Ideaforge

We all know the success of America’s leading startup hubs, cities like San Francisco, New York City, Boston and several others. Entrepreneurial talent, risk-seeking venture dollars, and dense human networks form an alchemy leading to wealth, jobs, and growth. The main streets and malls of the Midwest may be devastated, but you would never know that walking through the Hudson Yards development on the west side of Manhattan or in San Francisco’s SoMa neighborhood.

Despite their dizzying performance, the intense concentration of success in these zip codes does not bode well for the wider American economy. Geography and zoning ordinances prevent millions from migrating to these hubs, and for those lucky few who can make a living, high housing prices and other costs can place incredible stress on young families.

If we want to ameliorate inequality while lowering that cost burden, then it is up to cities across the nation to build up their own ecosystems and compete effectively. And those cities cannot just be the megalopolis global cities, but have to include the smaller urban cities that are often the core of regions outside the coast.

I have seen few cities sell themselves as effectively as Chattanooga, whose mayor Andy Berke visited TechCrunch’s offices recently. He was accompanied by Luke Marklin, the CEO of tech-enabled moving startup Bellhops, which has raised $27.2 million in venture capital according to Crunchbase.

The two have teamed up to share the gospel of Chattanooga, but their vision could also be the vision for the future of urban cities in America. The story at this point is well-told: the formerly down-on-its-luck Tennessee city brought its community together in the 1980s and 1990s to revitalize its downtown area. Following the 2008 global financial crisis, the city’s power utility started to revamp its infrastructure, and ultimately decided to build out a gigabit municipal fiber infrastructure for the city of about 175,000.

With that bandwidth in hand, the city has embarked on building a startup hub. It has invested significant resources into its downtown innovation district, and it has worked hard to program events and amenities that will attract a diverse and talented workforce. That concentration is intentional. “We can’t have our assets spread out in a city of our size,” Berke explained. “We need to juice up activity in that ecosystem so that it feels like an ecosystem.”

What makes Chattanooga competitive though, and ultimately an interesting case study of urban leadership, is the mayor’s and the city’s deep understanding of trade-offs. With just over 175,000 people, the city’s population is just slightly higher than the startup-focused Flatiron District in New York. Chattanooga, while a distinctive name, is also not the first city that people think of when they are considering locations to migrate to.

While the city has desirable outdoor and cultural amenities, Berke is realistic about how many people might consider Chattanooga as an adopted home. “We don’t need 10,000 engineers moving to Chattanooga to survive,” he said. “You have to grow more talent, because you don’t want to solely rely on the attraction piece.” He gave the example of connecting businesses with the leadership of the local university to ensure that the skills that graduates were learning lined up better with the needs of industry.

By focusing that training on local residents, startups that might otherwise flee to the Bay Area at the first sign of a VC investment decide to stay put. Berke, speaking about Marklin and Bellhops, said that “He is approaching 100 people and when it gets to 250, that creates tremendous wealth in our community, and most of that wealth gets reinvested in the area as opposed to other types of businesses.”

Chattanooga has become a competitive city. It has used its natural endowments, its institutions, its people, and its community to foster a new generation of its economy. That isn’t a panacea for all social or economic problems of course, but the city now has a base upon which it can continue to improve the quality of life for all of its residents and potentially some transplants as well.

James Fallows wrote something of a paean to local governments this week in his cover piece for The Atlantic. Fallows has spent the past few years investigating an interesting trend in American polling: “Even as national politics induces distrust and despair, most polls show rising faith in local governance.” The reason becomes obvious as he travels around the country. Local governments are shoring up their communities through engaged citizens, smart services, and a focus on bringing everyone together around the future of their homes. In short, they look a bit like Chattanooga.

I am a bit more skeptical than Fallows though of the strength of America’s local governments. While there are certainly success stories, there are also 307 American cities with populations above 100,000. Every single one of them should be focused on increasing their competitiveness using whatever resources — however meager — they have.

The key is that cities don’t become competitive with solutions, they become competitive through systems. Transforming an urban area’s built environment and economy is a process measured in decades, not months. Systems ensures that people and institutions are working together for the long-haul, so that when a mayor leaves office, the progress of a city isn’t suddenly halted.

Chattanooga shows what happens when a city can maintain that multi-decade focus on growth and revitalization, while also adapting itself to the realities of the talent inside its borders and the economy in the world at large. Chattanooga may never be as dense as New York City, but it can certainly find a seat at the economic table and be an attractive place to live. Ultimately, we need hundreds of Chattanoogas, urban cities with dynamic economies that offer affordable alternatives to the most expensive startup hub cities in the country.

Source: Tech Crunch

The Gillmor Gang — Frank Radice, Keith Teare, Denis Pombriant, Michael Markman, and Steve Gillmor . Recorded live Friday, April 27, 2018. Apple, Spotify meets Alexa, Is Social Dead, the coming subscription bubble.

@stevegillmor, @mickeleh, @DenisPombriant, @fradice, @kteare

Produced and directed by Tina Chase Gillmor @tinagillmor

Liner Notes

Live chat stream

The Gillmor Gang on Facebook

Source: Tech Crunch

For some food stamp recipients, 2018 could shape up to be a particularly aggravating year, including for one of the only startups trying to find ways to innovate on the ways that food stamps are delivered and managed.

It’s not something that’s talked about much in tech circles, but perhaps it should be, given that 42 million Americans rely on the more than 50-year-old, anti-hunger program behind the stamps — called the Supplemental Nutrition Assistance Program, or SNAP — for basic food assistance.

What’s the problem? It’s twofold essentially. First, let’s take a look at the farm bill, which subsidizes SNAP.

The farm bill, which got its start in 1933 as part of FDR’s New Deal legislation, expires and is updated and passed anew by Congress every five years, after which the sitting U.S. president signs it into law. The last bill was signed in February of 2014, so Congress is working on the next version now. But things aren’t looking very promising for SNAP recipients. Already, the first draft of the House Republicans’ farm bill, which passed through one committee, looks to cut $20 billion from the program over the next 10 years, potentially cutting off two million people in the process.

The cuts will be debated on the House floor beginning early next month, meaning it’s far from clear what happens from here. While Republicans argue they want to promote self-sufficiency (the cuts are expected to come via tightened work requirements), poverty experts see the proposal as chipping away at the already shrinking safety net for America’s most vulnerable. As an article about the bill in Vox notes, half of the 42 million people who are living below the poverty line and relying on SNAP for food assistance are children.

By now you might be wondering what startups have to do with any of this. Stick with us.

Propel, a four-year-old, Brooklyn-based company, makes software for low-income individuals. Its founder, Jimmy Chen, is a former Facebook manager who knows about need; he receive a full scholarship to Stanford based on it.

Propel is a for-profit enterprise. It has raised $5.2 million in outside funding, including from Andreessen Horowitz, the Omidyar Network, and the Center for Financial Services Innovation. It makes money through marketing. For example, though its app primarily helps food stamp recipients check their balances (something they’ve historically had to keep track of themselves or by calling an 800 number), Propel’s features also include coupons and notices about job opportunities, and it receives referrals fees from both food companies and employers for these services.

Still, the 11-person outfit remains rare in its focus on improving a public sector service, which is perhaps why more than 1 million people — or roughly 5 percent of SNAP participants — now actively use its technology. Indeed, the company’s app, which also enables users to create shopping lists, has grown its user base fourfold over the last eight months alone, largely via families telling other families.

Alas, Propel is newly in the crosshairs of a much bigger company that worries Propel is encroaching on its territory. Big government contractor Conduent — which runs the food stamp networks in roughly of all U.S. states — and which manages the database that Propel’s app relies on to help people check their accounts, keeps finding ways to cut off Propel’s access. It’s hamstringing Propel’s users in the process, some recently told the New York Times. (One young mother of two sons said she lost access to the time-saving app for a month.)

Conduent says it’s just protecting itself. In emailed replies to questions from the Times, Conduent said that Propel’s smartphone was launched “without the knowledge, input or consent from Conduent.” It further accused Propel of creating a “capacity ambush,” owing to its data requests. It said its measures were aimed to preventing the “unauthorized access to data — from Propel or any other unauthorized user.”

Chen calls it a misunderstanding. “We saw an opportunity for [the food stamp program] to be part of a modern financial product, to create digital tools that can reduce the stigma of poverty that people were experiencing at the cash register,” including by “creating a plastic card that they just swipe at the register” — like the rest of us.

Propel has taken a “fairly conservative approach to data” he adds. Because Propel is dealing with highly sensitive information, it doesn’t run data in the background of anyone’s phone, retrieving information only when someone opens the app, which he says users do seven times a month, on average.

Most important, says Chen, Propel isn’t trying to replace Conduent or any of a small number of other electronic benefit transfer (EBT) processors that make money via contracts with states. “We’re a direct-to-consumer software play that makes no money from the government and is not looking to [secure] government contracts. Instead of trying to displace them, we’re trying to work with them, and we think we can do it in a way that’s productive for all parties.”

Which takes us back to that farm bill.

If Conduent can’t be persuaded to see Propel’s side of the story, the startup — and others trying to help low-income Americans — may have no recourse, not unless Congress steps in. In fact, part of why the farm bill is reauthorized on a regular basis owes to changes in modern tech.

While lawmakers fight to see how much of its budget they can cut, they might also take into consideration stories like that of Propel, and well-meaning founders like Chen. Maybe they think a government contractor should be able to stamp out a company that it sees as competitive. We hope they do not. If they want to see more startups innovate on behalf of low-income Americans — and they should — they need to protect the companies doing the innovating. Updating the farm bill to protect these kinds of emerging and civic-minded technologies is at least one step in the right direction.

Source: Tech Crunch

The San Francisco Municipal Transportation Agency is gearing up to present its proposal for electric scooter permitting. This comes after the SF Board of Supervisors approved an ordinance for the SFMTA to create a permitting process to better regulate the plethora of electric scooters from Bird, Lime and Spin.

The SFMTA’s proposal lays out a 24-month pilot program, which would grant up to five permits and 500 scooters per permit. As part of the program, electric scooter companies would need to provide user education and insurance, share its detailed trip data with the city, have a privacy policy that protects user data, offer a low-income plan and operate in a to-be-approved service area.

That means the city would allow no more than 2,500 electric scooters on the streets at any one time. In order to receive a permit, each company would need to first pay an application fee of $5,000 and show how they would ensure safe use and proper storage of scooters.

“The SFMTA supports innovative solutions that have the potential to complement our existing transportation network,” the proposal states. “Powered Scooter Share Programs introduce a new transportation option that may be convenient for users making short trips or as a “last mile” solution when paired with public transit. Furthermore, if Powered Scooter Share users replace trips they would otherwise have taken by automobile, they have the potential to reduce traffic congestion, parking demand, and carbon emissions. SFMTA staff have received numerous emails from Powered Scooter Share Program users expressing their support for these programs.”

The SFMTA’s proposal also describes how the city has received numerous complaints from residents pertaining to electric scooters. The complaints cover improper parking that blocks sidewalks and access to doors, as well as someone tripping over a scooter that was left on a sidewalk.

“This is of particular concern to members of the public who travel in a wheelchair or who have visual impairments, and have greater difficulty seeing and avoiding (or moving) Powered Scooter Share Scooters blocking their path,” the proposal states. “The SFMTA has been informed of one instance in which a person with a visual impairment fell after tripping on a scooter, as well as a report of a person breaking a toe after tripping on a Powered Scooter Share scooter.”

As of earlier this week, the San Francisco Department of Public Works had impounded 319 scooters, resulting in impoundment fees of $5,774 for Bird, Lime and Spin. As part of the proposed permitting process, companies would need to pay $10,000 for a “public property repair and maintenance endowment” in the event the city incurs additional costs due to the damaging of public property or needing to store improperly parked scooters.

The SFMTA Board of Directors is holding a public hearing next week to consider implementing this permit process.

Source: Tech Crunch

EcoFlow, a Chinese hardware firm developed by former JDI engineers that sells portable power stations, has pulled in a Series A round of over $4 million ahead of the imminent launch of new products and an international sales expansion.

The Shenzhen-based company has taken an interesting route. Founded in 2016, the startup burst on to the scene when it launched its River product in an Indiegogo campaign that pulled in $1 million. Today, River is available in the U.S. where it is sold via Home Depot, Camping World, Amazon, HSN and the EcoFlow website for $699 upwards.

That’s pretty impressive progress for a young company, and CEO and co-founder Eli Harris told TechCrunch in an interview that relationships with key partners are at the core of that. In particular, EcoFlow has raised strategic investment from supply chain partners rather than traditional VC and that is the case again. This new $4 million came courtesy of battery makers Guangzhou Penghui Energy and SCUD Group, industrial design tooling factory ESID, and supply chain-focused firms Delian Capital and Chunjia Assets.

Names that aren’t known in Silicon Valley, for sure, but the key is what they bring to the table.

“Our investors are almost entirely vertically integrated with every component in our supply chain,” Harris said. “That gives us access to these top-tier manufacturers that no startups could enjoy and help us get direct access to vendors at large companies.”

Aside from reaching quality components and getting a good price, relationships with these component makers help EcoFlow with its cash flow — always a challenge puzzle piece for hardware startups. Harris explained that the relationships allow his company to delay paying for components rather than having to pay upfront — before product is sold and revenue comes in — which optimizes the books and means the capital can be put to work on R&D, sales and marketing and more.

The River itself is touted as industry-leading portable power. Aside from an aesthetic nice design, the li-ion-based device has a total output of 500 watts, weighs just 11 pounds and features two quick-charge USB ports, two USB type C ports, two standard USB ports, two AC outlets, two DC outlets and one 12V car port.

Now EcoFlow is doubling down with plans to launch two new products before the end of this year. Harris isn’t providing specific details right now, but he said the company is looking to take advantage of its promising growth.

“We think we are around 18 months ahead of the market in terms of engineering capabilities. Most experienced battery players are going after electronic vehicles and industrial opportunities, while smaller players have issues getting to manufactures, talent and money to build portable energy solutions,” he said.

While $699 may make the product a luxury for some — despite a $100 discount right now — Harris said that the price is likely to decrease going forward as technology develops.

“Batteries are expensive products but we will see costs come down with the expansion of the EV market, so we’ll be trending in the right direction. But people who understand the tech don’t think it is an expensive product,” Harris explained.

“A lot of the tech we use now will be utilized in future products so that’ll mean lower development costs as we leverage existing IP. We’re also exploring using second life batteries since cells are one of the biggest expenses of the product,” he added.

Working with those battery makers that it also counts as investors could help on that second-life battery push, which could cut the costs to one-fourth of what EcoFlow pays now.

While tactically selected investors are a boon for many reasons, Harris admitted that they do require educating of the investor-investee relationship as it is unconventional in their space. But, he said, increasingly large component and manufacturing firms are keen to do startup investments to help get new ideas, open relationships in the U.S. and explore other new areas of focus.

“A lot of the manufacturing industry players have been stuck in that OEM wheelhouse and there’s more competition now. The previous models of just churning out product might not be sustainable, and margins are thinner,” he said.

Most immediately, EcoFlow is looking to expand sales beyond the U.S and Canada with plans to move into Europe later this year. It also plans to raise a “significant” funding round before 2018 is out as the two new products hit the market.

Source: Tech Crunch

Ahead of Tesla’s annual shareholder meeting in June, stockholder Jing Zhao has submitted a proposal to replace the board’s chairman, Elon Musk, with an independent director. Musk, the chief executive officer at Tesla, has been chairman of the board since 2004.

“Although the current leadership structure, in which the positions of Chairman and CEO are held by one person, could provide an effective leadership for Tesla at the early stage, now in this much more highly competitive and rapidly changing technology industry, it is more and more difficult to oversee Tesla’s business and senior management (especially to minimize any potential conflicts) that may result from combining the positions of CEO and Chairman,” Zhao wrote in his proposal.

Zhao, who holds 12 shares of the company’s common stock, also noted Musk’s positions at SolarCity and SpaceX, and how Musk’s involvement could lead to conflicts down the road. But the likelihood of this happening is slim to none.

And the board has already expressed its opposition, recommending a vote against this proposal. In its statement, the board says Tesla’s success would not have been possible without Musk at the helm of both the board and the company itself.

“In light of the significant future opportunities for growth and the careful execution needed in order for the Company to achieve it, the Board believes that the Company is still best served by Mr. Musk continuing to serve as Chairman,” the board stated. “Moreover, the role of the Lead Independent Director protects the Company against any potential governance issues arising from a non-independent director serving as Chairman. This position is vested with broad authority to lead the actions of the independent directors and communicate regularly with the Chief Executive Officer. Additionally, the Company now has seven independent directors following the addition of two additional independent directors in July 2017.”

I reached out to Tesla for comment and the company directed me to the board’s response. Here it is in full:

The Board believes that the Company’s success to date would not have been possible if the Board was led by another director lacking Elon Musk’s day-to-day exposure to the Company’s business. In light of the significant future opportunities for growth and the careful execution needed in order for the Company to achieve it, the Board believes that the Company is still best served by Mr. Musk continuing to serve as Chairman.

Moreover, the role of the Lead Independent Director protects the Company against any potential governance issues arising from a non-independent director serving as Chairman. This position is vested with broad authority to lead the actions of the independent directors and communicate regularly with the Chief Executive Officer. Additionally, the Company now has seven independent directors following the addition of two additional independent directors in July 2017. The Board believes that the broad authority of the Lead Independent Director and the presence of six other independent directors ensures that the Board acts independently. This current Board structure also is consistent with majority practice at large public companies: according to the 2017 Spencer Stuart Board Index, 72% of companies in the S&P 500 do not have an independent board chairman.

The proponent acknowledges that a combined Chief Executive Officer and Chairman is an effective form of leadership for an early-stage company, until it faces increased competition and rapid technological changes. The Board believes that it is precisely during times when a company must quickly adapt to constant change and outside pressures that Board leadership needs to be lockstep with the Company’s operations. Our achievements to date notwithstanding, the Company is still at a point in its development where we must execute well in order to realize our long-term goals, and separating the roles of Chief Executive Officer and Chairman at this time would not serve the best interests of the Company or its stockholders.

Source: Tech Crunch

Stock market investors greeted payroll software company Ceridian with enthusiasm on its debut Thursday. After pricing above its expected range at $22 per share, the stock shot up 42%, closing above $31 by day’s end.

Ceridian helps clients ranging from BlackRock to Trader Joe’s keep tabs on personnel including payroll, benefits and onboarding. Its clients pay it a fee per employee per month.

“The platform is designed to ease administrative work for both employees and managers, creating opportunities for companies to increase employee engagement,” reads the prospectus.  ADP and Workday are amongst its competitors.

It was a large tech offering, raising $462 million in its IPO . But the Minneapolis-based business is lower-profile in Silicon Valley, partly because it didn’t raise venture capital.

Instead, Ceridian had financial backing from Fidelity and private equity firm, Thomas H. Lee, which owns 62% of the business. Formed in 1992, the company has gone through a few iterations. It was acquired by financial sponsors in 2007, but the acquisition of Dayforce Corporation in 2012 became the backbone of its software business.

David Ossip became CEO after that acquisition. He told TechCrunch that he was optimistic about its “single code-based platform” and that the money raised in the IPO will be used toward “paying off a bunch of debt.”

The company brought in $750.7 million in revenue for 2017, up from $704.2 million in 2016 and $693.9 million in 2015. Losses shrunk from $104.7 million to $10.5 million in that same timeframe.

“We have a history of losses and negative cash flows from operating activities, and we may not be able to attain or to maintain profitability or positive cash flows from operating activities in the future.

 

Goldman Sachs and J.P. Morgan served as lead bankers on the offering. Weil Gotshal and Latham & Watkins served as counsel.

The company listed on the New York Stock Exchange under the ticker “CDAY.”

Source: Tech Crunch

Often when I attend a conference or a networking event I am surprised by how many people operate at the periphery of the tech industry. Social media gurus, SEO “ninjas,” bloggers, etc. It’s a coterie of tech “club promoters.” The hype men of the industry.

“Hack your way to success.” “Meet the right people.” “Become a business superstar.” They’ve found their silver bullet. They boast of building a passive income from a web business, all while traveling the world as the rest of us mortals are slaving away at our 9-5 jobs.

In a world where we are searching for silver bullets, these people seem to have amassed an arsenal of them. Moreover, they’ve found audiences to sell their silver bullets to, en masse.

The most blatant example of this are some of the disciples of the 4-Hour Workweek, by Tim Ferriss. The book itself is not really the issue. Ferriss indeed outlines some interesting tips on managing resources to get the highest ROI on your work. What is objectionable, however, is the hack-your-way-to-success mentality it has spawned in entrepreneurial circles.

It’s a mindset that is antithetical to everything I know about entrepreneurship; a mindset that I see when I hear people talk about having an amazing idea that they want to farm out to a young college student who can code, or outsourcing development of a product to a cheap dev house. It’s a mindset that assumes entrepreneurship is a series of networking events and fundraising meetings, or even some silver-bullet business connection they have, in lieu of a real distribution strategy. It’s taking a passive approach to a very difficult undertaking.

What is missed in all of this is the mindset of craftsmanship; that one’s expertise and deliberate focus on one’s craft is actually the primary driver for success — and not some crapshoot of a series of hacks.

What happens on the periphery  —  whether it be the towel slapping we see on Twitter from tech celebrities or headline gossip out of TechCrunch  —  is not actually meaningful as a foundation of a business or a profession. Neither are the number of coffee meetings you have scheduled or the amount of networking meetings you attend. These things are tertiary at best, and, at worst, just plain-old distractions.

To be successful over the course of a career requires the application and accumulation of expertise. This assumes that for any given undertaking you either provide expertise or you are just a bystander. It’s the experts that are the drivers — an expertise that is gained from a curiosity, and a mindset of treating one’s craft very seriously.

A startup is by nature a crash-course in developing expertise. What makes startups unique is the sheer dearth of resources. This dearth of resources forces founders to rapidly adapt their skills to meet the demands of the project.

“I didn’t know how to do x, so I just had to figure it out.” This is what I regularly hear from successful founders, whereas “I couldn’t find someone to do x, so I had to reconsider whether to pursue it at all” is a common refrain from unsuccessful founders.

If you step up to the challenge, you’ll realize that the startup is nothing more than a teacher. It, in fact, is a great teacher for no other reason than it demands the accumulation of knowledge quickly for the startup to survive.

A technical founder, whose experience may relegate her or him to a specialist role in a large company, for example, has to adapt and take on more expertise in adjacent technical areas. There simply aren’t the human resources to delegate these tasks to another specialist.

This is true for taking on tasks in other domains, whether that be sales, finance, marketing, management or design. You have to take an interest in these domains because there is no one else to fill these roles in your early-stage company.

It’s in exploring these unknown territories and facing the headwind of startup challenges that it becomes clear that the startup is merely a force of catalytic professional and character growth. With actual success of any given venture subject to the whim of outside forces, this growth is the non-monetary dividend that makes the experience priceless.

That is why the passive, 4-Hour Mindset is so self-defeating. To lounge on a beach or travel the world and not actively engage in building your arsenal of expertise is professional malpractice.

It’s also not practical. No serious company has been created passively — the passive mindset that leads people to say “I’ve got a great idea, I’ll hire a team to build it out” or “I have this great connection who will drive sales” while I play armchair visionary simply doesn’t work. Startup graveyards are full of visionaries without expertise or the proper skills to execute, for no other reason than ideas are not self-executing, but are rather made into being by intense engagement by skilled operators.

Most importantly, to think of a business as a series of hacks and transactional relationships, you’ll never amass the expertise that your future self and future businesses need to succeed. Startups fail withstanding founder expertise, of course. It is certainly not sufficient to be an expert. However, expertise does make it possible to traverse the struggles of creating businesses over the course of a career. You’re not simply working on the idea in front of you, you’re building the knowledge to succeed at your next projects, as well.

It is the expertise and the mindset of craftsmanship that allows someone like Elon Musk to jump from project to project and sector to sector with the knowledge of how to execute on the highest-level problems. It’s not simply his ability to find interesting ideas — it’s his command of the domains of the business that allow him to execute the way he does. He is the epitome of an interdisciplinary student of his businesses.

If you are to optimize for anything, optimize for the long-term. Use the challenges of your business today to build mastery in your craft. There is no guarantee that any one venture will succeed, but that mastery will bend luck in your favor over the long course of your career.

Source: Tech Crunch