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China Roundup: Y Combinator’s short-lived China dream

By Rita Liao

Hello and welcome back to TechCrunch’s China Roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to people in the rest of the world. Last week, we looked at how Alibaba and Tencent fared in the last quarter; the talk in Silicon Valley and Beijing this week is on Y Combinator’s sudden retreat from China. We will also discuss the enduring food delivery war in the country later.

Brief adventure in the East

The storied Silicon Valley accelerator Y Combinator announced the closure of its China unit just a little over a year after it entered the country. In a vague statement posted on its official blog, the organization said the decision came amid a change in leadership. Sam Altman, its former president who hired legendary artificial intelligence scientist Lu Qi to initiate the China operation, recently left his high-profile role to join research outfit OpenAI. With that, YC has since refocused its energy to support “local and international startups from our headquarters in Silicon Valley.”

What was untold is the insurmountable challenge that multinationals face in their attempt to win in a wildly different market. Lu Qi, who wore management hats at Baidu and Microsoft before joining YC, was clearly aware of the obstacles when he said in an interview (in Chinese) in May that “multinational corporations in China have almost been wiped out. They almost never successfully land in China.” The prescription, he believes, is to build a local team that’s given full autonomy to make decisions around products, operations, and the business.

A former executive at an American company’s China branch, who asked to remain anonymous, argued that Lu Qi’s one-man effort can’t be enough to beat the curse of multinationals’ path in China. “All I can say is: Lu has taken a detour. Going independent is the best decision. When it comes to whether Chinese startups are suited for mentorship, or whether incubators bring value to China, these are separate questions.”

What’s curious is that YC China seemed to have been given a meaningful level of freedom before the split. “Thanks to Sam Altman and the U.S. team, who agreed with my view and supported with much preparation, YC China is not only able to enjoy key resources from YC U.S. but can also operate at a completely independent capacity,” Lu said in the May interview.

Moving on, the old YC China team will join Lu Qi to fund new companies under a newly minted program, MiraclePlus, announced YC China via a Wechat post (in Chinese). The initiative has set up its own fund, team, entity and operational team. The deep ties that Lu has fostered with YC will continue to benefit his new portfolio, which will receive “support” from the YC headquarters, though neither party elaborated on what that means.

Alibaba’s food delivery nemesis

The food delivery war in China is still dragging on two years after the major consolidation that left the market with two major players. Meituan, the local services company backed by Tencent, has managed to attain an expanding share against Alibaba-owned Ele.me. According to third-party data (in Chinese) provided by Trustdata, Meituan accounted for 65.1% of China’s overall food delivery orders during the second quarter, steadily rising from just under 60% a year ago. Ele.me, on the other hand, has lost nearly 10% of the market, slumping to 27.4% from 36% a year ago.

In terms of monetization, Meituan generated 15.6 billion yuan ($2.2 billion) in revenue from its food delivery segment in the quarter ended September 30. That dwarfs Ele.me, which racked up 6.8 billion yuan ($970 million) during the same period. Both are growing north of 30% year-over-year.

meituan dianping

Source: Meituan

This may not be all that surprising given Alibaba has arguably more imminent battles to fight. The e-commerce leader has been consumed by the rise of Pinduoduo, which has launched an assault on China’s low-tier cities with its ultra-cheap products and social-driven online shopping experience. Meituan, on the other hand, is fixated on beefing up its main turf of on-demand neighborhood services after divesting its costly bike-sharing endeavor. 

When both contestants have the capital to burn through — as they have demonstrated through heavily subsidizing customers and restaurants — the race comes down to which has greater control of user traffic. Meituan holds a competitive edge thanks to its merger with Dianping, a leading restaurant review app akin to Yelp, back in 2015. Dianping today operates as a standalone brand but its food app is deeply integrated with Meituan’s delivery services. For example, hundreds of millions of users are able to place Meituan-powered food delivery orders straight from Dianping.

Alibaba and Meituan used to be on more friendly terms just a few years ago. In 2011, the e-commerce giant participated in Meituan’s $50 million Series B financing. Before long, the two clashed over control of the company. Alibaba is known to impose a heavy hand on its portfolio companies by taking up majority stakes and reshuffling the company with new executives. That’s because Alibaba believes that “only when you operate can you generate synergies and really create exponential value,” said vice chairman Joe Tsai in an interview. Whereas if you just make a financial investment, you’re counting an internal rate of return. You’re not creating real value.”

Ele.me lived through that transformation. As of September, Alibaba has reportedly (in Chinese) completed replacing Ele.me’s management with its pool of appointed personnel. Ele.me’s founder Zhang Xuhao left the company with billions of yuan in cash and joined a venture capital firm (in Chinese).

Meituan’s founder Wang Xing had more unfettered pursuits. In a later financing round, he refused to accept Alibaba’s condition for portfolio companies to eschew Tencent investments, a strategy of the giant to hobble its archrival. That botched the partnership and Alibaba has since been gradually offloading its Meituan shares but still held onto small amounts, according to Wang in 2017, “to create trouble” for Meituan going forward.

Inside Prosus Ventures’ $4.5 billion bet on India

By Manish Singh

Prosus Ventures last week filed a hostile offer for British food delivery startup Just Eat, an attempt to defeat a unanimous rejection from its board and simultaneously fend off a bid from rival Takeaway.

The giant Naspers spinoff said it was willing to pay as much as $6.3 billion in cash to lure Just Eat, one of Europe’s largest foodtech players.

Prosus’ major bet on online food startups shouldn’t come as a surprise; the recently-listed subsidiary, whose parent firm has invested in companies in more than 90 nations, has shown a great appetite for food delivery startups globally.

How deeply Prosus believes in foodtech is perhaps on display in emerging markets such as India, one of the most buzziest nations for the investment firm, where the unit economics doesn’t work yet for almost any internet startup and probably won’t for another few years.

Prosus Ventures’ investments in food delivery startups globally

Last year, South Africa-based Naspers led a $1 billion financing round for Indian food delivery startup Swiggy. The investment firm contributed $716 million to the round, just shy of the roughly $750 million that Swiggy’s chief rival, Zomato, has raised in its 11 years of existence.

TechCrunch spoke with Larry Illg, CEO of Prosus Ventures and Food, and Ashutosh Sharma, head of investments for India at the venture firm, to understand how significant foodtech is for the investment firm and the bets it is making in India.

Swiggy

“We had a thesis on food delivery globally,” said Illg, describing the company’s first search for a food delivery company in India. “We knew that at least one big player will be there in India in the future. We went around the town and spoke to a lot of startups.”

And then they found Swiggy. But, Illg said, it was a very different Swiggy from the one that currently dominates the Indian market. “So here was a food delivery startup that was already profitable. The only challenge was that it was operational in just six cities in India.”

And thus began Naspers’ journey to convince Swiggy to expand its service nationwide. Now operational in more than 130 cities around the country, Swiggy today competes with Zomato, UberEats, and Ola-owned FoodPanda (now known as Ola Foods).

Prosus Ventures’ Sharma, who heads India business, cautioned that it is early for food startups in India. “I want to say we are on day one, but it might as well be day zero. The number of smartphone users in India who are ordering food online is still less than 2%,” he said.

But even this nascent category has attracted some tough competitors. While UberEats and Ola’s Foods are struggling to make a significant dent, Swiggy and Ant Financial-backed Zomato are locked in an intense battle.

Both companies, according to industry reports, are losing more than $20 million each month. Zomato was burning about $45 million each month a year ago, Info Edge, a publicly-listed investor in the startup revealed in its recent earnings call with analysts.

Illg is not really bothered with the frenzy cash burn in India’s food delivery market, and said Prosus has no shortage of cash, either.

That cash might come in handy very soon. A source at Zomato told TechCrunch that the company is in talks to raise as much as $550 million in a round led by Ant Financial .

TechCrunch reported earlier this year that Zomato is quietly setting up its own supply chain to control the raw material its restaurant partners use. Two sources familiar with Zomato say the food delivery startup is thinking of expanding beyond delivering food items.

Earlier this year, Swiggy announced that its delivery fleet can now move just about anything from one part of the city to another. The service, called Swiggy Go, is currently limited to select cities. Zomato plans to replicate this, sources say. Neither of these developments have been previously reported.

Additionally, cloud kitchens are current area of focus for Swiggy. This week, the company announced it has established more than 1,000 cloud kitchens in the country, more so than any of its rivals.

Illg said cloud kitchens are crucial for a country like India, which has a low density of restaurants. “We have the visibility of all the market dynamics,” he said. “We can look at a location, comb through the data and know what kind of restaurants and food supplies would work there.”

Amazon launches a Dash Smart Shelf for businesses that automatically restocks supplies

By Darrell Etherington

Amazon may have stopped selling its Dash buttons for consumers, but it’s not done with dedicated Dash hardware: The company is launching its new Amazon Dash Smart Shelf today. Aimed at small businesses rather than individuals, the Dash Smart Shelf is also even more automated than the Dash buttons, as it uses a built-in scale to automatically place an order for re-stocking supplies based on weight.

Available in three different sizes (7″x7″, 12″x10″ and 18″x13″), the Dash Smart Shelf is just 1″ tall and can basically be placed under a pile of whatever stock of supplies you commonly run through while operating a business. That could mean printer paper, coffee cups, pens, paper clips, toilet paper, coffee or just about anything, really – and Amazon’s replenishment system can either be set to automatically place an order when it detects that on-hand supply has fallen below a certain weight, or you can just have it send someone in your organization a notification if you’d rather not have the order happen automatically.

The Dash Smart Shelf connects via built-in Wi-Fi, and can be powered either connected by cable to a power outlet, or via four AAA batteries, providing flexibility as to where you want to put it. Using the web or the Amazon app, you then sign in with your Amazon Business account and just pick what product you’re using on the scale that you want to top up. And if you find that your staff doesn’t like the coffee selection, for instance, you can easily change up the brand or product your’e re-ordering from your account, too.

Dash Smart Shelf isn’t available immediately for anyone to purchase directly, but instead Amazon is going to be working with select small businesses in a trial pilot this month, with the plan being to open up general availability to any Amazon Business customers that have a registered U.S. business license beginning next year. If people are keen on getting Smart Shelf into their business, they can sign up directly with Amazon to be noticed about availability.

Uber reports a sharp rise in government demands for user data

By Zack Whittaker

Uber says the number of legal demands for riders’ data made by U.S. and Canadian authorities has risen sharply in the past year.

The ride-hailing company said the number of law enforcement demands for user data during 2018 are up 27% on the year earlier, according to its annual transparency report published Wednesday. Uber said the rise in demands was partly due to its business growing in size, but also a “rising interest” from governments to access data on its customers.

Uber said it received 3,825 demands for 21,913 user accounts from the U.S. government, with the company turning over some data in 72% of cases, during 2018.

That’s up from 2,940 demands for 17,181 user accounts a year earlier, with a slightly higher compliance rate of 73%.

Canadian authorities submitted 161 demands for data on 593 user accounts during 2018.

Uber said that the rise in demands for customer data presents a challenge for the ride-hailing company, previously valued at $82 billion, which went public in May. “Our responsibility to preserve consumer privacy while meeting regulatory and public safety obligations will become increasingly complex and challenging as we field a growing number of government requests for data every year,” said Uttara Sivaram, global privacy and security public policy manager at Uber.

The company also said it disclosed ride information on 34 million users to U.S. regulators and 1.8 million users to Canadian regulators, such as local taxi and transport authorities. Uber said it is mandated to give over the information to regulators as part of the “bespoke legal and regulatory requirements to which we are subject,” which can include pickup and drop-off locations, fares, and other data that may “identify individual riders,” the company said.

Uber isn’t the only company fielding a record number of demands from governments. Apple, Amazon, Facebook and Twitter have all reported a rise in government demands over the past year as their customer base continues to grow while governments become increasingly hungry for companies’ data.

But Uber’s figures offer insight into only the largest portions of its businesses — its consumer and business ride-hailing services, food delivery and electric scooters — and only covers North America, despite operating in hundreds of cities around the world.

Despite the rise in overall law enforcement requests, Uber said it “has not received a national security request” to date.

Such disclosures are rare but not unheard of. Most national security demands, such as orders issued by the Foreign Intelligence Surveillance Court and FBI-issued subpoenas, are coupled with secrecy rules that prevent the companies from disclosing anything about the demand. By proactively posting these so-called “warrant canary” statements, companies can quietly reveal when they have received such orders by removing the statements from their websites.

Apple famously used a warrant canary in its first transparency report in the wake of the NSA surveillance scandal, as revealed by whistleblower Edward Snowden. In 2016, Reddit quietly removed its warrant canary suggesting it had received a classified order.

Although the First Amendment protects government-compelled speech, the legality of warrant canaries remains legally questionable.

An earlier version of this report incorrectly stated Sivaram’s title. This has been corrected.

With echoes of Theranos, Truvian Sciences revives the dream of low-cost, accessible blood tests

By Jonathan Shieber

A little over a year after the dissolution of the once high-flying blood testing startup Theranos, another startup has raised over $27 million to breathe new life into the vision of bringing low-cost blood tests to point-of-care medical facilities.

Unlike Theranos, Truvian Sciences is not claiming that most of its blood tests do not need clearance from the U.S. Food and Drug Administration, and is, in fact, raising the money to proceed with a year-long process to refine its technology and submit it to the FDA for approval.

“More and more consumers are refusing to accept the status quo of healthcare and are saying no to expensive tests, inconvenient appointments and little to no access to their own test results,” said Jeff Hawkins, the president and chief executive of Truvian, in a statement. “In parallel, retail pharmacies are rising to fill demand, becoming affordable health access points. By bringing accurate, on-site blood testing to convenient sites, we will give consumers a more seamless experience and enable them to act on the vast medical insights that come with regular blood tests.”

Hawkins, the former vice president and general manager of reproductive and genetic health business at Illumina, is joined by a seasoned executive team of life sciences professionals including Dr. Dena Marrinucci, the former co-founder of Epic Sciences, who serves as the company’s senior vice president of corporate development and is a co-founder of the company.

Image courtesy of Flickr/Mate Marschalko

As part of today’s announcement, the company said it was adding Katherine Atkinson, a former executive at Epic Sciences and Illumina, as its new chief commercial officer, and has brought on the former chairman of the Thermo Fisher Scientific board of directors, Paul Meister, as a new director.

Funding for the company came from GreatPoint Ventures and included DNS Capital,Tao Capital Partners and previous investor Domain Associates.

The ultimate goal, according to Hawkins, is to develop a system that can be installed in labs and can provide accurate results in 20 minutes for a battery of health tests from a small sample of blood for as low as $50. Typically, these tests can cost anywhere from several hundred to several thousand dollars — depending on the testing facility, says Hawkins.

Using new automation and sensing technologies, Truvian is aiming to combine chemistries, immunoassays and hematology assays into a single device that can perform standard assessment blood tests like lipid panels, metabolic panels, blood cell counts, and tests of thyroid, kidney and liver functions.

The company’s system includes remote monitoring and serviceability, according to a statement from Truvian. Its dry reagent technology allows materials to be stored at room temperature, removing the need for cold chain or refrigerated storage. According to a statement, the company is working to receive a CE Mark in the European Economic Area and submitted to the FDA for 510(k) clearance along with a  “clinical laboratory improvement amendments” waiver application to let the devices be used in a retail setting or doctor’s office.

“We don’t believe that single drop of blood from a finger stick can do everything,” says Hawkins (in opposition to Theranos). “Fundamentally as a company we have built the company with seasoned healthcare leaders.”

As the company brings its testing technology to market, it’s also looking to compliment the diagnostics toolkit with a consumer-facing app that would provide a direct line of communication between the company and the patients receiving the results of its tests.

Truvian’s data will integrate with both Apple and Google’s health apps as well as reside on the company’s own consumer-facing app, according to Hawkins.

“At the end of the day precision medicine is going to come from integrating these data sources,” says Hawkins. “I think if we pull off what we want we should be able to make your routine blood testing far more accessible.”

Brava, a smart oven maker with big names attached, just sold to an industrial equipment company

By Connie Loizos

Brava had a lot of things working in its favor as startups go. It was founded in 2015 by serial executive John Pleasants, whose past stints have included as co-president of Disney Interactive Media Group, COO of Electronic Arts, and CEO of Ticketmaster.

His plans to create a suite of snazzy direct-to-consumer line of smart hardware and software products, beginning with the Brava oven, also attracted tens of millions of dollars from an impressive line-up of backers, including True Ventures, TPG Growth, and Lightspeed Venture Partners, among others. Indeed, though some sophisticated kitchen devices have come and gone (Juicero), some liked what Pleasants and his growing team in Redwood City, Ca., were trying to cook up, and one of these admirers, apparently, was the Middleby Corporation, a publicly traded commercial and residential cooking and industrial process equipment company in Illinois that just acquired Brava — though neither Brava nor Middleby is disclosing terms of the deal.

We were in touch via email yesterday with both Pleasants and the CEO of Middleby, Tim FitzGerald, to learn what they can share about the tie-up, as well as to ask what happens to Brava and its tens of employees now.

TC: This was a young company. Why turn around and sell it?

JP: The company itself is four years-old and we’ve had product available in market for one year. We’ve been venture funded to date and had the option to continue raising growth capital or merge with Middleby Corporation. Brava’s mission has always been to enable everyone to cook delicious, healthy home-cooked food with minimal time and effort, and we believe the fastest way to achieve this bold goal is through a strategic partnership with someone who can help make that happen.

TC: How did Brava and Middleby come together? Who brokered the first conversation? Was Brava talking with anyone else?

JP: We’ve been in talks with many people about financing, and a select group of strategics about a deeper partnership to achieve our objective. We had the assistance of City Capital in the process, and they made the introduction to Middleby in Chicago.

TC: How much is Middleby paying for the company? Also, is this an all-cash deal?

JP: While not disclosing the total amount, the consideration includes a mix of cash and stock

TC: So what’s next? Will Middleby retain the Brava name or will this be phased out over time?

JP: Brava as it’s known today will not only continue but see accelerated growth and expansion. We will continue to sell the product and support our customers under the Brava brand while further innovating new products and services for our customers.

TF: The Brava name will remain. The product and technology will enhance our existing residential and commercial kitchen appliance portfolio. In Middleby Residential, we manufacture and sell Viking Range and other well-known consumer brands.

TC:  How many people does Brava currently employ and how many if any are going to Middleby?

JP: Brava employs 38 people and all will be going to Middleby. I will remain as the CEO of Brava and will also work with other Middleby divisional leaders to leverage Brava’s light cooking platform and services for their existing brands. We’re excited by this because we currently have many ideas and plans for leveraging the Brava technology across new form factors, business segments (residential and commercial) and geographies. This all becomes more feasible with Middleby.

TC: We last talked before the Brava oven was out in the world. How many units did you wind up selling? 

JP: We’re closing in on 5,000 customers and expect to have a big holiday.

TC: What were some of the lessons learned with this experience?

JP: People love it. You can see this every day throughout our online communities. It’s not just about the quality of food and the ease in creating it . . . we hear comments all the time about how spouses who hardly ever cooked now do, how kids who never liked vegetables now ask for more . . .

In terms of what people want that doesn’t currently exist, [I’d say] more recipes and programs (we have thousands, but there are so many more we can do) and more flexibility; we can uniquely cook multiple ingredients simultaneously to perfection with our light-cooking technology and this enables lots of fun combinations [but] our customers would like even more flexibility in mixing and matching ingredients.

TC: Any business lessons?

JP: In terms of business lessons, it’s challenging to explain Brava’s full value proposition in a quick ad on social media. We have revolutionary technology that enables a new way of cooking that’s better, easier, faster — and that sounds almost too good to be true.

TC: Do you think the market for smart cooking appliance is big enough at this point? What do you think are the remaining hurdles and how do consumers get past them?

JP: The “smart cooking appliance” market is in its infancy. There are still very few pioneers in the space and household penetration is negligible. But this is all about to change. Once people know someone who can personally attest to the benefits, I fundamentally believe the adoption curve will bend exponentially.  People spend a lot of money on household appliances…once they can be “smart” and “chef powered” and deliver well against that promise, why would most people not want a “smart” one versus a “non-smart” one?

TF: We see this market growing significantly with the next generation [of home cooks] who currently rely on and demand a digital experience.

India’s Swiggy bets big on cloud kitchens

By Manish Singh

Can cloud kitchens take off in India? Swiggy, one of the country’s largest food delivery startups, is betting on it. The Prosus Ventures-backed startup said on Wednesday it has established 1,000 cloud kitchens for its restaurant partners in the country — more than any of its local rivals.

The Bangalore-headquartered firm said it has invested in over a million square feet of real estate space across 14 cities in the country over the last two years to help restaurant partners of all sizes expand to more locations both within their city and across new cities through cloud kitchens.

Swiggy said it has already invested about $24.5 million in its cloud kitchens business that it calls Swiggy Access, and plans to pump another $10.5 million into it by March next year.

Compared to developed nations like Japan and the U.S., India remains a very underpenetrated market for restaurants. “Even in dense areas, you know you need more restaurants,” said Larry Illg, chief executive of Prosus Ventures, in an interview with TechCrunch.

“That’s the value of creating kitchens for delivery platforms. We have the visibility of all the market dynamics. We can look at a location, comb through the data and know what kind of restaurants and food supplies would work there. Over time, you come to realize the neighborhood and their collective behaviour,” he said.

That’s where cloud kitchens could help. For restaurateurs, cloud kitchens reduce the risk when they look for expansion. “You have figured out the menu, and you know the operations. But you still have to take a big real estate risk when picking the location. Kitchens allow them to de-risk all these factors,” said Illg.

Early signs show that the concept of cloud kitchens is working for Swiggy Access partners. The company said one in three partners has been able to expand to a second kitchen within 90 days of signing up. Many restaurants from smaller cities have also expanded into big cities, the startup said.

Raymond Andrews, founder and chief executive of Biryani Blues, said in a statement that Swiggy Access has enabled the eatery to “expand quickly into newer territories not just in Delhi-NCR but also to Chandigarh. In the six years of our existence, I have found Access to be the easiest way to expand my brand. It’s a game-changer for the industry.”

Swiggy believes that India could emerge as the second-highest number of cloud kitchens after China in the coming years, said Vishal Bhatia, CEO of New Supply business at the firm. A year ago, the company had just 200 cloud kitchen partners.

“The milestone of Swiggy successfully creating over 1000 partner kitchens shows the faith the restaurant partners have in the concept and bolsters our pioneering efforts in enabling more success stories in the restaurant ecosystem,” he said.

Swiggy is also betting that cloud kitchens will help it speed up the delivery time. Swiggy co-founder and chief executive Sriharsha Majety said last month that the company is quickly scaling up “pods” that house cloud kitchens for restaurants in a way that they are “within a 10-minute reach of 99% of their consumers.”

Swiggy added that it is on track to create 15,000 new direct or indirect jobs in the restaurant industry through its Access program by next six months.

The announcement today comes weeks after news broke that Travis Kalanick, founder and former chief executive of Uber, is buying up cheap properties in India and some other markets to scale his cloud kitchens venture.

Indian newspaper Economic Times reported earlier this month that Ashish Saxena, former India head of TexMex Cuisine, franchisee for American casual dining restaurant chain Chili’s Grill & Bar in the country, is working with Kalanick on CloudKitchens, the new venture.

Food delivery firm FoodPanda, owned by ride-hailing giant Ola, earlier this year also pivoted to cloud kitchens. Swiggy claims it leads the cloud kitchens market in the country.

It will soon have another rival to compete with. American e-commerce giant Amazon plans to soon enter the food delivery business in the country.

In the heated cloud kitchens race, Kitchen United aims to kill with kindness; here’s its playbook

By Connie Loizos

Cloud kitchens, ghost kitchens, dark kitchens. No doubt by now you know a little about these businesses that are moving into underused or more affordable properties that can be turned into shared workspaces for the purposes of cooking up meals exclusively for delivery.

You probably also know that former Uber CEO Travis Kalanick has been at the forefront of the trend for more than a year, growing his CloudKitchens business as fast as he can, fueled in part by $400 million that he quietly raised from the sovereign wealth fund of Saudi Arabia earlier this year. Sometimes these are in the U.S., in so-called opportunity zones or lower-income areas that, under the Trump Administration, are enabling businesses to set up shop and avoid federal taxes in exchange. Kalanick is also reportedly eyeing big moves into both India and China.

CloudKitchens has competition, though. In fact, among a growing number of rivals, its fiercest competitor is Kitchen United, a Pasadena, Ca.-based outfit that has raised roughly $56 million to date from investors including GV, Fidelity, and the real estate operating companies Divco West and RXR Realty, among others — and which has turned down hundreds of millions of dollars more for the time being.

Does its founder, a tech veteran turned restaurateur Jim Collins, not understand the opportunity before him? It was one question among many that Collins answered last week at a StrictlyVC event in San Francisco where he dazzled the crowd with his comic timing — and his tactics. The interview — conducted by former TechCrunch editor and now CNBC reporter Lora Kolodny — also provided one of the best overviews we’ve heard to date of what this fast-ballooning industry is really about.

On Collins’s background:

I did tech companies for a bunch of years and sold the last one off about 10 years ago, and i said i never want to work with venture capital people again. [Laughs.] That’s sort of true but not completely. Honestly, I was burned out, it was a grind.

[One day] there was a restaurant up the street for sale. I walked up the street and bought the restaurant and then came home and told my wife, ‘I bought the restaurant.’ And so we had a conversation that [that decision] might entail a lifestyle change where I was going to be gone every night, and I was at the restaurant every night for about a year and a half getting it going, but I absolutely fell in love with the restaurant business.

On how he came to run Kitchen United:

[Our restaurant] is in Montrose outside of Los Angeles, in a sleepy community that most people in Los Angeles have never heard of, and about a year-and-a-half ago, we started getting people at the door, saying, ‘Yes, I’m from Postmates’ or ‘DoorDash’ or ‘UberEats’ and ‘I’m here to place an order.’  Because we weren’t signed up on any services, I was like: What is that? I was so far outside of my past world that I didn’t even know what it was. But all of a sudden, it was a thing and [it was growing], and one day, a headhunter who I knew well called me up and said, ‘Hey, I want you to take a look at food thing.’ So he sent me a job description (that was honestly terrible) for the CEO role at Kitchen United, so I went and met the founders — the two folks who were with the company at the time — and I kind of fell in love with them and felt like it was a big idea that we could go after.

What they pitched him on, and why he didn’t think it would work:

The original business plan was,  ‘Robots and autonomous cars are going to change the food business, so we need to be ready for that, so let’s build kitchens!’ And I said, ‘I think that’s actually true . . . in 10 years. The problem that the restaurant industry is experiencing because of the explosion of the shift in consumer demand and consumption isn’t a robots-and-autonomous-cars problem. It’s a proximity problem, and proximity is a problem we can solve tomorrow while we’re waiting.

What Kitchen United is building exactly:

We build kitchen centers. Basically you go into a space that’s $25 per square foot that no one has rented in 20 years, so we’ll take that space and put a bunch of kitchens in it. We also install a lot of technology — IoT, conveyer belts, all kinds of display information; we use machine learning to understand fire times — a whole series of things that go into deploying a kitchen center. Then we build a pick-up center in the front of the space that’s kind of the retail interface where drivers from Ubers, Postmates, DoorDash, Cavier, GrubHub (and seven other services can pick up the food) and [consumers can also grab pick-up].

Jim CollinsThere’s a thing called shared kitchens, which means that I’m going to go and cook in a space this morning, and when I’m done, somebody else is going to walk in this afternoon and cook in that same space. That’s not our business. Ours is effectively creating four-wall spaces for known restaurants to operate inside of our facilities for the purpose of extending their reach to meet new markets for delivery and consumer pick-up.

On whether Kitchen United is raising more money soon:

I don’t think so. We closed our Series B about six weeks ago.

It’s weird to be an entrepreneur in this world. There are two different operating methods that you’re encouraged to pursue if you’re going after a hot space. You’re either encouraged to be the biggest and fastest and to take as much money as you possibly can so you can be the biggest fastest, right? Or you’re encouraged to work hard and build a great business and then once you’ve built a great business, go out and get lots of money so you can build it.

Honestly, I felt like this business was so complex, that we had to learn about elementary stuff, like, where do we build these? Where’s the right place to put ’em? When we first started, we had meetings with big investment firms that were saying, ‘We’ll put $250 million against a $750 million valuation right now.’ That was the first conversation, when it was really like, we’ll put $8 in against whatever [laughs]. But when we were having that conversation, I’m flying home, thinking, $250 million? How would I deploy that? And they’re saying, ‘Well, you just go out and buy a bunch of warehouses in opportunity zones, and put kitchens in them, and it’ll be a great business! It’ll be awesome and you’ll own the market!”

Except warehouses in opportunity zones are too far away from consumers for food to get there fast enough for consumers to want to order from those restaurants. So I would have deployed $150 million in venture capital on brick walls and dry wall and stoves and vents and plumbing — like, ugly stuff. And once that stuff is deployed, it isn’t like it’s so easy to pick it up and move it someplace else.

How Kitchen United competes, if not in a land grab: 

Most conservative projections for this space over the course of the next four years are that we’re going to go from somewhere around $30 billion today to around $230 billion, so people come along and people say, ‘This guy is in this business and he’s got all this money’ or ‘This company has raised this much to put to work; does that make you nervous?’ And the answer is, if we go out and build 3,000 of these things, we build like the fourth-largest restaurant chain in the U.S., we’ve only addressed about 40 percent of the total market. So when I look at it from a pure antiseptic, practical perspective, the fact is we need other people in the space, helping us solve the problem. And honestly, to the extent that other people are learning from us and getting better, and we’re learning from others and getting better, I think the competition isn’t a bad thing, I think it’s a good thing. (Here, Kolodny teased him for his “very diplomatic answer.”)

On what makes Kitchen United distinct from its long and growing list of rivals:

First, we decided the U.S. is a giant market, so we decided to focus here on the U.S., despite requests probably once a week from somebody saying, ‘Come to Saudi Arabia’ because it turns out it’s hard to build kitchens anywhere in the world, and we’re pretty good at building them.

The other thing we did . . .[is decide to play nice with Kitchen United’s two biggest customers  — major food chains and delivery services]. I don’t want to boil the ocean. I don’t want to be a restaurant; I don’t want to cook food for consumers. There are 800,000 restaurants in the U.S., so let’s let them cook food and let’s come alongside them and help them expand what they are doing into new areas. . . . Our whole job is to expand the inventory for the [delivery] marketplace, expand the addressable market for the restaurant, and expand options for consumers so that we have a great business for all the various markets that we’re serving.

On the criteria to become part of Kitchen United:

We don’t work with startup restaurants. We don’t work with people that only have one location. When we started, we didn’t know what would work so we brought in all kinds of restaurants and ended up having to kick most of them out because either they didn’t know how to be a restaurant or they didn’t know how to be a multi-location restaurant. This is true of the ghost kitchen community as a whole: if you’re a restaurant and you don’t already have a consumer connection and an audience and a following and you try to open in a space with no consumer interface, no storefront, you have to climb a giant mountain.

There are some virtual restaurant brands. We have one in our location in Chicago. They were people who had operated multi-location restaurants and had a tremendous amount of internet marketing savvy and skill, so we decided to let them operate and they’re actually doing pretty well, so that’s an interesting new wrinkle.

On whether anything disqualifies a business from using Kitchen United as a platform:

Yes, a lot of large chains that will say we want to be in Kitchen United. We were at a big real estate development conference in Las Vegas and there were probably 20 chains that talked with us about being in KU and probably 18 of them would not qualify.

You’d like to think [that’s on a nutritional basis]. One thing we’ve learned isn’t to filter what the American consumer wants; our job is just to provide a path for them to get what they want.

The actual challenge is giant chains that have very little ability to create an online connection to their consumer. If they don’t have sophisticated online ordering interfaces, if they haven’t deployed the right technologies into their ERP and their ordering infrastructure and all the stuff that goes into the back end, then they aren’t going to be a good fit for KU because of the operational problems they have to overcome is just too great.

On how Kitchen United uses the data that’s running through its operations:

It’s a hot topic. We’re pretty careful. KU is a partner to our restaurants, and so we learn information through our own order channel. We don’t derive much information through the marketplace channels. There’s sort of a misnomer that when the marketplaces deliver orders . . . all we know is a consumer name, we don’t know an address or any of the other information. So you don’t get a lot of data like that.

Information we do get is stuff like how many chicken sandwiches a Chick-fil-A is selling or whatever. And you might think, ‘Oh cool, so you’ll just make a chicken sandwich [of your own] when Chick-fil-A closes down and you’ll sell it to the public.’ The restaurant world is very nervous about that; it’s a big topic in this space. If you go to restaurant conferences, there are a lot [accusations of], ‘They’re stealing my data.’ I’m the guy on stage saying, ‘It’s their data [the delivery marketplaces]. They attracted the consumer, they got the order from you. It’s their data. They aren’t stealing your data, it’s their data; you chose to allow them to sell your product on their network.’

But [also] it’s not as easy as that. You can’t just whip up a fried chicken sandwich and make consumers like it. The world is littered with even more failed restaurants than failed startups.

What happens to neighborhoods — and local restaurants — if Kitchen United succeeds:

The restaurant industry is huge — $800 billion in the U.S., $675 billion if you discount hospitals and stuff like that. [This take-out market] is somewhere around $33 billion this year. So we’re edging into it as a percentage, but if you look at dining room revenue year over year for the last 20 years in the U.S restaurant industry, it grows 1% per year, which is pretty much consistent with population growth. And the same is projected to be the case this year.

So restaurants aren’t dying because of marketplace delivery. Marketplace delivery is actually pulling business out of grocery stores. That’s why you see Kroger and Amazon and other grocery store chains plowing down rows of [goods] and installing warm counters with warm food and you’re seeing grocery chains focus on delivery.

It’s the wild west. It’s a crazy market and I absolutely, positively love it. It’s not a question of what gets me up in the morning. I never go to bed.

Robotics startup Picnic, known for its automated pizza assembly system, raises $5 million

By Catherine Shu

Picnic, a robotics startup that focuses on food production, announced today that it has raised $5 million in additional seed funding. The new round was led by Creative Ventures, with participation from Flying Fish Partners and Vulcan Capital.

The company also said it has hired Kennard Nielsen, a product engineer who worked on the first four Kindle Fire tablets, Nike Fuelband, Microsoft Xbox and Doppler Labs’ HereOne from Doppler Labs at previous positions, as its new vice president of engineering.

The new funding will be used for product development, hiring and marketing.

Picnic is known for an automated pizza assembly system that launched in October. The configurable, modular platform currently focuses on high-volume pizza production and can reach rates of up to 180 18-inch pizzas or 300 12-inch pizzas an hour. The system fits into existing kitchen layouts, including food trucks and kiosks, and integrates with Picnic’s software to provide backend data and cloud analytics that help with consistency, speed and reducing food waste.

Picnic operates on a “robotics-as-a-service” model, with users paying for the system on a subscription basis. The pizza assembly system’s first customers were Centerplate, a food and hospitality provider for large event venues, and Washington-based restaurant chain Zaucer Pizza.

In June, Picnic also hired Mike McLaughlin, a food and beverage industry veteran who previously held roles at BUNN, Concordia Coffee Systems and Starbucks, as its vice president of product.

DoorDash tipping practices prompts lawsuit from DC Attorney General

By Megan Rose Dickey

DoorDash is facing a new lawsuit regarding its tipping practices. This time, it’s coming from Washington, D.C. Attorney General Karl Racine. In the suit, Racine accuses DoorDash of engaging in deceptive tipping practices while also failing to provide any relief to workers whose tips were taken.

Racine’s office first opened an investigation into DoorDash’s practices in March 2019. In D.C., the suit alleges DoorDash customers paid millions of dollars in tips that the company used to offset the costs of its payments to workers over the span of two years. Racine’s office is seeking to make DoorDash pay damages and restitution.

“We strongly disagree with and are disappointed by the action taken today,” a DoorDash spokesperson told TechCrunch in an email. “Transparency is of paramount importance, which is why we publicly disclosed how our previous pay model worked in communications specifically created for Dashers, consumers, and the general public starting in 2017. We’ve also worked with an independent third party to verify that we have always paid 100% of tips to Dashers. We believe the assertions made in the complaint are without merit and we look forward to responding to them through the legal process.”

The suit focuses on how DoorDash had been offsetting the amount it pays its delivery drivers with customer tips. DoorDash’s payment structure as follows: $1 plus customer tip plus pay boost, which varies based on the complexity of order, distance to restaurants and other factors. It’s only when a customer doesn’t tip at all, which DoorDash told Fast Company happens about 15 percent of the time, that DoorDash is on the hook to pay the entire guaranteed amount.

In July, DoorDash announced it would change its tipping model, about a month after it doubled down on that same model. In August, DoorDash revealed how its new model would work but it later made clear that it would not be paying back any workers for lost wages.

“There’s no ‘back pay’ at issue here because every cent of every tip on DoorDash has always gone and will always go to Dashers,” a DoorDash spokesperson previously told TechCrunch via email in response to a question about whether or not DoorDash would back pay its delivery workers.

When Instacart changed its tipping practices earlier this year, it retroactively compensated shoppers when tips were included in the payment minimums. DoorDash, however, does not see the need for back pay. DoorDash fully implemented its new policy in September.

Meanwhile, DoorDash is funding a ballot initiative alongside Uber and Lyft to try to ensure it doesn’t have to treat its workers as W-2 employees.

The ballot measure looks to implement an earnings guarantee of at least 120% of minimum wage while on the job, 30 cents per mile for expenses, a healthcare stipend, occupational accident insurance for on-the-job injuries, protection against discrimination and sexual harassment and automobile accident and liability insurance.

This initiative is a direct response to the legalization of AB-5, the gig worker bill that will make it harder for the likes of Uber, Lyft, DoorDash and other gig economy companies to classify their workers as 1099 independent contractors.

I’ve reached out to DoorDash and will update this story if I hear back.

Weber’s new SmokeFire pellet grill uses June technology for smart cooking

By Darrell Etherington

BBQ legend Weber is getting into the connected cooking game with their new SmokeFire grill, which uses wood pellets for fuel and incorporates technology developed by Weber in partnership with appliance startup June for Wi-Fi-enabled smart cooking.

The SmartFire grill, which will be available for pre-order in the U.S. starting on Cyber Monday and which will start shipping early next year, is a first in more ways than one for Weber. Yes, it packs in connected smart cooking — but it’s also the first time Weber has made a pellet grill, a style of outdoor cooker popularized by Traeger, and useful for both low and slow smoking, as well as high-heat grilling like a more traditional coal, natural gas or propane BBQ.

Weber may not have a history of building pellet grills, but it does have a very strong reputation when it comes to outdoor cooking appliances. The business introduced its iconic Kettle Grill back in 1952, and consistency racks up top marks for its range of BBQs, known for their even, consistent temperatures and long-term durability.

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This legacy cooking industry heavyweight apparently decided to partner with June once word of the startup’s own Smart Oven started circulating around the office. June and Weber teamed up to test thousands of recipes in the development of the Weber Connect smart grilling software, which provides step-by-step directions ranging from prep through the entire cook, as well as an ETA on whatever you’ve got on the grill, delivered to and controlled from your smartphone.

The SmartFire comes in two sizes, with 24″ and 36″ grilling surfaces respectively, for $999 and $1,199 respectively. The design looks like what you’d expect from a pellet grill — with the interesting choice of locating the hopper wherein you feed said pellets to the back of a small prep shelf on the right side of the grill. If you’re new to pellet grills, they feed these processed wood pellets, which produce great smoke but very little ash because of their high-efficiency burn, in a controlled manner that keeps temperature inside the grill consistent where you set it.

Low and slow is a great way to grill, and having intelligent cooking features to guide you along the way should help alleviate rookie mistakes like over and undercooking. Plus, it’s just exciting to imagine what Weber can do with its first pellet grill.

Bolt Bikes launches e-bike subscription platform for gig delivery workers in US, UK

By Kirsten Korosec

Bolt Bikes, the Sydney, Australia-based startup founded in 2017, is taking its electric bike platform designed for gig economy delivery workers to the U.S. and UK.

The company is expanding on the heels of a $2.5 million seed round led by Maniv Mobility, European e-mobility firm Contrarian Ventures, individual investors and former executives of Uber and Deliveroo . The company was founded by Mina Nada, former Deliveroo and Mobike executive) and Michael Johnson, a former Bain & Co executive.

Bolt Bikes now provides its flexible subscriptions, which include vehicle servicing, in Sydney and Melbourne, Australia, San Francisco and London. The company sells its electric bikes. But the main premise is to rent them out for commercial use. The electric bikes are rented on a week-to-week contract for $39.

The Bolt Bikes platform includes a the electric bike, fleet management software, financing and servicing. Subscribers get 24-hour access to the bike. A battery charger, phone holder, phone USB port, secure U-Lock and safety induction is included. Bolt Bikes also offers the first week as a free trial.

“Being in the food delivery industry since its inception, we saw that light electric vehicles were the real future of ‘last mile’ logistics, yet no-one was offering the right vehicle, financing or maintenance solution,” Nada said in a statement.

Bolt Bikes has piqued the interest of more than investors. Postmates has been piloting a Bolt Bikes rental program in San Francisco since June.

And the company has aspirations to increase its fleet and to expand to more cities in the U.S., UK and Australia.

Opera’s Africa fintech startup OPay gains $120M from Chinese investors

By Jake Bright

Africa-focused fintech startup OPay has raised a $120 million Series B round backed by Chinese investors.

Located in Lagos and founded by consumer internet company Opera, OPay will use the funds to scale in Nigeria and expand its payments product to Kenya, Ghana and South Africa — Opera’s CFO Frode Jacobsen confirmed to TechCrunch.

Series B investors included Meituan-Dianping, GaoRong, Source Code Capital, Softbank Asia, BAI, Redpoint, IDG Capital, Sequoia China and GSR Ventures.

OPay’s $120 million round comes after the startup raised $50 million in June. It also follows Visa’s $200 million investment in Nigerian fintech company Interswitch and a $40 million raise by Lagos-based payments startup PalmPay — led by China’s Transsion.

There are a couple of quick takeaways. Nigeria has become the epicenter for fintech VC and expansion in Africa. And Chinese investors have made an unmistakable pivot to African tech.

Opera’s activity on the continent represents both trends. The Norway-based, Chinese-owned (majority) company founded OPay in 2018 on the popularity of its internet search engine.

Opera’s web-browser has ranked No. 2 in usage in Africa, after Chrome, the last four years.

The company has built a hefty suite of internet-based commercial products in Nigeria around OPay’s financial utility. These include motorcycle ride-hail app ORide, OFood delivery service and OLeads SME marketing and advertising vertical.

“OPay will facilitate the people in Nigeria, Ghana, South Africa, Kenya and other African countries with the best fintech ecosystem. We see ourselves as a key contributor to…helping local businesses…thrive from…digital business models,” Opera CEO and OPay Chairman Yahui Zhou, said in a statement.

Opera CFO Frode Jacobsen shed additional light on how OPay will deploy the $120 million across Opera’s Africa network. OPay looks to capture volume around bill payments and airtime purchases, but not necessarily as priority.  “That’s not something you do every day. We want to focus our services on things that have high-frequency usage,” said Jacobsen.

Those include transportation services, food services and other types of daily activities, he explained. Jacobsen also noted OPay will use the $120 million to enter more countries in Africa than those disclosed.

Since its Series A raise, OPay in Nigeria has scaled to 140,000 active agents and $10 million in daily transaction volume, according to company stats.

Beyond standing out as another huge funding round, OPay’s $120 million VC raise has significance for Africa’s tech ecosystem on multiple levels.

It marks 2019 as the year Chinese investors went all in on the continent’s startup scene. OPay, PalmPay and East African trucking logistics company Lori Systems have raised a combined $240 million from 15 different Chinese actors in a span of months.

OPay’s funding and expansion plans are also a harbinger for fierce, cross-border fintech competition in Africa’s digital finance space. Parallel events to watch for include Interswitch’s imminent IPO, e-commerce venture Jumia’s shift to digital finance and WhatsApp’s likely entry in African payments.

The continent’s 1.2 billion people represent the largest share of the world’s unbanked and underbanked population — which makes fintech Africa’s most promising digital sector. But it’s becoming a notably crowded sector, where startup attrition and failure will certainly come into play.

And not to be overlooked is how OPay’s capital raise moves Opera toward becoming a multi-service commercial internet platform in Africa.

This places OPay and its Opera-supported suite of products on a competitive footing with other ride-hail, food delivery and payments startups across the continent. That means inevitable competition between Opera and Africa’s largest multi-service internet company, Jumia.

 

Amazon and Google double down on hands-free recipes to help sell their smart displays

By Sarah Perez

Amazon and Google have identified a solid use case for their smart speaker devices, powered by Alexa and Google Assistant, respectively: recipes. The companies this week have both announced new product features that aim to help users cook hands-free while guided by the voice assistant. Amazon this week rolled out a new feature integration in partnership with BuzzFeed’s recipe site Tasty to offer step-by-step voice and video instructions to Alexa users. Meanwhile, Google partnered with entrepreneur and chef Ayesha Curry to bring her recipes to Google Assistant.

Curry’s recipes will also include step-by-step cooking instructions on Google Assistant-powered Smart Displays, like the Nest Hub Max.

Meanwhile, the Tasty recipes are available across Echo devices, but will include cooking videos on the Echo Show devices.

What’s interesting about the new features is that both involve content partnerships, instead of dedicated skills from third-parties. In fact, Curry is even providing her new recipe (Cast Iron Fall Bread Pudding with Brown Butter Apples) exclusively to Google Assistant users.

The growth in voice apps had been increasing steadily over the past few years, with Amazon announcing earlier this fall it had surpassed over 100,000 skills. But that momentum may now be slowing, reports say — a possible indication that developer enthusiasm may be waning, as well.

The issue with voice apps is they’re hard to discover by way of voice commands alone, and they require particular syntax to properly launch. Sure, users may find a great weather app or game, but if they can’t remember its name later on, they may not visit again. Another issue is that many of the first voice apps were built by developers, some of whom lack user-experience design backgrounds, resulting in kludgy, confusing voice experiences.

Finally, it’s not clear that a large number of smart speaker or smart display owners are even regularly using voice apps. After all, Amazon and Google tend to tout the number of skills they have, not the number of people using them.

Content integrations by way of partnerships circumvent all these problems.

They simplify things and put Amazon and Google back in control of the user experience. And they still give users what they want without requiring them to launch a third-party app.

Recipes are also more straightforward, as far as integrations go. They consist of only a few parts — ingredient lists and cooking instructions, for example. And the commands to launch them are as simple as “Alexa” or “Hey Google,” followed by “show me recipes from…” and then the recipe source.

Navigating recipes can also be easier than other voice apps, thanks to basic commands like “Alexa, ingredients,” “Alexa, next step,” or “Alexa, start recipe.”

The smart speakers can aid with general cooking questions, too, like “Hey Google, how many tablespoons in a cup?” or “Hey Google, show me how to brown butter.”

Before the Tasty partnership, Amazon had already tapped into the potential for recipes to boost device sales with the launch of a Guided Cooking feature that allowed Echo Show and Echo Spot customers to get step-by-step instructions from Allrecipes, Epicurious, Food52, TheKitchn and SideChef while they cook without having to install a skill.

In addition, Alexa more recently was the debut voice platform for Discovery’s new subscription service Food Network Kitchen, which doesn’t just offer recipes and videos, but also live cooking classes with master chefs.

Ayesha Curry isn’t Google’s first recipe partnership, either. It had also indexed recipes from Bon Appetite, The New York Times, Food Network and others for use on Google Home. This year, it said recipe suggestions would be personalized to users with the launch of a “Picks for You” feature for its smart displays.

Both new recipe integrations are live now.

To get started, say “Hey Google, show me recipes from Ayesha Curry,” or ask Alexa for recipes from Tasty based on ingredients, dish name or occasion, like, “Alexa, find chicken recipes from Tasty.”

 

Amazon to open its first non-Whole Foods grocery store in 2020

By Sarah Perez

Amazon is opening its first non-Whole Foods grocery store in the LA neighborhood of Woodland Hills, the retailer today confirmed. The news of the new store was first reported by CNET, which spotted several job postings referencing the location, including those for a zone leader, grocery associates and a food service associate.

Unlike Amazon’s growing number of cashierless Amazon Go convenience stores, the new store will feature conventional checkout technology, says Amazon. CNBC also noted the store may be located in a former Toys “R” Us location at a shopping center.

Amazon declined to offer more details about its plans for the store or others like it, but did confirm it’s opening a grocery store in Woodland Hills in 2020.

The retailer’s plans to expand its grocery operations beyond its Whole Foods brand was previously reported by The Wall Street Journal in October. Amazon, the report claimed, was planning a chain of dozens of grocery stores across the U.S., beginning with sites in LA, Chicago and Philadelphia. Woodland Hills was mentioned as being among the first locations, along with Studio City and Irvine.

Other locations being scouted included those in the New York metro area, New Jersey and Connecticut.

Amazon’s interest in an expanded brick-and-mortar presence comes at a time when Walmart’s grocery business has been booming, with some reports claiming it now dominates those from rivals, including Amazon, Instacart and others.

Walmart in Q2 reported 37% increase in e-commerce sales, supported by the strong growth in online grocery. Much of its success in that area can be attributed to the proximity of its stores to its customer base. With no markups on food prices (as some of its competitors do), it’s affordable to order from Walmart Grocery online, then drive to pick up the groceries — or pay a small fee to have them delivered.

Amazon’s Whole Foods, meanwhile, has long had a reputation as a more expensive store. Following the acquisition of the grocery chain, Amazon has tried to combat that notion with weekly sales and discounts for Prime members. But Whole Foods is still considered to be a more high-end store, and its prices continue to reflect that.

The new Amazon grocery stores, on the other hand, will be targeted at the mainstream consumer who typically shops from more traditional, or even value, grocery chains.

“When it comes to grocery shopping, we know customers love choice and this new store offers another grocery option that’s distinct from Whole Foods Market, which continues to grow and remain the leader in quality natural and organic food,” an Amazon spokesperson told CNET.

They said Whole Foods would continue to expand, despite the launch of the new Amazon grocery stores. Whole Foods opened 17 locations this year and has more planned, the company said.

Prosus makes $6.3B hostile bid for Just Eat; Just Eat rejects deal in favor of Takeaway merger

By Ingrid Lunden

As Amazon-backed Deliveroo expands into click-and-collect and procurement services to grow its footprint with restaurants in Europe, a food fight among three other takeout and delivery players continues apace in an ongoing consolidation march to compete better against the likes not just of Deliveroo but also Uber Eats and more.

Today, Prosus — the recently-listed arm of Naspers comprising its extensive online assets (including a significant stake in Tencent) — said that it would be willing to pay £4.9 billion ($6.3 billion) in cash for Just Eat, one of the big players in the food takeout and delivery market in Europe. The bid is a hostile one: Just Eat has been in the middle of working on a combination with Takeaway.com, another large competitor in the market; and today Just Eat wasted no time in asking its shareholders to reject the Prosus offer.

“The Board believes that Just Eat is a leading strategic asset in the food delivery sector and the Prosus Offer fails to appropriately reflect the quality of Just Eat and its attractive assets and prospects, the benefits of first mover advantage in a consolidating sector, and the significant future upside available to Just Eat shareholders through remaining invested in Just Eat and the Takeaway.com Combination,” it noted in a statement. “The Board of Just Eat believes that the Takeaway.com Combination is based on a compelling strategic rationale that will deliver a number of strategic benefits and greater value creation to Just Eat shareholders than the terms of the Prosus Offer. Accordingly, the Board of Just Eat continues to unanimously recommend the Takeaway.com Combination to Just Eat shareholders.”

Prosus’ offer, which works out to 710 pence per Just Eat Share, is 20% higher than Takeaway.com’s offer of 594 pence (which itself was at a premium to Just Eat’s share price).

The Takeaway offer has been months in the making and has had a number of twists and turns. The first announcement for a $10 billion merger was made in July, but in the interim Prosus made its first hostile offer, and so the deal switched to a takeover this month in hopes of securing shareholder agreement faster.

At stake for all players is the fact that the delivery business continues to be a fast-growing but very crowded field, with a number of players operating unprofitably and hoping for consolidation in order to improve their economies of scale and margins. If economies of scale and better margins is the rock, the competition is the hard place: all three have a strong and very highly capitalised set of a pair of competitors in the form of Uber Eats and Amazon-backed Deliveroo, with a number of smaller but also fast-growing startups continuing to crowd the field.

Just Eat and Takeaway.com have already done some consolidating of other operations. The latter two have gobbled up different parts of DeliveryHero’s European business in recent times. Prosus, meanwhile, has a 22% stake in the remaining DeliveryHero business (outside of Europe), alongside stakes in India’s Swiggy and iFood in Latin America. This would mean that Prosus taking over Just Eat would be less about consolidation of European holdings, which could be one reason why Just Eat is less keen on the idea.

Takeaway.com has also issued a response to the news, noting that it’s the only one of the three that has working on building profitability into the business: it’s currently profitable in the Netherlands, its home market, and is on track to getting there in Germany (a track it believes it can continue with more scale).

“Given the circumstances, I can fully understand that the current cash values of both our and the competing offer aren’t particularly appealing to the Just Eat shareholders, and seem to be quite far removed from the fair value of Just Eat. We do however believe that the agreed merger ratio between Just Eat and Takeaway.com is appropriate,” noted Jitse Groen, CEO of Takeaway.com, in a statement. “Takeaway.com now operates in two out of the world’s four major profit pools. Including the UK, the Just Eat Takeaway.com combination will therefore operate in three out of the four major profit pools globally available. This in stark contrast with most other food delivery websites, which are loss-making, and in our opinion, will likely never become profitable.”

Naspers’ Prosus has said that it is not interested in buying the merged company, should Just Eat go ahead with a combination with Takeaway.com. In any case, this is unlikely to be the final word on how food delivery and takeout will play out in Europe (or globally).

The market is still largely operating in the red globally — and even the most established players, like GrubHub, are not seeing much stability. And with about half a dozen giant players operating in different markets, and lots of capital riding on each of them, we’ll be seeing a number of deals and product expansions — for example the emergence of more “virtual” kitchens and other added services such as restaurant procurement — before it’s all gravy for this industry.

Correction: Prosus is not making a final offer. Corrected to say that it is not interested in a combination with Takeaway.com, solely Just Eat.

Deliveroo launches food orders for pickup

By Natasha Lomas

Don’t Deliveroo . The U.K.-based on-demand food delivery service has expanded into not actually delivering orders by offering users a pickup option, called “Pickup,” as an alternative to paying a delivery fee and waiting for lunch to arrive.

The new “click & collection” service is live for 700+ eateries in 13 U.K. cities at launch: Aberdeen, Birmingham, Cardiff, Glasgow, Leeds, Liverpool, London, Manchester, Milton Keynes, Newcastle, Norwich, Nottingham and Edinburgh (Old Town). Restaurant brands signed up in the first wave include Byron, Pizza Express, Pizza Hut, TGI Friday’s, Frankie & Benny’s, Chiquito, Coast to Coast and Giraffe.

Deliveroo says it expects the pickup service to grow rapidly, reckoning more than 10,000 restaurants will be offering it within the next 12 months — and doing so across the 200 U.K. towns and cities in which it currently operates. Albeit that’s just a prediction at this stage.

It’s not clear whether it also plans to add the “Pickup” option in its international markets. (We’ve asked and will update if we get more.Update: Deliveroo says it will be launching the collection option in Hong Kong, Australia, Netherlands, Belgium and Spain this year.)

Deliveroo says the pickup option is intended to widen customer choice with a cheaper option for users willing to collect a meal, potentially helping it to take a bite out of lunch money that could otherwise be spent at a supermarket.

At the same time it’s a way for the company to expand the order pipeline for restaurants that are signed up to its service — and in this scenario it’s acting merely as an ordering layer (but still taking a commission).

Customers picking up their own meals provides an additional revenue stream for Deliveroo’s platform that’s free from any legal or ethical risk attached to the employment status (and/or working conditions) of delivery couriers operating on its platform.

The pickup option launch is the latest addition to a suite of B2B offerings Deliveroo serves up for signed-up eateries.

These include a food procurement service; savings (badged as “perks”) on everyday business costs such as energy; a data service to support restaurant expansion; and “virtual brands” — using demand data to feed new or complementary cuisines being offered from a restaurant’s existing kitchen.

Deliveroo says it expects growth for its business to step up sharply — anticipating signing up another 10,000 restaurants in the U.K. over the next six months, which would take the total it’s working with to 30,000.

Right now it operates in 500+ towns and cities across 13 markets in all, including Australia, Belgium, France, Hong Kong, Italy, Ireland, Netherlands, Singapore, Spain, Taiwan, United Arab Emirates, Kuwait as well as its home market of the U.K.

Despite Deliveroo’s bullish talk of scaling in the U.K., the food delivery space remains highly competitive in many global markets. And this summer the company announced it was exiting the German market, saying it would refocus resources and investment to accelerate growth and expansion in other markets across Europe and APAC.

In Europe, consolidation has been the name of the recent game — with dominant platforms under pressure to increase choice and service offering to try to maintain an edge in key markets. So fast scaling in one market may be at the expense of any business at all in another.

Expansion into adjacent delivery markets is another strategy we’re seeing from regional on-demand delivery startups. For example, Spain’s Glovo, which focuses on Southern and Eastern Europe, is working on a “dark supermarkets” model to fuel high-speed local grocery deliveries, while also dabbling in regional expansion on the food delivery front, with a major push (via acquisition) into Poland.

Banning digital political ads gives extremists a distinct advantage

By Walter Thompson
Jessica Alter Contributor
Jessica Alter is co-founder and chairman of Tech for Campaigns, an organization building the lasting tech and digital arm for Democrats and has helped over 200 campaigns on this front since 2017.

Jack Dorsey’s announcement that Twitter will no longer run political ads because “political messages reach should be earned, not bought” has been welcomed as a thoughtful and statesmanlike contrast to Mark Zuckerberg’s and Facebook’s greedy acceptance of “political ads that lie.” While the 240-character policy sounds compelling, it’s both flawed in principle and, I fear, counterproductive in practice. 

First: like it or hate it, the U.S. political system is drowning in money. In 2018, a non-presidential year, it is estimated that over $9B was spent on the U.S. elections. And unless laws change, more will continue to flow. Banning digital ads will not reduce the amount of money in politics, and will simply shift it to less transparent channels. In an ideal world, it would be great if all “political messages were earned and not bought,”  but that is not how our system works. Candidates, Super PACs, C4s and others already allow the majority of their budgets to be swallowed up by other, less visible, accountable and cost-effective, channels — including television, mail, telephone, and radio.

More likely, at least some of the money will end up with even less transparent organizations that aren’t deemed “political,” but very much are. 

Second, banning digital political ads will not only hurt the very candidates people should want to help, it will also damage our democratic process. Analog mediums are significantly more expensive and inefficient than digital ones, so candidates who have a lot of money and/or have spent time cultivating their followings will continue to dominate. In other words, incumbent candidates, rich people and reality TV stars enjoy an outsized advantage when digital advertising is denied. 

A recent Stanford study found that, at the state house level, more than 10 times as many candidates advertise on Facebook than advertise on television. The research found that digital ads lowers advertising costs, which expands the set of candidates for whom advertising — and thus the potential to reach voters and seriously contest an election — is a real possibility. 

Lesser well-known, but often highly-qualified candidates at the state, local and federal level are precisely the people who have been celebrated for their new perspectives, creative ideas and commitment to shake up the system. People who put their heads down, do good work in their communities and decide to run because they want to make a difference will be the ones that are disadvantaged. 

You know who gets plenty of earned media opportunities? Donald Trump. He will be fine. In fact, he will be better than fine because we’ve just handed him and more extremist candidates like him a distinct advantage.

Democracy is about the combination of free speech and transparency. As the old adage goes, sunlight is the best disinfectant, so here are a few ideas that would be more effective than a ban:

  • Adding a “nutrition label” to political ads offers a more accessible, understandable and consistent way to identify the identities of the funder, their location, their budget and their target audience. This should be easily accessed, in any political ad via one click, just like we know where to find nutrition information on food we buy. 
  • Enhance “consumer beware” acknowledgments so that if digital political ads remain exempt from fact-checking (as they mostly are on television), platforms have a duty to make that clear with visual signals and user education.

Ultimately, decisions about what is permissible political speech and appropriate distribution and targeting is too important to be left to technology platforms and their conceptions of the public interest.

Do we want Google, Facebook and Twitter making the rules for all political ads and being responsible for enforcing them? What we need is a true oversight body — one with teeth. If non-political advertisers make false claims about their own products or those of their competitors, they can be fined by the FTC. This is an acknowledgment, not only that consumers need accurate facts, but also that companies can not police themselves. This is far too much power for them. 

This isn’t a way to let technology companies off the hook, as there is plenty more they can do as noted above. But we need a truly independent organization overseeing political ads — the rules that govern them and holding organizations accountable to following those rules. Is this the FEC? I’m not sure.

As I write this today, I worry that no agency truly has the capacity or the expertise to create these rules and challenge bad campaign practices. We should remedy this post-haste and get to finding true solutions. The alternative seems easier and even principled to fight for, but the unintended consequences will be swift — a government full of the types of people who we say we don’t want. 

Africa Roundup: Goldman leads $30M Twiga raise, China grows tech influence, Jumia weathers lockup-expiry

By Jake Bright

Kenya’s Twiga Foods raised a total of $30 million in October from lenders and investors led by Goldman Sachs.

This adds to the list of African startups the U.S. financial firm has backed, including e-commerce venture Jumia and South African fintech startup Jumo.

Twiga, a B2B food distribution company, will use its funds to set up a distribution center in Nairobi and deepen its conversion to offering supply chain services for both agricultural and FMCG products.

The startup is also targeting Pan-African expansion to French speaking West Africa by third quarter 2020, CEO Peter Njonjo told TechCrunch.

The venture has moved quickly on diversifying its supply-chain product mix. “We’re not just doing fruits and vegetables…I’d say we’re at 50/50 now between FMCG  and fresh,” said Njonjo.

Twiga doesn’t plan to move toward entering or supplying B2C e-commerce, where it could become a competitor to other online retailers, such as Jumia.

But the company has factored for advantages in the B2C e-commerce space. “If you’re able to serve Nairobi’s 180,000 retailers, it means that the furthest customer would be less than two kilometers away from any shop. That’s the power of building a B2C business on top of a B2B platform. So definitely, the potential is there,” said Njonjo.

China is known for its relationship with Africa based on trade and infrastructure, but not so much for tech. That’s changing with a number of Chinese actors increasing the country’s digital influence across the continent’s tech markets.

This includes Africa focused mobile phone Transsion’s IPO and planned expansion in Africa and recent moves on the continent by Alibaba and Chinese owned Opera.

In an ExtraCrunch feature, TechCrunch detailed China’s growing tech ties with Africa and what they could mean for the continent’s innovation ecosystem and Africa’s relationship with China overall.

In two stories in Ocotober, TechCrunch followed Jumia’s IPO lockup expiry and volatile share-price ahead of the Jumia’s November third-quarter earnings call.

The Africa focused e-commerce company — with online verticals in 14 countries —  has had a bumpy ride since becoming the first tech venture operating in Africa to list on a major exchange. Jumia saw its opening share price of $14.50 jump 70% after its NYSE IPO in April.

Then in May, Jumia’s stock tumbled when it came under assault from a short-seller, Andrew Left, who accused the company of fraud in its SEC filings.

In August, Jumia’s 2nd quarter earnings showed upside and downside: revenue growth still with big losses. Much of it may have been overshadowed by Jumia’s own admission of a fraud perpetrated by some employees and agents of its JForce sales program.

Jumia’s core investors appeared to show continued confidence in the company in October, when there wasn’t a big sell-off after the IPO lockup period expired.

It appears that what Jumia disclosed does not validate the claims in Citron Research’s May report. But the markets still seem wary of the company’s stock, which now stands at roughly half its opening IPO price.

Jumia will have a chance to clear up any lingering confusion and showcase its latest numbers on its third-quarter earnings call November 12.

PhutiMahanyele Dabengwa 52TechCrunch reported additional details to two big African tech market events that happened over the last year. First, Naspers Foundry’s new leader, Phuthi Mahanyele-Dabengwa, confirmed the 1.4 billion rand (≈$100 million) VC arm of South Africa’s Naspers is accepting pitches.

Announced in late 2018, Naspers Foundry will make equity investments in various amounts, primarily from Series A up to Series B in South African ventures. Founders from other parts of Africa with startup operations in South Africa can be considered for funding, Mahanyele-Dabengwa clarified.

CcHub and iHub CEO Bosun Tijani revealed more detail about the recent merger of both names. CcHub – iHub will pursue more operating revenue from consulting and VC investing, vs. grants, according to Tijani. The new Nigeria and Kenya based innovation network will also look to bring an Africa startup tour to the U.S. and is considering opening an office in San Francisco, he said.

More Africa-related stories @TechCrunch

Africa can list more gazelles at home than unicorn IPOs abroadKenyan telco Safaricom’s Alpha incubator faces uncertain futureNigeria’s #StopRobbingUs campaign could spur tech advocacy group, CEOs saySahara Reporters founder Sowore remains detained in Nigeria

At the recent TechCrunch Disrupt SF, Senegalese VC investor Marieme Diop suggested that Silicon Valley’s unicorn IPO model might not be right for African startups. The is largely because the …

African tech around the ‘net

Kenya’s BitPesa secures $15M debt funding as it rebrands

SA’s SweepSouth banks $3.95M to expand, launch new services

TLCom hosts first summit for African female tech founders in Nigeria

 

 

 

 

 

 

Sam Altman’s bet against Slack

By Kate Clark

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

This week Kate and Alex broke the discussion into two main themes. The first dealt with early-stage companies, and the second, as you can imagine, later-stage affairs. Don’t worry, we don’t get to SoftBank for quite some time.

Up top, we dug into Kate’s story about Quill, a formerly stealthy company that could be taking on Slack. That or something similar to Slack . Next, we turned to ManiMe, a startup in the beauty space that raised a smaller $2.6 million to take on a market that is valued in the billions.

After that it was time to leave the auspices of the early-stage market and move to, of all things, a public company. GrubHub reported earnings this week. It went poorly. Alex wanted to riff over the company’s earnings report and what it could mean for startups that are competing with GrubHub, a leader in the food delivery space that DoorDash and Postmates would prefer to lead themselves.

What impact GrubHub may have on the highly-valued on-demand companies isn’t clear yet, but will be pretty damn interesting to see when it does land.

Sticking to the later-stage markets, Alex dug into the problems at Wag which is struggling and looking for a sale despite raising a castle of cash from the Vision Fund. Kate followed that up with notes on problems at Katerra. The Information is reporting this week that the business is going through a number of layoffs and we’re wondering if it will suffer the same fate of some of SoftBank’s other investments.

And, finally, the changing face of things at SoftBank itself. The great money spigot is slowly cutting flow. How many unicorns that will strand isn’t yet clear. But surely it can’t be zero.

Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.

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