that technology.”
The three-page rebuttal says Bird used incorrectly cited legal statutes to substantiate its demands for Boing Boing to pull down the blog post. The letter added that unplugging and discarding a motherboard containing unwanted code within the scooter isn’t an act of circumventing as it doesn’t bypass or modify Bird’s code — which copyright law says is illegal.
As Doctorow himself put it in his blog post Friday: “If motherboard swaps were circumvention, then selling someone a screwdriver could be an offense punishable by a five year prison sentence and a $500,000 fine.”
In an email to TechCrunch, Doctorow said that legal threats “are no fun.”
AUSTIN, TX – MARCH 10: Journalist Cory Doctorow speaks onstage at “Snowden 2.0: A Field Report from the NSA Archives” during the 2014 SXSW Music, Film + Interactive Festival at Austin Convention Center on March 10, 2014 in Austin, Texas. (Photo by Travis P Ball/Getty Images for SXSW)
“We’re a small, shoestring operation, and even though this particular threat is one that we have very deep expertise on, it’s still chilling when a company with millions in the bank sends a threat — even a bogus one like this — to you,” he said.
The EFF’s response also said that Doctorow’s freedom of speech “does not in fact impinge on any of Bird’s rights,” adding that Bird should not send takedown notices to journalists using “meritless legal claims,” the letter said.
“So, in a sense, it doesn’t matter whether Bird is right or wrong when it claims that it’s illegal to convert a Bird scooter to a personal scooter,” said Walsh in a separate blog post. “Either way, Boing Boing was free to report on it,” she added.
What’s bizarre is why Bird targeted Doctorow and, apparently, nobody else — so far.
TechCrunch reached out to several people who wrote about and were involved with blog posts and write-ups about the Bird converter kit. Of those who responded, all said they had not received a legal demand from Bird.
We asked Bird why it sent the letter, and if this was a one-off letter or if Bird had sent similar legal demands to others. When reached, a Bird spokesperson did not comment on the record.
Two hours after we published this story, Bird spokesperson Rebecca Hahn said the company supports freedom of speech, adding: “In the quest for curbing illegal activities related to our vehicles, our legal team overstretched and sent a takedown request related to the issue to a member of the media. This was our mistake and we apologize to Cory Doctorow.”
All too often, companies send legal threats and demands to try to silence work or findings that they find critical, often using misinterpreted, incorrect or vague legal statutes to get things pulled from the internet. Some companies have been more successful than others, despite an increase in awareness and bug bounties, and a general willingness to fix security issues before they inevitably become public.
Now Bird becomes the latest in a long list of companies that have threatened reporters or security researchers, alongside companies like drone maker DJI, which in 2017 threatened a security researcher trying to report a bug in good faith, and spam operator River City, which sued a security researcher who found the spammer’s exposed servers and a reporter who wrote about it. Most recently, password manager maker Keeper sued a security reporter claiming allegedly defamatory remarks over a security flaw in one of its products. The case was eventually dropped, but not before more than 50 experts, advocates and journalist (including this reporter) signed onto a letter calling for companies to stop using legal threats to stifle and silence security researchers.
That effort resulted in several companies — notably Dropbox and Tesla — to double down on their protection of security researchers by changing their vulnerability disclosure rules to promise that the companies will not seek to prosecute hackers acting in good-faith.
But some companies have bucked that trend and have taken a more hostile, aggressive — and regressive — approach to security researchers and reporters.
“Bird Scooters and other dockless transport are hugely controversial right now, thanks in large part to a ‘move-fast, break-things’ approach to regulation, and it’s not surprising that they would want to control the debate,” said Doctorow.
“But to my mind, this kind of bullying speaks volumes about the overall character of the company,” he said.
Updated at 6pm ET: with statement from Bird.

Here’s what to expect in cybersecurity in 2019

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Sensel’s pressure-sensitive display tech works underwater

The Morph is a fun little computer peripheral. The small trackpad uses a series of silicone covers to recreate different interfaces, from a QWERTY keyboard to a drum pad. Ultimately, however, it’s the tech that drives the product — rather than the product itself — that may prove the most useful.
Sensel was on-hand at CES this week, in a much larger booth than the year prior. The Morph took up a chunk of the area, including a musician using different pads to play songs live. But the startup’s real star of the show were a series of thick, unbranded tablets. In a meeting with TechCrunch this time last year, the company noted that it was essentially shopping around the underlying technology for other uses. In a sense, the Morph is as much a way of proving that Sensel’s technology truly works.
Pressure Grid offers an alternative to more traditional capacitive touch, essentially building positional touch and force touch into a single sensor. It’s a less expensive way to accurately determine both the position and pressure (from 1g to 5kg) in one go. It’s also thin and capable of working with flexible displays, making the company well-positioned for what could well be the next wave of mobile devices.

And, as the company was more than happy to demonstrate on the show floor, it actually works underwater. Because what’s the fun of a waterproof phone, really, if you can’t use wet fingers?
Another key benefit here is the ability to detect objects beyond the finger — that could mean using it with a pair of gloves or taking a regular old paintbrush to the surface to draw some art. Sensel says it has built fail-safes into the software, to cut down on false positives, which could definitely present an issue for a device that can register just about any object that comes into contact with it.
Sensel says it’s already begun working with industry partners to implement this technology into commercial devices. Of course, like 3D touch before it, incorporating pressure sensitivity is going to take some customer training to make using it a natural part of day to day computing.

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WeWork gets into the food business, backing the superfood startup of big wave surfer Laird Hamilton

WeWork CEO Adam Neumann has been described as an avid surfer, one who has been known to grab his board and go, both in the Hamptons in Long Island, where he reportedly owns a home, as well as in Hawaii.
Maybe it’s no surprise, then, that WeWork is now also investing in a so-called superfood company that was created several years ago by big wave surf star Laird Hamilton, who Neumann was apparently surfing alongside just last week. In a video call with Neumann on Monday, a Fast Company reporter noted that Neumann is currently sporting a cast on one of his fingers, having broken it during the outing.
How much WeWork is investing in the startup, Laird Superfood, is not being disclosed, but according to the food company, the money will be used to fuel product development, acquisitions and to hire more employees. A press release that was published without fanfare earlier today also notes that Laird Superfood products will be made available to WeWork members and employees at select locations soon.
Some of those offerings are certainly interesting, including “performance mushrooms” that it says “harnesses the benefits” of Chaga, a fungus believed by some to stimulate the immune system; Cordyceps, another fungus that’s been used for kidney disorders and erectile dysfunction; and Lion’s Mane, yet another fungus believed by some to stimulate nerve growth in the brain.
The company suggests adding one teaspoon of the mushrooms each day to one’s coffee, tea or health shake.
Laird Superfood also sells beet- and turmeric-infused powdered coconut waters, “ultra-caffeinated” coffee and a variety of coffee creamers, including a mint-flavored creamer and a turmeric-flavored number.
It’s for a very specific consumer, in other words — presumably one who really likes turmeric, for example. Then again, what works for Laird Hamilton will undoubtedly work for a lot of people who’ve watched his decades-long career with amazement.
Hamilton seems to be selling what he actually ingests, too. As he told The Guardian last spring of his own diet: “I love espresso. You could give me five shots of espresso, a quarter stick of butter, a quarter stick of coconut oil and other fat, and I’ll drink that. I could go for five or six hours and not be hungry, because I’m burning fat.”
Organic food startups have been raising money left and right in recent years, including from traditional food companies, as well as from venture investors, who’ve poured billions of dollars into healthy snacks and drinks, with mixed results.
For WeWork’s part, the investment isn’t the first that has seemed somewhat far afield for the company. In one of its more surprising bets to date, WeWork invested in a maker of wave pools in 2016. The size of that funding was also undisclosed.

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That GoFundMe to build a border wall is issuing $20 million in refunds

A Trump-inspired GoFundMe campaign that raised $20 million ostensibly to build a wall on the southern U.S. border will refund every cent. Run by Brian Kolfage, a veteran with a track record of questionable business practices, the project defied all logistical considerations with its proposal for a “simple and straightforward” plan to build the wall. That didn’t stop the fund from attracting the attention of 337,559 donors at the time of writing.

Surprising perhaps no one beyond its donors, the campaign collided with reality, with Kolfage coming to the realization that “the federal government won’t be able to accept our donations anytime soon” given that there is no actual mechanism through which it could do so. On the campaign page, Kolfage newly disclosed his plans to form a nonprofit, “We Build The Wall, Inc.” that would hold onto the donations until the federal government is able to accept them or until all of the donors eventually forget the project altogether.
Initially, donors were told that their money would be refunded if the goal for the project was not met. On December 22, the project’s language changed, removing any mention of refunds if the goal was not met. With that, the project appears to have run afoul of GoFundMe’s policies.

Also, as the campaign , Kolfage’s been changing the language about refunding $
12/18 "If for ANY reason we don't reach our goal we will refund your donation”12/19: saying they will hold funds, but will refund if goal not hit12/22: refund promise goneNow: Will hold all funds pic.twitter.com/nhVvCiNFbN
— Brianna Sacks (@bri_sacks) January 11, 2019

Kolfage claims that he has formed an advisory board that features war privatization enthusiast and brother of the Secretary of Education Erik Prince and the also ethically questionable former Kansas Secretary of State Kris Kobach, who lost his race this past November.
While Kolfage might be in good company, it sounds like GoFundMe will be automatically handing back every bit of the $20 million he raised before getting called out for changing the terms of the campaign. Donors who still want their money to go to Kolfage will need to opt in specifically.

“If a donor does not want a refund, and they want their donation to go to the new organization, they must proactively elect to redirect their donation to that organization,” GoFundMe told The Hill. “If they do not take that step, they will automatically receive a full refund.”

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