| |1. As the venture market tightens, a debt lender sees big opportunities02:08[−]
David Spreng spent more than 20 years in venture capital before dipping his toe into the world of revenue-based financing and realizing there was a growing appetite for alternatives to venture capital. Indeed, since forming debt-lending company Runway Growth Capital in mid-2015, Spreng has been busy writing checks to a variety of mostly later-stage companies on behalf of his institutional investors. (One of these, Oak Tree Capital Management in LA, is a publicly-traded credit firm.)
He expects he’ll be even busier in 2020. The reason — if you haven’t noticed already — is a general slowing down in what has been a very long boom cycle. “We’re in the late innings of a very long game,” said Spreng today, calling from Davos, where he has been attending meetings this week. “I don’t think the cycle is going to end this second. But where we went from a growth-at-all-costs mentality, boards are now saying, ‘let’s find a balance between top line growth and capital efficiency — let’s figure out a path to profitability.’ ”
Why is that good for Spreng and his colleagues? Because when a cycle ends, venture capitalists get stingier with their portfolio companies, writing fewer checks to support startups that aren’t hitting it out of the park, and often taking a bigger bite under more onerous terms when they do reinvest to counter the added risk they’re taking.
|↑|2. Google backtracks on search results design02:00[−]
Earlier today, Google announced that it would be redesigning the redesign of its search results as a response to withering criticism from politicians, consumers, and the press over the way in which search results display were made to look like ads.
Google makes money when users of its search service click on ads. It doesn’t make money when people click on an unpaid search result. Making ads look like search results makes Google more money.
It’s also a pretty evil (or at least unethical) business decision by a company whose mantra was “Don’t be evil”(although they gave that up in 2018).
Users began noticing the changes to search results last week and at least one user flagged the changes earlier this week.
Google responded with a bit of doublespeak from its corporate account about how the redesign was intended to achieve the opposite effect of what it was actually doing.
“Last year, our search results on mobile gained a new look. That’s now rolling out to desktop results this week, presenting site domain names and brand icons prominently, along with a bolded ‘Ad’ label for ads,” the company wrote.
Virginia’s Senator Mark Warner took a break from impeachment hearings to talk to the Washington Post about just how bad the new search redesign was.
“We’ve seen multiple instances over the last few years where Google has made paid advertisements ever more indistinguishable from organic search results,” Warner told the Post. “This is yet another example of a platform exploiting its bottleneck power for commercial gain, to the detriment of both consumers and also small businesses.”
Google’s changes to its search results happened despite the fact that the company is already being investigated by every state in the country for antitrust violations.
For Google, the rationale is simple. The company’s advertising revenues aren’t growing the way they used to, and the company is looking at a slowdown in its core business. To try and juice the numbers, dark patterns present an attractive way forward.
Indeed, Google’s using the same tricks that it once battled to become the premier search service in the U.S. When the company first launched its search service, ads were clearly demarcated and separated from actual search results returned by Google’s algorithm. Over time, the separation between what was an ad and what wasn’t became increasingly blurred.
“Search results were near-instant and they were just a page of links and summaries – perfection with nothing to add or take away,” user experience expert Harry Brignull (and founder of the watchdog website darkpatterns.org) said of the original Google search results in an interview with TechCrunch.
“The back-propagation algorithm they introduced had never been used to index the web before, and it instantly left the competition in the dust. It was proof that engineers could disrupt the rules of the web without needing any suit-wearing executives. Strip out all the crap. Do one thing and do it well.”
“As Google’s ambitions changed, the tinted box started to fade. It’s completely gone now,” Brignull added.
The company acknowledged that its latest experiment might have gone too far in its latest statement and noted that it will “experiment further” on how it displays results.
|↑|3. The Pentagon pushes back on Huawei ban in bid for ‘balance’01:10[−]
Huawei may have just found itself an ally in the most unexpected of places. According to a new report out of The Wall Street Journal, both the Defense and Treasury Departments are pushing back on a Commerce Department-led ban on sales from the embattled Chinese hardware giant.
That move, in turn, has reportedly led Commerce Department officials to withdraw a proposal set to make it even more difficult for U.S.-based companies to work with Huawei.
Defense Secretary Mark Esper struck a fittingly pragmatic tone while speaking with the paper, noting, “We have to be conscious of sustaining those [technology] companies’ supply chains and those innovators. That’s the balance we have to strike.”
Huawei, already under fire for allegations of flouting sanctions with other countries, has become a centerpiece of a simmering trade war between the Trump White House and China. The smartphone maker has been barred from selling 5G networking equipment due to concerns over its close ties to the Chinese government.
Last year, meanwhile, the government barred Huawei from utilizing software and components from U.S.-based companies, including Google. Huawei is also expected to be a key talking point in upcoming White House discussions, as officials weigh actions against the repercussions they’ll ultimately have for U.S. partners.
The Commerce Department has yet to offer any official announcement related to the report.
|↑|4. Kraftful raises $1M to help smart home companies make better apps00:10[−]
If a thousand companies make their own smart light bulb, do a thousand companies also have to design a light switch app to control them?
Kraftful, a company out of Y Combinator’s Summer 2019 class, doesn’t think so. Kraftful builds the myriad components that an IoT/smart home company might need, puzzle piecing them together into apps for each company without requiring them to reinvent the light switch (or the padlock button, or the smart thermostat dial) for the nth time.
Because no company wants an app that looks identical to a competitor’s, much of what Kraftful produces is built to be tailored to each company’s branding — all the surface-level stuff, like iconography, fonts, colors, etc. are all customizable. Under the hood, though, everything is built to be reusable.
This focus on finding the parts that can be built once makes sense, especially given the team’s background. CEO Yana Welinder and CTO Nicky Leach were previously head of Product and a senior engineer, respectively, at IFTTT — the web service made up of a zillion reusable, interlinking “recipe” applets that let you hook just about anything (Gmail, Instagram, your cat’s litter box, whatever) into anything else to let one trigger actions on the other.
Kraftful founders Nicky Leach and Yana Welinder
So why now? More smart devices are coming onto the market every day, many of them from legacy appliance companies that don’t have much (or any) history in building smartphone apps. Good apps are the exception — the Philips Hue app is one of the better ones out there, and even it’s a little wonky sometimes. Many of them are… really bad.
Bad apps get bad App Store reviews, and bad reviews dent sales. And even for those who dive in and buy it without checking the reviews first, bad apps means returned devices. According to this iQor survey from 2018, 22% of smart home customers give up and return the products before getting them to work.
“We kind of looked around and realized that 80% of all smart home apps have zero, one or two stars on the App Store,” Welinder tells me.
Knowing what’s working and what’s not with buyers is a strength of Kraftful’s approach; behind the scenes, they can run all sorts of analytics on how users are actually interacting with components in the apps they’re powering and adjust all of them accordingly. If they make a tweak to the setup process in one app, do more users actually get all the way through it? Great. Now roll that out everywhere.
“If you look at some of the leading smart lock apps, they all have very… very similar interfaces. They’ve basically gotten to a standardized user experience, but they’ve all be developed individually,” says Welinder. “So all of these companies are spending the resources designing and developing these apps, but they’re not getting the benefit of being standardized across the board and being able to leverage data from all of these apps to be able to improve them all at once”
Kraftful builds the app for both iOS and Android, tailors it to the brand’s needs, offers cloud functionality like push notifications and activity history, provides analytics for insights on how users are actually using an app and keeps everything working as OS updates roll out and as device display sizes grow ever larger.
Of course, the entire concept of a dedicated app for a smart home device has some pretty fierce competition — between Apple’s HomeKit and Google Home, the platform makers themselves seem pretty set on gobbling up much of the functionality. But most buyers still expect their shiny devices to have their own apps — something branded and purpose-built, something for the manual to point them to. Power users, meanwhile, will always want to do things beyond what the all-encompassing solutions like HomeKit/Home are built for.
Folks at Google seem to agree with Kraftful’s approach — the team counts the Google Assistant Investments Program as one of the investors in the $1 million they’ve raised. Other investors include YC, F7 Ventures, Cleo Capital, Julia Collins (co-founder of Zume Pizza and Planet Forward), Lukas Biewald (co-founder of CrowdFlower), Nicolas Pinto (co-founder of Perceptio) and a number of other angel investors.
Welinder tells me they’re already working with multiple companies to start powering their apps; NDAs prevent her from saying who, at this point, but she notes that they’re “some of the largest brands that provide smart lights, plugs/switches, thermostats and other smart home products.”
|↑|5. A founder’s guide to recession planning for startupsПт, 24 янв[−]
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Schwark Satyavolu is a general partner at Trinity Ventures where he makes early-stage investments in fintech, security and AI. A serial entrepreneur, he co-founded Yodlee (YDLE) and Truaxis, both of which were acquired. Previously, he held senior executive positions at LifeLock and Mastercard. He is an inventor on 15 patents.
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Are employers the latest financial services disruptors?
We are living through one of the nation’s longest periods of economic growth. Unfortunately, the good times can’t last forever. A recession is likely on the horizon, even if we can’t pinpoint exactly when. Founders can’t afford to wait until the midst of a downturn to figure out their game plans; that would be like initiating swim lessons only after getting dumped in the open ocean.
When recession inevitably strikes, it will be many founders’ — and even many VCs’ — first experiences navigating a downturn. Every startup executive needs a recession playbook. The time to start building it is now.
While recessions make running any business tough, they don’t necessitate doom. I co-founded two separate startups just before downturns struck, yet I successfully navigated one through the 2000 dot-com bust and the second through the 2008 financial crisis. Both companies not only survived but thrived. One went public and the second was acquired by Mastercard.
I hope my lessons learned prove helpful to building your own recession game plan.
||↑|6. Daily Crunch: Goldman Sachs calls for diverse boardsПт, 24 янв[−]
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.
1. Goldman Sachs says it won’t take startups public without at least one ‘diverse’ director; it should go further
CEO David Solomon told CNBC that beginning this year, Goldman will no longer take companies public if they don’t have at least one “diverse” member on its board of directors.
Some will, perhaps rightly, see the announcement as little more than marketing. After all, it’s already widely viewed as unacceptable for a company to go public without at least one female board member and preferably far more diversity than that.
2. London’s Met Police switches on live facial recognition, flying in face of human rights concerns
The deployment comes after a multi-year period of trials by the Met and police in South Wales. The Met says its use of the controversial technology will be targeted to “specific locations … where intelligence suggests we are most likely to locate serious offenders.”
3. Sonos clarifies how unsupported devices will be treated
If you use a Zone Player, Connect, first-generation Play:5, CR200, Bridge or pre-2015 Connect:Amp, Sonos is still going to drop support for those devices. But at least the company is backing away from its initial decision that your entire ecosystem of Sonos devices would stop receiving updates, as well.
4. Meet the B2B videoconferencing startup that’s gone crazy for online dating
Eyeson’s website touts “no downloads, no lag, no hassle” video calls. But when TechCrunch came across founder Andreas Kr?pfl last December, pitching hard in Startup Alley at Disrupt Berlin, he was most keen to talk about something else entirely: video dating.
5. Layoffs hit Q&A startup Quora
Quora, the 10-year-old question-and-answer company based in Mountain View, is laying off staff in its Bay Area and New York offices. CEO Adam D’Angelo did not disclose the scale of the layoffs.
6. As SaaS stocks set new records, Atlassian’s earnings show there’s still room to grow
Atlassian reported earnings after-hours yesterday and the market quickly pushed its shares up by more than 10%. Alex Wilhelm explores why. (Extra Crunch membership required.)
7. Wikipedia now has more than 6 million articles in English
The feat, which comes roughly 19 years after the website was founded, is a testament of “what humans can do together,” said Ryan Merkley, chief of staff at Wikimedia, the nonprofit organization that operates the online encyclopedia.
|↑|7. Los Angeles-based CREXi raises $29 million for its online real estate marketplaceПт, 24 янв[−]
Los Angeles is one of the most desirable locations for commercial real estate in the United States, so it’s little wonder that there’s something of a boom in investments in technology companies servicing the market coming from the region.
It’s one of the reasons that CREXi, the commercial real estate marketplace, was able to establish a strong presence for its digital marketplace and toolkit for buyers, sellers and investors.
Since the company raised its last institutional round in 2018, it has added more than 300,000 properties for sale or lease across the U.S. and increased its user base to 6 million customers, according to a statement.
It has now raised $29 million in new financing from new investors, including Mitsubishi Estate Company (“MEC”), Industry Ventures and Prudence Holdings . Previous investors Lerer Hippeau Ventures and Jackson Square Ventures also participated in the financing.
CREXi makes money three ways. There’s a subscription service for brokers looking to sell or lease property; an auction service where CREXi will earn a fee upon the close of a transaction; and a data and analytics service that allows users to get a view into the latest trends in commercial real estate based on the vast collection of properties on offer through the company’s services.
The company touts its service as the only technology offering that can take a property from marketing to the close of a sale or lease without having to leave the platform.
According to chief executive Mike DiGiorgio, the company is also recession-proof thanks to its auction services. “As more distressed properties hit the market, the best way to sell them is through an online auction,” DiGiorgio says.
So far, the company has seen $700 billion of transactions flow through the platform, and roughly 40% of those deals were exclusive to the company.
“The CRE industry is evolving, and market players, especially younger, digitally native generations are seeking out platforms that provide free and open access to information,” said Gavin Myers, general partner at Prudence Holdings, in a statement. “CREXi directly addresses this market need, providing fair access to a range of CRE information. As CREXi continues to build out its stable of services, features, and functionality, we’re thrilled to partner with them and support the company’s continued momentum.”
CREXi joins the ranks of startups based in Los Angeles that have raised money to reshape the real estate industry. Estimates from Built in LA count roughly 127 companies, which have raised in excess of $2.4 billion, active in the real estate industry in Los Angeles. These companies range from providers of short-term commercial office space, like Knotel, or co-working companies like WeWork, to companies focused on servicing the real estate industry like Luxury Presence, which raised a $5 million round earlier in the year.
|↑|8. German football league Bundesliga teams with AWS to improve fan experienceПт, 24 янв[−]
Germany’s top soccer (football) league, Bundesliga, announced today it is partnering with AWS to use artificial intelligence to enhance the fan experience during games.
Andreas Heyden, executive vice president for digital sports at the Deutsche Fu?ball Liga, the entity that runs Bundesliga, says that this could take many forms, depending on whether the fan is watching a broadcast of the game or interacting online.
“We try to use technology in a way to excite a fan more, to engage a fan more, to really take the fan experience to the next level, to show relevant stats at the relevant time through broadcasting, in apps and on the web to personalize the customer experience,” Heyden said.
This could involve delivering personalized content. “In times like this when attention spans are shrinking, when a user opens up the app the first message should be the most relevant message in that context in that time for the specific user,” he said.
It also can help provide advanced statistics to fans in real time, even going so far as to predict the probability of a goal being scored at any particular moment in a game that would have an impact on your team. Heyden thinks of it as telling a story with numbers, rather than reporting what happened after the fact.
“We want to, with the help of technology, tell stories that could not have been told without the technology. There’s no chance that a reporter could come up with a number of what the probability of a shot [scoring in a given moment]. AWS can,” he said.
Werner Vogels, CTO at Amazon, says this about using machine learning and other technologies on the AWS platform to add to the experience of watching the game, which should help attract younger fans, regardless of the sport. “All of these kind of augmented customer fan experiences are crucial in engaging a whole new generation of fans,” Vogels told TechCrunch.
He adds that this kind of experience simply wasn’t possible until recently because the technology didn’t exist. “These things were impossible five or 10 years ago, mostly because now with all the machine learning software, as well as how the [pace of technology] has accelerated at such a [rate] at AWS, we’re now able to do these things in real time for sports fans.”
Bundesliga is not just any football league. It is the second biggest in the world in terms of revenue, and boasts the highest stadium attendance of all football teams worldwide. Today’s announcement is an extension of an ongoing relationship between DFL and AWS, which started in 2015 when Heyden helped move the league’s operations to the cloud on AWS.
Heyden says that it’s not a coincidence he ended up using AWS instead of another cloud company. He has known Vogels (who also happens to be a huge soccer fan) for many years, and has been using AWS for more than a decade, even well before he joined the DFL. Today’s announcement is an extension of that long-term relationship.
|↑|9. Most tech companies aren’t WeWorkПт, 24 янв[−]
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Shin Kim is working on a new SaaS startup and is also chief of staff to entrepreneur Elad Gil . Previously, Shin was at Oak Hill Capital and J.P. Morgan and earned a Master’s in EECS (data science) from UC Berkeley.
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Most tech companies aren t WeWork
With the recent emphasis on Uber and WeWork, much media attention has been focused on high-burn, “software-enabled” startups. However, most of the IPOs of the last few years in tech have been in higher capital efficiency software-as-a-service startups (SaaS).
In the last 30 months (2017 2H onwards), a total of 21 U.S.-based, VC-backed SaaS companies have gone public, including Zoom, Slack, Datadog and others1. I analyzed all 21 companies to understand their fundraising and revenue-generating trajectories. A deep dive into the individual companies’ trajectories can be found in this Extra Crunch article.
Here are the summary takeaways from this data set:
1. At IPO, total capital raised2 was slightly ahead of annual run-rate revenue (ARR)3 for the median company
Here is a scatterplot of the ARR and cumulative capital raised at the time each company went public. Most companies are clustered close to the diagonal line that represents ARR and capital raised matching each other. Total capital raised is often neck-and-neck or slightly higher than ARR.
For example, Zscaler raised $148 million to get to $146 million of ARR at IPO and Sprout Social raised $112 million to get to $106 million of ARR.
It is useful to introduce a metric instead of looking at gross dollars, given the high variance in revenue of the companies in the data set — Sprout Social had $106 million and Dropbox had $1,222 million in ARR, a 10x+ difference. Total capital raised as a multiple of ARR normalizes this variance. Below is a histogram of the distribution of this metric.
The distribution is concentrated around 1.00x-1.25x, with the median company raising 1.23x of ARR by the time of its IPO.
There are outliers on both ends. Domo is a profligate outlier that had raised $690 million to get to $128 million of ARR, or 5.4x of ARR — no other company comes remotely close. Zoom and Datadog are efficient outliers. Zoom raised $161 million to get to $423 million of ARR and Datadog raised $148 million to get to $333 million of ARR, both representing only 0.4x of ARR.
2. Cash burn is a more accurate measure of capital efficiency and may diverge significantly from capital raised (depending on the company)
How much capital a company raised tells only half of the story of capital efficiency, because many companies are sitting on a significant cash balance. For example, PagerDuty raised a total of $174 million but had $128 million of cash left when it went public. As another example, Slack raised a total of $1,390 million prior to going public but had $841 million of unspent cash.
Why do some SaaS companies end up seemingly over-raising capital beyond their immediate cash needs despite the dilution to existing shareholders?
One reason might be that companies are being opportunistic, raising capital far ahead of actual needs when market conditions are favorable.
Another reason may be that VCs that want to meet ownership targets are pushing for larger rounds. For example, a company valued at $400 million pre-money may only need $50 million of cash but could end up taking $100 million from a VC that wants to achieve 20% post-money ownership.
These confounding factors make cash burn — calculated by subtracting the cash balance from total capital raised4 — a more accurate measure of capital efficiency than total capital raised. Here is a distribution of total cash burn as a multiple of ARR.
Remarkably, Zoom achieved negative cash burn, meaning Zoom went public with more cash on its balance sheet than all of the capital it raised.
The median company’s cash burn at IPO was 0.77x of ARR, quite a bit less than the total capital raised of 1.23x of ARR.
3. The healthiest SaaS companies (as measured by the Rule of 40) are often the most capital-efficient
The Rule of 40 is a popular heuristic to gauge the business health of a SaaS company. It asserts that a healthy SaaS company’s revenue growth rate and profit margins should sum to 40%+. The below chart shows how the 21 companies score on the Rule of 405.
Among the 21 companies, eight companies exceed the 40% threshold: Zoom (123%), Crowdstrike (119%), Datadog (76%), Bill.com (56%), Elastic (55%), Slack (52%), Qualtrics (44%) and SendGrid (41%).
Interestingly, the same outliers in terms of capital efficiency as measured by cash burn, on both extremes, are the same outliers in the Rule of 40. Zoom and Datadog, which have the highest capital efficiency, score the highest and third highest on the Rule of 40. And inversely, Domo and MongoDB, which have the lowest capital efficiency, also score lowest on the Rule of 40.
This is not surprising, because the Rule and capital efficiency are really two sides of the same coin. If a company can sustain high growth without sacrificing profit margins too much (i.e. score high on the Rule of 40), it will over time naturally end up burning less cash compared to peers.
To apply all of this to your favorite SaaS business, here are some questions to consider. What is the total capital raised in multiples of ARR? What is the total cash burn in multiples of ARR? Where does it stack compared to the 21 companies above? Is it closer to Zoom or Domo? How does it score on the Rule of 40? Does it help explain the company’s capital efficiency or lack thereof?
Thanks to Elad Gil and Denton Xu for reviewing drafts of this article.
1Only includes U.S.-based, VC-backed SaaS companies. Includes Quatrics, even though it did not go public, as it was acquired right before its scheduled IPO.
2Includes institutional investments prior to the IPO. Does not include founders’ personal capital investment.
3Note that this is not annual recurring revenue, which is not a reporting requirement for public companies. Annual run-rate revenue is calculated by annualizing quarterly revenue (multiplying by four). The two metrics will track closely for SaaS businesses, given that SaaS revenue is predominantly recurring software subscriptions.
4This is a simplified definition as it will capture non-operational uses of cash such as share repurchase from founders.
5Revenue growth is calculated as the growth rate of the revenue during the last 12 months (LTM) over the revenue during the 12 months prior to that. Profit margins are non-GAAP operating margins, calculated as operating income plus stock-based compensation expense divided by revenue over the last 12 months (LTM).
What s the right pace for raising capital?
||↑|10. What’s the right pace for raising capital?Пт, 24 янв[−]
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Shin Kim is working on a new SaaS startup and is also chief of staff to entrepreneur Elad Gil . Previously, Shin was at Oak Hill Capital and J.P. Morgan and earned a Master’s in EECS (data science) from UC Berkeley.
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Most tech companies aren t WeWork
A common question in the minds of many SaaS founders is the pace of raising capital. How much is too much too early? What amount of capital raise is typical for comparable peers? How capital-efficient are the best-in-class companies?
In the last 30 months (2017 2H onwards), a total of 21 SaaS U.S.-based, VC-backed companies have gone public, including Zoom, Slack, Datadog and others1. To answer the above questions, I analyzed all 21 companies to understand their fundraising and revenue-generating trajectories.
The charts below show each company’s annual run-rate revenue (ARR)2 and cumulative equity funding3 over time. Read endnotes for details on data source4 and methodology5. The backup for the full analysis can be accessed here.
I divided the companies into four patterns:
||↑|11. An adult sexting site exposed thousands of models’ passports and driver’s licensesПт, 24 янв[−]
A popular sexting website has exposed thousands of photo IDs belonging to models and sex workers who earn commissions from the site.
SextPanther, an Arizona-based adult site, stored more than 11,000 identity documents on an exposed Amazon Web Services (AWS) storage bucket, including passports, driver’s licenses and Social Security numbers, without a password. The company says on its website that it uses these documents to verify the ages of models with whom users communicate.
Most of the exposed identity documents contain personal information, such as names, home addresses, dates of birth, biometrics and their photos.
Although most of the data came from models in the U.S., some of the documents were supplied by workers in Canada, India and the United Kingdom.
The site allows models and sex workers to earn money by exchanging with paying users text messages, photos and videos, including explicit and nude content. The exposed storage bucket also contained more than 100,000 photos and videos sent and received by the workers.
It was not immediately clear who owned the storage bucket. TechCrunch asked U.K.-based penetration testing company Fidus Information Security, which has experience in discovering and identifying exposed data, to help.
Researchers at Fidus quickly found evidence suggesting the exposed data could belong to SextPanther.
An hour after we alerted the site’s operator, Alexander Guizzetti, to the exposed data, the storage bucket was pulled offline.
“We have passed this on to our security and legal teams to investigate further. We take accusations like this very seriously,” Guizzetti said in an email, who did not explicitly confirm the bucket belonged to his company.
Using information from identity documents matched against public records, we contacted several models whose information was exposed by the security lapse.
“I’m sure I sent it to them,” said one model, referring to her driver’s license, which was exposed. (We agreed to withhold her name given the sensitivity of the data.) We passed along a photo of her license found in the exposed bucket. She confirmed it was her license, but said that the information on her license is no longer current.
“I truly feel awful for others whom have signed up with their legit information,” she said.
The security lapse comes a week after researchers found a similar cache of highly sensitive personal information of sex workers on adult webcam streaming site, PussyCash.
More than 850,000 documents were insecurely stored in another unprotected storage bucket.
Got a tip? You can send tips securely over Signal and WhatsApp to +1 646-755–8849.
|↑|12. The App Store is down [Update: It’s back]Пт, 24 янв[−]
[Update: The App Store has returned. Back to your regularly scheduled Fridays.]
Midday on Friday it appeared that Apple’s App Store, a critical piece of the digital and mobile economies, struggled with uptime issues. Apple’s own status page indicated that the application vendor was having an “ongoing” issue that affected “some users.”
The company said that it was investigating the issue, according to its website.
Users weren’t pleased. A quick Twitter search shows a host of complaints from users noting that they can’t make purchases on the App Store, were struggling with sign-on issues and that downloads had ground to a halt.
Despite launching after the original iPhone, the App Store has become an industry to itself. According to certain data, the App Store drove $50 billion gross sales in 2019 — Apple takes a cut of transactions and sales, generating material revenue for itself.
The App Store will come back, but Apple is losing money along with its developer partners as we speak. More when it’s back. Until then, well, there’s Android or a walk.
|↑|13. Goldman Sachs’ new board member diversity rule misses the markПт, 24 янв[−]
Goldman Sachs CEO David Solomon recently said the investment bank won’t take companies public that don’t have at least one board member from an underrepresented group. The main focus will be on female board members, he told CNBC, because companies that have gone public in the last four years with at least one woman on their board of directors performed “significantly better” than those without. The new rule is set to go into effect in the U.S. and Europe on July 1.
While the move is significant, what Solomon and Goldman are doing is not a novel idea, nor is it the best version of an outdated idea. It reminds me of something Salesforce CEO Marc Benioff said a few years ago at Dreamforce:
Overall, diversity is extremely important to us. Right now, this is the major issue [gesturing to the room/crowd]. I think when we feel like we’ve got this, you know, a little bit more under control, then I think that one is gonna surface as the major thing we’re focusing on. We’re not ignoring it, it’s something that we support, it’s something that we’re working on, but this is our major focus right now, is the women’s issue.
At the time, Benioff failed to address the complexity of diversity, which is what Goldman Sachs is doing. A “focus on women” does not take into account the intersectional identities many people have. And it’s those intersectional identities — whether it’s being a black woman, a trans man and so forth — that bring both intellectual and financial value to the table. By focusing on women, as Solomon said, Goldman Sachs is setting itself up to exclude women of color, as they are oftentimes left out of women-focused initiatives. This outdated and misguided strategy, where diversity equals more (white) women, needs to be squashed.
While this requirement will likely increase returns for Goldman Sachs and operate as a forcing function to boost diversity at startups, it needs to go further. By focusing on a broader definition of diversity, Goldman Sachs could be more inclusive and make its returns even greater.
|↑|14. Early-bird savings end next Friday on tickets to Robotics+AI 2020Пт, 24 янв[−]
TechCrunch Sessions: Robotics+AI 2020 is gearing up to be one amazing show. This annual day-long event draws the brightest minds and makers from these two industries — 1,500 attendees last year alone. And if you really want to make 2020 a game-changing year, grab yourself an early-bird ticket and save $150 on tickets before prices go up after January 31.
Not convinced yet? Check out some agenda highlights featuring some of today’s leading robotics and AI leaders:
- Saving Humanity from AI with Stuart Russell ( UC Berkeley)
The UC Berkeley professor and AI authority argues in his acclaimed new book, “ Human Compatible,” that AI will doom humanity unless technologists fundamentally reform how they build AI algorithms.
- Automating Amazon with Tye Brady ( Amazon Robotics)
Amazon Robotics’ chief technology officer will discuss how the company is using the latest in robotics and AI to optimize its massive logistics. He’ll also discuss the future of warehouse automation and how humans and robots share a work space.
- Engineering for the Red Planet with Lucy Condakchian ( Maxar Technologies)
Maxar Technologies has been involved with U.S. space efforts for decades, and is about to send its sixth (!) robotic arm to Mars aboard NASA’s Mars 2020 rover. Lucy Condakchian is general manager of robotics at Maxar and will speak to the difficulty and exhilaration of designing robotics for use in the harsh environments of space and other planets.
- Toward a Driverless Future with Anca Dragan ( Waymo/ UC Berkeley) and Jur van den Berg ( Ike)
Autonomous driving is set to be one of the biggest categories for robotics and AI. But there are plenty of roadblocks standing in its way. Experts will discuss how we get there from here.
See the full agenda here.
If you’re a startup, nab one of the five demo tables left and showcase your company to new customers, press, and potential investors. Demo tables run $2,200 and come with four attendee tickets so you can divide and conquer the networking scene at the conference.
Students, get your super-reduced $50 ticket here and learn from some of the biggest names in the biz and meet your future employer or internship opportunity.
Don’t forget, the early-bird ticket sale ends on January 31. After that, prices go up by $150. Purchase your tickets here and save an additional 18% when you book a group of four or more.
|↑|15. Vivo beats Samsung for 2nd spot in Indian smartphone marketПт, 24 янв[−]
Samsung, which once led the smartphone market in India, slid to the third position in the quarter that ended in December, even as the South Korean giant continues to make major bets on the rare handset market that is still growing. 158 million smartphones shipped in India in 2019, up from 145 million the year before, according to research firm Counterpoint.
Chinese firm Vivo surpassed Samsung to become the second biggest smartphone vendor in India in Q4 2019. Xiaomi, with command over 27% of the market, maintained its top spot in the nation for the tenth consecutive quarter.
Vivo’s annual smartphone shipment grew 76% in 2019. The Chinese firm’s aggressive positioning of its budget S series of smartphones — priced between $100 to $150 (the sweet spot in India) — in the brick and mortar market and acceptance of e-commerce sales helped it beat Samsung, said Counterpoint analysts.
Vivo’s market share jumped 132% between Q4 of 2018 and Q4 of 2019, according to the research firm.
Realme, which spun out of Chinese smartphone maker Oppo, claimed the fifth spot. Oppo assumed the fourth position.
Samsung has dramatically lowered prices of some of its handsets in the country and also introduced smartphones with local features, but it is struggling to compete with an army of Chinese smartphone makers. The company did not respond to a request for comment.
Realme has taken the Indian market by storm. The two-year-old firm has replicated Xiaomi’s playbook in the country and so far focused on selling aggressively low-cost Android smartphones online.
Vivo and Oppo, on the other hand, have over the years expanded to smaller cities and towns in the country and inked deals with merchants. The companies have offered merchants fat commission to incentivize them to promote their handsets over those of the rivals.
Xiaomi, which entered India six years ago, sold handsets exclusively through online channels to cut overhead, but has since established presence in about 10,000 brick and mortar stores (including some through partnership with big retail chains). The company said in September last year that it had shipped 100 million smartphones in the country.
India surpasses the U.S.
The report, released late Friday (local time), also states that India, with 158 million smartphone shipments in 2019, took over the U.S. in annual smartphone shipment for the first time.
India, which was already the world’s second largest smartphone market for total handset install base, is now also the second largest market for annual shipment of smartphones.
Tarun Pathak, a senior analyst at Counterpoint, told TechCrunch that about 150 million to 155 million smartphone units were shipped in the U.S. in 2019.
As smartphone shipments decline in most countries, India has emerged as a rare market where people are still showing great appetite for new handsets. There are nearly half a billion smartphones in use in the country today — but more than half a billion people in the nation are yet to get one.
The nation’s slowing economy, however, is understandably making its mark on the smartphone market as well. The Indian smartphone market grew by 8.9% last year, compared to 10% in the previous year.
|↑|16. Facebook’s dodgy defaults face more scrutiny in EuropeПт, 24 янв[−]
Italy’s Competition and Markets Authority has launched proceedings against Facebook for failing to fully inform users about the commercial uses it makes of their data.
At the same time, a German court has today upheld a consumer group’s right to challenge the tech giant over data and privacy issues in the national courts.
Lack of transparency
The Italian authority’s action, which could result in a fine of €5 million for Facebook, follows an earlier decision by the regulator, in November 2018 — when it found the company had not been dealing plainly with users about the underlying value exchange involved in signing up to the “free” service, and fined Facebook €5 million for failing to properly inform users how their information would be used commercially.
In a press notice about its latest action, the watchdog notes Facebook has removed a claim from its homepage — which had stated that the service “is free and always will be” — but finds users are still not being informed, “with clarity and immediacy” about how the tech giant monetizes their data.
The Authority had prohibited Facebook from continuing what it dubs “deceptive practice” and ordered it to publish an amending declaration on its homepage in Italy, as well as on the Facebook app and on the personal page of each registered Italian user.
In a statement responding to the watchdog’s latest action, a Facebook spokesperson told us:
We are reviewing the Authority decision. We made changes last year — including to our Terms of Service — to further clarify how Facebook makes money. These changes were part of our ongoing commitment to give people more transparency and control over their information.
Last year Italy’s data protection agency also fined Facebook $1.1 million — in that case for privacy violations attached to the Cambridge Analytics data misuse scandal.
In separate but related news, a ruling by a German court today found that Facebook can continue to use the advertising slogan that its service is “free and always will be” — on the grounds that it does not require users to hand over monetary payments in exchange for using the service.
A local consumer rights group, vzbv, had sought to challenge Facebook’s use of the slogan — arguing it’s misleading, given the platform’s harvesting of user data for targeted ads. But the court disagreed.
However, that was only one of a number of data protection complaints filed by the group — 26 in all. And the Berlin court found in its favor on a number of other fronts.
Significantly, vzbv has won the right to bring data protection-related legal challenges within Germany even with the pan-EU General Data Protection Regulation in force — opening the door to strategic litigation by consumer advocacy bodies and privacy rights groups in what is a very pro-privacy market.
This looks interesting because one of Facebook’s favored legal arguments in a bid to derail privacy challenges at an EU Member State level has been to argue those courts lack jurisdiction — given that its European HQ is sited in Ireland (and GDPR includes provision for a one-stop shop mechanism that pushes cross-border complaints to a lead regulator).
But this ruling looks like it will make it tougher for Facebook to funnel all data and privacy complaints via the heavily backlogged Irish regulator — which has, for example, been sitting on a GDPR complaint over forced consent by adtech giants (including Facebook) since May 2018.
The Berlin court also agreed with vzbv’s argument that Facebook’s privacy settings and T&Cs violate laws around consent — such as a location service being already activated in the Facebook mobile app; and a pre-ticked setting that made users’ profiles indexable by search engines by default
The court also agreed that certain pre-formulated conditions in Facebook’s T&C do not meet the required legal standard — such as a requirement that users agree to their name and profile picture being used “for commercial, sponsored or related content,” and another stipulation that users agree in advance to all future changes to the policy.
Commenting in a statement, Heiko D?nkel from the law enforcement team at vzbv, said: “It is not the first time that Facebook has been convicted of careless handling of its users’ data. The Chamber of Justice has made it clear that consumer advice centers can take action against violations of the GDPR.”
We’ve reached out to Facebook for a response.
|↑|17. Sonos clarifies how unsupported devices will be treatedПт, 24 янв[−]
Smart speaker manufacturer Sonos clarified its stance when it comes to old devices that are no longer supported. The company faced some criticisms after its original announcement. Sonos now says that you’ll be able to create two separate Sonos systems so that your newer devices stay up to date.
If you use a Zone Player, Connect, first-generation Play:5, CR200, Bridge or pre-2015 Connect:Amp, Sonos is still going to drop support for those devices. According to the company, those devices have reached their technical limits when it comes to memory and processing power.
While nothing lasts forever, it’s still a shame that speakers that work perfectly fine are going to get worse over time. For instance, if Spotify and Apple Music update their application programming interface in the future, your devices could stop working with those services altogether.
But the announcement felt even more insulting as the company originally said that your entire ecosystem of Sonos devices would stop receiving updates so that all your devices remain on the same firmware version. Even if you just bought a Sonos One, it would stop receiving updates if there’s an old speaker on your network.
“We are working on a way to split your system so that modern products work together and get the latest features, while legacy products work together and remain in their current state,” the company writes.
It’s not ideal, but the company is no longer holding your Sonos system back. Sonos also clarifies that old devices will still receive security updates and bug fixes — but there won’t be any new features.
I still think Sonos should add a computing card slot to its devices. This way, you wouldn’t have to replace speakers altogether. You could get a new computing card with more memory and faster processors and swap your existing card. Modularity is going to be essential if tech companies want to adopt a more environmentally friendly stance.
|↑|19. Why Front’s Series C matters, the latest on Lambda and The Athletic makes media look goodПт, 24 янв[−]
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.
This week Danny and Alex are back with more than ever to get through. 2020 has come out of the gate fast when it comes to news, so much so that we had to leave out of the show way more than we wanted. Things like the newest members of the $100 million ARR club, One Medical’s proposed IPO pricing, the Clubhouse funding round and Placer.ai’s latest investment.
But we did manage to chat through a host of news, including:
- Why Front’s latest investment (a $59 million Series C) is a pretty big deal. Not because of how much money it has raised — the firm has raised more in a single, preceding round — but because of who put the capital to work.
- On the venture capital front, Danny and Alex also chewed over signaling risk in venture, and why bigger funds are writing earlier and earlier checks.
- Also on the docket was the latest from Lambda School, which our former co-host and friend Kate Clark wrote. The gist is that regardless of how you feel about the company, your views are probably a bit too negative, or a bit too positive. (More on the company’s ilk from Extra Crunch here, and here.)
- And three media deals, including The Athletic’s latest investment ($50 million), who might buy the company behind the hit podcast “Serial” and why Spotify might buy The Ringer. Which is about sports, it turns out.
All that and we had fun. One more thing: Don’t fret, we’re going to bring guests back in just a few weeks. So if you’ve missed hearing from Folks Who Actively Invest, fear not, the VCs will be back.
Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.
|↑|20. London’s Met Police switches on live facial recognition, flying in face of human rights concernsПт, 24 янв[−]
While EU lawmakers are mulling a temporary ban on the use of facial recognition to safeguard individuals’ rights, as part of a risk-focused plan to regulate AI, London’s Met Police has today forged ahead with deploying the privacy hostile technology — flipping the switch on operational use of live facial recognition in the U.K. capital.
The deployment comes after a multi-year period of trials by the Met and police in South Wales.
The Met says its use of the controversial technology will be targeted to “specific locations… where intelligence suggests we are most likely to locate serious offenders.”
“Each deployment will have a bespoke ‘watch list’, made up of images of wanted individuals, predominantly those wanted for serious and violent offences,” it adds.
It also claims cameras will be “clearly signposted,” adding that officers will be “deployed to the operation will hand out leaflets about the activity.”
“At a deployment, cameras will be focused on a small, targeted area to scan passers-by,” it writes. “The technology, which is a standalone system, is not linked to any other imaging system, such as CCTV, body worn video or ANPR.”
The biometric system is being provided to the Met by Japanese IT and electronics giant, NEC.
In a press statement, assistant commissioner Nick Ephgrave claimed the force is taking a balanced approach to using the controversial tech.
“We all want to live and work in a city which is safe: the public rightly expect us to use widely available technology to stop criminals. Equally I have to be sure that we have the right safeguards and transparency in place to ensure that we protect people’s privacy and human rights. I believe our careful and considered deployment of live facial recognition strikes that balance,” he said.
London has seen a rise in violent crime in recent years, with murder rates hitting a 10-year peak last year.
The surge in violent crime has been linked to cuts to policing services — although the new Conservative government has pledged to reverse cuts enacted by earlier Tory administrations.
The Met says its hope for the AI-powered tech is that it will help it tackle serious crime, including serious violence, gun and knife crime and child sexual exploitation, and that it will “help protect the vulnerable.”
However, its phrasing is not a little ironic, given that facial recognition systems can be prone to racial bias, for example, owing to factors such as bias in data sets used to train AI algorithms.
So in fact there’s a risk that police use of facial recognition could further harm vulnerable groups who already face a disproportionate risk of inequality and discrimination.
Yet the Met’s PR doesn’t mention the risk of the AI tech automating bias.
Instead it makes pains to couch the technology as an “additional tool” to assist its officers.
“This is not a case of technology taking over from traditional policing; this is a system which simply gives police officers a ‘prompt’, suggesting ‘that person over there may be the person you’re looking for’, it is always the decision of an officer whether or not to engage with someone,” it adds.
While the use of a new tech tool may start with small deployments, as is being touted here, the history of software development underlines how potential to scale is readily baked in.
A “targeted” small-scale launch also prepares the ground for London’s police force to push for wider public acceptance of a highly controversial and rights-hostile technology via a gradual building out process… AKA surveillance creep.
On the flip side, the text of the draft of an EU proposal for regulating AI which leaked last week — floating the idea of a temporary ban on facial recognition in public places — noted that a ban would “safeguard the rights of individuals.” Although, it’s not yet clear whether the Commission will favor such a blanket measure, even temporarily.
U.K. rights groups have reacted with alarm to the Met’s decision to ignore concerns about facial recognition.
Liberty accused the force of ignoring the conclusion of a report it commissioned during an earlier trial of the tech — which it says concluded the Met had failed to consider human rights impacts.
It also suggested such use would not meet key legal requirements.
“Human rights law requires that any interference with individuals’ rights be in accordance with the law, pursue a legitimate aim, and be ‘necessary in a democratic society’,” the report notes, suggesting the Met earlier trials of facial recognition tech “would be held unlawful if challenged before the courts.”
A petition set up by Liberty to demand a stop to facial recognition in public places has passed 21,000 signatures.
Discussing the legal framework around facial recognition and law enforcement last week, Dr. Michael Veale, a lecturer in digital rights and regulation at UCL, told us that in his view the EU’s data protection framework, GDPR, forbids facial recognition by private companies “in a surveillance context without member states actively legislating an exemption into the law using their powers to derogate.”
A U.K. man who challenged a Welsh police force’s trial of facial recognition has a pending appeal after losing the first round of a human rights challenge. Although in that case the challenge pertains to police use of the tech — rather than, as in the Met’s case, a private company (NEC) providing the service to the police.