Category: StartUps

As perennial front runner for the title of probably-the-most-evil tech company, Amazon has a long way to go to rehabilitate its image as a take-no-prisoners, industry-consolidating wealth machine.

In a bold effort to do so, the company announced today that it would buy the rights to Seattle’s KeyArena, an aging stadium currently under redevelopment in the city. Amazon founder and CEO Jeff Bezos boasts that the stadium will “be the first net zero carbon certified arena in the world.”

“Instead of calling it Amazon Arena, we’re naming it Climate Pledge Arena as a regular reminder of the urgent need for climate action,” Jeff Bezos wrote on Instagram.

Other regular reminders for urgent climate action include the company’s own employees walking out to protest its lack of accountability on climate issues, its ongoing courtship with oil and gas companies and the sheer amount of times in a single day we see Amazon delivery vans dropping packages off on the same block.

Addressing its record of climate indifference, Amazon announced a $2 billion investment in sustainable efforts to reduce the company’s massive carbon footprint earlier this week as part of the same climate-friendly PR blitz.

Bezos himself announced in February that he would invest $10 billion of his personal wealth in a fund to address climate change, which is probably the least you can do when you’ve amassed an amount of wealth that’s incomprehensible to any normal person at the expense of workers, the environment and whatever else got in the way.

Source: Tech Crunch

Source: Tech Crunch

Earlier today, insurtech unicorn Lemonade filed an S-1/A, providing context into how the former startup may price its IPO and what the company may be worth when it begins to trade.

According to its new filing, Lemonade expects its IPO to price at $23 to $26 per share. As the company intends to sell 11 million shares in its debut, the rental and home insurance-focused unicorn would raise between $253 million and $286 million at those prices.

Counting an additional 1.65 million shares that it will make available to its underwriting banks, the company’s fundraise grows to $291 million to $328.9 million. Including shares offered to underwriters, Lemonade’s implied valuation given its IPO price range runs from $1.30 billion to $1.47 billion.

That’s the news. Now, is that expected valuation interval strong, and, if not, what might it portend for other insurtech startups? Let’s talk about it.

Not great, not terrible

TechCrunch is speaking with the CEOs of Hippo (homeowner’s insurance) and Root (car insurance) later today, so we’ll get their notes in quick order regarding how Lemonade’s IPO is shaping up, and if they are surprised by its pricing targets.

But even without external commentary, the pricing range that Lemonade is at least initially targeting is not terribly impressive. That said, it’s stronger than I anticipated.

Source: Tech Crunch

Think you’ve found a way to consistently brick someone’s PS4, or make it run code that it shouldn’t? Sony wants to know — and now they’re willing to pay.

This morning Sony announced that it’s opening its bug bounty program to the public, and will pay for newly discovered bugs and exploits that impact either the PlayStation 4 or their online PlayStation Network.

Sony is pretty explicit about what kind of bugs they’re looking for: anything that hits “the PlayStation 4 system, operating system, accessories” in its current and/or beta form, or that impacts any of a handful of PlayStation Network domains/APIs. Tactics like socially engineering Sony employees or DDoSing their servers, meanwhile, aren’t allowed.

Bugs found in the PlayStation Network will have base bounties of $100-$3,000 or more (depending on severity), while critical bugs found related to the PS4 itself will pay upwards of $50,000. You can see Sony’s breakdown, including what’s in/out of the program’s scope, right here.

(Note the focus on PlayStation 4. Finding a new way to break the ol’ PS2 is cool and all, but Sony won’t be dishing out any money for it.)

In a blog post announcing the bug bounty program, Sony notes that they’ve actually been running this program quietly with a handful of researchers for a while now — today, though, they’re opening it up to anyone with the skill and interest. The program’s HackerOne page says Sony has already paid out over $170,000 to researchers, with an average bounty of around $400.

Microsoft launched a similar bug bounty program for Xbox Live earlier this year.

Source: Tech Crunch

Hoxton Ventures, a London-based early-stage VC firm best known for backing British unicorns Babylon Health, Darktrace and Deliveroo, announced its second fund last week, coming in at just under $100 million.

The firm’s self-proclaimed strategy is to seek out startups that can scale globally into “large, category-defining leaders” in nascent industries — A strategy that appears to be bearing fruit.

However, although fund two is twice the size of the firm’s $40 million debut fund back in 2013 (when new VC firms in Europe were still seen as a novelty), Hoxton struggled somewhat to close a new fund. Despite having the highest ratio of unicorns to investments in Europe, according to Dealroom, it took more than four years to get fund two over the line, leaving many VC watchers scratching their heads.

To find out exactly what happened and to learn more about Hoxton’s strategy going forward, I put questions to founding partners Rob Kniaz and Hussein Kanji — Fidelity and Accel alums, respectively — and new partner and chief operating officer Rob Ludwig. The conversation that followed was refreshingly candid, providing valuable insights into the state of early-stage venture capital in Europe and what it takes to get funded by an outlier VC like Hoxton.

It’s seven years since you announced your debut fund, which I remember at the time was considerably harder to raise than you had perhaps envisaged. However, despite having three unicorns in fund one, this second fund also appears to have taken a long time to get over the line. Why was that?

Hussein Kanji: I see you’re not taking it easy on us. Good question. Fundraising is our Achilles’ heel.

We did our final closing in November 2014 (not widely reported) and did the majority of this fund’s closing in January/February 2019. That’s a little more than a four-year gap, meaning we’re a year (maybe two) past due. That goes to a combination of two things: we are terrible fundraisers and we had a really awkward experience with the European Investment Fund, which set us back by at least a year.

Rob Kniaz: Yes, sadly EIF denied this publicly but they discontinued new fund relationships in the U.K. after Article 50 triggered, so that cost us a significant amount of time due to the length of their process. By that time we had other commitments that had timed out so we probably had and then lost then reraised nearly half of what we eventually raised.

Source: Tech Crunch

Editor’s note: Andreessen Horowitz’s Crypto Startup School brought together 45 participants from around the U.S. and overseas in a six-week course to learn how to build crypto companies. Andreessen Horowitz partnered with TechCrunch to release the online version of the course. 

The final week of a16z’s Crypto Startup School kicks off with former Coinbase Chief Legal Officer Brian Brooks discussing “Token Securities Frameworks and Launching a Network.” Brooks starts off calling crypto the “most perfect intersection of tech and finance,” but he cautions that crypto builders must navigate traditional financial-services regulatory structures.

This takes on special importance because tokens, the native assets of crypto networks, can be deemed securities by regulators, making them illegal to list on exchanges and subject to disclosures and other legal requirements.

Brooks explains the four-part Howey test, the Supreme Court ruling that has come to define when a given transaction is a securities transaction. Because crypto is still relatively new, however, the path to legality is still developing.

In the meantime, the crypto industry has created the Crypto Rating Council, a new tool to objectively rate tokens and gauge their risk of being deemed securities. Broadly, the tokens that carry the most risk of being labeled securities are those issued before a crypto network is fully decentralized, and while the actions of the management team remain critical to a network’s success. (Bitcoin, for example, is not a security, because it is completely decentralized and there is no core management team.)

Brooks introduces some promising new regulatory paths for crypto including membership models — similar to cooperatives or mutuals — in which token holders agree to only sell the token to other members of the network, avoiding a secondary sales market and thus steering clear of securities issues. While this model hasn’t been tested with the SEC, it has a long track record in other industries and bears further study.

In the final video of the program, former a16z partner and Mediachain co-founder Jesse Walden discusses “Fundraising and Deal Structure” for crypto startups. During early product development, crypto startups can raise traditional venture capital through equity, which allows for the most alignment between founders and investors.

Then, unlike a traditional startup, a crypto startup can invite its user base to participate in ownership and operation via the disbursement of tokens, once the core founding team has found product-market fit and established a viable network. This aligns incentives among the network, its users, the core team, and venture investors. Issuing tokens dilutes the stakes of the core team and early investors, but this is a desirable outcome because incentivizing more participants increases the chances that a network will grow. This leads to a larger pie overall for investors to share.

Walden also discusses Network Monetary Policy, citing Bitcoin, with its guaranteed limit of 21 million tokens, as having a fixed, deflationary supply policy. Other networks may be inflationary, with no ceiling on token amount, thereby perpetually diluting founders and early investors.

A perpetually dilutive system can nonetheless be productive for token holders due to staking, or the process of holders contributing to the operation of the network, which pays off in newly minted tokens for stakers and the retention of their ownership stakes.

See the videos from all six weeks of Crypto Startup School.

Source: Tech Crunch

When Dell bought EMC in 2016 for $67 billion it was one of the biggest acquisitions in tech history, and it brought with it a boatload of debt. Since then Dell has been working on ways to mitigate that debt by selling off various pieces of the corporate empire and going public again, but one of its most valuable assets remains VMware, a company that came over as part of the huge EMC deal.

The Wall Street Journal reported yesterday that Dell is considering selling part of its stake in VMware. The news sent the stock of both companies soaring.

It’s important to understand that even though VMware is part of the Dell family, it runs as a separate company, with its own stock and operations, just as it did when it was part of EMC. Still, Dell owns 81% of that stock, so it could sell a substantial stake and still own a majority the company, or it could sell it all, or incorporate into the Dell family, or of course it could do nothing at all.

Patrick Moorhead, founder and principal analyst at Moor Insights & Strategy thinks this might just be about floating a trial balloon. “Companies do things like this all the time to gauge value, together and apart, and my hunch is this is one of those pieces of research,” Moorhead told TechCrunch.

But as Holger Mueller, an analyst with Constellation Research, points out, it’s an idea that could make sense. “It’s plausible. VMware is more valuable than Dell, and their innovation track record is better than Dell’s over the last few years,” he said.

Mueller added that Dell has been juggling its debts since the EMC acquisition, and it will struggle to innovate its way out of that situation. What’s more, Dell has to wait on any decision until September 2021 when it can move some or all of VMware tax-free, five years after the EMC acquisition closed.

“While Dell can juggle finances, it cannot master innovation. The company’s cloud strategy is only working on a shrinking market and that ain’t easy to execute and grow on. So yeah, next year makes sense after the five year tax free thing kicks in,” he said.

In between the spreadsheets

VMware is worth $63.9 billion today, while Dell is valued at a far more modest $38.9 billion, according to Yahoo Finance data. But beyond the fact that the companies’ market caps differ, they are also quite different in terms of their ability to generate profit.

Looking at their most recent quarters each ending May 1, 2020, Dell turned $21.9 billion in revenue into just $143 million in net income after all expenses were counted. In contrast, VMware generated just $2.73 billion in revenue, but managed to turn that top line into $386 million worth of net income.

So, VMware is far more profitable than Dell from a far smaller revenue base. Even more, VMware grew more last year (from $2.45 billion to $2.73 billion in revenue in its most recent quarter) than Dell, which shrank from $21.91 billion in Q1 F2020 revenue to $21.90 billion in its own most recent three-month period.

VMware also has growing subscription software (SaaS) revenues. Investors love that top line varietal in 2020, having pushed the valuation of SaaS companies to new heights. VMware grew its SaaS revenues from $411 million in the year-ago period to $572 million in its most recent quarter. That’s not rocketship growth mind you, but the business category was VMware’s fastest growing segment in percentage and gross dollar terms.

So VMware is worth more than Dell, and there are some understandable reasons for the situation. Why wouldn’t Dell sell some VMware to lower its debts if the market is willing to price the virtualization company so strongly? Heck, with less debt perhaps Dell’s own market value would rise.

It’s all about that debt

Almost four years after the deal closed, Dell is still struggling to figure out how to handle all the debt, and in a weak economy, that’s an even bigger challenge now. At some point, it would make sense for Dell to cash in some of its valuable chips, and its most valuable one is clearly VMware.

Nothing is imminent because of the five year tax break business, but could something happen? September 2021 is a long time away, and a lot could change between now and then, but on its face, VMware offers a good avenue to erase a bunch of that outstanding debt very quickly and get Dell on much firmer financial ground. Time will tell if that’s what happens.

Source: Tech Crunch

Instagram is expanding its TikTok competitor known as “Reels” to new markets, following its launch last year in Brazil. Starting today, Instagram is rolling out further access to Reels in France and Germany, allowing users to record short, 15-second video clips set to music or other audio, then share them on the platform where they have the potential to go viral.

The Reels feature is similar to TikTok in that it presents a set of editing tools that make it easier to film creative videos. At launch, for example, Reels offered a countdown timer, the ability to adjust the video’s speed, and other effects.

The company learned from its early tests in Brazil and has since rethought key aspects to the Reels experience.

Before, Reels were meant to be shared only within Instagram Stories. But the Instagram community said they wanted the ability to share Reels with followers and friends in a more permanent way, and also have the opportunity to expand that distribution more broadly if desired.

In addition, the community said they wanted a dedicated space where they could easily compile Reels and watch other people’s Reels.

With the expansion in Germany and France, Instagram has moved Reels to a dedicated space on the user Profile and in Explore — the latter for public accounts — so people can share with a new audience and share on their Instagram Feed, a company spokesperson tells TechCrunch.

These changes offer the chance for more exposure for both Reels and their creators, as Reels becomes more of a destination in the app — like the Stories row is today, for instance.

Reels are not Facebook’s first attempt at challenging TikTok’s growing popularity.

The Instagram parent company had previously launched short-form video app Lasso, but it has so far failed to gain significant traction. With Reels, however, Instagram is able to tap into its existing base of creators and leverage users’ familiarity with its video editing tools.

The challenge for Reels is in getting Instagram users to create a different type of content than they do today in Feed posts and in Stories. Those video tend to be more personal in nature — like clips from someone’s day or a vlog, for example. Meanwhile, more professional creator content has been relocated to IGTV.

TikTok videos, on the other hand, tend to be rehearsed and choreographed. Users learn a dance, perform a trick, make jokes, lip-sync to songs or audio, or replicate a popular meme in their own way. These videos are not typically off-the-cuff, as on Instagram. Encouraging this content requires a different editing tool set and workflow, which is what Reels offers.

Instagram didn’t say when it plans to roll out Reels globally or when it expects to bring the product to the U.S., but says the further expansion will allow the company to continue to build on the existing experience and evolve the product.

Source: Tech Crunch

The fintech revolution is just getting started.

At least that’s the impression we got after a conversation with Plaid co-founder Zach Perret. He appeared on Extra Crunch Live last week to talk about his company’s announced exit to Visa and the larger fintech landscape.

Perret and Plaid announced a deal to sell the company to Visa earlier this year for $5.3 billion, a transaction that highlighted the company’s central position in the fintech world. Plaid provides APIs that link consumer bank accounts to apps and other financial services, making it the connective tissue of the fintech boom.

It’s probably no surprise, then, that Perret is bullish: “You’ve heard it a million times, but the quote of software eating the world [is true], and my corollary to that is [that] every company is a fintech company. And certainly every financial services company should be a fintech company.”

He said there’s lots of room left for fintech and finservices companies to create new products, which is not a bad view of the future if you want to be cheered up. Perret also noted that there are widespread opportunities for fintech companies to help underbanked people in the U.S. and abroad, which indicates a massive, untapped total addressable market.

To make sure you can take your own notes, we’ve included the full session below and excerpted a few passages from the transcript. (You can sign up for Extra Crunch here if you need access.)

Zach Perret

First up, here’s the full call:

Source: Tech Crunch

Twitter took its latest action on content from President Trump Tuesday, again hiding a threat of state violence behind a warning label and appending it with a notice.

Trump’s latest offending tweet declared “There will never be an ‘Autonomous Zone’ in Washington, D.C., as long as I’m your President. If they try they will be met with serious force!” The tweet follows a clash between protesters and law enforcement Monday night in Lafayette Square near the White House.

Twitter says the tweet violated its rules prohibiting threats of harm against groups of people, a form of “abusive behavior” on the social network. The company said that it will allow the tweet to remain up, though has restricted the ability of users to interact with it, including likes, replies and retweets without comment.

On Monday, Twitter declined to act on a different tweet from the president that made false claims about mail-in voting and the “RIGGED 2020 ELECTION.” That tweet was not specific enough to cross the line for breaking platform rules around election integrity—a policy we’ll certainly be hearing more about.

In recent weeks, the president has frequently derided the city of Seattle for allowing protesters to create a police-free area, returning to the topic to stoke fear and anger within his political base. After police abandoned a station in the Capitol Hill neighborhood, Seattle demonstrators moved into the area declaring it an “autonomous zone.” The autonomous zone—and the president’s latest threat—grew out of national civil rights protests against police brutality and racist violence after Minneapolis police killed George Floyd late last month.

Today’s tweet is the latest in what may become many examples of Twitter enforcing its platform rules against the president. In the past, the company rarely acted to enforce its policies on tweets from high profile U.S. politicians, Trump included.

Over the last month, Twitter shifted to a much more active approach to its moderation responsibilities for political figures. In late May, Twitter ignited a political firestorm when it flagged two of the president’s tweets making false claims about vote-by-mail systems in California, leading to a retaliatory executive order from Trump days later. In the early days of the George Floyd protests, the company hid another tweet from the president that threatened lethal violence against protesters.

Source: Tech Crunch