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SoftBank reportedly plans to lend employees as much as $20 billion to invest in its VC fund

By Darrell Etherington

SoftBank has a plant to loan up to $20 billion to its employees, including CEO Masayoshi Son, for the purposes of having that capital re-invested in SoftBank’s own Vision venture fund, according to a new report from the Wall Street Journal. That’s a highly unusual move that could be risky in terms of how much exposure SoftBank Group has on the whole in terms of its startup bets, but the upside is that it can potentially fill out as much as a fifth of its newly announced second Vision Fund’s total target raise of $108 billion from a highly aligned investor pool.

SoftBank revealed its plans for its second Vision Fund last month, including $38 billion from SoftBank itself, as well as commitments from Apple, Microsoft and more. The company also took a similar approach to its original Vision Fund, WSJ reports, with stakes from employees provided with loans totalling $8 billion of that $100 billion commitment.

The potential pay-off is big, provided the fund has some solid winners that achieve liquidation events that provide big returns that employees can then use to pay off the original loans, walking away with profit. That’s definitely a risk, however, especially in the current global economic client. As WSJ notes, the Uber shares that Vision Fund I acquired are now worth less than what SoftBank originally paid for them according to sources, and SoftBank bet WeWork looks poised to be another company whose IPO might not make that much, if any, money for later stage investors.

How ‘ghost work’ in Silicon Valley pressures the workforce, with Mary Gray

By Arman Tabatabai

The phrase “pull yourself up by your own bootstraps” was originally meant sarcastically.

It’s not actually physically possible to do — especially while wearing Allbirds and having just fallen off a Bird scooter in downtown San Francisco, but I should get to my point.

This week, Ken Cuccinelli, the acting Director of the United States Citizenship and Immigrant Services Office, repeatedly referred to the notion of bootstraps in announcing shifts in immigration policy, even going so far as to change the words to Emma Lazarus’s famous poem “The New Colossus:” no longer “give me your tired, your poor, your huddled masses yearning to breathe free,” but “give me your tired and your poor who can stand on their own two feet, and who will not become a public charge.”

We’ve come to expect “alternative facts” from this administration, but who could have foreseen alternative poems?

Still, the concept of ‘bootstrapping’ is far from limited to the rhetorical territory of the welfare state and social safety net. It’s also a favorite term of art in Silicon Valley tech and venture capital circles: see for example this excellent (and scary) recent piece by my editor Danny Crichton, in which young VC firms attempt to overcome a lack of the startup capital that is essential to their business model by creating, as perhaps an even more essential feature of their model, impossible working conditions for most everyone involved. Often with predictably disastrous results.

It is in this context of unrealistic expectations about people’s labor, that I want to introduce my most recent interviewee in this series of in-depth conversations about ethics and technology.

Mary L. Gray is a Fellow at Harvard University’s Berkman Klein Center for Internet and Society and a Senior Researcher at Microsoft Research. One of the world’s leading experts in the emerging field of ethics in AI, Mary is also an anthropologist who maintains a faculty position at Indiana University. With her co-author Siddharth Suri (a computer scientist), Gray coined the term “ghost work,” as in the title of their extraordinarily important 2019 book, Ghost Work: How to Stop Silicon Valley from Building a New Global Underclass. 

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Image via Mary L. Gray / Ghostwork / Adrianne Mathiowetz Photography

Ghost Work is a name for a rising new category of employment that involves people scheduling, managing, shipping, billing, etc. “through some combination of an application programming interface, APIs, the internet and maybe a sprinkle of artificial intelligence,” Gray told me earlier this summer. But what really distinguishes ghost work (and makes Mary’s scholarship around it so important) is the way it is presented and sold to the end consumer as artificial intelligence and the magic of computation.

In other words, just as we have long enjoyed telling ourselves that it’s possible to hoist ourselves up in life without help from anyone else (I like to think anyone who talks seriously about “bootstrapping” should be legally required to rephrase as “raising oneself from infancy”), we now attempt to convince ourselves and others that it’s possible, at scale, to get computers and robots to do work that only humans can actually do.

Ghost Work’s purpose, as I understand it, is to elevate the value of what the computers are doing (a minority of the work) and make us forget, as much as possible, about the actual messy human beings contributing to the services we use. Well, except for the founders, and maybe the occasional COO.

Facebook now has far more employees than Harvard has students, but many of us still talk about it as if it were little more than Mark Zuckerberg, Cheryl Sandberg, and a bunch of circuit boards.

But if working people are supposed to be ghosts, then when they speak up or otherwise make themselves visible, they are “haunting” us. And maybe it can be haunting to be reminded that you didn’t “bootstrap” yourself to billions or even to hundreds of thousands of dollars of net worth.

Sure, you worked hard. Sure, your circumstances may well have stunk. Most people’s do.

But none of us rise without help, without cooperation, without goodwill, both from those who look and think like us and those who do not. Not to mention dumb luck, even if only our incredible good fortune of being born with a relatively healthy mind and body, in a position to learn and grow, here on this planet, fourteen billion years or so after the Big Bang.

I’ll now turn to the conversation I recently had with Gray, which turned out to be surprisingly more hopeful than perhaps this introduction has made it seem.

Greg Epstein: One of the most central and least understood features of ghost work is the way it revolves around people constantly making themselves available to do it.

Mary Gray: Yes, [What Siddarth Suri and I call ghost work] values having a supply of people available, literally on demand. Their contributions are collective contributions.

It’s not one person you’re hiring to take you to the airport every day, or to confirm the identity of the driver, or to clean that data set. Unless we’re valuing that availability of a person, to participate in the moment of need, it can quickly slip into ghost work conditions.

Energy Vault raises $110 million from SoftBank Vision Fund as energy storage grabs headlines

By Jonathan Shieber

Imagine a moving tower made of huge cement bricks weighing 35 metric tons. The movement of these massive blocks is powered by wind or solar power plants and is a way to store the energy those plants generate. Software controls the movement of the blocks automatically, responding to changes in power availability across an electric grid to charge and discharge the power that’s being generated.

The development of this technology is the culmination of years of work at Idealab, the Pasadena, Calif.-based startup incubator, and Energy Vault, the company it spun out to commercialize the technology, has just raised $110 million from SoftBank Vision Fund to take its next steps in the world.

Energy storage remains one of the largest obstacles to the large-scale rollout of renewable energy technologies on utility grids, but utilities, development agencies and private companies are investing billions to bring new energy storage capabilities to market as the technology to store energy improves.

The investment in Energy Vault is just one indicator of the massive market that investors see coming as power companies spend billions on renewables and storage. As The Wall Street Journal reported over the weekend, ScottishPower, the U.K.-based utility, is committing to spending $7.2 billion on renewable energy, grid upgrades and storage technologies between 2018 and 2022.

Meanwhile, out in the wilds of Utah, the American subsidiary of Japan’s Mitsubishi Hitachi Power Systems is working on a joint venture that would create the world’s largest clean energy storage facility. That 1 gigawatt storage would go a long way toward providing renewable power to the Western U.S. power grid and is going to be based on compressed air energy storage, large flow batteries, solid oxide fuel cells and renewable hydrogen storage.

“For 20 years, we’ve been reducing carbon emissions of the U.S. power grid using natural gas in combination with renewable power to replace retiring coal-fired power generation. In California and other states in the western United States, which will soon have retired all of their coal-fired power generation, we need the next step in decarbonization. Mixing natural gas and storage, and eventually using 100% renewable storage, is that next step,” said Paul Browning, president and CEO of MHPS Americas.

Energy Vault’s technology could also be used in these kinds of remote locations, according to chief executive Robert Piconi.

Energy Vault’s storage technology certainly isn’t going to be ubiquitous in highly populated areas, but the company’s towers of blocks can work well in remote locations and have a lower cost than chemical storage options, Piconi said.

“What you’re seeing there on some of the battery side is the need in the market for a mobile solution that isn’t tied to topography,” Piconi said. “We obviously aren’t putting these systems in urban areas or the middle of cities.”

For areas that need larger-scale storage that’s a bit more flexible there are storage solutions like Tesla’s new Megapack.

The Megapack comes fully assembled — including battery modules, bi-directional inverters, a thermal management system, an AC breaker and controls — and can store up to 3 megawatt-hours of energy with a 1.5 megawatt inverter capacity.

The Energy Vault storage system is made for much, much larger storage capacity. Each tower can store between 20 and 80 megawatt hours at a cost of 6 cents per kilowatt hour (on a levelized cost basis), according to Piconi.

The first facility that Energy Vault is developing is a 35 megawatt-hour system in Northern Italy, and there are other undisclosed contracts with an undisclosed number of customers on four continents, according to the company.

One place where Piconi sees particular applicability for Energy Vault’s technology is around desalination plants in places like sub-Saharan Africa or desert areas.

Backing Energy Vault’s new storage technology are a clutch of investors, including Neotribe Ventures, Cemex Ventures, Idealab and SoftBank.

How tech is transforming the intelligence industry

By Jonathan Shieber
Shay Hershkovitz Contributor
Shay Hershkovitz is a Senior Research Fellow at The Intelligence Methodology Research Center (IMRC).

At a conference on the future challenges of intelligence organizations held in 2018, former Director of National Intelligence Dan Coats argued that he transformation of the American intelligence community must be a revolution rather than an evolution. The community must be innovative and flexible, capable of rapidly adopting innovative technologies wherever they may arise.

Intelligence communities across the Western world are now at a crossroads: The growing proliferation of technologies, including artificial intelligence, Big Data, robotics, the Internet of Things, and blockchain, changes the rules of the game. The proliferation of these technologies – most of which are civilian, could create data breaches and lead to backdoor threats for intelligence agencies. Furthermore, since they are affordable and ubiquitous, they could be used for malicious purposes.

The technological breakthroughs of recent years have led intelligence organizations to challenge the accepted truths that have historically shaped their endeavors. The hierarchical, compartmentalized, industrial structure of these organizations is now changing, revolving primarily around the integration of new technologies with traditional intelligence work and the redefinition of the role of the humans in the intelligence process.

Take for example Open-Source Intelligence (OSINT) – a concept created by the intelligence community to describe information that is unclassified and accessible to the general public. Traditionally, this kind of information was inferior compared to classified information; and as a result, the investments in OSINT technologies were substantially lower compared to other types of technologies and sources. This is changing now; agencies are now realizing that OSINT is easy to acquire and more beneficial, compared to other – more challenging – types of information.

Yet, this understanding trickle down solely, as the use of OSINT by intelligence organizations still involves cumbersome processes, including slow and complex integration of unclassified and classified IT environments. It isn’t surprising therefore that intelligence executives – for example the Head of State Department’s Intelligence Arm or the nominee to become the Director of the National Reconnaissance Office – recently argued that one of the community’s grandest challenges is the quick and efficient integration of OSINT in its operations.

Indeed, technological innovations have always been central to the intelligence profession. But when it came to processing, analyzing, interpreting, and acting on intelligence, however, human ability – with all its limitations – has always been considered unquestionably superior. That the proliferation of data and data sources are necessitating a better system of prioritization and analysis, is not questionable. But who should have a supremacy? Humans or machines?

A man crosses the Central Intelligence Agency (CIA) seal in the lobby of CIA Headquarters in Langley, Virginia, on August 14, 2008. (Photo: SAUL LOEB/AFP/Getty Images)

Big data comes for the spy business

The discourse is tempestuous. Intelligence veterans claim that there is no substitute for human judgment. They argue that artificial intelligence will never be capable of comprehending the full spectrum of considerations in strategic decision-making, and that it cannot evaluate abstract issues in the interpretation of human behavior. Machines can collect data and perhaps identify patterns, but they will never succeed in interpreting reality as do humans. Others also warn of the ethical implications of relying on machines for life-or-death situations, such as a decision to go to war.

In contrast, techno-optimists claim that human superiority, which defined intelligence activities over the last century, is already bowing to technological superiority. While humans are still significant, their role is no longer exclusive, and perhaps not even the most important in the process. How can the average intelligence officer cope with the ceaseless volumes of information that the modern world produces?

From 1995 to 2016, the amount of reading required of an average US intelligence researcher, covering a low-priority country, grew from 20,000 to 200,000 words per day. And that is just the beginning. According to forecasts, the volume of digital data that humanity will produce in 2025 will be ten times greater than is produced today. Some argue this volume can only be processed – and even analyzed – by computers.

Of course, the most ardent advocates for integration of machines into intelligence work are not removing human involvement entirely; even the most skeptical do not doubt the need to integrate artificial intelligence into intelligence activities. The debate centers on the question of who will help whom: machines in aid of humans or humans in aid of machines.

Most insiders agree that the key to moving intelligence communities into the 21st century lies in breaking down inter- and intra-organizational walls, including between
the services within the national security establishment; between the public sector, the private sector, and academia; and between intelligence services of different countries.

It isn’t surprising therefore that the push toward technological innovation is a part of the current intelligence revolution. The national security establishment already recognizes that the private sector and academia are the main drivers of technological innovation.

Alexander Karp, chief executive officer and co-founder of Palantir Technologies Inc., walks the grounds after the morning sessions during the Allen & Co. Media and Technology Conference in Sun Valley, Idaho, U.S., on Thursday, July 7, 2016. Billionaires, chief executive officers, and leaders from the technology, media, and finance industries gather this week at the Idaho mountain resort conference hosted by investment banking firm Allen & Co. Photographer: David Paul Morris/Bloomberg via Getty Images

Private services and national intelligence

In the United States there is dynamic cooperation between these bodies and the security community, including venture capital funds jointly owned by the government and private companies.

Take In-Q-Tel – a venture capital fund established 20 years ago to identify and invest in companies that develop innovative technology which serves the national security of the United States, thus positioning the American intelligence community at the forefront of technological development. The fund is an independent corporation, which is not subordinate to any government agency, but it maintains constant coordination with the CIA, and the US government is the main investor.

It’s most successful endeavor, which has grown to become a multi-billion company though somewhat controversial, is Palantir, a data-integration and knowledge management provider. But there are copious other startups and more established companies, ranging from sophisticated chemical detection (e.g. 908devices), automated language translations (e.g. Lilt), and digital imagery (e.g. Immersive Wisdom) to sensor technology (e.g. Echodyne), predictive analytics (e.g. Tamr) and cyber security (e.g. Interset).

Actually, a significant part of intelligence work is already being done by such companies, small and big. Companies like Hexagon, Nice, Splunk, Cisco and NEC offer intelligence and law enforcement agencies a full suite of platforms and services, including various analytical solutions such as video analytics, identity analytics, and social media analytics . These platforms help agencies to obtain insights and make predictions from the collected and historic data, by using real-time data stream analytics and machine learning. A one-stop-intelligence-shop if you will.

Another example of government and non-government collaboration is the Intelligence Advanced Research Projects Activity (IARPA) – a nonprofit organization which reports to the Director of National Intelligence (DNI). Established in 2006, IARPA finances advanced research relevant to the American intelligence community, with a focus on cooperation between academic institutions and the private sector, in a broad range of technological and social sciences fields. With a relatively small annual operational budget of around $3bn, the fund gives priority to multi-year development projects that meet the concrete needs of the intelligence community. The majority of the studies supported by the fund are unclassified and open to public scrutiny, at least until the stage of implementation by intelligence agencies.

Image courtesy of Bryce Durbin/TechCrunch

Challenging government hegemony in the intelligence industry 

These are all exciting opportunities; however, the future holds several challenges for intelligence agencies:

First, intelligence communities lose their primacy over collecting, processing and disseminating data. Until recently, the organizations Raison D’etre was, first and foremost, to obtain information about the enemy, before said enemy could disguise that information.

Today, however, a lot of information is available, and a plethora of off-the-shelf tools (some of which are free) allow all parties, including individuals, to collect, process and analyze vast amounts of data. Just look at IBM’s i2 Analyst’s Notebook, which gives analysts, for just few thousand dollars, multidimensional visual analysis capabilities so they can quickly uncover hidden connections and patterns in data. Such capacities belonged, just until recently, only to governmental organizations.

A second challenge for intelligence organizations lies in the nature of the information itself and its many different formats, as well as in the collection and processing systems, which are usually separate and lacking standardization. As a result, it is difficult to merge all of the available information into a single product. For this reason, intelligence organizations are developing concepts and structures which emphasize cooperation and decentralization.

The private market offers a variety of tools for merging information; ranging from simple off-the-shelf solutions, to sophisticated tools that enable complex organizational processes. Some of the tools can be purchased and quickly implemented – for example, data and knowledge sharing and management platforms – while others are developed by the organizations themselves to meet their specific needs.

The third challenge relates to the change in the principle of intelligence prioritization. In the past, the collection of information about a given target required a specific decision to do so and dedicated resources to be allocated for that purpose, generally at the expense of allocation of resources to a different target. But in this era of infinite quantities of information, almost unlimited access to information, advanced data storage capabilities and the ability to manipulate data, intelligence organizations can now collect and store information on a massive scale, without the need to immediately process it – rather, it may be processed as required.

This development leads to other challenges, including: the need to pinpoint the relevant information when required; to process the information quickly; to identify patterns and draw conclusions from mountains of data; and to make the knowledge produced accessible to the consumer. It is therefore not surprising that most of the technological advancements in the intelligence field respond to these challenges, bringing together technologies such as big data with artificial intelligence, advanced information storage capabilities and advanced graphical presentation of information, usually in real time.

Lastly, intelligence organizations are built and operate according to concepts developed at the peak of the industrial era, which championed the principle of the assembly line, which are both linear and cyclical. The linear model of ​​the intelligence cycle – collection, processing, research, distribution and feedback from the consumer – has become less relevant. In this new era, the boundaries between the various intelligence functions and between the intelligence organizations and their eco-system are increasingly blurred.

 

The brave new world of intelligence

A new order of intelligence work is therefore required, and therefore intelligence organizations are currently in the midst of a redefinition process. Traditional divisions – e.g. between collection and research; internal security organizations and positive intelligence; and public and private sectors – all become obsolete. This is not another attempt to carry out structural reforms: there is a sense of epistemological rupture which requires a redefinition of the discipline, the relationships that intelligence organizations have with their environments – from decision makers to the general public – and the development of new structures and conceptions.

And of course, there are even wider concerns; legislators need to create a legal framework that accurately incorporates the assessments based on data in a way that takes the predictive aspects of these technologies into account and still protects the privacy and security rights of individual citizens in nation states that have a respect for those concepts.

Despite the recognition of the profound changes taking place around them, today’s intelligence institutions are still built and operate in the spirit of Cold War conceptions. In a sense, intelligence organizations have not internalized the complexity that characterizes the present time – a complexity which requires abandoning the dichotomous (within and outside) perception of the intelligence establishment, as well as the understanding of the intelligence enterprise and government bodies as having a monopoly on knowledge; concepts that have become obsolete in an age of decentralization, networking and increasing prosperity.

Although some doubt the ability of intelligence organizations to transform and adapt themselves to the challenges of the future, there is no doubt that they must do so in this era in which speed and relevance will determine who prevails.

Last chance for early-bird tickets to TC Sessions: Enterprise 2019

By Emma Comeau

It’s down to the wire folks. Today’s the last day you can save $100 on your ticket to TC Sessions: Enterprise 2019, which takes place on September 5 at the Yerba Buena Center in San Francisco. The deadline expires in mere hours — at 11:59 p.m. (PT). Get the best possible price and buy your early-bird ticket right now.

We expect more than 1,000 attendees representing the enterprise software community’s best and brightest. We’re talking founders of companies in every stage and CIOs and systems architects from some of the biggest multinationals. And, of course, managing partners from the most influential venture and corporate investment firms.

Take a look at just some of the companies joining us for TC Sessions: Enterprise: Bain & Company, Box, Dell Technologies Capital, Google, Oracle, SAP and SoftBank. Let the networking begin!

You can expect a full day of main-stage interviews and panel discussions, plus break-out sessions and speaker Q&As. TechCrunch editors will dig into the big issues enterprise software companies face today along with emerging trends and technologies.

Data, for example, is a mighty hot topic, and you’ll hear a lot more about it during a session entitled, Innovation Break: Data – Who Owns It?: Enterprises have historically competed by being closed entities, keeping a closed architecture and innovating internally. When applying this closed approach to the hottest new commodity, data, it simply does not work anymore. But as enterprises, startups and public institutions open themselves up, how open is too open? Hear from leaders who explore data ownership and the questions that need to be answered before the data floodgates are opened. Sponsored by SAP .

If investment is on your mind, don’t miss the Investor Q&A. Some of greatest investors in enterprise will be on hand to answer your burning questions. Want to know more? Check out the full agenda.

Maximize your last day of early-bird buying power and take advantage of the group discount. Buy four or more tickets at once and save 20%. Here’s a bonus. Every ticket you buy to TC Sessions: Enterprise includes a free Expo Only pass to TechCrunch Disrupt SF on October 2-4.

It’s now o’clock startuppers. Your opportunity to save $100 on tickets to TC Sessions: Enterprise ends tonight at precisely 11:59 p.m. (PT). Buy your early-bird tickets now and join us in September!

Is your company interested in sponsoring or exhibiting at TC Sessions: Enterprise? Contact our sponsorship sales team by filling out this form.

Japan’s mobile payments app PayPay reaches 10 million users

By Manish Singh

Paytm, India’s biggest mobile payments firm, now has 10 million customers in Japan, the company said as it pushes to expand its reach in international markets.
Paytm entered Japan last October after forming a joint venture with SoftBank and Yahoo Japan called PayPay.

In addition to 10 million users, PayPay is now supported by 1 million local stores in Japan, Vijay Shekhar Sharma, founder and CEO of Paytm said Thursday. The mobile payment services has clocked 100 million transactions to date, he claimed.

“Thank you India 🇮🇳 for your inspiration and giving us chance to build world class tech,” he posted in a tweet.

More to follow…

Klarna raises $460 million, looks to expand its payments presence in the US

By Darrell Etherington

Swedish payments provider Klarna has announced a new round of equity funding, adding $60 million at a post-money valuation of $5.5 billion, which makes it one of the most highly valued private fintech companies in the world. The new funding will be used to help Klarna continue to grow its presence in the U.S. payments market, the company said in a press release.

Klarna’s European presence is strong, based on the back of its credit card-alternative payment method, which allows customers to pay over time, with the purchase price broken up over four equal installments, but directly from their bank accounts and without incurring any interest. The company also offers pay-now options to provide both retailers and their customers so people can pay more traditionally, too.

In Europe, the mode has been a tremendous success because it’s more in line with how customers in many European markets prefer to pay anyway — avoiding credit and opting for cash and debit. Klarna is also riding the rise of pay-later options that are increasingly popular in U.S. commerce, including offerings like purchase financing from Affirm.

Once reserved for big ticket items, interest-free, installment-based payment programs are increasingly common, and popular, for lower-cost purchase. Affirm, for instance, saw total loan volume cross $2 billion in 2018. Klarna, meanwhile, is currently growing in the U.S. at a rate of around 6 million new customers annually, and it counts more than 3,000 U.S. merchants as customers. Per order value is also growing among customers using Klarna’s four-payment installment option, the company says: Average order value is 68% higher when using this option, with a 44% higher conversion rate (i.e. customers actually following through with the purchase) versus traditional credit card payments.

The new funding for Klarna is led by Dragoneer Investment Group, and includes participation by Commonwealth Bank of Australia, HMI Capital LLC, Merian Chrysalis Investment Company Limited, and more.

Apple rolls out Apple Card Preview to select users

By Matthew Panzarino

Apple Card is getting its first group of public test users today. A limited amount of customers that signed up to be notified about the release of Apple Card are getting the ability to apply for the card in their Wallet app today — as well as the option to order their physical Apple Card.

I’ve been using the card for a few days on my own device, making purchases and payments and playing around with features like Apple Cash rewards and transaction categorization.

A full rollout of Apple Card will come later in August. It requires iOS 12.4 and up to operate.

The application process was simple for me. Portions of the information you need are pre-filled from your existing AppleID account, making for less manual entry. I had an answer in under a minute and was ready to make my first purchase instantly. I used it both online and in person with contactless terminals.

It…works.

The card on the screen has a clever mechanism that gives you a sort of live heat map of your spending categories. The color of the card will shift and blend according to the kinds of things you buy. Spend a lot at restaurants and the card will take on an orange hue. Shop for entertainment related items and the card shifts into a mix of orange and pink. It’s a clever take on the chart based spending category features many other credit cards have built into their websites.

IMG 0676

As many have pointed out, if you’re the kind of person that maximizes your points on current cards towards super specific rewards, like travel miles, the rewards system of Apple Card will not feel all that impressive. This is by design. Apple’s aim on this initial offering was to provide the most representational and easy to understand reward metric, rather than to provide top of category points returns.

But it also means that this may not be the card for you if you’re a big travel points maximizer.

I am a points person, and I carry several cards with differing rewards returns and point values depending on what I’m trying to accomplish. Leveraging these cards has allowed me to secure upgrades to higher classes, first class flights for family members and more due to how much I travel. Getting to this point, though, required a crash course in points values, programs and a tight grip on what cards to use when. Shout out to TPG.

IMG 0677

You will not be able to leverage Apple’s card in this way as a frequent traveler. Instead, Apple decided on a (by comparison) transparent rewards methodology: cash back based on a percentage of your purchases in 3 categories.

Those categories are 3% on all purchases from Apple Stores, the App Store and Apple subscriptions, 2% daily cash on any Apple Pay purchase and 1% with the physical card either online or offline.

The cash rewards are delivered daily, and made available to you very quickly on your Apple Cash card balance. Usually in less than a day. You can then do an instant transfer to your bank for a maximum $10 fee or a 1-3 day transfer for free. This cashout is faster than just about any other cash back program out there and certainly way faster cash reward tallying than anyone else. And Apple makes no effort to funnel you into a pure statement credit version of cash back, like many other cards do. The cash becomes cash pretty instantly.

I could easily see the bar Apple sets here — daily rewards tallies and instant cashouts — becoming industry standard.

The card interface itself is multiples better to use than most card apps, with the new Amex apps probably coming the closest. But even those aren’t system level, requiring no additional usernames and passwords. Apple Card has a distinct advantage there, one that Apple I’m sure hopes to use to the fullest. This is highlighted by the fact that the Apple Card application option is present on the screen any time you add a new credit card or debit card to Apple Pay now. Top of mind.

The spending categories and clear transaction names (with logos in many cases) are a very welcome addition to a credit card interface. The vast majority of time with even the best credit card dashboards you are presented with super crappy list of junk that includes a transaction identifier and a mangled vendor ID that could or could not map directly to the name of the actual merchant you purchased from. It makes deciphering what a specific transaction was for way harder then it should be. Apple Card parses these by vendor name, website name and then whatever it can parse on its own before it defaults back to the raw identifier. Way easier.

IMG 0681

A note, during the setup process the card will ask you if you want it to be your payment default for everything Apple and will automatically attach to your Apple stuff like App Store and subscription payments. So keep an eye out for that and make a call. You will get 3% cash back on any apps you buy, of course, even if they’re third party.

The payments interface is also unique in that Apple is pushing very hard to help you not pay interest. It makes recommendations on how to pay chunks of your balance over time before you incur interest. It places 1-3 markers on the circle-shaped interface that show you how much you need to pay off minimum, minimum with no interest and in full. These markers are personalized a bit and can vary depending on balance, due date and payment history.

I really dug hard on how Apple Card data was being handled the last time I wrote about the service, so you should read that for more info. Goldman Sachs is the partner for the card but it absolutely cannot use the data it gathers on transactions via Apple Card for market maps, as chunks of anonymized data it can offer partners about spending habits or any of the typical marketing uses credit card processors get up to. Mastercard and Goldman Sachs can only use the data for operations uses. Credit reporting, remittance, etc.

And Apple itself neither collects nor views anything about where you shopped, what you bought or how much you paid.

And, as advertised, there are no fees with Apple Card.

One thing I do hope that Apple Card adds is an ability to see and filter out recurring payments and subscriptions. This fits with the fiscal responsibility theme it’s shooting for with the payments interface and it’s sorely lacking in most first party apps.

Some nice design touches beyond the transaction maps, the color grading that mirrors purchases and the far more readable interface is a pleasant metallic sheen that is activated on device tilt.

My physical card isn’t here yet so I can’t really evaluate that part of it. But it is relatively unique in that it is nearly featureless, with no printed number, expiration, signature or security codes on its surface.

The titanium Apple Card comes in a package with an NFC chip that allows you to simply tap your phone to the envelope to begin the process of activating your card. No phone numbers to call and, heavens forbid, no 1-800 stickers on the surface of the card.

I can say that this is probably the first experience most people will ever have with a virtual credit card number. The physical card has a ‘hard coded’ number that cannot be changed. You never need to know it because it’s only used in in-person transactions. If it ever gets compromised, you can request a new card and freeze the old one in the app.

For online purchases that do not support Apple Pay, you have a virtual card number in the Wallet app. You enter that number just as you would any other card number and it’s automatically added to your Safari auto-fill settings when you sign up for Apple Card.

The advantage to this, of course, is that if it’s ever compromised, you can hit a button to request an entirely new number right from within the app. Notably, this is not a ‘per transaction’ number — it’s a semi-permanent virtual number. You keep it around until you have an issue. But when you do have a problem, you’ve got a new number instantly, which is far superior to having to wait for a new physical card just to continue making online purchases.

Some banks like Bank of America and Citibank already offer virtual options for online purchases, and third party services like Privacy.com also exist. But this is the beginning of the mainstreaming of VCCs. And it’s a good thing.

The Federal Reserve announces plans for a real-time payments system that will be available to all banks

By Catherine Shu

The Federal Reserve Bank announced today that it is developing a new service called FedNow that will allow all banks in the United States to offer 24/7 real-time payment services every day of the week. FedNow is expected to be available by 2023 or 2024 and will initially support transfers of up to $25,000.

FedNow will make managing budgets easier for many people and small businesses, but it also puts the Fed at loggerheads with big banks since a federal real-time payments system would compete with the one being developed by the Clearing House, which is owned by some of the world’s largest banks, including Capital One, Citibank, Wells Fargo, Bank of America, JP Morgan Chase and Deutsche Bank.

The Federal Reserve’s board of governors voted 4-1 to approve the proposal for FedNow on August 2, with its of vice chair for supervision, Randal Quarles, casting the dissenting vote.

While Venmo, Zelle and other apps already allow users to transfer money instantly to one another, the Federal Reserve Bank described services like those as a “closed loop” because both parties need to be on the same platform in order to transfer money and they can only be linked to accounts from certain banks. On the other hand, FedNow will be a universal infrastructure, enabling all banks, including smaller ones, to provide real-time payments.

Furthermore, the traditional retail payment methods used for transferring funds not only creates frustrating delays, but can “result in a build-up of financial obligations between banks which, as faster payment usage grows, could present risks to the financial system, especially in times of stress,” the Federal Reserve Board said.

In a FAQ, the Federal Reserve Board explained that “there is a broad consensus within the U.S. payment community and among other stakeholders” that real-time payment services can have a “significant and positive impact on individuals and businesses throughout the country and on the broader U.S. economy.”

For example, real-time payments mean people living on tight budgets will have to rely less on costly check-cashing services and high-interest loans and will incur less overdraft and late fees. Small businesses will also benefit because they can avoid short-term loans with high-interest rates.

The proposal has gained the support of Google’s head of payments, Caesar Sengupta, and Democratic lawmakers including U.S. Senators Elizabeth Warren and Chris Van Hollen and Representatives Ayanna Pressley and Jesús García.

Great to see today’s news on a real-time payments system in the US! We @Google welcome the Fed’s leadership here. This is a good step toward more economic opportunity and financial inclusion for everyone. https://t.co/Slb3jxFeTF

— Caesar Sengupta (@caesars) August 6, 2019

In a statement, Warren, who is campaigning for the Democratic presidential nomination, said “I’m glad the Fed has finally taken action to ensure that people living paycheck-to-paycheck don’t have to wait up to five days for a check to clear so that they can pay their rent, cover child care, or pick up groceries.  Today’s Fed action will also help small businesses by making payments from customers available more quickly. I look forward to working with the Fed to ensure a swift and smooth implementation of this system.”

Comments about FedNow will be accepted for 90 days after the proposal is published in the Federal Register.

Cybereason raises $200 million for its enterprise security platform

By Jonathan Shieber

Cybereason, which uses machine learning to increase the number of endpoints a single analyst can manage across a network of distributed resources, has raised $200 million in new financing from SoftBank Group and its affiliates. 

It’s a sign of the belief that SoftBank has in the technology, since the Japanese investment firm is basically doubling down on commitments it made to the Boston-based company four years ago.

The company first came to our attention five years ago when it raised a $25 million financing from investors including CRV, Spark Capital and Lockheed Martin.

Cybereason’s technology processes and analyzes data in real-time across an organization’s daily operations and relationships. It looks for anomalies in behavior across nodes on networks and uses those anomalies to flag suspicious activity.

The company also provides reporting tools to inform customers of the root cause, the timeline, the person involved in the breach or breaches, what tools they use and what information was being disseminated within and outside of the organization.

For founder Lior Div, Cybereason’s work is the continuation of the six years of training and service he spent working with the Israeli army’s 8200 Unit, the military incubator for half of the security startups pitching their wares today. After his time in the military, Div worked for the Israei government as a private contractor reverse engineering hacking operations.

Over the last two years, Cybereason has expanded the scope of its service to a network that spans 6 million endpoints tracked by 500 employees with offices in Boston, Tel Aviv, Tokyo and London.

“Cybereason’s big data analytics approach to mitigating cyber risk has fueled explosive expansion at the leading edge of the EDR domain, disrupting the EPP market. We are leading the wave, becoming the world’s most reliable and effective endpoint prevention and detection solution because of our technology, our people and our partners,” said Div, in a statement. “We help all security teams prevent more attacks, sooner, in ways that enable understanding and taking decisive action faster.”

The company said it will use the new funding to accelerate its sales and marketing efforts across all geographies and push further ahead with research and development to make more of its security operations autonomous.

“Today, there is a shortage of more than three million level 1-3 analysts,” said Yonatan Striem-Amit, chief technology officer and Co-founder, Cybereason, in a statement. “The new autonomous SOC enables SOC teams of the future to harness technology where manual work is being relied on today and it will elevate  L1 analysts to spend time on higher value tasks and accelerate the advanced analysis L3 analysts do.”

Most recently the company was behind the discovery of Operation SoftCell, the largest nation-state cyber espionage attack on telecommunications companies. 

That attack, which was either conducted by Chinese-backed actors or made to look like it was conducted by Chinese-backed actors, according to Cybereason targeted a select group of users in an effort to acquire cell phone records.

As we wrote at the time:

… hackers have systematically broken in to more than 10 cell networks around the world to date over the past seven years to obtain massive amounts of call records — including times and dates of calls, and their cell-based locations — on at least 20 individuals.

Researchers at Boston-based Cybereason, who discovered the operationand shared their findings with TechCrunch, said the hackers could track the physical location of any customer of the hacked telcos — including spies and politicians — using the call records.

Lior Div, Cybereason’s co-founder and chief executive, told TechCrunch it’s “massive-scale” espionage.

Call detail records — or CDRs — are the crown jewels of any intelligence agency’s collection efforts. These call records are highly detailed metadata logs generated by a phone provider to connect calls and messages from one person to another. Although they don’t include the recordings of calls or the contents of messages, they can offer detailed insight into a person’s life. The National Security Agency  has for years controversially collected the call records of Americans from cell providers like AT&T and Verizon (which owns TechCrunch), despite the questionable legality.

It’s not the first time that Cybereason has uncovered major security threats.

Back when it had just raised capital from CRV and Spark, Cybereason’s chief executive was touting its work with a defense contractor who’d been hacked. Again, the suspected culprit was the Chinese government.

As we reported, during one of the early product demos for a private defense contractor, Cybereason identified a full-blown attack by the Chinese — ten thousand usernames and passwords were leaked, and the attackers had access to nearly half of the organization on a daily basis.

The security breach was too sensitive to be shared with the press, but Div says that the FBI was involved and that the company had no indication that they were being hacked until Cybereason detected it.

The SEC wants disgraced VC Mike Rothenberg to cough up more than $30 million

By Connie Loizos

Nearly three year ago to the day, TechCrunch reported on suspected fraud committed by Mike Rothenberg, a self-described “millennial venture capitalist” who’d made a name for himself not only by eponymously branding his venture firm but for spending lavishly to woo startup founders, including on Napa Valley wine tours, at luxury boxes at Golden State Warriors games and most famously, hosting an annual “founder field day” at the San Francisco Giants’s baseball stadium that later inspired a scene in the HBO show “Silicon Valley.”

The Securities & Exchange Commission had initially reached out to Rothenberg in June of 2016 and by last August, Rothenberg had been formally charged for misappropriating up to $7 million on his investors’ capital. He settled with the agency without making an admission of guilt, and, as part of the settlement, he stepped down from what was left of the firm and agreed to be barred from the brokerage and investment advisory business with a right to reapply after five years.

Now, comes the money part. Following a forensic audit conducted in partnership with the accounting firm Deloitte, the SEC is seeking $18.8 million in disgorgement penalties from Rothenberg, and an additional $9 million civil penalty. The SEC is also asking that Rothenberg be forced to pay pre-judgment interest of $3,663,323.47

According to a new lawsuit filed on Wednesday, the SEC argues that Rothenberg raised a net amount of approximately $45.9 million across six venture funds from at least 200 investors, yet that he took “fees” on their capital that far exceeded what his firm was entitled to during the life of those funds, covering up these “misdeeds” by “modifying accounting entries to make his misappropriation look like investments, entering into undisclosed transactions to paper over diverted money, and shuffling investments from one [f]und to another to conceal prior diversions.”

Ultimately, it says, Deloitte’s examination demonstrated that Rothenberg misappropriated $18.8 million that rightfully belong to Rothenberg Ventures, $3.8 million of which was transferred to Rothenberg personally; $8.8 million of which was used to fund other entities under his control (including a car racing team and a virtual reality studio); and $5.7 of which was used to pay the firm’s expenses “over and above” the management and administrative fees it was entitled to per its management agreements.

We reached out to Rothenberg this morning. He has not yet responded to our request to discuss the development.

It sounds from the filing like he doesn’t have wiggle room to fight it, in any case. According to the SEC’s suit, the “Rothenberg Judgment” agreed upon last summer left monetary relief to be decided by a court’s judgment, one that “provides that Rothenberg accepts the facts alleged in the complaint as true, and does not contest his liability for the violations alleged, for the purposes of this motion and at any hearing on this motion.”

In the meantime, the lawsuit contains interesting nuggets, including an alleged maneuver in which Rothenberg raised $1.3 million to invest in the game engine company Unity but never actually bought shares in the company, instead diverting the capital to other entities. (He eventually paid back $1 million to one investor who repeatedly asked for the money back, but not the other $300,000.)

Rothenberg also sold a stake in the stock-trading firm Robinhood for $5.4 million, says the SEC, but rather than funnel any proceeds to investors, he again directed the money elsewhere, including, apparently, to pay for a luxury suite during Golden State Warriors games for which he shelled out $136,000.

In a move that one Rothenberg investor finds particularly galling, the SEC claims that Rothenberg then turned around and rented that box through an online marketplace that enables people to buy and sell suites at various sports and entertainment venues, receiving at least $56,000 from the practice.

Ostensibly to keep up appearances, Rothenberg also gave $30,000 to the Stanford University Athletics Department (he attended Stanford as an undergrad) and spent thousands of dollars on ballet tickets last year and early this year, says the SEC’s filing.

Regardless of what happens next, one small victor in the SEC’s detailed findings is Silicon Valley Bank, a sprawling enterprise that has aggressively courted the tech industry since its 1983 founding. Last year, at the same time that Rothenberg was agreeing to be barred from the industry, he made a continued show of his innocence by filing suit against SVB to “vindicate the interests of its funds and investors,” the firm said in a statement at the time.

The implication was that SVB was at fault for some of Rothenberg’s woes because it had not properly wired money to the correct accounts, but the SEC says that SVB was defrauded, providing Rothenberg a $4 million line of credit after being presented with fabricated documents.

A loser — other than Rothenberg and the many people who now feel cheated by him — is Harvard Business School. The reason: it used Rothenberg Ventures as a case study for students after Rothenberg graduated from the program. As we’ve reported previously, that case study — funded by HBS before any hint of trouble at the firm had surfaced  — was co-authored by two professors who had a “significant financial interest in Rothenberg Ventures,” as stated prominently in a curriculum footnote.

Presumably, those ties gave confidence to at least some of the investors in Silicon Valley and elsewhere who later provided Rothenberg with money to invest on their behalf.

You can read the SEC’s 20-page motion for disgorgement and penalties below, along with the 48-page report assembled by Deloitte’s forensic accounting partner Gerry Fujimoto.

SEC vs. Mike Rothenberg by TechCrunch on Scribd

Forensic report re Mike Rothenberg/Rothenberg Ventures by TechCrunch on Scribd

Additional reporting by TechCrunch’s Sarah Perez.

Above: Rothenberg Ventures during better days.

Nyca Partners raises $210M to invest in fintech startups

By Kate Clark

Nyca Partners, a firm with investments in financial technology businesses including PayRange, Trellis, Affirm and Acorns, has collected another $210 million for its third venture capital fund.

Located in New York, Nyca’s debut fund closed on $31 million in 2014. Its second fund, a similarly focused fintech effort, raised $125 million in 2017.

Venture capital investment in fintech is poised to reach new heights in 2019, according to PitchBook. So far this year, investors have bet $8.6 billion on U.S.-based fintech upstarts. Last year, investment in the space reached an all-time high of more than $12 billion, with Robinhood, Coinbase and Plaid all raising multi-hundred-million-dollar rounds.

“Much has changed since we launched Nyca,” the firm wrote in a blog post announcing the fund. “In 2014 the fintech landscape was still a relatively small community of investors and several hundred companies, dominated by credit and payments strategies, and incipient crypto enthusiasts. Most regulators around the world were generally uninformed about the dramatic changes taking place in financial technology and with it the potential impact on banking, investing and insurance practices. In mid-2019, we estimate there are fifteen thousand funded fintech start-ups. Some have become very large companies extremely quickly, and entrepreneurs are creating new models and ideas with breathtaking speed.”

Nyca managing partner Hans Morris has a long history in the financial space. Most recently, he was managing director at General Atlantic; before that, he served as president of Visa and spent nearly three decades at Citigroup in roles including chief financial officer and head of finance.

The firm is also led by Ravi Mohan, partner and chief operating officer, who spent 25 years at Citigroup and JP Morgan Chase .

As part of the new fundraise, Nyca has promoted David Sica to partner. Prior to joining Nyca, Sica was a director at Visa.

Nyca announces its new fund just days after Oak HC/FT, another fintech-focused fund, raised $800 million to invest in the space.

Revolut launches stock trading in limited release

By Romain Dillet

Fintech startup Revolut is launching its stock trading feature today. It’s a Robinhood-like feature that lets you buy and sell shares without any commission. For now, the feature is limited to some Revolut customers with a Metal card.

While Robinhood has completely changed the stock trading retail market in the U.S., buying shares hasn’t changed much in Europe. Revolut wants to make it easier to invest on the stock market.

After topping up your Revolut account, you can buy and hold shares directly from the Revolut app. For now, the feature is limited to 300 U.S.-listed stocks on NASDAQ and NYSE. The company says that it plans to expand to U.K. and European stocks as well as Exchange Traded Funds.

There’s no minimum limit on transactions, which means that you can buy fractional shares for $1 for instance. You can see real-time prices in the Revolut app.

When it comes to fees, Revolut doesn’t charge any fee indeed, but with some caveats. The feature is currently limited to Revolut Metal customers for now. It currently costs £12.99 per month or €13.99 per month to become a Metal customer.

As long as you make less than 100 trades per month, you don’t pay anything other than your monthly subscription. Any trade above that limit costs £1 per trade and an annual custody fee of 0.01%.

Eventually, Revolut will roll out stock trading to other subscription tiers. Revolut Premium will get 8 commission-free trades per month and basic Revolut users will get 3 commission-free trades per month.

Behind the scene, Revolut has partnered with DriveWealth for this feature. This is a nice addition for existing Revolut users. You don’t have to open a separate account with another company and Metal customers in particular get a lot of free trades.

Visa pitches a program offering fintechs faster market access through an ecosystem of partners

By Jonathan Shieber

Visa is pitching a new way for startups in the fintech space to get to market faster by using its rails and a group of pre-approved partners.

The Fast Track program, a variant of an investment commitment and ecosystem of services the company has already launched in other geographies around the world, comes to the U.S. without an investment commitment, but with a pre-defined list of partners that will help new financial services startups launch more quickly, the company said.

Chiefly, the process makes it easier to integrate with Visa . It’s an attempt to put the payment processor’s network, VisaNet, at the center of a vast array of services ranging from payroll to business to business payments and online banking, online lending and even digital wallets.

“There’s about $17 trillion in cash and checks today that hasn’t gone digital and $20 trillion in business to business that’s happening over wires and check… those are all opportunities for Visa,” says Terry Angelos, a former fintech entrepreneur who now serves as a senior vice president at Visa and the company’s global head of fintech. 

“To some degree Visa has been the original fintech,” says Angelos. “Today, you would  pitch it as a SaaS platform for payment and commerce.”

For its new service, Visa has come up with a list of partners to provide the array of compliance services and infrastructure that a startup in the financial services space would need to get up and running quickly.

“These are vetted partners that are providing a fast track process and a concierge service so we can track the companies in the program,” says Angelos. 

What the program won’t include, Angelos said, is a commitment to invest in startups in the U.S. that would be equivalent to the $100 million investment fund the company has carved out for European investments as part of the fast track program there.

“We have investments that are happening that are in parallel,” Angelos says. “We don’t have a separate fund.”

Companies that are partnering with Visa on this program represent a different service offering for the ecosystem, including: Alloy, BBVA Open Platform, Cross River Bank, Galileo, Green Dot, Marqeta, Netspend (TSYS’ Consumer Segment), Stripe, TabaPay, TSYS, Q2 and Very Good Security. The company said its debit processing service will support some of the partners’ participation in the program.   

Last year, fintech companies raised $39.5 billion from investors globally, up 120% from the previous year, according to data provided by Visa. And as part of their outreach to this startup community, Visa is pre-qualifying for its program portfolio companies from investment firms like Andreessen Horowitz, Nyca Partners, Ribbit Capital and Trinity Ventures

“We see many entrepreneurs with big ideas that can add real value and solve problems in the global payments system; the problem can be the difficulty of distribution and connectivity to the essential infrastructure,” said Hans Morris, managing partner, Nyca Ventures, in a statement. “Fast Track solves for this, enabling some of our best companies to start working with Visa right away.”

Many of the firms’ portfolio companies are already partnering with Visa in some capacity. The company has already announced agreements (of an undefined and undisclosed nature) with startups like Currencycloud, Flutterwave, Ininal, N26, PayActiv, Rappi, Razer and Remitly

Visa has also invested in startups. In 2019 alone, the company added Anchorage, Bankable, Branch, Finix, Minna Technologies and Paymate to its stable of startups. 

The main thing that startups would get from the Visa Fast Track program is mentorship and access to the company’s experts in payments and fintech. And its effort to tie itself more closely to a financial services ecosystem comes as Visa finds itself under threat from some of the very startup technologies that the company may look to co-opt.

Cryptocurrencies and blockchain technologies offer the possibility of alternative payment mechanisms that don’t rely on the traditional money transfer systems developed decades ago by companies like Visa and Mastercard, and can offer potentially faster transaction times and charge lower fees.

To combat that threat, Visa has been aligning with some of the largest technology companies to head off challengers at the pass. The company (along with its largest rival, Mastercard) is collaborating with Facebook on its controversial proposed cryptocurrency, Libra, in an effort to head off any challengers with a new transaction system of its own.

Angelos insists that there’s nothing nefarious in Visa’s efforts to engage with startups, and says that the company is merely another actor supporting the movement of trillions of dollars into a digital economy.

“If you look at what’s happening in the fintech ecosystem… Fintechs are reducing friction and adding consumers that are underbanked,” Angelos says. “They can work on any payment rails they choose. [But] all those fintechs… are choosing to build at least part of their products on top of the rails that we built… if you look around the world, fintechs are probably leveraging the existing payment  rails to provide a lot of innovation and remove friction.”

Former Cambridge Analytica director, Brittany Kaiser, dumps more evidence of Brexit’s democratic trainwreck

By Natasha Lomas

A UK parliamentary committee has published new evidence fleshing out how membership data was passed from UKIP, a pro-Brexit political party, to Leave.EU, a Brexit supporting campaign active in the 2016 EU referendum — via the disgraced and now defunct data company, Cambridge Analytica.

In evidence sessions last year, during the DCMS committee’s enquiry into online disinformation, it was told by both the former CEO of Cambridge Analytica, and the main financial backer of the Leave.EU campaign, the businessman Arron Banks, that Cambridge Analytica did no work for the Leave.EU campaign.

Documents published today by the committee clearly contradict that narrative — revealing internal correspondence about the use of a UKIP dataset to create voter profiles to carry out “national microtargeting” for Leave.EU.

They also show CA staff raising concerns about the legality of the plan to model UKIP data to enable Leave.EU to identify and target receptive voters with pro-Brexit messaging.

The UK’s 2016 in-out EU referendum saw the voting public narrowing voting to leave — by 52:48.

New evidence from Brittany Kaiser

The evidence, which includes emails between key Cambridge Analytica, employees of Leave.EU and UKIP, has been submitted to the DCMS committee by Brittany Kaiser — a former director of CA (who you may just have seen occupying a central role in Netflix’s The Great Hack documentary, which digs into links between the Trump campaign and the Brexit campaign).

We have just published new evidence from Brittany Kaiser relating to Cambridge Analytica, UKIP and Leave EU – you can read them all here @CommonsCMS https://t.co/2LjfJiozO6 #TheGreatHack

— Damian Collins (@DamianCollins) July 30, 2019

“As you can see with the evidence… chargeable work was completed for UKIP and Leave.EU, and I have strong reasons to believe that those datasets and analysed data processed by Cambridge Analytica as part of a Phase 1 payable work engagement… were later used by the Leave.EU campaign without Cambridge Analytica’s further assistance,” writes Kaiser in a covering letter to committee chair, Damian Collins, summarizing the submissions.

Kaiser gave oral evidence to the committee at a public hearing in April last year.

At the time she said CA had been undertaking parallel pitches for Leave.EU and UKIP — as well as for two insurance brands owned by Banks — and had used membership survey data provided by UKIP to built a model for pro-brexit voter personality types, with the intention of it being used “to benefit Leave.EU”.

“We never had a contract with Leave.EU. The contract was with the UK Independence party for the analysis of this data, but it was meant to benefit Leave.EU,” she said then.

The new emails submitted by Kaiser back up her earlier evidence. They also show there was discussion of drawing up a contract between CA, UKIP and Leave.EU in the fall before the referendum vote.

In one email — dated November 10, 2015 — CA’s COO & CFO, Julian Wheatland, writes that: “I had a call with [Leave.EU’s] Andy Wigmore today (Arron’s right hand man) and he confirmed that, even though we haven’t got the contract with the Leave written up, it’s all under control and it will happen just as soon as [UKIP-linked lawyer] Matthew Richardson has finished working out the correct contract structure between UKIP, CA and Leave.”

Another item Kaiser has submitted to the committee is a separate November email from Wigmore, inviting press to a briefing by Leave.EU — entitled “how to win the EU referendum” — an event at which Kaiser gave a pitch on CA’s work. In this email Wigmore describes the firm as “the worlds leading target voter messaging campaigners”.

In another document, CA’s Wheatland is shown in an email thread ahead of that presentation telling Wigmore and Richardson “we need to agree the line in the presentations next week with regards the origin of the data we have analysed”.

“We have generated some interesting findings that we can share in the presentation, but we are certain to be asked where the data came from. Can we declare that we have analysed UKIP membership and survey data?” he then asks.

UKIP’s Richardson replies with a negative, saying: “I would rather we didn’t, to be honest” — adding that he has a meeting with Wigmore to discuss “all of this”, and ending with: “We will have a plan by the end of that lunch, I think”.

In another email, dated November 10, sent to multiple recipients ahead of the presentation, Wheatland writes: “We need to start preparing Brittany’s presentation, which will involve working with some of the insights David [Wilkinson, CA’s chief data scientist] has been able to glean from the UKIP membership data.”

He also asks Wilkinson if he can start to “share insights from the UKIP data” — as well as asking “when are we getting the rest of the data?”. (In a later email, dated November 16, Wilkinson shares plots of modelled data with Kaiser — apparently showing the UKIP data now segmented into four blocks of brexit supporters, which have been named: ‘Eager activist’; ‘Young reformer’; ‘Disaffected Tories’; and ‘Left behinds’.)

In the same email Wheatland instructs Jordanna Zetter, an employee of CA’s parent company SCL, to brief Kaiser on “how to field a variety of questions about CA and our methodology, but also SCL. Rest of the world, SCL Defence etc” — asking her to liaise with other key SCL/CA staff to “produce some ‘line to take’ notes”.

Another document in the bundle appears to show Kaiser’s talking points for the briefing. These make no mention of CA’s intention to carry out “national microtargeting” for Leave.EU — merely saying it will conduct “message testing and audience segmentation”.

“We will be working with the campaign’s pollsters and other vendors to compile all the data we have available to us,” is another of the bland talking points Kaiser was instructed to feed to the press.

“Our team of data scientists will conduct deep-dive analysis that will enable us to understand the electorate better than the rival campaigns,” is one more unenlightening line intended for public consumption.

But while CA was preparing to present the UK media with a sanitized false narrative to gloss over the individual voter targeting work it actually intended to carry out for Leave.EU, behind the scenes concerns were being raised about how “national microtargeting” would conflict with UK data protection law.

Another email thread, started November 19, highlights internal discussion about the legality of the plan — with Wheatland sharing “written advice from Queen’s Counsel on the question of how we can legally process data in the UK, specifically UKIP’s data for Leave.eu and also more generally”. (Although Kaiser has not shared the legal advice itself.)

Wilkinson replies to this email with what he couches as “some concerns” regarding shortfalls in the advice, before going into detail on how CA is intending to further process the modelled UKIP data in order to individually microtarget brexit voters — which he suggests would not be legal under UK data protection law “as the identification of these people would constitute personal data”.

He writes:

I have some concerns about what this document says is our “output” – points 22 to 24. Whilst it includes what we have already done on their data (clustering and initial profiling of their members, and providing this to them as summary information), it does not say anything about using the models of the clusters that we create to extrapolate to new individuals and infer their profile. In fact it says that our output does not identify individuals. Thus it says nothing about our microtargeting approach typical in the US, which I believe was something that we wanted to do with leave eu data to identify how each their supporters should be contacted according to their inferred profile.

For example, we wouldn’t be able to show which members are likely to belong to group A and thus should be messaged in this particular way – as the identification of these people would constitute personal data. We could only say “group A typically looks like this summary profile”.

Wilkinson ends by asking for clarification ahead of a looming meeting with Leave.EU, saying: “It would be really useful to have this clarified early on tomorrow, because I was under the impression it would be a large part of our product offering to our UK clients.” [emphasis ours]

Wheatland follows up with a one line email, asking Richardson to “comment on David’s concern” — who then chips into the discussion, saying there’s “some confusion at our end about where this data is coming from and going to”.

He goes on to summarize the “premises” of the advice he says UKIP was given regarding sharing the data with CA (and afterwards the modelled data with Leave.EU, as he implies is the plan) — writing that his understanding is that CA will return: “Analysed Data to UKIP”, and then: “As the Analysed Dataset contains no personal data UKIP are free to give that Analysed Dataset to anyone else to do with what they wish. UKIP will give the Analysed Dataset to Leave.EU”.

“Could you please confirm that the above is correct?” Richardson goes on. “Do I also understand correctly that CA then intend to use the Analysed Dataset and overlay it on Leave.EU’s legitimately acquired data to infer (interpolate) profiles for each of their supporters so as to better control the messaging that leave.eu sends out to those supporters?

“Is it also correct that CA then intend to use the Analysed Dataset and overlay it on publicly available data to infer (interpolate) which members of the public are most likely to become Leave.EU supporters and what messages would encourage them to do so?

“If these understandings are not correct please let me know and I will give you a call to discuss this.”

About half an hour later another SCL Group employee, Peregrine Willoughby-Brown, joins the discussion to back up Wilkinson’s legal concerns.

“The [Queen’s Counsel] opinion only seems to be an analysis of the legality of the work we have already done for UKIP, rather than any judgement on whether or not we can do microtargeting. As such, whilst it is helpful to know that we haven’t already broken the law, it doesn’t offer clear guidance on how we can proceed with reference to a larger scope of work,” she writes without apparent alarm at the possibility that the entire campaign plan might be illegal under UK privacy law.

“I haven’t read it in sufficient depth to know whether or not it offers indirect insight into how we could proceed with national microtargeting, which it may do,” she adds — ending by saying she and a colleague will discuss it further “later today”.

It’s not clear whether concerns about the legality of the microtargeting plan derailed the signing of any formal contract between Leave.EU and CA — even though the documents imply data was shared, even if only during the scoping stage of the work.

“The fact remains that chargeable work was done by Cambridge Analytica, at the direction of Leave.EU and UKIP executives, despite a contract never being signed,” writes Kaiser in her cover letter to the committee on this. “Despite having no signed contract, the invoice was still paid, not to Cambridge Analytica but instead paid by Arron Banks to UKIP directly. This payment was then not passed onto Cambridge Analytica for the work completed, as an internal decision in UKIP, as their party was not the beneficiary of the work, but Leave.EU was.”

Kaiser has also shared a presentation of the UKIP survey data, which bears the names of three academics: Harold Clarke, University of Texas at Dallas & University of Essex; Matthew Goodwin, University of Kent; and Paul Whiteley, University of Essex, which details results from the online portion of the membership survey — aka the core dataset CA modelled for targeting Brexit voters with the intention of helping the Leave.EU campaign.

(At a glance, this survey suggests there’s an interesting analysis waiting to be done of the choice of target demographics for the current blitz of campaign message testing ads being run on Facebook by the new (pro-brexit) UK prime minister Boris Johnson and the core UKIP demographic, as revealed by the survey data… )

[gallery ids="1862050,1862051,1862052"]

Call for Leave.EU probe to be reopened

Ian Lucas, MP, a member of the DCMS committee has called for the UK’s Electoral Commission to re-open its investigation into Leave.EU in view of “additional evidence” from Kaiser.

The EC should re-open their investigation into LeaveEU in view of the additional evidence from Brittany Kaiser via @CommonsCMS

— Ian Lucas MP (@IanCLucas) July 30, 2019

We reached out to the Electoral Commission to ask if it will be revisiting the matter.

An Electoral Commission spokesperson told us: “We are considering this new information in relation to our role regulating campaigner activity at the EU referendum. This relates to the 10 week period leading up to the referendum and to campaigning activity specifically aimed at persuading people to vote for a particular outcome.

“Last July we did impose significant penalties on Leave.EU for committing multiple offences under electoral law at the EU Referendum, including for submitting an incomplete spending return.”

Last year the Electoral Commission also found that the official Vote Leave Brexit campaign broke the law by breaching election campaign spending limits. It channelled money to a Canadian data firm linked to Cambridge Analytica to target political ads on Facebook’s platform, via undeclared joint working with a youth-focused Brexit campaign, BeLeave.

Six months ago the UK’s data watchdog also issued fines against Leave.EU and Banks’ insurance company, Eldon Insurance — having found what it dubbed as “serious” breaches of electronic marketing laws, including the campaign using insurance customers’ details to unlawfully to send almost 300,000 political marketing messages.

A spokeswoman for the ICO told us it does not have a statement on Kaiser’s latest evidence but added that its enforcement team “will be reviewing the documents released by DCMS”.

The regulator has been running a wider enquiry into use of personal data for social media political campaigning. And last year the information commissioner called for an ethical pause on its use — warning that trust in democracy risked being undermined.

And while Facebook has since applied a thin film of ‘political ads’ transparency to its platform (which researches continue to warn is not nearly transparent enough to quantify political use of its ads platform), UK election campaign laws have yet to be updated to take account of the digital firehoses now (il)liberally shaping political debate and public opinion at scale.

It’s now more than three years since the UK’s shock vote to leave the European Union — a vote that has so far delivered three years of divisive political chaos, despatching two prime ministers and derailing politics and policymaking as usual.

Leave.EU

Many questions remain over a referendum that continues to be dogged by scandals — from breaches of campaign spending; to breaches of data protection and privacy law; and indeed the use of unregulated social media — principally Facebook’s ad platform — as the willing conduit for distributing racist dogwhistle attack ads and political misinformation to whip up anti-EU sentiment among UK voters.

Dark money, dark ads — and the importing of US style campaign tactics into UK, circumventing election and data protection laws by the digital platform backdoor.

This is why the DCMS committee’s preliminary report last year called on the government to take “urgent action” to “build resilience against misinformation and disinformation into our democratic system”.

The very same minority government, struggling to hold itself together in the face of Brexit chaos, failed to respond to the committee’s concerns — and has now been replaced by a cadre of the most militant Brexit backers, who are applying their hands to the cheap and plentiful digital campaign levers.

The UK’s new prime minister, Boris Johnson, is demonstrably doubling down on political microtargeting: Appointing no less than Dominic Cummings, the campaign director of the official Vote Leave campaign, as a special advisor.

At the same time Johnson’s team is firing out a flotilla of Facebook ads — including ads that appear intended to gather voter sentiment for the purpose of crafting individually targeted political messages for any future election campaign.

So it’s full steam ahead with the Facebook ads…

Boris Facebook ads

Yet this ‘democratic reset’ is laid right atop the Brexit trainwreck. It’s coupled to it, in fact.

Cummings worked for the self same Vote Leave campaign that the Electoral Commission found illegally funnelled money — via Cambridge Analytica-linked Canadian data firm AggregateIQ — into a blitz of microtargeted Facebook ads intended to sway voter opinion.

Vote Leave also faced questions over its use of Facebook-run football competition promising a £50M prize-pot to fans in exchange for handing over a bunch of personal data ahead of the referendum, including how they planned to vote. Another data grab wrapped in fancy dress — much like GSR’s thisisyourlife quiz app that provided the foundational dataset for CA’s psychological voter profiling work on the Trump campaign.

The elevating of Cummings to be special adviser to the UK PM represents the polar opposite of an ‘ethical pause’ in political microtargeting.

Make no mistake, this is the Brexit campaign playbook — back in operation, now with full-bore pedal to the metal. (With his hands now on the public purse, Johnson has pledged to spend £100M on marketing to sell a ‘no deal Brexit’ to the UK public.)

Kaiser’s latest evidence may not contain a smoking bomb big enough to blast the issue of data-driven and tech giant-enabled voter manipulation into a mainstream consciousness, where it might have the chance to reset the political conscience of a nation — but it puts more flesh on the bones of how the self-styled ‘bad boys of Brexit’ pulled off their shock win.

In The Great Hack the Brexit campaign is couched as the ‘petri dish’ for the data-fuelled targeting deployed by the firm in the 2016 US presidential election — which delivered a similarly shock victory for Trump.

If that’s so, these latest pieces of evidence imply a suggestively close link between CA’s experimental modelling of UKIP supporter data, as it shifted gears to apply its dark arts closer to home than usual, and the models it subsequently built off of US citizens’ data sucked out of Facebook. And that in turn goes some way to explaining the cosiness between Trump and UKIP founder Nigel Farage…

🇬🇧So Donald Trump wants Nigel Farage on any trade negotiating team?🇪🇺

Maybe this is how #Brexit will end?
Not with a bang, not with a cliff edge, but with a great Tory shriek of revulsion?#nodealbrexit #ridge #marr #bbcbh #farage pic.twitter.com/iCn6hd9eka

— carol hedges (@carolJhedges) July 28, 2019

 

Kaiser ends her letter to DCMS writing: “Given the enormity of the implications of earlier inaccurate conclusions by different investigations, I would hope that Parliament reconsiders the evidence submitted here in good faith. I hope that these ten documents are helpful to your research and furthering the transparency and truth that your investigations are seeking, and that the people of the UK and EU deserve”.

Banks and Wigmore have responded to the publication in their usual style, with a pair of dismissive tweets — questioning Kaiser’s motives for wanting the data to be published and throwing shade on how the evidence was obtained in the first place.

You mean the professional whistleblower who’s making a career of making stuff up with a book deal and failed Netflix film! The witch-hunt so last season !! https://t.co/f2rsPfoDdT

— Arron Banks (@Arron_banks) July 30, 2019

Desperate stuff @DamianCollins lol 😂 know one cares – oh and are those emails obtained illegally – computer misuse act – tut tut stolen data, oh the irony https://t.co/BNWxUJmwoQ

— Andy Wigmore (@andywigmore) July 30, 2019

Real estate platform Compass raises another $370M on a $6.4B valuation en route to an IPO

By Ingrid Lunden

The real estate market regularly goes through ups and downs, but today comes big news for a startup in the space that has built a platform that it believes can help all players in it — buyers, sellers, and those who help with the buying and selling — no matter what stage of the cycle we happen to be in.

Compass — a company that has built a three-sided marketplace for the industry, along with a wide set of algorithms to help make it work — has raised a $370 million round of funding, money that it plans to use to continue expanding to more markets, as well as for more tech and product development. Sources tell me that it’s also now eyeing up an IPO, likely sometime in the next 24 months.

“From day one we knew, when we had just a small amount of people at the company, we had a very clear focus,” co-founder and chairman Ori Allon said in an interview. “We wanted to bring more tech and data and transparency to real estate, and i think it’s paid off.”

Based out of New York, Compass earlier this year established an engineering hub in Seattle run by the former CTO of AI for Microsoft, Joseph Sirosh . It’s continuing to hire there and elsewhere (alongside also making acqui-hires for talent).

The Series G funding — which brings the total raised by Compass to $1.5 billion — is coming in at a $6.4 billion valuation, a huge uptick for the company compared to its $4.4 billion valuation less than a year ago. Part of the reason for that has been the company’s massive growth: in the last quarter, its revenues were up 250% compared to Q2 2018.

The investor list for this latest round includes previous investors Canada Pension Plan Investment Board (CPPIB), Dragoneer Investment Group, and SoftBank Vision Fund. Other backers since it was first founded in 2012 have included Founders Fund, the Qatar Investment Authority (a construction and real estate giant), Fidelity and others.

Compass

The company was co-founded by Ori Allon and Robert Reffkin — respectively the chairman and CEO, pictured here on the right and left of COO Maelle Gavet. The company first caught my eye because of Allon. An engineer by training, he has a string of notable prior successes in the field of search to his name (his two previous startups were sold to Google and Twitter, which used them as the basis of large areas of their search and discovery algorithms).

In this latest entrepreneurial foray, Allon’s vision of using machine learning algorithms to improve decisions that humans make has been tailored to the specific vertical of real estate.

The platform is not a mere marketplace to connect buyers to real estate agents to sellers, but an engine that helps figure out pricing, timing for sales, how to stage homes (and more recently how to improve them with actual building work by way of Compass Concierge) to get the best prices and best sales.

It also helps real estate agents manage their time and their customers (by way of an acquisition it made of CRM platform Contactually earlier this year). Starting with high-end homes for private individuals, Compass has expanded to commercial real estate and a much wider set of price brackets.

There is a wide opportunity for vertical search businesses at the moment. People want more accurate and targeted information to make purchasing decisions; and companies that are in the business of providing information (and selling things) are keen for better platforms to bring in online visitors and increase their conversions.

I understand that this has led to Compass getting approached for acquisitions, but that is not in the blueprint for this real estate startup: the longer term plan will be to take the company public, likely in the next 24 months.

“It has been incredible to see the growth of our Product & Engineering team, including the addition of Joseph Sirosh as CTO,” said Compass Founder & Executive Chairman Ori Allon, in a statement. “We are excited to partner with new investors, and deepen our relationship with our existing partners to accelerate our growth and further our technology advancements.”

Mobile messaging financial advisory service Stackin’ adds banking features and raises cash

By Jonathan Shieber

When Stackin’ initially pitched itself as part of Techstars Los Angeles accelerator program two years ago, the company was a video platform for financial advice targeting a millennial audience too savvy for traditional advisory services.

Now, nearly two years later, the company has pivoted from video to text-based financial advice for its millennial audience and is offering a new spin on lead generation for digital banks.

The company has launched a new, no-fee, checking and savings account feature in partnership with Radius Bank, which offers users a 1% annual percentage yield on deposits.

And Stackin has raised $4 million in new cash from Experian Ventures, Dig Ventures and Cherry Tree Investments, along with supplemental commitments from new and previous investors including Social Leverage, Wavemaker Partners, and Mucker Capital.

“Stackin’ has a unique and highly effective approach to connect and communicate with an entire generation of younger consumers around finance,” said Ty Taylor, Group President of Global Consumer Services at Experian, in a statement.

Founded two years ago by Scott Grimes, the former founder of Uproxx Media, and Kyle Arbaugh, who served as a senior vice president at Uproxx, Stackin initially billed itself as the Uproxx of personal finance.

It turns out that consumers didn’t want another video platform.

“Stackin’ is fundamentally changing the shape and context of what a financial relationship means by creating a fun, inclusive and judgement free environment that empowers our users to learn and take action through messaging,” said Scott Grimes, CEO and co-founder of Stackin’, in a statement. “This funding allows us to build out new features around banking and investing that will enhance the relationship with our customers.”

Later this fall the company said it would launch a new investment feature that will encourage Stackin users to participate in the stock market. It’s likely that this feature will look something like the Acorns model, which encourages users to invest in diversified financial vehicles to get them acquainted with the stock market before enabling individual trades on stocks.

According to Grimes, the company made the switch from video to text in March 2018 and built a custom messaging platform on Twilio to service the company’s 500,000 users.

“In a short time, we have built a large customer base with a demographic that is typically hard to reach. Having financial institutions like Experian come on board as an investor is a testament that this model is working,” Grimes wrote in an email.

SoftBank pumps $2B into Indonesia through Grab investment, putting it head to head with Gojek

By Ingrid Lunden

Grab — the on-demand transportation app worth $14 billion that is the Uber of Southeast Asia — today announced how it would be using some of the $7 billion or so that it has raised to date: $2 billion provided by SoftBank is being earmarked Grab’s operations in Indonesia — the biggest economy in Southeast Asia — over the next five years, to help it go head-to-head with local rival Gojek.

Specifically, Grab said it and SoftBank met with Indonesian government officials and have agreed to use the money to help modernise the country’s transportation infrastructure and economy with the development of an electronic vehicle “ecosystem”, new geo-mapping solutions, and the establishment of a second headquarters for Grab in Jakarta focused on R&D for Indonesia and the wider region, to sit alongside its existing HQ in Singapore.

Grab has confirmed that this investment news does not affect the company’s valuation as it’s not fresh funding — although it looks like it might lead to another, new SoftBank injection in Grab, too.

“I’d like to invest more… We would invest (in) Grab more, and also encourage to invest more in other companies,” SoftBank CEO Masayoshi Son said in a press conference earlier today. “We will create a second headquarters of Grab in Indonesia, and become 5th unicorn and also invest $2b through Grab. On top of that, we will invest more.”

Grab last raised money just four weeks ago, $300 million from Invesco as part of a larger, ongoing Series H that it wants to use in part for acquisitions. That round is already at around $4.5 billion, with SoftBank having already put in just under $1.5 billion. This $2 billion is on top of that previous round, the company said today.

The company’s last reported valuation from a couple of months ago was around $14 billion, a figure that we have been able to confirm remains the same today.

“With our presence in 224 cities, Indonesia is our largest market and we are committed to long-term sustainable development of the country,” said Anthony Tan, CEO of Grab, in a statement. “We are delighted to facilitate this SoftBank investment, as we believe by investing in digitizing critical services and infrastructure, we hope to accelerate Indonesia’s ambition to become the largest digital economy in the region and improve the livelihoods of millions in the country.” Indonesia accounts for the lion’s share of Grab’s business in terms of total footprint: its in 338 countries overall, meaning this country accounts for two-thirds of the whole list.

The news puts Grab head to head with another big on-demand transportation startup Gojek: the two were already rivals in the region, but GoJek is based out of Jakarta and has been the dominant player in that specific market up to now.

Indeed, the deal is notable not just for the amount, but for how it casts both Grab and SoftBank as allies of the government, not just accepted as businesses but endorsed as key players in helping improve the Indonesian economy and how the country is able to deliver critical services like healthcare and transportation, as well as give more services to drive the growth of “micro-entrepreneurs” by way of Grab-Kudo, the payments startup in the country that Grab acquired in 2017 for less than $100 million.

Given the track record that companies like Uber have had in locking horns with regulators, this puts Grab immediately into a strong position in terms of introducing and running with new services in the future. Its restaurant delivery business, GrabFood, is already the largest in the region, it claimed today.

Grab said the financial commitment was the result of a meeting between Indonesia’s President Joko Widodo, Masayoshi Son, Chairman & CEO of SoftBank Group, Anthony Tan, CEO of Grab and Ridzki Kramadibrata, President of Grab Indonesia, at the Merdeka Palace in Jakarta.

“Indonesia’s technology sector has huge potential,” said Son in a statement. “I’m very happy to be investing $2 billion into the future of Indonesia through Grab.”

Indonesia’s Coordinating Minister for Maritime Affairs Luhut Binsar Panjaitan also had words supporting the deal: “Supported by the growing economy, Indonesia has a good investment climate where we are working together to boost the ease of investment in Indonesia,” he said. “This investment is evidence that Indonesia has been on the radar of investors, especially in the technology sector. We look forward to working with Grab, the fifth unicorn in Indonesia, and SoftBank to empower SMEs, accelerate tourism, and improving health services.”

This deal is a win on a couple of levels for Grab.

Most obviously, it’s giving the company a huge injection of capital to continue expanding its business aggressively in what is the biggest economy in Southeast Asia, with GDP of around $1 trillion annually.

A well-worn strategy by on-demand transportation companies — typified by others like Uber, Lyft and Didi — is to go big and go fast in order to establish a market presence among drivers and passengers, which can be used as a foothold to expand into other areas like food or package delivery and to then increase prices to improve margins.

Given that Indonesia is Gojek’s home country, and given that Indonesia is one of the biggest markets in the region, this makes it one of the most important territories for Grab to — err — grab.

“Grab is an Indonesia-focused company,” said Ridzki Kramadibrata, president of Grab Indonesia, in a statement today. “Having our second headquarters in Jakarta will allow us to better serve the needs of all Indonesians and those from emerging economies in the region. As a technology decacorn, Grab very well understands the needs and challenges we have here. We are also well positioned to support more high tech industries and infrastructure companies originating from Indonesia.”

On another front, this is an important strategy for the company on the regulatory and government front.

In a climate where it’s not unusual to see companies banned from operating in markets where they have run afoul of officials and the public, Grab is essentially buying its way into working with the state, and actually taking a commercial role in building its infrastructure. This — offering help with building infrastructure and simply passing on some of its experience and learnings — is a route that Didi has also been taking to make its way into new markets.

Grab said that it has invested $1 billion to date in Indonesia before now, and it said that its contribution to the economy in 2018 was $3.5 billion (48.9 trillion Indonesian rupiahs).

Updated to clarify that this is NOT a new infusion of capital, but a specification of how existing investments will be used. Meanwhile, Grab is still raising money and SoftBank said it wants to invest more.

Startups Weekly: SoftBank’s second act

By Kate Clark

Hello and welcome back to Startups Weekly, a weekend newsletter that dives into the week’s noteworthy startups and venture capital news. Before I jump into today’s topic, let’s catch up a bit. Last week, I noted some challenges plaguing mental health tech startups. Before that, I wrote about Zoom and Superhuman’s PR disasters.

Remember, you can send me tips, suggestions and feedback to kate.clark@techcrunch.com or on Twitter @KateClarkTweets. If you don’t subscribe to Startups Weekly yet, you can do that here.

Anyway, onto the subject on everyone’s mind this week: SoftBank’s second Vision Fund.

Well into the evening on Thursday, SoftBank announced a target of $108 billion for the Vision Fund 2. Yes, you read that correctly, $108 billion. SoftBank indeed plans to raise even more capital for its sophomore vehicle than it did for the record-breaking debut vision fund of $98 billion, which was majority-backed by the government funds of Saudi Arabia and Abu Dhabi, as well as Apple, Foxconn and several other limited partners.

Its upcoming fund, to which SoftBank itself has committed $38 billion, has attracted investment from the National Investment Corporation of National Bank of Kazakhstan, Apple, Foxconn, Goldman Sachs, Microsoft and more. Microsoft, a new LP for SoftBank, reportedly hopped on board with the Japanese telecom giant as part of a grand scheme to convince the massive fund’s portfolio companies to transition to Microsoft Azure, the company’s cloud platform that competes with Amazon Web Services . Here’s more on that and some analysis from TechCrunch editor Jonathan Shieber.

News of the second Vision Fund comes as somewhat of a surprise. We’d heard SoftBank was having some trouble landing commitments for the effort. Why? Well, because SoftBank’s investments have included a wide-range of upstarts, including some uncertain bets. Brandless, a company into which SoftBank injected a lot of money, has struggled in recent months, for example. Wag is said to be going downhill fast. And WeWork, backed with billions from SoftBank, still has a lot to prove.

Here’s everything else we know about The Vision Fund 2:

  • It’s focused on the “AI revolution through investment in market-leading, tech-enabled growth companies.”
  • The full list of investors also includes seven Japanese financial institutions: Mizuho Bank, Sumitomo Mitsui Banking Corporation, MUFG Bank, The Dai-ichi Life Insurance Company, Sumitomo Mitsui Trust Bank, SMBC Nikko Securities and Daiwa Securities Group. Also, international banking services provider Standard Chartered Bank, as well as “major participants from Taiwan.”
  • The $108 billion figure is based on memoranda of understandings (MOUs), or agreements for future investment from the aforementioned entities. That means SoftBank hasn’t yet collected all this capital, aside from the $38 billion it plans to invest itself in the new Vision Fund.
  • Saudi and Abu Dhabi sovereign wealth funds are not listed as investors in the new fund.
  • SoftBank is expected to begin deploying capital fund from Fund 2 immediately, and a first close is expected in two months, per The Financial Times.
  • We’ll keep you updated on the Vision Fund 2’s investments, fundraising efforts and more as we learn about them.

On to other news…

iHeartMedia And WeWork's "Work Radio" Launch Party

IPO Corner

WeWork is planning a September listing

The company made headlines again this week after word slipped it was accelerating its IPO plans and targeting a September listing. We don’t know much about its IPO plans yet as we are still waiting on the co-working business to unveil its S-1 filing. Whether WeWork can match or exceed its current private market valuation of $47 billion is unlikely. I expect it will pull an Uber and struggle, for quite some time, to earn a market cap larger than what VCs imagined it was worth months earlier.

Robinhood had a wild week

The consumer financial app made headlines twice this week. The first time because it raised a whopping $323 million at a $7.6 billion valuation. That is a whole lot of money for a business that just raised a similarly sized monster round one year ago. In fact, it left us wondering, why the hell is Robinhood worth $7.6 billion? Then, in a major security faux pas, the company revealed it has been storing user passwords in plaintext. So, go change your Robinhood password and don’t trust any business to value your security. Sigh.

Another day, another huge fintech round

While we’re on the subject on fintech, TechCrunch editor Danny Crichton noted this week the rise of mega-rounds in the fintech space. This week, it was personalized banking app MoneyLion, which raised $100 million at a near unicorn valuation. Last week, it was N26, which raised another $170 million on top of its $300 million round earlier this yearBrex raised another $100 million last month on top of its $125 million Series C from late last year. Meanwhile, companies like payments platform Stripesavings and investment platform Raisintraveler lender Uplift, mortgage backers Blend and Better and savings depositor Acorns have also raised massive new rounds this year. Naturally, VC investment in fintech is poised to reach record levels this year, according to PitchBook.

Uber’s changing board

Arianna Huffington, the CEO of Thrive Global, stepped down from Uber’s board of directors this week, a team she had been apart of since 2016. She addressed the news in a tweet, explaining that there were no disagreements between her and the company, rather, she was busy and had other things to focus on. Fair. Benchmark’s Matt Cohler also stepped down from the board this week, which leads us to believe the ride-hailing giant’s advisors are in a period of transition. If you remember, Uber’s first employee and longtime board member Ryan Graves stepped down from the board in May, just after the company’s IPO. 

Today I told my fellow @Uber board members that given @Thrive's growth, I will no longer be able to give my board duties the attention they deserve, so I will be stepping down. I look forward to watching Uber go from strength to strength! Here is the email I sent to the board: pic.twitter.com/sck0CPLwAV

— Arianna Huffington (@ariannahuff) July 24, 2019

Startup Capital

Unity, now valued at $6B, raising up to $525M
Bird is raising a Sequoia-led Series D at $2.5B valuation
SMB payroll startup Gusto raises $200M Series D
Elon Musk’s Boring Company snags $120M
a16z values camping business HipCamp at $127M
An inside look at the startup behind Ashton Kutcher’s weird tweets
Dataplor raises $2M to digitize small businesses in Latin America

Extra Crunch

While we’re on the subject of amazing TechCrunch #content, it’s probably time for a reminder for all of you to sign up for Extra Crunch. For a low price, you can learn more about the startups and venture capital ecosystem through exclusive deep dives, Q&As, newsletters, resources and recommendations and fundamental startup how-to guides. Here are some of my current favorite EC posts:

  1. What types of startups are the most profitable?
  2. The roles tools play in employee engagement
  3. What to watch for in a VC term sheet

#Equitypod

If you enjoy this newsletter, be sure to check out TechCrunch’s venture-focused podcast, Equity. In this week’s episode, available here, Equity co-host Alex Wilhelm, TechCrunch editor Danny Crichton and I unpack Robinhood’s valuation and argue about scooter startups. Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple PodcastsOvercast and Spotify.

That’s all, folks.

Fintech decacorn Nubank raises $400M led by TCV

By Danny Crichton

Another day, another mega round for a fintech startup. And this one is mega-mega.

Brazil-based Nubank, which offers a suite of banking and financial services for Brazilian consumers, announced today that it has raised a $400 million Series F round of venture capital led by Woody Marshall of TCV. The growth-stage fund is best known for its investment in Netflix but has also made fintech a high priority, with over $1.5 billion in investments in the space. According to Nubank, the company has now raised $820 million across seven venture rounds.

Katie Roof of the Wall Street Journal reported this morning that the company secured a valuation above $10 billion, potentially making it one of a short list of startup decacorns. That’s up from the $4 billion valuation we wrote about back in October 2018.

Part of the reason for that big-ticket round is the company’s growth. Nubank said in a statement that it has now reached 12 million customers for its various products, making it the sixth-largest financial institution by customer count within its home market. Brazil has a population of roughly 210 million people — indicating that there is still a lot of local growth potential even before the company begins to consider its international expansion options. Nubank announced a few weeks ago that it will start to expand its offerings to Mexico and Argentina.

Over the past year, the company has expanded its product offerings to include personal loans and cash withdrawal options as part of its digital savings accounts.

As I wrote earlier this week, part of the reason for these fintech mega-rounds is that the cost of acquiring a financial customer is critical to the success of these startups. Once a startup has a customer for one financial product — say, a savings account — it can then upsell customers to other products at a very low marketing cost. That appears to be the strategy at Nubank as well, with its quickly expanding suite of products.

As my colleague Jon Shieber discussed last month, critical connections between Stanford, Silicon Valley and Latin America have forged a surge of investment from venture capitalists into the region, as the continent experiences the same digital transformation seen in elsewhere throughout the world. As just one example from the health care space, Dr Consulta raised more than nine figures to address the serious health care needs of Brazilian consumers. Additionally, SoftBank’s Vision Fund, which was rumored to be investing in Nubank earlier this year, has vowed to put $5 billion to work in the region and recently invested $231 million in fintech startup Creditas.

In an email from TCV, Woody Marshall said that, “Leveraging unique technology, David Vélez and his team are continuously pushing the boundaries of delivering best in class financial services, grounded in a culture of tech and innovation. Nubank has all the core tenets of what TCV looks for in preeminent franchise investments.”

NuBank was founded in 2013 by co-founders Adam Edward Wible, Cristina Junqueira, and David Velez. In addition to TCV, existing backers Tencent, DST Global, Sequoia Capital, Dragoneer, Ribbit Capital, and Thrive Capital also participated in the round.

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