posted 7 days ago on techcrunch
Welcome back to This Week in Apps, the Extra Crunch series that recaps the latest OS news, the applications they support and the money that flows through it all. The app industry is as hot as ever, with a record 204 billion downloads and $120 billion in consumer spending in 2019. People are now spending three hours and 40 minutes per day using apps, rivaling TV. Apps aren’t just a way to pass idle hours — they’re a big business. In 2019, mobile-first companies had a combined $544 billion valuation, 6.5x higher than those without a mobile focus. In this Extra Crunch series, we help you keep up with the latest news from the world of apps, delivered on a weekly basis. This week, we’re looking at the highlights from Apple’s first-ever virtual Worldwide Developers Conference (WWDC) and what its announcements mean for app developers. Plus, there’s news of the U.S. antitrust investigation into Apple’s business, a revamp of the App Store review process, and more. In other app news, both Instagram and YouTube are responding to the TikTok threat, while Snapchat is adding new free tools to its SDK to woo app developers. Amazon also this week entered the no-code app development space with Honeycode. WWDC20 Wrap-Up Image Credits: Apple Apple held its WWDC developer event online for the first time due to the pandemic. The format, in some ways, worked better — the keynote presentations ran smoother, packed in more content, and you could take in the information without the distractions of applause and cheers. (If you were missing the music, there was a playlist.) Of course, the virtual event lacked the real-world networking and learning opportunities of the in-person conference. Better online forums and virtual labs didn’t solve that problem. In fact, given there aren’t time constraints on a virtual event, some might argue it would make sense to do hands-on labs in week two instead of alongside all the sessions and keynotes. This could give developers more time to process the info and write some code. Among the bigger takeaways from WWDC20 — besides the obvious changes to the Mac and the introduction of “Apple silicon” — there was the introduction of the refreshed UI in iOS 14 that adds widgets, an App Library and more Siri smarts; plus the debut of Apple’s own mini-apps, in the form of App Clips; and the ability to run iOS apps on Apple Silicon Macs — in fact, iOS apps will run there by default unless developers uncheck a box. Let’s dig in. The iPad’s influence over Mac. There are plenty of iOS apps that would work on Mac, but making the choice an opt-out instead of an opt-in experience could lead to poor experiences for end users. Developers should think carefully about whether they want to make the leap to the Mac ecosystem and design accordingly. There’s also a broader sense that the iPad and the Mac are starting to look very similar. The iPad already gained support for a proper trackpad and mouse, while the Mac with Big Sur sees the influence of design elements like its new iPad-esque notifications, Control Center, window nav bars and rounded rectangular icons. Are the two OS’s going to merge? Apple’s answer, thankfully, is still “NO.”

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posted 8 days ago on techcrunch
Reddit co-founder Alexis Ohanian is leaving Initialized Capital, the investment firm he co-founded in 2011 with Garry Tan, as first reported by Axios and confirmed by TechCrunch. The move comes weeks after Ohanian publicly stepped down from the Reddit board of directors, with Y Combinator president Michael Seibel taking his spot. Ohanian launched Initialized Capital back in 2011 with a $7 million investment vehicle. Since then, the San Francisco-based firm has grown immensely and made early-stage bets in companies like Flexport, Instacart, Cruise, Coinbase and Codecademy. Most recently, it closed a $225 million investment vehicle in 2018, its fourth fund to date. Ohanian is leaving Initialized Capital to work on “a new project that will support a generation of founders in tech and beyond,” the firm said in a statement to TechCrunch. According to the Axios story, Ohanian is leaving Initialized to work more closely on pre-seed efforts. On its website, Initialized details that many teams it talks to already have launched products and have a plan to earn revenue. “We understand that products and business models evolve, but it’s good to see in a very concrete way how teams are able to ship products and work together,” the firm wrote. If Ohanian raises a pre-seed fund, it will be interesting to see how he changes this methodology. Ohanian did not directly respond to a request for comment. It’s worth mentioning that partner departures in venture capital are rarely crystal clear break-ups. As Initialized confirmed, Ohanian will remain involved in the firm’s existing investment vehicles and portfolio companies due to legal ties. It is unclear if Ohanian will remain on any board he is on. Ro, a company in which Ohanian has a board seat, did not immediately respond to a request for comment. One big question is whether Ohanian’s departure would trigger a key-man clause in the firm’s limited partnership agreement. “Key-man” clauses, which are typical in limited partner agreements, require that certain designated people (typically the main partners in a firm) must stay continuously employed at a firm and be active investors. When a key-man clause is triggered, limited partners often have a variety of tools, ranging from control over new hiring to outright ending the investing at a fund, in order to protect their investment in a fund. In this case, it would be surprising if Alexis Ohanian wasn’t a key man, as he is one of the leading general partners and a founder of the firm. Ohanian stepped away from being involved in the day to day of Reddit in 2018, and recently left his board seat at the company following protests against police brutality. The co-founder urged Reddit to fill the seat with a Black board member. Reddit ultimately selected Y Combinator CEO Michael Seibel to fill the position. Tan, the other founding partner of Initialized, helped YC grow in its early days and helped build the famed accelerator’s internal software system and late-stage funding program. “[Tan] will continue to lead Initialized Capital into the future, finding and funding great entrepreneurs as he has done for nearly a decade,” the firm wrote in a statement to TechCrunch. “Garry and Alexis remain committed to each other as long-standing friends and business partners. The firm fully supports Alexis in his future pursuits.” Initialized Capital currently has $500 million assets under management and has backed over 200 companies to date. Additional reporting by Danny Crichton.

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posted 8 days ago on techcrunch
Pavel Durov’s grand cryptocurrency dreams for his Telegram messaging service are ending with a $18.5 million civil settlement with the US Securities and Exchange Commission and a pledge to return the more than $1.2 billion that investors had put into its TON digital token. The settlement ends a months long legal battle between the company and the regulator. In October 2019 the SEC filed a complaint against Telegram alleging the company had raised capital through the sale of 2.9 billion Grams to finance its business. The SEC sought to enjoin Telegram from delivering the Grams it sold, which the regulator alleged were securities. In March, the US District Court for the Southern District of New York agreed with the SEC and issued a preliminary injunction. In May, Telegram announced that it was shutting down the TON initiative. Telegram abandons its TON blockchain platform Announcing that TON was being shut down, Durov wrote: I want to conclude this post by wishing luck to all those striving for decentralization, balance and equality in the world. You are fighting the right battle. This battle may well be the most important battle of our generation. We hope that you succeed where we have failed. In its own announcement of the settlement, the SEC differed with Durov’s assessment of its actions. “New and innovative businesses are welcome to participate in our capital markets but they cannot do so in violation of the registration requirements of the federal securities laws,” said Kristina Littman, Chief of the SEC Enforcement Division’s Cyber Unit, in a statement. “This settlement requires Telegram to return funds to investors, imposes a significant penalty, and requires Telegram to give notice of future digital offerings.” The argument from the regulator is that Telegram didn’t follow the rules. Had it worked with the regulator instead of launching the token offering without any oversight, the outcome might have been different, according to the SEC. “Our emergency action protected retail investors from Telegram’s attempt to flood the markets with securities sold in an unregistered offering without providing full disclosures concerning their project,” said Lara Shalov Mehraban, Associate Regional Director of the New York Regional Office. “The remedies we obtained provide significant relief to investors and protect retail investors from future illegal offerings by Telegram.”  

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posted 8 days ago on techcrunch
TuSimple, the self-driving truck startup backed by Sina, Nvidia, UPS and Tier 1 supplier Mando Corporation, is headed back into the marketplace in search of new capital from investors. The company has hired investment bank Morgan Stanley to help it raise $250 million, according to multiple sources familiar with the effort. Morgan Stanley has sent potential investors an informational packet, viewed by TechCrunch, that provides a snapshot of the company and an overview of its business model, as well as a pitch on why the company is poised to succeed — all standard fare for companies seeking investors. TuSimple declined to comment. The search for new capital comes as TuSimple pushes to ramp up amid an increasingly crowded pool of potential rivals. TuSimple is a unique animal in the niche category of self-driving trucks. It was founded in 2015 at a time when most of the attention and capital in the autonomous vehicle industry was focused on passenger cars, and more specifically robotaxis. Autonomous trucking existed in relative obscurity until high-profile engineers from Google launched Otto, a self-driving truck startup that was quickly acquired by Uber in August 2016. Startups Embark and the now defunct Starsky Robotics also launched in 2016. Meanwhile, TuSimple quietly scaled. In late 2017, TuSimple raised $55 million with plans to use those funds to scale up testing to two full truck fleets in China and the U.S. By 2018, TuSimple started testing on public roads, beginning with a 120-mile highway stretch between Tucson and Phoenix in Arizona and another segment in Shanghai. Others have emerged in the past two years, including Ike Robotics and Kodiak Robotics. Even Waymo is pursuing self-driving trucks. Waymo has talked about trucks since at least 2017, but its self-driving trucks division began noticeably ramping up operations after April 2019, when it hired more than a dozen engineers and the former CEO of failed consumer robotics startup Anki Robotics. More recently, Amazon-backed Aurora has stepped into trucks. TuSimple stands out for a number of reasons. It has managed to raise $298 million with a valuation of more than $1 billion, putting it into unicorn status. It has a large workforce and well-known partners like UPS. It also has R&D centers and testing operations in China and the United States. TuSimple’s research and development occurs in Beijing and San Diego. It has test centers in Shanghai and Tucson, Arizona. Its ties to, and operations in China can be viewed as a benefit or a potential risk due to the current tensions with the U.S. Some of TuSimple’s earliest investors are from China, as well as its founding team. Sina, operator of China’s biggest microblogging site Weibo, is one of TuSimple’s earliest investors. Composite Capital, a Hong Kong-based investment firm and previous investor, is also an investor. In recent years, the company has worked to diversify its investor base, bringing in established North American players. UPS, which is a customer, took a minority stake in TuSimple in 2019. The company announced it added about $120 million to a Series D funding round led by Sina. The round included new participants, such as CDH Investments, Lavender Capital and Tier 1 supplier Mando Corporation. TuSimple has continued to scale its operations. As of March 2020, the company was making about 20 autonomous trips between Arizona and Texas each week with a fleet of more than 40 autonomous trucks. All of the trucks have a human safety operator behind the wheel.

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Spot.IM, which offers a platform for publishers (including TechCrunch) to manage their user comments, announced this week that it’s rebranding as OpenWeb. CEO and co-founder Nadav Shoval told me that the new name reflects a vision that’s far grander and more ambitious than the company’s initial product, a location-based messaging service. “We all felt that this is the time to be proud of what we actually do,” Shoval said. “It’s about saving the open web.” Specifically, Shoval is hoping to move more online conversations away from the big social platforms like Facebook and back to independent publishers. To illustrate this, he pointed to recent discussions about reexamining or revising Section 230 of the Communications Decency Act, a crucial legal protection for the big online platforms. While you don’t have to take President Donald Trump’s complaints of Twitter censorship at face value, Shoval said the key is that “no one big tech company should control the conversation.” To that end, the company has also unveiled an upgraded version of its platform, which includes features like scoring the overall quality of conversation for a specific publisher, incentivizing quality comments by allowing users to earn reputation points and even asking users to reconsider their comment if it appears to violate a publisher’s standards — OpenWeb describes these warnings as “nudges,” so you can still go ahead and post that comment if you want. Spot.IM raises $25M to help publishers engage with readers “We stopped focusing only on algorithms to identify bad behavior, which we’ve done for years and have become commodity,” said Ido Goldberg, OpenWeb’s senior vice president of product. “What we did here is, we put a lot of time into understanding how we should look at quality and scale in millions of conversations.” A big theme in our conversation and demonstration was civility — for example, Goldberg showed me how OpenWeb’s nudges had convinced some users to adopt less incendiary language. But I argued that civility doesn’t always lead to quality conversations. After all, racist (and sexist and homophobic and otherwise hateful) ideas can be expressed in ostensibly polite language. “For us, civility is the baseline,” Goldberg replied. “When things become incivil folks that want to [have a productive conversation] don’t want to be there.” Shoval added, “There is no silver bullet for quality conversations.” He argued that OpenWeb is trying to encourage quality conversations without being seen as “East Coast lefties who are censoring the Internet” — a balance it tries to find by working with each of its publishers and being aware of different standards in different geographies. “What we want to do is a neverending journey.” PACT Act takes on internet platform content rules with ‘a scalpel rather than a jackhammer’

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posted 8 days ago on techcrunch
Games and esports analytics firm Newzoo released its highly cited annual report on the size and state of the video gaming industry yesterday. The firm is predicting 2020 global game industry revenue from consumers of $159.3 billion, a 9.3% increase year-over-year. Newzoo predicts the market will surpass $200 billion by the end of 2023. Importantly, the data excludes in-game advertising revenue (which surged +59% during COVID-19 lockdowns, according to Unity) and the market of gaming digital assets traded between consumers. Advertising within games is a meaningful source of revenue for many mobile gaming companies. In-game ads in just the U.S. drove roughly $3 billion in industry revenue last year, according to eMarketer. To compare with gaming, the global markets for other media and entertainment formats are: Pay TV: $226 billion in 2019 (excludes streaming services) Publishing: $261 billion in 2017, of which books accounted for $121 billion Film: $101 billion in 2019 ($42.5 billion from box office) Music: $62 billion in 2017 ($30 billion recorded music, $6 billion music publishing, $26 billion live music) Board games and playing cards: $12 billion in 2018 Podcasting: $863 million 2020 advertising revenue (there is no good data on subscription and live events revenue in podcasting, but it is fair to estimate it at a fraction of the total ad revenue figure) Counting gamers Of 7.8 billion people on the planet, 4.2 billion (53.6%) of whom have internet connectivity, 2.69 billion will play video games this year, and Newzoo predicts that number to reach three billion in 2023. It broke down the current geographic distribution of gamers as: 1,447 million (54%) in Asia-Pacific 386 million (14%) in Europe 377 million (14%) in Middle East & Africa 266 million (10%) in Latin America 210 million (8%) in North America

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posted 8 days ago on techcrunch
Sometimes you can’t just get a [L]uckin’ break. After announcing this morning that it is ending its fight to stay listed on Nasdaq, China-based coffee chain and delivery company Luckin Coffee announced that it is requiring that its chairman, Lu Zhengyao, resign in a filing with the SEC. Luckin Coffee will unluckin’ly delist from Nasdaq following fraud allegations It also announced in its SEC filing that the chairman has requested the firing of independent director Sean Shao through a shareholders resolution, which will be voted upon at a shareholders meeting to be held on Sunday, July 5th. My god. It’s getting ugly at Luckin, which is struggling to turnaround in the aftermath of revelations of a $300 million accounting fraud that has seen its stock price plummet in recent months. Shao has been leading the board’s independent investigation over the accounting irregularity. Luckin Coffee’s board initiates investigation into $300M potential fraud Now, at a shareholders meeting, the board will be up for grabs, with investors in the company (yes, there are still investors!) choosing who to keep and who to fire in a devolving case of corporate governance run amok. In addition to voting on several current directors of the company, shareholders will also vote on installing two new independent directors, Zeng Ying and Yang Jie, who have long-time business and legal backgrounds. We had previously known about the extraordinary shareholders meeting, but now the company has upped the ante, by voting to force out the chairman by July 2 — three days before the shareholders meeting is scheduled to take place. Honestly, at this point, it’s impossible to say what comes next. But what I can say is that Luckin is currently trading down 54% at close this Friday, and is worth barely a few hundred million dollars — down from its peak market cap of over $12 billion. Wh ever wins is going to own some truly empty cups.

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posted 8 days ago on techcrunch
Welcome to The TechCrunch Exchange, a forthcoming weekly newsletter from the TC crew about startups, money, and markets. You can sign up for it here, and receive it regularly when it formally launches in a few weeks. You can email me about it here, or talk to me on Twitter. Let’s go! In the last week there were 23 rounds worth $50 million in the world, according to Crunchbase data. The rounds were worth a total of $3.72 billion, with a median value of $80 million and an average size of $161.9 million. So in case you were under the impression that late-stage money was under threat, it’s not. And it’s not hard to see why; with the public markets flirting with new record highs, late-stage startups are able to raise on the back of strong comps. High public valuations help late-stage startups defend their own prices as much as rising stocks can help direct venture investment to certain sectors at the earlier-stages of startup land. It’s also a situation that can lead to a rash of IPOs, which we’re on the cusp of seeing. With Agora out this week to good effect, and Lemonade in the wings alongside Accolade, nCino, and GoHealth, things are heating up. This week The Exchange and TechCrunch more broadly tried to take on the matter, asking questions about Lemonade’s impending public offering, trying our best to explore the S-1 filings of nCino and GoHealth (two IPOs not from California or New York), parsing Accolade’s proposed IPO valuation after it reignited its march to the public markets, and working to grok Agora’s pretty solid IPO pricing. But there was still more going on. Over on Extra Crunch and TechCrunch this week, we also chewed over Lemonade’s first whack at IPO pricing (down from its prior valuation) and what’s good about it (better than we’d expected), and talked about the host of companies that we are excited about seeing go public over the next few quarters and years. What’s coming There are reasons to expect more of the same going forward in terms of IPO density. Looking into Q3 — now just days away — there are some VCs who anticipate a tide of software IPOs as many unicorns try to get public before the election, and while valuations are super hot. Redpoint’s Jamin Ball is of this view: Buy side is rolling out the red carpet for SaaS! Wouldn't shock me to see a flood of SaaS IPOs in Q3. Zoominfo was the first offering of the year and it only happened in June. Crazy to see a 6 month hiatus (https://t.co/Bg1I3WxgBa was last before ZI) Lots of pent up demand! — Jamin Ball (@jaminball) June 26, 2020 You can think of today’s public markets as a do-over for unicorns that should have gone public last year, but put it off. Or in racing terms, it’s a free pit stop for cars that made an error. But if you don’t get out while the getting is this good, what the hell were you waiting for? That’s the multi-billion-dollar question. Money, markets, mistakes Let’s catch up on the week’s biggest market news and how we feel about it. As always, we’ll lean toward the private markets but talk about public tech companies when they matter to the startup world. Social companies took a hit late in the week after Snap, Facebook, and Twitter fell sharply was trading came to a close, after major advertisers like P&G, Unilever, and Verizon* decided that they might actually care what sort of content their ads are shown against. Bear in mind that this sort of ad-dollar yanking is not new; publishers have dealt with this sort of thing for ages. However, social tech companies haven’t taken as many hits from this as they might have over time. Welcome to reality, y’all. For startups? It’s not great for social startups that Facebook and Twitter are taking very public knocks. If they the startups wanted to raise new capital, that is. SaaS startups — early and late-stage alike — should take heart that the recent spate of public SaaS earnings went pretty ok. There were some misfires, but it could have been worse. And with SaaS shares on the rise again, it’s a lovely time to be a SaaS company. Putting metrics on it, you can find over a dozen public SaaS companies that are worth more than 25x their next year’s sales. That’s insane. Something we’re tracking is the pace of SaaS investing in 2020. So far, Crunchbase has 648 rounds for companies tagged as SaaS in 2020 through June 26, 2020. Looking at the same interval last year, it was 1,135. Dollars are down from $12.15 billion in the year-ago period, to $9.36 billion this year. Now, there is venture data lag there, but, all the same, it’s not precisely what we expected to see. Perhaps middle-tier SaaS startups are struggling? The Zoox deal with Amazon shows how far private-market self-driving rounds valued startups ahead of reality. At one point self-driving engineers were the unobtanium of the labor market. Now, we wonder. Still, a $1 billion deal isn’t the end of the world for any company. For self-driving startups, it could mark the end of the good times in the sector, if we hadn’t already crossed the zenith and began a trudge towards its nadir. Cybersecurity is still hot hot hot, as this week Salesforce poured capital into security startup Tanium. Tanium is now worth $9 billion. 2019 IPO CrowdStrike has been outperforming as a public company, making its sector look rosy at the same time. Some of that beneficence could be at play here. Fintech is hard. Uber is backing out of its fintech push, it appears. Sure, every company is going to be a fintech company of sorts in time, but not, apparently, like this. Chime et al, rest easy, Uber’s downshift from its formerly frenetic fintech fight indicates that not every major company is going to be able to take a slice of this particular consumer pie. And, finally, the excellent Kate Clark has notes on startup valuation trends: “The median valuation for Series C or later-stage financings increased to a new high of $120 million in the first half of this year, from $80 million for 2019, according to data provided to The Information by research firm PitchBook.” It’s still good times, we suppose. There’s so much more to talk about in the worlds of startups, money and markets, but we have to stop here. This newsletter will come out every Friday once we get all the pipes linked up. So, go ahead and subscribe here (it’s 100% free) so that you miss precisely zero entries. Chat soon! *Verizon owns Verizon Media Group, which owns TechCrunch, which, in turns, owns me.

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Shares of Agora, a China and U.S.-based “real-time engagement” API company, soared today after it went public. Yesterday Agora priced 17.5 million shares at $20 apiece, up from its target range of $16 to $18 per share. The firm raised $350 in its debut, or around 10 times its Q1 2020 revenue and is now amply capitalized and has runway for effectively forever, given its modest cash consumption as an ongoing concern. But while the debut was a success, seeing Agora’s share price rise as quickly as it did was not universally popular. Regular critic of the traditional IPO process Bill Gurley — a venture capitalist, so someone with a stake in this particular gambit — weighed in: Pretty amazing that there is a financial exercise on this planet involving hundreds of millions of dollars where its OK to not even get to 50% of the actual end result. The process is so rigged/broken at this point. They missed by more than the original guess. #marketpricing pic.twitter.com/MqmmYRw3ZM — Bill Gurley (@bgurley) June 26, 2020 Let me translate. Gurley is irked — rightly, to at least some degree — that as Agora opened at $45 per share, the company’s IPO was awfully priced. By that we mean that the company should have sold its IPO shares not at $20, but at $45, the value at which the market quickly repriced them. As $45 is more than twice $20, its bankers “missed by more than [their] original guess.” Given the number of shares the company sold, the mis-pricing could be worth up to $437.5 million! There’s merit to this argument, but it’s not as complete a slam dunk as it might appear. Chat with CEOs of public companies and they will tell you about how important it is to have steady, stable, long-term shareholders of their equity. Those you might, say, meet on a roadshow and get to invest in your IPO shares. Those groups — the long-term investors that tech folks claim to love so dearly — are likely a bit more price conscious than the momentum traders eager to find upside in recent debuts. That is, folks more likely to hold onto shares for a shorter period of time. So, if you want long-term shareholders, you may have to price you IPO under the price the market may initially bear once trading begins. Agora’s above-range IPO pricing underscores a welcoming IPO market   Still, holy shit $20 per share is not close to $45. Gurley has a point. The future Change may be coming. The Agora news rotates back to what the NYSE, an American exchange, is doing. Namely trying to come up with a way to let companies direct list (to just start trading, sans pricing or raising new capital), and raise capital. This gets rid of the issues that Gurley highlighted above. At least in theory. Obviously, if that model becomes possible and long-term investors are willing to pay for shares in a slightly different manner, the new method will be far superior than the old for companies that are great. What sort of companies get burned from first-day pops the most? I reckon it’s the most attractive, or hyped companies. The companies that would make the most attractive IPOs would use the new method, leaving — what? The detritus to go out the old-fashioned way? Signaling issues abound! Anyway, it was a zany first day for Agora.

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Telemedicine is becoming more widely embraced by the day — and not just for humans. With a pet in roughly 65% of U.S. homes, there is now a dizzying number of companies enabling vets to meet with their furry patients remotely, including Petriage, Anipanion, TeleVet, Linkyvet, TeleTails, VetNOW, PawSquad, Vetoclock, and Petpro Connect. One of these — a two-year-old, 13-person, L.A.-based startup called Airvet — unsurprisingly thinks it is the best among the bunch, and it has persuaded investors of as much. Today, the company is announcing $14 million in Series A funding led by Canvas Ventures, with participation by e.ventures, Burst Capital, Starting Line, TrueSight Ventures, Hawke Ventures, and Bracket Capital, as well as individual investors. The pandemic played a role in Canvas’s decision, as did a smart model, suggests general partner Rebecca Lynn, who says she has looked at many telemedicine startups over the last 11 years and that she fell for Airvet after using the service for the animals that live on her own small farm. While vets were initially slow to embrace the shift to more telehealth visits, Airvet has “solved” some of the “objections unique to the space,” she says. Plus, “COVID has been a massive accelerant to adoption.” We asked Airvet’s founder and CEO, Brandon Werber, to make the company’s case to us separately. TC: Why start the company? BW: My dad is one of the most well-known vets in the U.S. – celebrity vet Dr. Jeff Werber. We saw the impact that telehealth was making in the human world and wanted to bring the same access to and level of care we get for ourselves to our pets.Since I grew up in the pet space, I know it intimately and recognized a lot of inefficiencies in the delivery of care and how vets have been unable to meet the evolving expectations of pet owners. TC: How are you connecting vets with their pet patients? BW: We have two apps. One is for pet-owners to download to talk with a vet, and one is for vets to download to organize workflows and talk to their clients. We do not usurp any existing vet relationships. Instead, we partner with vet clinics and enable them to conduct telehealth visits and simultaneously enable pet-owners to have access to vets 24/7, even if they don’t live nearby a vet hospital. A huge portion of pet owners in the US don’t even have a primary vet. For serious health issues like surgery, animals still need to go in-person, and network vets can even refer them. We’ve also seen Airvet used as curbside check-in, where pet-owners can chat and follow their pet’s in-person vet appointment via live video from the parking lot. TC: I see there is a minimum charge of $30 per visit. How do you make this model work financially for vets? BW: Vets view us as an additional revenue-generating tool on top of their base income. We don’t hire vets. Our network of 2,600+ vets are largely the same vets who use Airvet within their own hospital. They can decide at will, like an Uber drive, to swipe online to be part of the on-demand network and take calls from pet parents anywhere in the country to generate additional income. TC: What have you learned from startups to try this model before? BW: All the startups that came before us are not consumer-first and are just focused on building tools for vets, so their platforms cannot be used by every pet owner. Instead, they can only be used by pet owners whose own vets use that specific platform, which is a tiny fraction of vets and therefore a tiny fraction of pet parents. TC: Do you have ancillary businesses? Beyond these vet visits, are you selling anything else? BW: For now, just the vet visits, which range from a $30 minimum to higher, based on the vet and specialty. Over time, we have plans and partnerships lined up to expand into other pet health verticals. A projected $99 billion will be spent on pets in the U.S. alone in 2020, and for us, telemedicine is only the beginning. TC: Does Airvet involve specific practice management software? BW: No. We provide the workflow layer enabling vets to schedule virtual appointments, which will soon be able to be fully integrated with their existing systems and workflows. TC: When a customer calls a vet for $30, is there a time limit? BW: There is no time limit and cases will usually stay open for three full days, so pet parents can continue to access the vet via chat for any follow up questions or concerns. TC: Are you competing at all on pricing? BW: Our goal is to work alongside the hospitals, not to compete with them or replace them. You can’t take blood virtually or feel a tumor or do a dental. People always will need to go to the vet. What we want to do is help [pet owners] understand when [to come in]. The average pet parent only goes to the vet 1.5 times a year. A huge segment of users on Airvet have already connected with a vet six times more than that and save time and stress in doing so. It’s not about competing for us, it’s about being the provider of care in between office visits [and helping] pet parents who have used our service ultimately avoid an unnecessary emergency visit.

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With the game industry booming, more entrepreneurs are evaluating where to base their new startup or open a new office for their existing company. The U.S. government’s block on H1-B and L-1 visas will encourage American game startups to add an office abroad much sooner than they otherwise would have. But where? This spring, I surveyed a number of gaming-focused VCs about which cities are the best hubs for game studios targeting the Western games market. Several locales stood out as heavily recommended — which I’ve shared below — but the most interesting takeaway was the lack of consensus. Game studios are far less geographically concentrated than other categories of VC-backed startups. While there are odes on Twitter and conference stages that “you can build a successful startup anywhere,” most investors will push founders to locate themselves in the SF Bay Area, or at least in LA, NYC or London. Meanwhile, the most common piece of advice from those I spoke to: You should probably not base a gaming startup in the San Francisco Bay Area. Access to the right talent is the top priority, as is the ability to retain them. Proximity to investors matters, but a successful game quickly turns a profit, which reduces the need for outside funding beyond Series A (and U.S. and European VCs who focus on gaming tend to be very international in scope). Quality of life, ease of obtaining visas and access to strategic partners all play into the decision as well and will weigh these recommendations differently depending on who you are and the games you’re developing. Three notes: I focused on qualitative research, gauging the assessments of top investors who track new startups in the sector about where the action is right now.  The scope of this survey is limited to studios targeting the Western gaming market, so leading hubs in Asia weren’t included. I group cities by metropolitan area so, for example, San Francisco includes Redwood City and Seattle includes Bellevue. North America In North America, Los Angeles is the clear favorite with Montreal, Seattle, San Francisco, Toronto and Vancouver all receiving many endorsements as the other top hubs. Regarding cities with the most interesting gaming startups recently, Ryann Lai of Makers Fund said, “It is hard to name a single best location, but Toronto, Culver City (in Los Angeles), Orange County (next to Los Angeles) have gotten increasingly popular among gaming founders lately.”

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Nearly 40 million Americans are unemployed, and a recent study that examined more than 66,000 tech job layoffs found that sales and customer success roles are most vulnerable amid COVID-19. In response, some quarters of Silicon Valley are abuzz about a long-standing technology: reskilling, or training individuals to adopt an entirely new skillset or career for employment. As millions look for a way to reenter the workforce, the question arises: Who really benefits from reskilling technology? That depends on how you look at it, said Jomayra Herrera, a senior associate at Cowboy Ventures. Reskilling for a well-networked manager looks a lot different than it does for someone who doesn’t have as much leverage, and the vast majority of people fall into the latter. Not everyone has a friend at Google or Twitter to help them skip the online application and get right to the decision-makers. Beyond the accessibility offered by live online classes, she pointed to the difference between assets and opportunities. “You can give someone access to something, but it’s not true access unless they have the tools and structure to really engage with it,” Herrera said. In other words, how useful is content around reskilling if the company doesn’t support job placement post-training. Herrera said companies must give individuals opportunities to test skills with real work and navigate the career path. Her mother, who did not go to college and speaks English as a second language, is looking to pursue training online. Before she can proceed, however, she has to surmount hurdles like language support, resume creation, job search and other challenges. All of a sudden, content feels like a commodity, regardless of if it has active and social learning components. It’s part of the reason that MOOCs (massive open online courses) feel so stale. Udacity, for example, was almost out of cash in 2018 and laid off more than half of its team in the past two years, according to The New York Times. Now, like other edtech companies, it is facing surges in usage.

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In a blog post this Friday afternoon, Y Combinator’s president Geoff Ralston said that the accelerator would make two changes to its terms for startups. The first would see the size of the standard deal for YC startups decline from $150,000 for 7% (roughly a $2.1 million post-money valuation) to $125,000 for the same equity (or roughly a $1.79 million post-money valuation). The deal will continue to be offered using a SAFE, which YC and a group of others pioneered as a simpler investment option compared to convertible notes. Interestingly, the firm is always writing into its terms that it will only take pro rata up to 4% of a subsequent round’s size, which is obviously smaller than the 7% ownership that the company is buying in its financing. That 4% number is a ceiling — in cases where the accelerator has less ownership than 4%, the smaller percentage applies. Full terms of Y Combinator’s deal are available on its website. The new deal will apply to startups who join Y Combinator in the Winter 2021 batch, and doesn’t include startups in the current summer batch (who have already presumably been funded) YC’s deal has varied over the years. When it first launched more than a decade ago, it offered terms of $20,000 for 6%. A Y Combinator spokeswoman said that the change was in line with the fundraising and budget realties of the accelerator going forward. “The future of the economy is unpredictable, and we feel it is prudent during these times to switch to a leaner model,” she said. “In our case, we want to be set up to fund as many great founders as possible — especially during a time that is creating an unprecedented change to consumer and business behavior; with these changes comes endless opportunities for startups. And with the changes made to our standard deal, we can fund as many as 3000 more companies.” Outside of budget, at least a couple of factors are potentially at work here. One is the increased use of Work From Anywhere, which presumably can help lower some of the running costs of a startup, particularly in its earliest days (i.e. no need to pay for that WeWork flex desk). Work From Home is dead, long live Work From Anywhere Y Combinator has also invested more of its funds into emerging markets startups, which can have dramatically lower costs of development given prevailing wages for talent in local markets. Yet, the cutback is also a sign that the flood of capital entering the Valley in recent years has receded — if ever so slightly — in the wake of COVID-19. Valuations are depressing, and while $25,000 is not a massive loss considering the scale of later venture financings, the 16% valuation haircut is inline with other numbers we have seen in the Valley in recent weeks.

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As advertisers pull away from Facebook to protest the social networking giant’s hands-off approach to misinformation and hate speech, the company is instituting a number of stronger policies to woo them back. In a livestreamed segment of the company’s weekly all-hands meeting, CEO Mark Zuckerberg recapped some of the steps Facebook is already taking, and announced new measures to fight voter suppression and misinformation — although they amount to things that other social media platforms like Twitter have already enacted and enforced in more aggressive ways. At the heart of the policy changes is an admission that the company will continue to allow politicians and public figures to disseminate hate speech that does, in fact, violate the Facebook’s own guidelines — butit will add a label to denote they’re remaining on the platform because of their “newsworthy” nature. It’s a watered down version of the more muscular stance that Twitter has taken to limit the ability of its network to amplify hate speech or statements that incite violence. Zuckerberg said: A handful of times a year, we leave up content that would otherwise violate our policies if the public interest value outweighs the risk of harm. Often, seeing speech from politicians is in the public interest, and in the same way that news outlets will report what a politician says, we think people should generally be able to see it for themselves on our platforms. We will soon start labeling some of the content we leave up because it is deemed newsworthy, so people can know when this is the case. We’ll allow people to share this content to condemn it, just like we do with other problematic content, because this is an important part of how we discuss what’s acceptable in our society — but we’ll add a prompt to tell people that the content they’re sharing may violate our policies. The problems with this approach are legion. Ultimately, it’s another example of Facebook’s insistence that with hate speech and other types of rhetoric and propaganda, the onus of responsibility is on the user. Zuckerberg did emphasize that threats of violence or voter suppression are not allowed to be distributed on the platform whether or not they’re deemed newsworthy, adding that “there are no exceptions for politicians in any of the policies I’m announcing here today.” But it remains to be seen how Facebook will define the nature of those threats — and balance that against the “newsworthiness” of the statement. The steps around election year violence supplement other efforts that the company has taken to combat the spread of misinformation around voting rights on the platform. Facebook adds option for US users to turn off political ads, launches voting info hub   The new measures that Zuckerberg announced also include partnerships with local election authorities to determine the accuracy of information and what is potentially dangerous. Zuckerberg also said that Facebook would ban posts that make false claims (like saying ICE agents will be checking immigration papers at polling places) or threats of voter interference (like “My friends and I will be doing our own monitoring of the polls”). Facebook is also going to take additional steps to restrict hate speech in advertising. “Specifically, we’re expanding our ads policy to prohibit claims that people from a specific race, ethnicity, national origin, religious affiliation, caste, sexual orientation, gender identity or immigration status are a threat to the physical safety, health or survival of others,” Zuckerberg said. “We’re also expanding our policies to better protect immigrants, migrants, refugees and asylum seekers from ads suggesting these groups are inferior or expressing contempt, dismissal or disgust directed at them.” Zuckerberg’s remarks came days of advertisers— most recently Unilever and Verizon — announced that they’re going to pull their money from Facebook as part the #StopHateforProfit campaign organized by civil rights groups. These some small, good steps from the head of a social network that has been recalcitrant in the face of criticism from all corners (except, until now. from the advertisers that matter most to Facebook). But they don’t do anything at about the teeming mass of misinformation that exists in the private channels that simmer below the surface of Facebook’s public facing messages, memes and commentary.

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It’s now o’clock, founders. A mere 12 hours stands between you and a chance to compete in Startup Battlefield and launch your pre-Series A startup during Disrupt 2020 — in front of the world’s influential technorati. You won’t find a bigger launching pad, and this window of extraordinary opportunity slams shut on June 26 at 11:59 pm (PT). Apply to Startup Battlefield right here, right now. This year’s legendary pitch competition is virtual, but the benefits and opportunity that comes from competing are very real and often life changing — for all participants not just the ultimate winner. Let’s explore that a bit more. The top prize — $100,000 equity free cash — will do wonders for your bottom line. The TechCrunch feature article – brings you into the league of legends. The Disrupt cup and the acclaim that comes with winning, well, who doesn’t love bragging rights? But it’s the huge exposure — on a global scale — to media, investors, potential customers and big tech players looking to acquire promising startups, that can take Battlefield competitors on a whole new trajectory. Here’s a quick look at how Startup Battlefield works. We accept applications from founders of any background, geography and industry as long as your company is early stage, has an MVP with a tech component (software, hardware or platform) and hasn’t received much major media coverage. Our editors screen every application and will choose only startups they feel possess that certain je ne sais quoi. The epic pitch-off takes place during Disrupt 2020, which runs from Sept. 14 – 18. Note: This opportunity is 100 percent free. TechCrunch does not charge any application or participation fees or take any equity. You’ll receive six weeks of free pitch coaching from TC editors to whip you into prime fighting trim. Plus a virtual webinar series with industry experts. You’ll have just 6 minutes to pitch and demo to the judges — a panel of expert VCs, entrepreneurs and TechCrunch editors. Then you’ll answer their questions — and they’ll have plenty. Founders who survive the first round move to the finals on the last day of Disrupt. It’s lather-rinse-repeat as you pitch to a fresh set of judges. Then it’s time for the big reveal: one startup takes the title, the Disrupt cup and the $100,000. Have you clicked the application link yet? No? Here are more reasons to apply. If you earn a spot in the competition, you get a Disrupt Digital Pro pass and you get to exhibit to people around the world in Digital Startup Alley — for free. You’ll network with CrunchMatch, our AI-powered platform, to set up virtual 1:1 meetings with investors, media, potential customers and the throngs of folks eager to meet a Battlefield competitor. Need more perks? We got you covered. A launch article featuring your startup on TechCrunch.com Access to Leading Voices Webinars: Hear top industry minds share their strategies for adapting and thriving during and after the pandemic A YouTube video promoted on TechCrunch.com Free subscription to Extra Crunch Free passes to future TechCrunch events This no-cost, perk-packed opportunity disappears in just 12 hours. Do whatever it takes to keep your startup moving forward. Apply to compete in Startup Battlefield before the deadline expires on June 26 at 11:59 pm (PT). Is your company interested in sponsoring or exhibiting at Disrupt 2020? Contact our sponsorship sales team by filling out this form.

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When Apple confirmed it had acquired Fleetsmith, a mobile device management vendor, on Wednesday, it seemed like a straightforward purchase, but Fleetsmith customers quickly learned a key piece of functionality had stopped working  — and many weren’t happy about it. Apple systems administrators began complaining on social media on the morning of the acquisition announcement that the company was no longer allowing them to connect to third-party applications. “Primarily Fleetsmith maintained a third party app catalog, so you could deploy things like Chrome or Zoom to your Macs, and Fleetsmith would maintain security updates for those apps. This was the main reason we purchased Fleetsmith,” a Fleetsmith customer told TechCrunch. The customer added that the company described this functionality as a major feature in a company blog post: Fleetsmith handles this all for you automatically. Once the version is enforced, it is downloaded and queued for install immediately across the device fleet. Most apps will update silently and automatically once they’re restarted, but users can also choose to do the update manually. Our agent will remind users about the update periodically, and then once the enforcement date hits, it will give them an opportunity to save work and then run the update itself. Apple has acquired Fleetsmith, a startup that helps IT manage Apple devices remotely As it turned out, Apple had made it clear that it was discontinuing this feature in an email to Fleetsmith customers on the day of the transition. The email included links to several help articles that were supposed to assist admins with the transition. (The email is included in full at the end of the article). The general consensus among admins that I spoke to was that these articles were not terribly helpful. While they described a way to fix the issues, they said that Apple has turned what was a highly automated experience into a highly manual one, effectively eliminating the speed and ease of use advantage of having then update feature in the first place. Apple did confirm that it had responded to some help ticket requests after the changes this week, saying that it would soon restore some configurations for Catalog apps, and were working with impacted customers as needed. The company did not make clear, however, why they removed this functionality in the first place. Fleetsmith offered a couple of key features that appealed to Mac system administrators. For starters, it let them set up new Macs automatically out of the box. This allows them to ship a new Mac or other Apple device, and as soon as the employee powers it up and connects to WiFi, it connects to Fleetsmith where systems administrators can track usage and updates. In addition, it allowed System Administrators to enforce Apple security and OS updates on company devices. What’s more, it could also do the same thing with third-party applications like Google Chrome, Zoom or many others. When these companies pushed a new update, system administrators could make sure all users had the most recent version running on their machines. This is the key functionality that was removed this week. It’s not clear why Apple chose to strip out these features outlined in the email to customers, but it seems likely that most of this functionality  isn’t coming back, other than restoring some configurations for Catalog apps. Email that went out to Fleetsmith customers the day of the acquisition outlining the changes:   Attempts to reach Fleetsmith founders for comment were unsuccessful. Should that change we will update the article.

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Advertiser momentum against Facebook’s content and monetization policies continues to grow. Last night, Verizon (which owns TechCrunch) said it will be pausing advertising on Facebook and Instagram “until Facebook can create an acceptable solution that makes us comfortable and is consistent with what we’ve done with YouTube and other partners.” Then today, it was joined by consumer goods giant Unilever, which said it will halt all U.S. advertising on Facebook, Instagram (owned by Facebook) and even Twitter, at least until the end of the year. “Based on the current polarization and the election that we are having in the U.S., there needs to be much more enforcement in the area of hate speech,” Unilever’s executive vice president of global media Luis Di Como told The Wall Street Journal. The effort to bring advertiser pressure to bear on Facebook began with a campaign called #StopHateforProfit, which is coordinated by the Anti-Defamation League, the NAACP, Color of Change, Free Press and Sleeping Giants. The campaign is calling for changes that are supposed to improve support for victims of racism, anti-Semitism and hate, and to end ad monetization on misinformation and hateful content. The list of companies who have agreed to pull their advertising from Facebook also includes outdoor brands like REI, The North Face and Patagonia. (An important caveat: Gizmodo noted that it’s not clear whether these advertisers are also pulling their money from the Facebook Audience Network.) We have taken the decision to stop advertising on @Facebook, @Instagram & @Twitter in the US. The polarized atmosphere places an increased responsibility on brands to build a trusted & safe digital ecosystem. Our action starts now until the end of 2020.https://t.co/flHhKid6jD pic.twitter.com/QdzbH2k3wx — Unilever #StaySafe (@Unilever) June 26, 2020 Facebook provided the following statement in response to Unilever’s announcement: We invest billions of dollars each year to keep our community safe and continuously work with outside experts to review and update our policies. We’ve opened ourselves up to a civil rights audit, and we have banned 250 white supremacist organizations from Facebook and Instagram. The investments we have made in AI mean that we find nearly 90% of Hate Speech [and take] action before users report it to us, while a recent EU report found Facebook assessed more hate speech reports in 24 hours than Twitter and YouTube. We know we have more work to do, and we’ll continue to work with civil rights groups, GARM, and other experts to develop even more tools, technology and policies to continue this fight. And Twitter provided a statement from Sarah Personette, vice president of global client solutions: Our mission is to serve the public conversation and ensure Twitter is a place where people can make human connections, seek and receive authentic and credible information, and express themselves freely and safely. We have developed policies and platform capabilities designed to protect and serve the public conversation, and as always, are committed to amplifying voices from underrepresented communities and marginalized groups. We are respectful of our partners’ decisions and will continue to work and communicate closely with them during this time. As of 1:57 p.m. EDT, Facebook stock was down more than 7% from the start of trading. CEO Mark Zuckerberg said he will also be addressing these issues at a town hall starting at 2 p,m. EDT today. Big outdoor brands join #StopHateForProfit campaign, boycott Facebook and Instagram ads  

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Tim O’Reilly has a financial incentive to pooh-pooh the traditional VC model, wherein investors gamble on nascent startups in hopes of seeing many times their money back. Bryce Roberts, who is O’Reilly’s longtime investing partner at the early-stage venture firm O’Reilly AlphaTech Ventures (OATV), now actively steers the partnership away from these riskier investments and into companies around the country that are already generating revenue and don’t necessarily want to be blitzcaled. Yet in an interview with O’Reilly last week, he nonetheless argued persuasively for why venture capital, in its current iteration, has begun to make less sense for more founders who genuinely want to build sustainable businesses. The way he sees it, the venture industry is no longer as focused on finding small companies that might one day change the world but more on creating financial instruments for the wealthy — and that shift has real consequences. Below, we’re pulling out parts of that conversation that may be of interest to readers who are either debating raising venture capital, debating raising more venture capital, and even those who have been turned away from VCs and perhaps dodged a bullet in the process. At a minimum, O’Reilly — who bootstrapped his own company, O’Reilly Media, 42 years ago and says it now produces “couple hundred million dollars in revenue” yearly — provides a lot of food for thought. TechCrunch: A lot of companies celebrated Juneteenth this year, which is a big deal. There’s been a lot of talk about making the venture industry more inclusive. How far — or not — do you think we’ve come in the venture industry on this front? Tim O’Reilly: The thing that I would say about VC and about really everything in tech is, this concept of structural racism [is really the problem]. People think that all it matters is, ‘Well, my values are good, my heart’s in the right place, I donate to charities,’ and we don’t actually fix the systems that cause the problems. With VCs, the networks from which they’re drawing entrepreneurs are not that different [than they have been historically]. But more importantly, the goals of the VC model are not that different. The industry sets a goal, and it has a certain kind of financial shape, which is inherently exclusionary. How so? The typical VC model is looking for this high-growth company with exit potential, because it’s looking for this big financial return from an IPO or acquisition, and that selects for a certain type of founder. My partner Bryce decided two funds ago [to] look for companies that are kind of disparaged as lifestyle companies that are trying to build sustainable businesses with cash flow and profits. They’re the kind of small businesses, and small business entrepreneurs, that have banished from America, partly because of the VC myth, which is really about creating financial instruments for the wealthy. He came up with a version of a SAFE note that allows the founders to buy out the VC at a predetermined amount if they ever become sufficiently profitable but also gives them the optionality, because periodically, some of them do end up becoming a rocket ship. But the founder is not on the treadmill of: you have to get out. How does that relate to Juneteenth? When you start saying, ‘Okay, we’re going to look for sustainable businesses,’ you look all over the country, and Bryce ended up [with a portfolio] that’s made up of more than 50% women founders and 30% people of color, and it has been an incredible investment strategy. That’s not to say that people who are African-American or women can’t also lead companies that are part of the high-growth VC model that’s typical of Silicon Valley. No, of course not. Of course, they could lead. The talent pool is just much greater [when you look outside of Silicon Valley]. There’s a certain kind of bro culture in Silicon Valley and if you don’t fit in, sure [you could find a way], but there are a lot of impediments. That’s what we mean by structural racism. To your point about insular networks, a prominent Black VC, Charles Hudson, has noted that a lot of [traditional VCs] just don’t know have regular or professional associations with Black people, which hampers how they find companies. How has Bryce fostered some of these connections, because it does feel like traditional VCs are right now trying to figure out how to better do this. It’s breaking the geographic isolationism of Silicon Valley. It’s breaking the business model isolationism of Silicon Valley that says: only things that fit this particular profile are worth investing in. Bryce didn’t go out there and say, ‘I want to go find people of color to invest in.’ What he said was, ‘I want to have a different kind of investment in different places in the United States.’ And when he did that, he naturally found entrepreneurs who reflect the diversity of America. That’s what we have to really think about. It’s not: how do we get more Black and brown founders into this broken Silicon Valley model. It’s: how do we go figure out what the opportunities are helping them to grow businesses in their communities? Are LPs interested in this kind of model? Does it have the kind of growth potential that they need to service their endowments? It was a bit of a struggle when we did fund four, which was focused on [this newer model]. It was about a third of the size of fund three. But for fund five, the fundraising is [going] like gangbusters. Everybody wants in because the model has proven itself. I don’t want to name names, but there are two companies [in the portfolio] that are kind of in similar businesses. One was in third fund and was sort of a traditional Silicon Valley-style investment. And the other was an investment in Idaho of all places. The first company, which involved a more traditional seed round, we’ve ended up putting in $2.5 million for a 25% stake. The one in Idaho we put in 500,000 for a 25% stake, and the one in Idaho is now twice the size of the Silicon Valley one and growing much faster. So from what you’re seeing, the returns are actually going to be better than with a traditional Silicon Valley venture [approach]. As I said, I’ve been really disillusioned with Silicon Valley investing for a long time. It reminds me of Wall Street going up to 2008. the idea was, ‘As long as someone wants to buy this [collateralized debt obligation], we’re good.’ Nobody is thinking about: is this a a good product? So many things that what VCs have created are really financial instruments like those CDOs. They aren’t really think about whether this is a company that could survive on revenue from its customers. Deals are designed entirely around an exit. As long as you can get some sucker to take them, [you’re good]. So many acquisitions fail, for example, but the VCs are happy because — guess what? — they got their exit. But now, because funds are raised so quickly, VCs have to show much more traction, which is where things like blitzscaling come in. Just the way you’re describing it. Can’t you hear what’s wrong with that? It’s for the benefit of the VCs, the VCs have to show, not the entrepreneurs have to show. Aren’t the LPs addicted to that crack? Don’t they want to see that quick financial traction? Yeah, but you know that VC returns have actually lagged public markets for four decades now. It’s a little bit like the lottery. The only sure winners are the VCs because the VCs that don’t return their fund get their management fees every year. A huge amount of the VC capital doesn’t return. Everybody just sees the really big wins. And I know when they happen, it’s really wonderful. But I think [those rare wins] have gotten an outsize place, and they’ve displaced other kinds of investment. It’s part of structural inequality in our society, where we’re building businesses that are optimized for their financial return rather than their return to society.

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The events of the past few months have shaken the lives of everyone, but especially Black people in the U.S. COVID-19 has disproportionately impacted members of the Black community while police violence has recently claimed the lives of George Floyd, Tony McDade, Breonna Taylor, Rayshard Brooks and others.  Two weeks ago, two Black transgender women, Riah Milton and Dominique “Rem’mie” Fells were murdered. In light of their deaths, activists took to the streets to protest the violence Black trans women face. Two days after Floyd’s killing, McDade, a Black trans man was shot and killed by police in Tallahassee, Florida.  In light of Pride month coinciding with one of the biggest racial justice movements of the century amid a pandemic, TechCrunch caught up with Robyn Exton, founder of queer dating app Her, to see how her company is navigating this unprecedented moment.  Exton and I had a wide-ranging conversation including navigating COVID-19 as a dating startup, how sheltering in place has affected product development, shifting the focus of what is historically a month centered around LGBTQ people to include racial justice work and putting purpose back into Pride month. “Pride exists because there is inequality within our world and within our community and still there is no clear focus on what it is we should be fighting for as a community,” Exton says. “It almost feels like since equal marriage was passed, there’s a range of topics but no clear voice saying this is what everyone should focus on right now. And then obviously everything changed after George Floyd’s murder. Over the course of the following weekend, we canceled pretty much everything that was going out that talked still about Pride as a celebration. Especially for Black people within our community, in that moment of so much trauma, it felt completely wrong to talk about Pride just in general.” Worldwide, Pride events have been canceled as a result of the pandemic. But it gives people and corporations time to reflect on what kind of presence they want to have in next year’s Pride celebrations.

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It’s time to put on our thinking caps so we can discuss an esoteric but important policy change and how it is going to impact the VC world. The 2008 financial crisis devastated the global economy. One of the reforms that came from the detritus of that situation was a policy known as the Volcker Rule. The rule, proposed by former Fed chairman Paul Volcker and passed into law with the Dodd-Frank reform bill, was designed to limit the ways that banks could invest their balance sheets to avoid the kind of cataclysmic systemic risks that the world witnessed during the crisis. Many banks faced a liquidity crunch after investing in mortgage-backed securities (MBSs), collateralized debt obligations (CDOs), and other even more arcane speculative financial instruments (like POGs, or Piles Of Garbage) in seeking profits. A number of reforms are underway to the Volcker Rule, which has been a domestic regulatory priority for the Trump administration since Inauguration Day. One of the unintended consequences of the Rule is that it limited banks from investing in certain “covered funds,” which was written broadly enough that it, well, covered VC firms as well as hedge funds and other private equity vehicles. Reforms to that policy (and to the Rule in general) have been proposed for a decade with little traction until recently. Now, a number of reforms are underway to the Volcker Rule, which has been a domestic regulatory priority for the Trump administration since Inauguration Day. Proposed amendments to the Volcker Rule could be a lifeline for venture firms hit by market downturn First, a a simplification to some of the Rule’s regulations was passed late last year and went into effect in January. Now, a final rule to reform the Volcker Rule’s applications to VC firms among other issues was agreed to by a group of U.S. regulatory agencies, and will go into effect later this year.

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The ongoing COVID-19 crisis has had a number of unexpected impacts on global economic activity – most of them negative. But the pandemic has also highlighted the need for alternative solutions to challenges where traditional solutions now prove either too costly, or too difficult to do while maintaining good health and safety practices. Near Space Labs, a startup focused on providing timely, location-specific, high resolution Earth imaging from balloons in the stratosphere, is one company that has found its model remarkably well-suited to the conditions that have arisen due to the coronavirus crisis. Near Space Labs is in the process of expanding its offering to Texas, with some imagery already collected, and the team in active conversations with a number of potential customers about subscribing to its imaging services ahead of launching the first full batch of collected imagery by early next month. Adding a new geography in the middle of a pandemic required Near Space Labs to move up the development of a way for it to easily ship and deploy its balloon-lofted imaging equipment using remote instruction with local technical talent, which now means it’s ready to effectively spin up an imaging operation very quickly, on-demand basically anywhere in the world, with simple, minimal training to onboard and equip local operators on-demand. “With travel restrictions, we had to figure out how to deploy hardware in a fully remote way,” explained Near Space Labs’ CEO Rema Matevosyan. “That had been a challenge that we wanted to tackle at some point, for our scalability – but instead we had to tackle that ASAP. Today, I’m really proud to say that the Swift, our robotic vehicles are able to be shipped anywhere on the globe in a small suitcase. And with a few videos, and a manual, it’s super easy to train new people to launch.” Swift is basically a sophisticated camera attached to a balloon that flies between 60,000 and 85,000 feet, with short duration flights that can nonetheless capture up to 270 square miles of imagery at 30cm per inch resolution in a single pass. Swift is also designed to be able to go up frequently, making trips up to as frequently as twice per day, and it’s designed to provide quick turnaround times for processed images, compared to long potential waits for imaging from geosynchronous or even LEO satellites based on orbital schedules, ground station transmission times and other factors. Image Credits: Near Space Labs And because Near Space Labs can basically ship its imaging equipment in a suitcase and have just about anyone train quickly to use it effectively, vs. having to build a satellite that requires delivery via rocket and operation by highly trained engineers, it can offer considerable savings vs. the space-based competition – at a time when cost sensitivity for public institutions and the organizations looking for this kind of data aren’t eager to open their wallets. “In these uncertain economic times, margins and fiscal responsibility become very important for people,” Matevosyan explained. “We have the perfect solution for that – our approach is very flexible, very low-cost. Even states are ‘bankrupt,’ – so everybody’s looking for ways to improve their margins, and to improving their spend.” Matevosyan told me that Near Space Labs has seen an uptick in interest in its product from two directions as a result of the ongoing global economic shifts – first, there are customers who have traditionally sourced this imaging from satellite providers and who are looking for cost savings and a product that more closely fits their geographic and timing needs. Second, there are organizations looking to start using this kind of imagery for the first time, as an alternative to in-person inspection or sensing, because of the ways in which COVID-19 has put restrictions on workforces. “COVID also put a spotlight in general on the remote sensing industry, because people are unable to, for instance, go down to the assets or the sites that they usually would check manually,” she said. “So that started looking into remote sensing solutions, and we saw an uptick in applications and signups to our imagery. One example industry where that’s happening is conservation. Conservation wasn’t a vertical that was super active in our pipeline. But suddenly with COVID, it became pretty active.” Matevosyan says that it took Near Space just “days” to ramp a new technical team to be able to launch its Swifts in Texas, and that’s representative of the speed at which it can now scale to establish imaging basically anywhere in the world. Flexibility and scalability were always key assets of the business, she says, but the COVID crisis pushed that essential value to the forefront, and could help propel the company’s growth a lot quicker than expected.

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Up until 2013, Adobe sold its software in cardboard boxes that were distributed mostly by third party vendors. In time, the company realized there were a number of problems with that approach. For starters, it took months or years to update, and Adobe software was so costly, much of its user base didn’t upgrade. But perhaps even more important than the revenue/development gap was the fact that Adobe had no direct connection to the people who purchased its products. By abdicating sales to others, Adobe’s customers were third-party resellers, but changing the distribution system also meant transforming the way the company developed and sold their most lucrative products. The shift was a bold move that has paid off handsomely as the company surpassed an $11 billion annual run rate in December — but it still was an enormous risk at the time. We spoke to Adobe CIO Cynthia Stoddard to learn more about what it took to completely transform the way they did business. Understanding the customer Before Adobe could make the switch to selling software as a cloud service subscription, it needed a mechanism for doing that, and that involved completely repurposing their web site, Adobe.com, which at the time was a purely informational site. “So when you think about transformation the first transformation was how do we connect and sell and how do we transition from this large network of third parties into selling direct to consumer with a commerce site that needed to be up 24×7,” Stoddard explained. She didn’t stop there though because they weren’t just abandoning the entire distribution network that was in place. In the new cloud model, they still have a healthy network of partners and they had to set up the new system to accommodate them alongside individual and business customers. She says one of the keys to managing a set of changes this immense was that they didn’t try to do everything at once. “One of the things we didn’t do was say, ‘We’re going to move to the cloud, let’s throw everything away.’ What we actually did is say we’re going to move to the cloud, so let’s iterate and figure out what’s working and not working. Then we could change how we interact with customers, and then we could change the reporting, back office systems and everything else in a very agile manner,” she said.

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Amazon makes an autonomous driving acquisition, Microsoft closes its retail stores and health insurance startup Oscar raises $225 million. Here’s your Daily Crunch for June 26, 2020. 1. Amazon to acquire autonomous driving startup Zoox According to Amazon’s announcement, Zoox will continue to exist as a standalone business, with current CEO Aicha Evans continuing in her role, along with CTO and co-founder Jesse Levinson. The Financial Time reports that the deal is worth $1.2 billion. Amazon has been working on its own autonomous vehicle technology projects, including its last-mile delivery robots. The company has also invested in autonomous driving startup Aurora, and it has tested self-driving trucks powered by self-driving freight startup Embark. 2. Microsoft is closing all of its retail stores for good As other retailers begin the slow process of reopening, Microsoft has announced that it will be permanently shutting down the vast majority of its retail stores. The remaining locations — in cities like London, New York City and Sydney, as well as on Microsoft’s Redmond campus — will become “Microsoft Experience Centers,” rather than standard retail stores. 3. Oscar’s health insurance platform nabs another $225 million Oscar’s insurance customers have the distinction of being among the most active users of telemedicine in the United States, according to the company. Around 30% of patients with insurance plans from Oscar have used telemedical services, versus only 10% of the country as a whole. 4. Luckin Coffee will unluckin’ly delist from Nasdaq following fraud allegations An investigation by the company’s board found that Luckin had inflated sales by essentially having affiliated companies buy large orders of coffees that never got delivered. And of course, that’s fraud when you put it on a 10-K form and submit it to the SEC. (Also, it’s very important to me that you know: I did not write this headline.) 5. Four perspectives: Will Apple trim App Store fees? Given its massive reach, is it time for Apple to change its terms? Will the company allow its revenue share to go gently into that good night, or does it have enough resources to keep new legislation at bay and mollify an increasingly vocal community of software developers? (Extra Crunch membership required.) 6. Google finally brings group calling to the Nest Hub Max Video chat has long been one of the chief selling points of smart screens like the Amazon Echo Show and Google’s Nest Hub Max (the regular Hub doesn’t have a camera). But until yesterday, the latter only offered users the option to have one-on-one calls. 7. Amazon really just renamed a Seattle stadium ‘Climate Pledge Arena’ One more Amazon story to close out the week: The company is buying the rights to Seattle’s KeyArena, an aging stadium currently under redevelopment. Amazon founder and CEO Jeff Bezos said, “Instead of calling it Amazon Arena, we’re naming it Climate Pledge Arena as a regular reminder of the urgent need for climate action.” The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 9am Pacific, you can subscribe here.

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Two years after closing their debut fund of $150 million, Base10 co-founders Adeyemi Ajao and TJ Nahigian, are back with a $250 million investment fund and a sense of vindication for their thesis of investing in startups making automation for the people. For Ajao, an immigrant who spent grew up in Nigeria and Spain before moving to the US, the new fund is a confirmation that even without having an explicit focus on minority investments, it’s possible to create a portfolio led by a diverse mix of founders. Indeed, roughly 60 percent of the firm’s investments have been into companies led or co-led by women or minority founders. “We might be minority-led but we are not minority focused,” said Ajao, in an interview. “We’re targeting industries that are big problems for the 99 percent so we hope the portfolio will reflect the diversity of the 99 percent.” Part of that diversity simply comes from the geographic diversification of the portfolio, said Ajao. “We like to invest in Latin America [and] we like to invest outside of Silicon Valley… We have always had the knack of look where others are not looking.” And as part of that commitment, the firm is making a diversity pledge including: doubling-down on a commitment to diversity through its investment process, hiring practices, and bias training; and a commitment of 1 percent of the firm’s profits from its management company and another 1 percent commitment of its carried interest to support organizations fighting for inclusion and racial equality. Ajao and Nahigian have already enlisted firms like Precursor Ventures, Illumen Capital and Plexo Capital in the new commitment. Drawing on Ajao’s connections in the Spanish and Latin American community of entrepreneurs has meant that Base 10 already has a geographically and racially diverse portfolio. Latin American companies account for about 5 of the firm’s 28 publicly listed portfolio companies, with other portfolio companies coming from the Netherlands and Germany. Ajao and Nehigian have also spread the wealth pretty broadly across the U.S. with companies in Atlanta, Austin, Los Angeles, Stamford, Conn. and Seattle in addition to the traditional startup hub of San Francisco. At Base 10, the typical check size will remain in the $500,000 to $5 million range and the focus remains on experienced founders in industries as diverse as agriculture, construction, logistics, waste management, shipping and logistics. Investments include Cottage, which is building adjacent dwelling units for the California market; Faber, which provides staffing for commercial construction; the Mexico City-based digital freight forwarder, NowPorts; birth control delivery startup The Pill Club; on-demand staffing company Wonolo and TokenSoft, a platform for compliant token sales. The new capital is a huge vote of confidence in both Nahigian, a Los Angeles native who spent years as an investor at Summit Partners, Accel, and Coatue Management before founding the mobile job platform, Jobr; and Ajao, who only began working in venture as a corporate investor with Workday Ventures. Previously, the serial entrepreneur launched seferal companies including Identified, which was sold to Workday, and Tuenti, which Telefonica acquired for $100 million back in 2010. Ajao also has the distinction of co-founding Cabify, which raised at a $1.4 billion valuation back in 2018. And he was Nahigian’s first investor in Jobr. The pair stayed in touch, discussed startups and potential deals, and ultimately decided to go into business together back when the firm was first getting off the ground.  These days, Ajao believes that the public’s fears of automation coming for people’s jobs have been replaced with a realization that automation is “essential to survival for millions of people and small and medium businesses” looking to stay afloat amid the wave of economic shocks caused by the COVID-19 pandemic. “Moreover, with issues of racial, economic, and gender inequality front and center, it is evident today more than ever that we have a collective responsibility to focus on urgently solving problems that are actually important for 99% of people,” Ajao wrote in a blog post announcing the new Base 10 fund.  As the co-founder of what is one of the largest Black-led venture fund, with $400 million in assets under management, Ajao is taking this moment to situate his fund in a place that supports the development of technology for the 99%. Examples of portfolio companies stepping in to solve real business problems abound, writes Ajao, in his blog post. From a family-owned restaurant in San Francisco using Virtual Kitchen Company to transition its operations to a full-service delivery model; to restaurants across the Southeast using PopMenu. There’re also newer portfolio company investments like AMI, a Salesforce-style software platform for direct marketers. As employers responded to the economic slowdown caused by the COVID-19 epidemic by slashing jobs, many laid-off workers turned to direct sales to support their families, Ajao said. Tools like AMI are helping these stay-at-home entrepreneurs continue to make money as their main source of income. New investments in the firm’s second fund in companies like Wise, which gives online storefronts and gig economy workers a way to set up bank accounts online easily; Mimic, which is building a distributed kitchen network for Brazil; and Lana, the financial management service for gig workers in Latin America. These new deals illustrate the firm’s belief that “the tech industry’s collective responsibility [is] to focus on the problems that affect 99% of people, and to work in tandem with communities, governments, and existing Real Economy companies to solve these problems.” Ultimately, Ajao and Nahigian are attributing their success to what amounts to the old (and overused) investment cliche that investors go to where opportunities are going to be. “If the VC industry as a whole is overlooking minorities, you can generate alpha by simply taking steps to ensure that you don’t have this same blind spot,” Ajao writes.   

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Byju’s is in advanced stages of talks to acquire Doubtnut, a two-year-old education learning app, as the Indian edtech giant looks to expand its reach in smaller cities and towns in the world’s second largest internet market. Three sources familiar with the matter told TechCrunch that the acquisition offer from nine-year-old Byju’s values the younger startup between $125 million to $150 million. The talks haven’t finalized yet and its terms could change or the deal could fall apart, the sources said. A separate source familiar with the matter told TechCrunch that Facebook-backed Unacademy also held preliminary talks with Doubtnut but they are no longer engaging while some investors have suggested the startup to remain independent. Byju’s and Unacademy declined to comment. One of Doubtnut’s founders did not respond to a text message sent to them Friday afternoon. The sudden interest in Doubtnut comes as the two-year-old New Delhi-based startup’s app has attracted millions of new users in recent months, most of whom live in smaller cities and towns across India. Byju’s, which has over 55 million registered users, has a better hold on urban Indian cities. The startup sees Doubtnut as a way to expand its reach in tier 2 and tier 3 Indian markets and tackle the online learning opportunities in a more comprehensive way. Doubtnut, which has raised $18.5 million to date including $15 million in its Series A financing round earlier this year, allows students from sixth grade to high-school solve and understand math and science problems in local languages. Doubtnut app enables students to take a picture of the problem, and uses machine learning and image recognition to deliver the answers through short-videos. A student can take a picture of the problem, and share it with Doubtnut through its app, website, or WhatsApp and get a short video that shows the answer and walks them through the procedure to tackle it. In late January, Doubtnut said it had amassed over 13 million monthly active users across its website, app, YouTube, and WhatsApp channels. More than 85% of its users at the time came from outside of the top 10 cities in India, the startup said in a statement then.

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