Month: December 2019

Small-satellite launch company Rocket Lab just officially declared its second launch pad open, but it has already broken ground on a third. The new one will be located in New Zealand on the Mahia peninsula, right next to its first launch pad at the company’s original launch facility — which is already the first and only privately owned and operated rocket launch facility on Earth.

Rocket Lab’s new launch pad at Launch Complex-1 (LC-1) will provide it with the ability to launch with even more frequency. Already, the company intends its LC-1 to be the locus of its rapid response and high-volume business, while its new launch pad on Wallops Island in Virginia is primarily designed to unlock access to clients who require U.S.-based launch operations from American providers (Rocket Lab is now officially headquartered in LA).

The company has been doing a lot of work to increase its ability to launch multiple missions in quick succession — this year, it unveiled a new room-sized carbon composite manufacturing robot that can turn parts of its Electron launch vehicle construction process, which used to take weeks, into something that is done in just hours. It’s also now in the process of developing a way to recover the first-stage booster of Electron, which would save it even more time and money on building new ones between missions.

Ultimately, Rocket Lab wants to get turnaround time between missions to mere days, and having two active pads at the same site will mean it has a lot more flexibility to do things like bumping a customer up the queue should conditions allow, or adding a new customer with tight timelines on an ad hoc basis.

Source: Tech Crunch

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1. Amazon, Apple, Google and Zigbee join forces for an open smart home standard

The Connected Home over IP project seeks to create a connectivity standard designed to increase compatibility across companies and devices. The landscape is pretty scattered at the moment, with each player digging pretty heavily into their own standard and forcing many smaller third-party players to pick sides.

So the biggest names in the connected home category are reaching across the aisle to create an open-source standard. And while the names in the headline are leading the charge, Ikea, Legrand, NXP Semiconductors, Resideo, Samsung SmartThings, Schneider Electric, Signify (nee Philips Lighting), Silicon Labs, Somfy and Wulian are also on the board.

2. SAP spinout Sapphire Ventures raises $1.4B for new investments

The firm, which focuses primarily on enterprise tech companies in the U.S., Europe and Israel, writes checks to Series B through pre-IPO businesses. Its portfolio includes 23andMe, Sumo Logic and TransferWise.

3. Europe’s space agency just launched a satellite to study planets outside our solar system

CHEOPS will specifically be looking to spot exoplanets as they pass in front of their stars — at which point they become observable because they block some of the light emitted from the distant suns.

4. ‘The Rise of Skywalker’ delivers a messy but satisfying finale to the new Star Wars trilogy

How could any single movie live up to 40 years of theories and daydreams from millions of Star Wars fans? (It’s still worth watching, though.)

5. Political ‘fixer’ Bradley Tusk closes second fund on $70M

Tusk, before launching Tusk Ventures, served as campaign manager for Mike Bloomberg, as deputy governor of Illinois and as communications director for Senator Chuck Schumer. He also penned the book “The Fixer: My Adventures Saving Startups from Death by Politics.”

6. All tulips must wilt

After recovering somewhat during the summer, the value of bitcoin and other cryptocurrencies are sharply down over the last several weeks.

7. 2019: the year podcasting broke

Brian Heater outlines how podcasting became an overnight success, more than 15 years in the making. (Extra Crunch membership required.)

Source: Tech Crunch

Welcome to TechCrunch’s 2019 Holiday Gift Guide! Need help with gift ideas? We’re here to help! We’ll be rolling out gift guides from now through the end of December. You can find our other guides right here.

As we reach the end of 2019 and approach crunch time for everyone who has procrastinated holiday gift buying, we wanted to highlight a few more great reads that might add value to your life or are just plain old fun.

Over the past couple of weeks, we’ve asked Extra Crunch members and the TechCrunch editorial staff for their favorite books of the year. Responses covered a huge mix of genres, narrative structures and formats, with titles that would fit the interests of anyone from your techno-nerd co-founder to your craziest second-cousin that you only see around the holidays.

For our last round of book recommendations, we decided to ask the investors who control the capital in Silicon Valley, help catalyze the industry’s biggest winners and ultimately influence what our future will look like. We surveyed a select group of five leading VCs on their top book recommendations for 2019 with the only criteria being that the respondents personally read the title this year and thought it was meaningful. Among our correspondents:

• Josh Wolfe, Lux Capital
• Theresia Guow, aCrew Capital
• Mamoon Hamid, Kleiner Perkins
• Maha Ibrahim, Canaan
• Jennifer Fonstad, Owl Capital

The books could cover any topic, be fiction or non-fiction, and could be old, new or anything in between. Here are the six books that resonated with our panel of investors, all of which they would recommend to you, a friend or a family member looking for a great holiday gift. 

This article contains links to affiliate partners where available. When you buy through these links, TechCrunch may earn an affiliate commission.

Josh Wolfe, Lux Capital

Exhalation by Ted Chiang

Knopf / 368 pages / May 2019

This year for me it was Ted Chiang’s “Exhalation”. The gap between sci-fi and sci-fact keeps shrinking. I contend either our authors are becoming less creative or our scientists more creative. Chiang disproves the former. One of the most provocative stories in this collection is The Truth of Fact, The Truth of Feeling which parallels two protagonists set in the near future and the not-too-distant past. One sub-story centers on a Black Mirror-esque technology that gives high-fidelity perfect recall and recordings of prior experience. The other story is of a tribe that lives by oral tradition has one member encounter an outsider with the technology of writing. Together they make a provocative poignant point on the distinction between being precise and being right—and the meaning in our lives between them.

Summary: “Exhalation” is the latest composition by acclaimed sci-fi writer Ted Chiang, whose short story titled “Story of Your Life” famously acted as the inspiration for the oscar-nominated film “Arrival.” Chiang’s newest work is a collection of science fiction short stories and novelettes that stray away from the speculative dystopian side of the genre. Using common sci-fi motifs such as aliens and A.I. proliferation, the selected writings instead dial-in on the characters living in these imagined universes as they examine how societal and technological evolutions impact the ethical, philosophical and cognitive aspects of the human psyche and existence. 

Price: $16 on Amazon

Theresia Guow, aCrew Capital

Alpha Girls: The Women Upstarts Who Took on Silicon Valley’s Male Culture and Made the Deals of a Lifetime, by Julian Guthrie

Currency / 304 pages / April 2019

The most interesting book to come out in 2019 that tells the story of tech and venture is “Alpha Girls: The Women Upstarts Who Took on Silicon Valley’s Male Culture and Made the Deals of a Lifetime”, by Julian Guthrie. I find it a fascinating read (even if I weren’t included) – with stories that speak to both men and women, to the deals won and lost (Skype, Imperva, F5, Trulia, Facebook, Salesforce and more) and to the history of Silicon Valley through the lens of four outsiders. Despite having to pave their own path, the women jumped in headfirst in the pursuit of their dreams. You will walk away with a different view of how it is to be a woman in this male-dominated industry, and you will get a sense of the important role of male allies. “Alpha Girls” shows that women have long been “hidden figures” behind big companies and key deals. Finally, their stories are being told.

Summary: Silicon Valley’s massive gender gap is no secret, particularly in the notorious ‘boys and bros’ club that is the venture capital industry. In “Alpha Girls” The Women Upstarts Who Took on Silicon Valley’s Male Culture and Made the Deals of a Lifetime”, esteemed business journalist, international best-selling author and multi-time Pulitzer nominee Julian Guthrie details the career paths of four leading female VCs (disclosure: our respondent Theresia Guow is one of them) that have played major roles in shaping today’s tech and startup landscape.

Through first-hand accounts, Guthrie explores how Theresia, Magdalena Yesil (Broadway Angels, Salesforce, US Venture Partners), Mary Jane Elmore (Broadway Angels, Institutional Venture Partners (IVP)), and Sonja Hoel Perkins (Broadway Angels, Menlo Ventures) first found there way to the male-dominated world of venture capital, the strategies they used to find recurring success, and how they navigated the structural disadvantages of an industry built for others.

“Alpha Girls” offers tremendous, difficult-to-find depth around the professional, personal, and familial scenarios underrepresented groups in VC encounter as they look to challenge the status quo, find personal success and redefine an entire industry.

Price: $14 on Amazon

Mamoon Hamid, Kleiner Perkins

The Coddling of the American Mind by Greg Lukianoff and Jonathan Hadit

Penguin Press / 352 pages / September 2018

Our world is rapidly shifting around us – from evolving social norms, to the external stimuli that impact our well-being. It’s a new pace that is acutely felt in how we are raising and educating our kids and young adults. This book deeply explores the societal ramifications, and offers perspective about how we may be doing it all wrong.

Summary: “The Coddling of the American Mind” is a provocative sociological dive into how commonly-accepted modern social and parenting practices have led to increased agitation and tension in today’s youth. Written by attorney, public advocate, and First Amendment specialist Greg Lukianoff and social psychologist and NYU professor of ethical leadership Jonathan Haidt, “The Coddling of the American Mind” introduces its thesis by examining issues of censorship and free speech on college campuses, which are occurring at a more frequent clip than ever before.

As the authors debate the potential negative impacts that an overly partisan culture of “safety-ism” might have on mental health and development, they retrace the historical social trends and cultural transformations that led to today’s conditions. 

Price: $17 on Amazon

Maha Ibrahim, Canaan

The Back Channel by William Burns

Random House / 512 pages / March 2019

For the last two years, I’ve had the pleasure of serving as a Trustee for the Carnegie Endowment for International Peace where Bill Burns serves as President. Bill is the consummate statesman and has been a central figure in international diplomacy for decades. The depth of his knowledge is a testament to his commitment to international order and peace. “The Back Channel” provides readers with an inside look into his career in foreign service, from the Cold War and Middle East affairs to modern-day Russia. My respect for Bill was immense before I read the book and it only grew bigger with every chapter.

Summary: Throughout his illustrious, nearly thirty-year career in foreign service, William Burns has held titles that include the US ambassador to Russia and the Deputy Secretary of State. Burns’ memoirs, “The Back Channel,” focuses on the biggest policy decisions of Burns’ tenure.

Burns uses his own notes, declassified State Department documents and primary-source, first-hand analysis to offer up some inside baseball and help readers understand the strategic rationale and key considerations behind some of the most important U.S. foreign policy decisions that have shaped the global geopolitical landscape over the last two decades.

Price: $13 on Amazon

The Education of an Idealist by Samantha Power

Dey Street Books / 592 pages / September 2019

Ambassador Power is an icon of courage, compassion and resolve. During her recent book tour, I was fortunate enough to interview her and was struck by her humanity. The stories she writes about her impressive career are both powerful and personal. Ambassador Power immigrated to the US as a child and has since dedicated her life to human rights and equality. She is my age and has accomplished so much in her life, most recently as US Ambassador to the UN under President Obama. I don’t know anyone who, at 22, would voluntarily become a war correspondent (in Bosnia). I suspect she will one day run for political office and I will be a big supporter.

Summary: “Education of an Idealist” is the memoir of former US Ambassador to the United Nations and Pulitzer-award-winning author Samantha Power, detailing her journey from a child in Ireland, to an immigrant growing up in the US, through her Ivy League undergrad and legal education, all the way through her careers in journalism and public advocacy and her time working as a senior advisor to President Barack Obama. Even from a purely narrative perspective, Power’s lengthy journey, which brought her across the globe through warzones and revolutions long before her career in politics, is incredibly compelling on its own.

But Ambassador Power’s reflection offers even more value as she recounts how she overcame personal, professional and internal struggles as she traversed different geographies, environments and stages of her career and life.

Additionally, Power’s writing also offers up valuable lessons for those in the startup world. Power’s move from an external public advocate to a government policymaker, in a roundabout way (or at least in the eyes of startup nerds like us), provides a unique look into the transition, differences and challenges one may come across when moving from an externally focused role to an operational one.

Price: $18 on Amazon 

Jennifer Fonstad, Owl Capital

The First Congress: How James Madison, George Washington, and a Group of Extraordinary Men Invented the Government by Fergus M. Bordewich

Simon & Schuster / 416 pages / February 2017

As I read about impeachment proceedings, presidential elections, and racial tensions in today’s political climate, it begged the question – how did we get here?

While not knowing exactly what I was undertaking, I recently read the book, “The First Congress.” The book was a remarkable story about how both ordinary and extraordinary people took the ‘startup’ that was the United States in 1789 and launched us on a remarkable ride.

The book takes us through the critical decisions made by the country’s very first Congress, 1789-1791. This includes establishing the Supreme Court, passing the first 10 Amendments to the Constitution (later called the Bill of Rights), establishing the country’s first revenue ‘stream,’ and picking the location of the nation’s capital (putting our country’s hero – George Washington, in a different light).

It’s hard to fathom our nation as a startup. The country was fresh off of its failure as a Confederation of States, deeply in debt, with no source of revenue yet established. Two of the states had not yet ‘signed on’ to the whole enterprise. And while the Constitution put forth certain operating principles, it fell to this group of men (yes, all men and all white) to put many of the mechanisms in place that still guide and define us today. As one always trying to do what I do better and learn from the past, this was a terrific lesson in both getting this startup off the ground as well as the intended and unintended consequences of those decisions.

Summary: Writer and historian Fergus Bordewich’s “The First Congress” puts us in the room for the First Congress in our country’s history, which saw the admission of several states into the union, the passing of the Bill of Rights and several other of the biggest decisions that shaped the United States.

The book details how the founding fathers debated the United States’ structural and operational systems including the American legal system and national banking system. Additionally, “The First Congress” highlights an interesting yet often overlooked period of US history, where the country was essentially functioning like a startup, grinding and building from scratch, having to create mission statements, organizational hierarchies, operational systems, or otherwise for the very first time.

Price: $12 on Amazon

Source: Tech Crunch

One of the more notable startups using artificial intelligence to understand and fight cancer has raised $45 million more in funding to continue building out its operations and inch closer to commercialising its work.

Paige — which applies AI-based methods such as machine learning to better map the pathology of cancer, an essential component of understanding the origins and progress of a disease with seemingly infinite mutations (its name is an acronym of Pathology AI Guidance Engine) — says it will be use the funding to inch closer to FDA approvals for products it is developing in areas such as biomarkers and prognostic capabilities.

It also plans to use the funding to continue developing better ways of diagnosing and ultimately fighting the disease, as well as exploring further commercial opportunities for its work, specifically within the bio-pharmaceutical industry.

This round is being led by Healthcare Venture Partners, with previous investor Breyer Capital, Kenan Turnacioglu and other funds participating. The company is not disclosing its valuation, but PitchBook noted that a first close of this round (when it raised $33 million) put the valuation at $208 million. That would value Paige now at about $220 million with the $45 million close, more than three times its valuation in its previous round.

Paige first emerged from stealth back in 2018 — with a bang.

Paige.AI — as it was known at the time — was hatched inside the Memorial Sloan Kettering Cancer Center, one of the world’s foremost institutions both for working on cancer therapies and treating cancer patients, and along with a $25 million investment led by Jim Breyer, Paige had secured exclusive access to MSK’s 25 million pathology slides as well as its intellectual property related to the AI-based computational pathology that underpinned its work. These slides make up one of the biggest repositories of its kind in the world, and as all solutions and services built on machine learning are only as good as the data that’s fed into them, they were critical to the startup’s beginnings.

The startup also launched with some serious talent behind it.

Much of the computational pathology being used by Paige had been developed by Dr Thomas Fuchs, who is known as the “father of computational pathology” and is the director of Computational Pathology in The Warren Alpert Center for Digital and Computational Pathology at Memorial Sloan Kettering, as well as a professor of machine learning at the Weill Cornell Graduate School of Medical Sciences.

Fuchs co-founded Paige with Dr David Klimstra, chairman of the department of pathology at MSK, and Fuchs had originally started out as the CEO of Paige, but was replaced earlier this year by Leo Grady, who joined from another bio-startup, Heartflow (another company backed by Healthcare Venture Partners). Fuchs is still supporting the company, but no longer in an executive role.

In the nearly two years since it launched, there have been some milestones reached. The company, which has around 30 employees today, has been the first to get an FDA breakthrough designation (which helps expedite the long process of drug approvals in urgent areas where there are few or no other options for patients) for using AI in oncology pathology. It’s also the first to get a CE mark in the same category, which opens the door to working in Europe, too. Paige has so far ingested 1.2 million images into its slide database and is using them — in algorithms that also take in genomic data, drug response data and outcome data — to work on developing diagnostic solutions.

But as with all new medical products, progress is not measured in quarters as it might be with a more typical tech startup. Moving fast and breaking things is something to be avoided. So even with all of the above advances, there has yet to be any commercial products launched, nor is Grady giving any specific time frames for when they will. And when the company came out of stealth in 2018, it said it would be focusing on breast, prostate and other major cancers, although today it’s not as quick to specify what its targets will be when it does launch commercial products.

Similarly, it’s also expanding its remit from primarily clinical environments to pharmaceutical ones.

“The clinical side is still our focus, but this is an expansion and realisation that this has a broader impact, and that includes pharmaceutical customers,” Grady said. 

And the dropping of the .AI in its name was also intentional, in part a reaction it seems to how much AI gets thrown around today.

“There is a fundamental misconception, which is thinking of AI as a product and not a technology,” said Grady. “It’s a technology set that can allow you to do many things that could not have been done in the past, but you need to apply it in a meaningful way. Developing a good AI and putting that on the market will not cut it in terms of clinical adoption.”

The funding round, Grady said, saw a lot of interest from strategic investors, although the company intentionally has stayed away from these.

“We were approached by all of the scanner vendors and some of the biopharmaceutical companies,” he said. “But we made the decision to not take a strategic investment with this round because we wanted to be neutral with hardware vendors and not be too tied with any one.”

He also pointed to the challenges of talking to investors when you are working in a cutting-edge area (a challenge that has foxed many an investor also into backing the wrong horses, too, such as Theranos).

“We’re at the intersection of three areas: tech, medical devices and clinical medicine, and life sciences and biotech,” he said. “Many investors sit squarely in one and don’t feel comfortable in others. That makes the conversations challenging and short. But there has been an increasing blend between those three sectors.”

That’s where Healthcare Venture Partners fits into the mix. “Paige exemplifies the benefits of digital pathology and represents the bright future of AI-driven medical diagnosis,” said Jeff Lightcap of Healthcare Venture Partners, in a statement. “As hospitals embark on digital transformations, they will face challenges associated with these transitions. We believe Paige addresses many of these issues by enhancing the ability of clinical teams and pathologists to collaborate. We’re confident in Paige’s future and believe they will continue to develop cutting-edge technologies that enable pathology departments to transform their practices, which have changed little in the last century.”

“We applaud Paige’s commitment to building clinical AI products that will improve the diagnostic process and patient care,” added Jim Breyer of Breyer Capital, in a statement. “This is a critical time for Pathology, as pathologists are carrying a heavier workload than ever before. Paige understands their needs and the team has built cutting-edge technologies to address them. Paige represents the future of computational pathology and we look forward to their continued growth and success.”

Source: Tech Crunch

Earlier this year, PBS announced it had secured streaming agreements for its member stations on YouTube’s live TV service, YouTube TV. Today, that deal goes live. PBS says over 100 of its local stations are now available on YouTube TV by way of dedicated live channels for both PBS and PBS Kids, as well through on-demand programming.

More stations are expected to be added in 2020, PBS notes.

YouTube TV’s service is available to 75% of U.S. households, significantly broadening PBS’ reach among cord-cutters.

Before today, PBS programming has been available through the PBS.org and PBSKids.org websites, as well as the PBS Video app and PBS Kids app for iOS, Android, Roku, Apple TV, Amazon Fire TV, Samsung TV, and Chromecast. Some of its programming has also been available on-demand via channels offered by Amazon and Apple as well as through popular on-demand streaming services, like Netflix.

And of course, U.S. households can also pick up their local PBS station’s signal for free via their digital antenna, or subscribe to cable or satellite TV to access PBS channels.

But YouTube TV is the first live TV service to offer PBS stations directly in its app.

The partnership brings live and on-demand content including the stations’ locally produced shows and PBS favorites, like “American Experience,” “Antiques Roadshow,” “Frontline,” “Great Performances,” “Masterpiece,” “Nature,” and others. The kids’ stations, meanwhile, offer shows like “Daniel Tiger’s Neighborhood,” “Molly of Denali,” “Odd Squad,” “Pinkalicious & Peterrific,” “Wild Kratts,” and “Sesame Street.”

It’s worth noting, however, that it’s HBO Max, not PBS, that will be the new streaming home to first-run “Sesame Street” episodes starting in 2020. PBS gets them at some later point.

“Every year, more and more households are seeking alternative ways to view their favorite PBS programs,” said PBS Chief Digital and Marketing Officer, Ira Rubenstein, in a statement. “PBS is committed to making trusted content available to all households across as many platforms as possible. We are pleased that YouTube TV recognizes public television’s unique structure and worked with us to provide our viewers with more ways to watch the programs that they love through their local PBS station.”

It’s not likely that losing access to PBS has stopped many people from cutting the cord, the way that the lack of live sports has, in years past. In fact, today’s streaming services like Prime Video and Netflix offer a range of “PBS-like” content, including educational kids’ shows, nature documentaries, musical performances, news, history and more. But the addition will make it easier for cord-cutters who prefer to watch TV through streaming services to access PBS.

“We are excited to partner with PBS on this unique partnership to further our commitment to providing a best-in-class experience for our users,” said Lori Conkling, Global Head of Partnerships at YouTube TV. “PBS and PBS Kids are highly requested channels by our users, and we’re thrilled to be able to add these to the YouTube TV lineup starting today,” she said.

Source: Tech Crunch

Hiring the right people may be the most important thing you do when you start a new company. But how much time should founders spend on hiring when there are so many other competing demands?

Last week, we discussed team-building and several other issues during a panel on the Extra Crunch stage at Disrupt Berlin with Cloudflare CEO Matthew Prince and Red Points CEO Laura Urquizu.

“I was looking through early emails the other day,” said Prince . “I had forgotten how hard it was to hire people in the very beginning. I think that [Cloudflare co-founder] Michelle [Zatlyn] and I spent probably at least 70% of our time in the first two years just begging people to work for us.”

While it’s a hard job to get right, Prince said he didn’t believe that this was a job he should have outsourced to recruiters. “Fundamentally, as the founder and leader of an organization, your job is to attract and retain the best best possible people,” Prince argued. “And so even to this day, at least a third of my time is spent on recruiting.”

Red Points co-founder Urquizu agreed, noting that she also spends at least a third of her time on recruiting. But she also argued that as you grow as a company, your needs may change and you may need to let some people go.

“I usually say that what brought us here is not going to bring us to the next stage — and that includes people,” she said. “It’s not pleasant and it is very hard when you have to say ‘bye’ to people that have been with you in the journey for two years, or for one year, or three years, but then you need to find the next people that are gonna come along with you in the next stage.”

Source: Tech Crunch

We’re excited to announce a new community perk for Extra Crunch. Starting today, annual and two-year Extra Crunch members located in the United States can get free access to Avodocs from AXDRAFT.

Avodocs provides free legal documents for startups, including NDAs, privacy policies, founders’ agreements, employee onboarding documents, terms of service and more. Founders and startup teams often waste tons of time searching Google and asking friends for legal help. Avodocs provides the necessary documents for early-stage companies in minutes.    

Avodocs is used by more than 4,000 startups, including alumni from Y Combinator, 500 Startups and Techstars. Users of Avodocs enjoy having documents ready for signature in less than 10 minutes, plain English description of the implications, a simple Q&A process for creating a document, the ease of editing and personalizing documents after download and the fact that Avodocs works on any device. Users of Avodocs also get access to extra content, such as a consulting agreement and advisory agreement, as well as document storage and DocuSign integration.

Extra Crunch is a membership program from TechCrunch that features how-tos and interviews on company building, intelligence on the most disruptive opportunities for startups, an experience on TechCrunch.com that’s free of banner ads, discounts on TechCrunch events and several community perks like the one mentioned in this article. Our goal is to democratize information about startups, and we’d love to have you join our community.

You can sign up for Extra Crunch here.

After signing up for an annual or two-year Extra Crunch membership (U.S. users only), you’ll receive a welcome email with a link to sign up for Avodocs. If you are already an annual or two-year Extra Crunch member, you will receive an email with the offer at some point today. If you are currently a monthly Extra Crunch subscriber and want to upgrade to annual in order to claim this deal, head over to the “my account” section on TechCrunch.com and click the “upgrade” button.

This is one of several community perks we’ve launched for Extra Crunch members. Other community perks include a 20% discount on TechCrunch events, 100,000 Brex rewards points upon credit card sign up and an opportunity to claim $1,000 in AWS credits. For a full list of community perks from partners, head here. 

If there are other community perks you want to see us add, please let us know by emailing travis@techcrunch.com.

To sign up or learn more about all the benefits of Extra Crunch, head here.

Disclaimer:

Documents on Avodocs were created for startups operating in the United States. Avodocs provides self-help services at customer’s specific direction. Avodocs is not a law firm or a substitute for an attorney or law firm.

Communications between customer and Avodocs are protected by Avodocs Privacy Policy, but not by the attorney-client privilege. Avodocs does not provide any kind of advice, explanation, opinion, or recommendation about possible legal rights, remedies, defenses, options, selection of forms, or strategies.

Access to Avodocs is subject to its Terms of Service. 

This offer is provided as a partnership between TechCrunch and Avodocs, but it is in no way an endorsement from the TechCrunch editorial team. TechCrunch’s business operations remain separate to ensure editorial integrity. 

Source: Tech Crunch

In the wake of WeWork’s embarrassing IPO rout, you might imagine that startups working in similar markets would cool it for a bit. Perhaps they could work on cutting spending, improving their gross margins, and, say, shooting for profitability.

Not so, at least in one case. Instead of doing those things, China-based Ucommune filed to go public in America this month. The WeWork competitor is mostly a co-working business. It’s also a marketing company. And it has some of the worst economics we’ve seen in a company since WeWork.

Why this company is trying to go public isn’t hard to understand. It needs the cash. But at the same time, the chance of it debuting at a price it likes seems slim, given the market’s recent history — as well as Ucommune’s own.

Introductions

Before we chat about the business fundamentals of Ucommune, a primer on the company itself.

Founded in 2015, according to Crunchbase data, Ucommune has raised over hundreds of millions. In 2018 alone the company raised a venture round and its Series C and its Series D. Prior investors include Gopher Asset Management, Aikang Group, Tianhong Asset Management, All-Stars Investment and Longxi Real Estate.

TechCrunch reported that its final private round valued Ucommune at $3 billion.

All that capital was put to work. According to is F-1 filing, Ucommune operates 197 co-working facilities in 42 cities. The company also claims more than 600,000 members and nearly 73,000 workstations.

The WeWork similarities continue: While discussing itself in its IPO filing, the firm touts an “asset-light model,” which it claims helps property owners “benefit from our professional capabilities and strong brand recognition” as well as allowing its “business to scale at a cost-efficient manner.”

Let’s see.

How to lose money

As a primer for all you non-accountants, here’s how you make money as a company: First, generate some revenue. Next, deduct the direct costs that that revenue engendered. What’s left is called “gross profit,” and the relative total of gross profit generated from revenue is called gross margin. From there, subtract your operating costs. If there’s anything left over, that’s operating profit. Now take your operating profit and remove taxes and other costs. What remains is net income.

As you can quickly see, the more gross profit a business generates from its revenue, the more money is has left over to pay for operating expenses. So, revenues that generate lots of gross profit — called high-margin revenue — are better than those that don’t.

Ucommune, our IPO hopeful, is unique in that its revenue doesn’t generate any gross profit at all. Its revenue doesn’t even pay for itself. The company is gross margin negative. 

Here’s what that looks like:

If your cost of revenue is higher than your revenue, your gross profit is negative. And that means that you have no gross margin available to fund operating costs. In turn, that means that your company is super unprofitable.

Ucommune is unprofitable, unsurprisingly. (If it feels like we’re overly focused on gross margins, keep in mind that software companies are worth as much as they are in part because they have very high gross margins.)

Things get a bit worse when we look further.

Yuck

Digging in, Ucommune operates two main businesses. The first enterprise is co-working, which generated just less than half of the company’s total revenue during the first three quarters of 2019. Its second largest business is a marketing effort. Ucommune acquired a company called “Shengguang Zhongshuo” in December of 2018, a deal that lets the company drive revenue by selling “branding services and online targeted marketing services.”

Ucommune is therefore a hybrid co-working and services business. Neither piece of the whole is attractive from a margin perspective. For example, the company’s $58.7 million in co-working revenue earned during the first nine months of 2019 was nearly entirely offset by lease costs ($49.6 million) alone, before the company staffed and otherwise managed the locations in question.

The company’s marketing business is slightly better. Its $56.5 million in revenue from the first three quarters of 2019 was nearly offset by $51.0 million in revenue costs. Ucommune’s services arm, therefore, was more lucrative in terms of generating gross margin for the co-working company than its actual co-working business.

(Bear in mind as we go along that this company wants to go public.)

Wrapping our discussion of yuck, let’s talk about cash. Ucommune had cash and equivalents of $23.4 million and short-term investments worth $11.0 million at the end of Q3 2019. That’s $33.4 million in total that the company can access, presuming that every short-term investment is unwindable into cash inside the window in which Ucommune would need to access it.

A window that is closing, mind. Ucommune’s operations burned through $32.4 million in the first three quarters of 2019. If the company kept consuming cash at its prior pace, we can estimate that it will not have enough cash to make it to the end of Q2 2020. Which is why Ucommune is going public.

Growth?

The only counterargument to the mess that is Ucommune’s business is that it is growing quickly. That’s true. The company’s revenue grew from ¥282.2 million in the first three quarters of 2018 to ¥874.6 million over the same time period this year. That’s quick!

But instead of demonstrating operating leverage (losing less money as its revenue grew), the company lost more money this year than the last, making its business appear likely to keep burning acres of cash while it grows. And you have to ask yourself if it is a good business, why are its private investors pushing it onto the public markets instead of giving it more of their own money?

They must have known, landing this close to WeWork, how this was going to look. And that’s not confidence-inspiring.

Source: Tech Crunch