It’s hard to put a positive spin on terrible situation, but that didn’t stop Goldman Sachs CEO David Solomon earlier today. Asked during a session at the World Economic Forum in Davos about WeWork’s yanked IPO in September, Solomon suggested it was proof that the listing process works, despite that the CFO of Goldman — one of the offering’s underwriters — disclosed last fall that the pulled deal cost the bank a whopping $80 million.
Reuters was on the scene, reporting that Solomon acknowledged the process was “not as pretty as everybody would like it to be” yet also eschewing responsibility, telling those gathered that the “banks were not valuing [WeWork]. Banks give you a model. You say to the company, ‘Well, if you can prove to us that the model actually does what it does, then it’s possible that the company is worth this in the public markets,'” Solomon said.
Investment banks had reportedly courted WeWork’s business by discussing a variety of figures that led cofounder Adam Neumann to overestimate how it might be received by public market shareholders. According to the New York Times, in 2018, JPMorgan was telling Neumann that it could find buyers to value the company at more than $60 billion; while Goldman Sachs said $90 billion was a possibility, and Morgan Stanley — which has been assigned as lead underwriter of many of the buzziest tech offerings over the last decade — reportedly posited that even more than $100 billion was possible.
Ultimately, the IPO was canceled several weeks after Neumann was asked to resign and WeWork’s biggest investor, SoftBank — which itself nearly tripled the company’s private market valuation across funding rounds — stepped in to ostensibly rescue the company (and its now $18.5 billion investment in it.
Solomon isn’t the only one defending some of the frustrating logic of IPO pricing in recent years. This editor sat down in November with Morgan Stanley’s head tech banker Michael Grimes, who has been called “Wall Street’s Silicon Valley whisperer” for landing a seemingly endless string of coveted deals for the bank.
Because Morgan Stanley pulled out of the process of underwriting WeWork’s IPO (reportedly after WeWork rejected its pitch to be the company’s lead underwriter), we talked with Grimes instead about Uber, whose offering last year Morgan Stanley did lead. We asked how Uber could have been told reportedly by investment bankers that its valuation might be as high as $120 billion in an IPO when, as we now know, public market shareholders deemed it worth far less. (Its current market cap is roughly half that amount, at $64 billion.)
Grimes said matter-of-factly that price estimates can routinely be all over the place, explaining that “if you look at how companies are valued, at any given point of time right now, public companies with growth prospects and margins that are not yet at their mature margin, I think you’ll find on average price targets by either analysts who work at banks or buy-side investors that can be 100%, 200% and 300% different from low to high.”
He called that a “typical spread.”
The reason, he said, had to do with each bank’s or analyst’s guess at “penetration.”
“Let’s say, what, 100 million people or so [worldwide] have have been monthly active users of Uber, somewhere in that range,” said Grimes during our sit-down “What percentage of the population is that? Less than 1% or something. Is that 1% going to be 2%, 3%, 6%, 10%, 20%? Half a percent, because people stop using it and turn instead to some flying [taxi]?
“So if you take all those variable, possible outcomes, you get huge variability in outcome. So it’s easy to say that everything should trade the same every day, but [look at what happened with Google]. You have some people saying maybe that is an outcome that can happen here for companies, or maybe it won’t. Maybe they’ll [hit their] saturation [point] or face new competitors.”
Grimes then turned the tables on reporters and others in the industry who wonder how banks could get the numbers so wrong, with Uber but also with a lot of other companies. “It’s really easy to be a pundit and say, ‘It should be higher’ or ‘It should be lower,’” Grimes said. “But investors are making decisions about that every day.”
Besides, he added, “We think our job is to be realistically optimistic” about where things will land. “If tech stops changing everything and software stops eating the world, there probably would be less of an optimistic bias.”
In recent years, the retail category has become one of the biggest and best-funded robotics categories — particularly when coupled with connected verticals like warehouse fulfillment and logistics. Berkshire Grey has flown mostly under the under the radar, but is kicking 2020 off with some pretty sizable funding news.
The Massachusetts-based company just announced a lofty $263 million Series B. The round is led by Softbank, which has taken a particular interest in robotics of late, along with participation from Khosla Ventures, New Enterprise Associates and Canaan.
In spite of having a name that sounds like a financial holdings company, Berkshire Grey has displayed some pretty sophisticated pick and place robots. It’s positioned particularly well in the warehouse space, making it a competitor with the likes of Amazon Robotics and Fetch. Like the others, Berkshire’s pitch is largely around questions of labor shortages in such high intensity jobs, while claiming to increase e-commerce operations by 70% to 80%.
“Our customers from leading enterprises in retail, ecommerce, and logistics are selecting Berkshire Grey as a competitive differentiator,” founder and CEO Tom Wagner said in a release tied to the news. “With our intelligent robotic automation, our clients see faster and more efficient supply chain operations that enable them to address the wants of today’s savvy consumer.”
The funding follows recent rounds by companies like Bossa Nova, Osaro Realtime and a $23 million raise by Soft Robotics earlier this week. Berkshire says the money will go toward increased headcount, acquisitions and a push toward international growth.
One of the biggest opportunities in the new space economy lies in taking the connectivity made possibly by ever-growing communications satellite constellations, and making that useful for things and companies here on Earth. Startup Skylo, which emerged from stealth today with a $103 million Series B funding announcement, is one of the players making that possible in an affordable way.
The funding brings Skylo’s total raised to $116 million, following a $14 million Series A. This new round was led by Softbank Group (which at this point carries a complicated set of connotations) and includes existing investors DCM and Eric Schmidt’s Innovation Endeavors. Skylo’s business is based on connecting Internet of Things (IoT) devices, including sensors, industrial equipment, logistics hardware and more, to satellite networks using the cellular-based Narrowband IoT protocol. Its network is already deployed on current geostationary satellites, too, meaning its customers can get up and running without waiting for any new satellites or constellations with dedicated technology to launch.
Already, Skylo has completed tests of its technology with commercial partners in real-world usage, including partners in private enterprise and government, across industries including fisheries, maritime logistics, automotive and more. The company’s main claim to advantage over other existing solutions is that it can offer connectivity for as little as $1 per seat, along with hardware that sells for under $100, which it says adds up to a cost savings of as much as 95 percent vs. other satellite IoT connectivity available on the market.
Its hardware, the Skylo Hub, is a satellite terminal that connects to its network on board geostationary satellites, acting as a “hot spot” to make that available to standard IoT sensors and devices. It’s roughly 8″ by 8″, can be powered internally via battery or plugged in, and is easy for customers to install on their own without any special expertise.
The company was founded in 2017, by CEO Parth Trivedi, CTO Dr. Andrew Nuttall and Chief Hub Architect Dr. Andrew Kalman. Trivedi is an MIT Aerospace and Astronautical engineering graduate; Nuttal has a Ph.D in Aeronautics from Stanford, and Kalman is a Stanford professor who previously founded CubeSat component kit startup Pumpkin, Inc.
As the global cybersecurity market becomes increasingly crowded, the Start Up Nation remains a bulwark of innovation and opportunity generation for investors and global cyber companies alike. It achieved this chiefly in 2019 by adapting to the industry’s competitive developments and pushing forward its most accomplished entrepreneurs in larger numbers to meet them.
New data illustrates how Israeli entrepreneurs have seized on the country’s reputation for building radically cutting-edge technologies as the number of new Israeli cybersecurity startups addressing nascent sectors eclipses its more traditional counterparts. Moreover, related findings highlight how cybersecurity companies looking to expand beyond their traditional offerings are entering Israel’s cybersecurity ecosystem in larger numbers through highly strategic acquisitions.
Broadly, new findings also reveal the Israeli cybersecurity market’s overall coming of age, seasoned entrepreneurial dominance and greater appetite for longer-term visions and strategies — the latter of which received record-breaking investor backing in 2019.
Space as an investment target is trending upwards in the VC community, but specialist firm Space Angels has been focused on the sector longer than most. The network of angel investors just published its most recent quarterly overview of activity in the space startup industry, revealing that investors put nearly $6 billion in capital into space companies across 2019.
I spoke to Space Angels CEO Chad Anderson about what he’s seen in terms of changes in the industry since Space Angels began publishing this quarterly update in 2017, and about what’s in store for 2020 and beyond as commercial space matures and comes into its own. Informed by data released publicly, SEC filings and investor databases — as well as anonymized and aggregated info from Space Angels’ own due diligence process and portfolio company management — Anderson is among the best-positioned people on either the investment or the operator side to weigh in on the current and future state of the space startup industry.
“2019 was a record year — record number of investments, record number of companies, a record on all these fronts,” Anderson said. “2019 in its own right was a huge year, but then you look at everything that happened over the last decade. We always refer to this last decade as ‘the entrepreneurial space age’ […] and you see everything that’s happened over the last 10 years, you see it all culminating in a record year like this one.”
E-commerce now accounts for 14% of all retail sales, and its growth has led to a rise in the fortunes of startups that build tools to enable businesses to sell online. In the latest development, a company called VTEX — which originally got its start in Latin America helping companies like Walmart expand their business to new markets with an end-to-end e-commerce service covering things like order and inventory management, front-end customer experience and customer service — has raised $140 million in funding, money it will be using to continue taking its business deeper into more international markets.
The investment is being led by SoftBank, specifically via its Latin American fund, with participation also from Gávea Investimentos and Constellation Asset Management. Previous investors include Riverwood and Naspers; Riverwood continues to be a backer, the company said.
Mariano Gomide, the CEO who co-founded VTEX with Geraldo Thomaz, said the valuation is not being disclosed, but he confirmed that the founders and founding team continue to hold more than 50% of the company. In addition to Walmart, VTEX customers include Levi’s, Sony, L’Oréal and Motorola . Annually, it processes some $2.4 billion in gross merchandise value across some 2,500 stores, growing 43% per year in the last five years.
VTEX is in that category of tech businesses that has been around for some time — it was founded in 1999 — but has largely been able to operate and grow off its own balance sheet. Before now, it had raised less than $13 million, according to PitchBook data.
This is one of the big rounds to come out of the relatively new SoftBank Innovation Fund, an effort dedicated to investing in tech companies focused on Latin America. The fund was announced earlier this year at $2 billion and has since expanded to $5 billion. Other Latin American companies that SoftBank has backed include online delivery business Rappi, lending platform Creditas and property tech startup QuintoAndar.
The common theme among many SoftBank investments is a focus on e-commerce in its many forms (whether that’s transactions for loans or to get a pizza delivered), and VTEX is positioned as a platform player that enables a lot of that to happen in the wider marketplace, providing not just the tools to build a front end, but to manage the inventory, ordering and customer relations at the back end.
“VTEX has three attributes that we believe will fuel the company’s success: a strong team culture, a best-in-class product and entrepreneurs with profitability mindset,” said Paulo Passoni, managing investment partner at SoftBank’s Latin America fund, in a statement. “Brands and retailers want reliability and the ability to test their own innovations. VTEX offers both, filling a gap in the market. With VTEX, companies get access to a proven, cloud-native platform with the flexibility to test add-ons in the same data layer.”
Although VTEX has been expanding into markets like the U.S. (where it acquired UniteU earlier this year), the company still makes some 80% of its revenues annually in Latin America, Gomide said in an interview.
There, it has been a key partner to retailers and brands interested in expanding into the region, providing integrations to localise storefronts, a platform to help brands manage customer and marketplace relations, and analytics, competing against the likes of SAP, Oracle, Adobe and Salesforce (but not, he said in answer to my question, Commercetools, which builds Shopify -style API tools for mid and large-sized enterprises and itself raised $145 million last month).
E-commerce, as we’ve pointed out, is a business of economies of scale. Case in point: While VTEX processes some $2.5 billion in transactions annually, it makes a relatively small return on that — $69 million, to be exact. This, plus the benefit of analytics on a wider set of big data (another economy of scale play), are two of the big reasons VTEX is now doubling down on growth in newer markets like Europe and North America. The company now has 122 integrations with localised payment methods.
“At the end of the day, e-commerce software is a combination of knowledge. If you don’t have access to thousands of global cases you can’t imbue the software with knowledge,” Gomide said. “Companies that have been focused on one specific region are now realising that trade is a global thing. China has proven that, so a lot of companies are now coming to us because their existing providers of e-commerce tools can’t ‘do international.’ ” There are very few companies that can serve that global approach and that is why we are betting on being a global commerce platform, not just one focused on Latin America.”
A commons tactic in both amateur and professional sports – and even in competitions as mundane as a casual board game night – is trash talk. But the negative effect of trash talk may have less to do with the skill of the repartee involved, and more with just the fact that it’s happening at all. A new study conducted by researchers at Carnegie Mellon University suggests that even robots spitting out pretty lame pre-programmed insults can have a negative impact on human players.
CMU’s study involved programming one of SoftBank’s Pepper humanoid robots to deliver scorchers like “I have to say you are a terrible player” to a group of 40 participants, who were playing the robot in a game called “Guards and Treasures,” which is a version of a strategy game often used for studying rationality. During the course of the experiment, participants played 35 times against the robot – some getting bolstering, positive comments form the robot, while others were laden with negative criticism.
Both groups of participants improved at the game over time – but the ones getting derided by the bots didn’t score as highly as the group that was praised.
It’s pretty well-established that people excel when they receive encouragement from other – but that’s generally meant other humans. This study provides early evidence that people could get similar benefits from robotic companions – even ones that don’t look particularly human-like. The researchers still want to do more investigation into whether Pepper’s humanoid appearance affected the outcome, vs. say a featureless box or an industrial robot acting as the automaton opponent and doling out the same kind of feedback.
The results of this and related research could be hugely applicable to areas like at-home care, something companies including Toyota are pursuing to address the needs of an aging population. It could also come into play in automated training applications, both at work and in other settings like professional sports.
WeWork is reportedly being investigated by the New York State Attorney General. According to Reuters, the NYAG’s questions include if WeWork founder and former CEO Adam Neumann engaged in self-dealing.
A WeWork spokesperson said in an email that “we have received an inquiry from the office of the New York State Attorney General and are cooperating in the matter.” TechCrunch also contacted the New York State Attorney General’s office for comment. WeWork is headquartered in New York City.
This comes less than a week after Bloomberg reported WeWork is the subject of a U.S. Securities and Exchange Commission inquiry into potential rule violations related to its cancelled IPO.
WeWork’s parent company, The We Company, announced on Sept. 30 that it was withdrawing its S-1 filing for an initial public offering, shortly after Neumann stepped down as CEO. In addition to questions about the company’s financial state, red flags for investors included that Neumann had borrowed against his WeWork shares and leased properties he owned back to the company.
An entity Neumann controlled also sold the company the right to use the word “We” for $5.9 million, though he later asked the company to unwind the agreement and returned the money after public criticism.
After receiving a lifeline from investor SoftBank worth up to $8 billion, WeWork is now engaging in major cost-cutting measures, including layoffs at Meetup, which it acquired for $200 million in 2017.
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.
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.
SoftBank Corp. announced today that it has reached an agreement to merge with Z Holdings (the SoftBank subsidiary formerly known as Yahoo Japan) and Line Corp., in a move they hope will better position them against competitors. The merger, which was first reported by Nikkei last week, is expected to be completed in October 2020.
SoftBank and Naver, the owner of Line, will each hold 50% of a new holding company that will operate Line and Z Holdings. By uniting, SoftBank and Naver hope that they will better position search portal Yahoo Japan, Line’s messaging app and their other businesses to compete against rivals from the United States and China.
In its announcement, SoftBank said “in the Internet market, overseas companies, especially those based in the United States and China, are overwhelmingly dominant, and even when comparing the size of operations, there is currently a big difference between such overseas companies and those in other Asian countries, other than China.”
Line is one of the most popular messaging apps in Japan, Taiwan and Thailand, but has struggled to compete in other markets, despite offering a wide array of services that includes Line Pay, Line Taxi and Line Music. Yahoo Japan is one of the country’s biggest search engines, but it competes with Google, and its other businesses, including e-commerce, are up against rivals like Rakuten and Alibaba.
Once merged, SoftBank and Naver say cooperation between their subsidiaries and investment portfolio companies will enable them to make more advances in artificial intelligence and other areas, including search, advertising and payment and financial services.
The merger would entail taking Line private by acquiring all outstanding Line shares, options and convertible bonds. The tender offer for Line’s remaining shares will be 5,200 yen, a 13.41% premium over the closing price of Line’s common shares, listed on the Tokyo Stock Exchange, on November 13, before reports came out about the potential merger.
SoftBank’s Vision Fund has single-handedly changed the game when it comes to tech startup investment. And that’s why I’m excited to announce that SoftBank Vision Fund investment director Carolina Brochado is joining us at TechCrunch Disrupt Berlin.
Carolina Brochado isn’t a newcomer when it comes to VC investment. She’s worked for years at Atomico in London. Originally from Brazil, she first joined Atomico as an intern in 2012 while studying her MBA at Columbia Business School.
After her MBA, she joined an e-commerce startup as head of operations. Unfortunately, that startup is now defunct. But she used that opportunity to join Atomico once again, as a principle. She became a partner at Atomico in 2016 and left the firm late last year.
At SoftBank’s Vision Fund, she focuses on fintech, digital health and marketplace startups. Just to give you an idea, some of her past investments with both Atomico and SoftBank include LendInvest, Gympass, Hinge Health, Ontruck and Rekki.
More generally, given the size of SoftBank’s Vision Fund ($100 billion), it has had a huge impact on the growth trajectory of some companies. I’m personally curious to know SoftBank’s approach as board members, whether they get involved in the strategy of those companies or let the executive teams make decisions on their own.
Buy your ticket to Disrupt Berlin to listen to this discussion and many others. The conference will take place on December 11-12.
In addition to panels and fireside chats, like this one, new startups will participate in the Startup Battlefield to compete for the highly coveted Battlefield Cup.
Carolina focuses on fintech, digital health and marketplaces. Prior to joining Softbank, Carolina was a Partner at Atomico, where she sourced and collaborated with portfolio companies for almost five years. Some of her investments included Lendinvest, Gympass, Hinge Health, Ontruck and Rekki.
Previously Carolina has worked as Head of Ops to a now defunct gifting e-commerce start-up, as an investor at Chicago-based private equity firm Madison Dearborn Partners and within Consumer/Retail Investment Banking at Merrill Lynch in New York.
Carolina has a Bachelor of Science degree in Foreign Service from Georgetown University and an MBA from Columbia Business School. She is originally from Brazil.
A UK PR firm pitching to run an account for Ola has proposed running a campaign to politicize ride-hailing as a tactic to shift regulations in its favor.
The approach suggests that, despite the appearance of ride-hailing platforms taking a more conciliatory position with regulators that are now wise to earlier startup tactics in this space, there remains a calculus involving realpolitik, propaganda and high-level lobbying between companies that want to enter or expand in markets, and those who hold the golden tickets to do so.
In 2017 Estonia-based ride-hailing startup Taxify tried to launch in London ahead of regulatory approval, for example, but city authorities clamped down straight away. It was only able to return to the UK capital 21 months later (now known as Bolt).
In Western markets ride-hailing companies are facing old and new regulatory roadblocks that are driving up costs and creating barriers to growth. In some instances unfavorable rule changes have even led companies to pull out of cities or regions all together. Even as there are ongoing questions around the employment classification of the drivers these platforms depend on to deliver a service.
The PR pitch, made by a Tufton Street-based PR firm called Public First, suggests Ola tackle legislative friction in UK regions with a policy influence campaign targeted at local voters.
The SoftBank-backed Indian ride-hailing startup launched in the U.K. in August, 2018 and currently offers services in a handful of regional locations including South Wales, Merseyside and the West Midlands. Most recently it gained a licence to operate in London, and last month launched services in Coventry and Warwick — saying then that passengers in the UK had clocked up more than one million trips since its launch.
Manchester is also on its target list — and features as a focus in the strategy proposal — though an Ola spokesman told us it has no launch date for the city yet. The company met with Manchester’s mayor, Andy Burnham, during a trade mission to India last month.
— Leena Paul (@leenavittal) October 9, 2019
The Public First proposal suggests a range of strategies for Ola to get local authorities and local politicians on-side, and thus avoid problems in potential and future operations, including the use of engagement campaigns and digital targeting to mobilize select coalitions around politicized, self-serving talking points — such as claims that public transport is less safe and convenient; or that air quality improves if fewer people drive into the city — in order to generate pressure on regulators to change licensing rules.
Another suggestion is to position the company less as a business, and more as an organization representing tens of thousands of time-poor people.
Public First advocates generally for the use of data- and technology-driven campaign methods, such as microtargeted digital advertising, as more effective than direct lobbying of local government officials — suggesting using digital tools to generate a perception that an issue is politicized will encourage elected representatives to do the heavy lifting of pressuring regulators because they’ll be concerned about losing votes.
The firm describes digital campaign elements as “crucial” to this strategy.
“Through a small, targeted online digital advertising campaign in both cities, local councillors’ email inboxes would begin to fill with requests from a number of different people (students, businesses, and other members of [a commuter advocacy group it proposes setting up to act as a lobby vehicle]) for the local authority to change its approach on local taxi licensing — in effect, to make it easier for Ola to launch,” it offers as a proposed strategy for building momentum behind Ola in Manchester and Liverpool.
Public First confirmed it made the pitch to Ola but told us: “This was merely a routine, speculative proposal of the sort we generate all the time as we meet people.”
“Ola Cabs has no relationship whatsoever with Public First,” it added.
A spokesperson for Ola also confirmed that it does not have a business relationship with Public First. “Ola has never had a relationship with Public First, does not currently have one and nor will it in the future,” the spokesman told us.
“Ola’s approach in the UK has been defined by working closely and collaborating with local authorities and we are committed to being fully licensed in every area we operate,” he added, suggesting the strategy it’s applying is the opposite of what’s being proposed.
We understand that prior to Public First pitching their ideas to a person working in Ola’s comms division, Ola’s director of legal, compliance and regulation, Andrew Winterton, met with the firm over coffee — in an introductory capacity. But that no such tactics were discussed.
It appears that, following first contact, Public First took the initiative to draw up the strategy suggesting politicizing ride-hailing in key target regions which it emailed to Winterton but only presented to a more junior Ola employee in a follow-up meeting the legal director did not attend.
Ola has built a major ride-hailing business in its home market of India — by way of $3.8BN in funding and aggressive competition. Since 2018 it has been taking international steps to fuel additional growth. In the U.K. its approach to date has been fairly low key, going to cities and regional centers outside of high-profile London first, as well as aiming to serve areas with big Indian populations to help recruit riders and drivers.
It’s a strategy that’s likely been informed by being able to view the track record of existing ride-hailing players — and avoid Uber-style regulatory blunders.
The tech giant was dealt a major shock by London’s transport regulator in 2017, when TfL denied it a licence renewal — citing concerns over Uber’s approach to passenger safety and corporate governance, including querying its explanation for using proprietary software that could be used to evade regulatory oversight.
The Uber story looks to be the high water mark for blitzscaling startup tactics that relied on ignoring or brute forcing regulators in the ride-hailing category. Laws and local authorities have largely caught up. The name of the game now is finding ways to get regulators on side.
The fact that strategic proposals such as Public First’s to Ola are considered routine enough to put into a speculative pitch is interesting, given how the lack of transparency around the use of online tools for spreading propaganda is an issue that’s now troubling elected representatives in parliaments all over the world. Tools such as those offered by Facebook’s ad platform.
In Facebook’s case the company provides only limited visibility into who is running political and issue-based ads on its platform. The targeting criteria being used to reach individuals is also not comprehensively disclosed.
Some of the company’s own employees recently went public with concerns that its advanced targeting and behavioral-tracking tools make it “hard for people in the electorate to participate in the public scrutiny that we’re saying comes along with political speech”, as they put it.
At the same time, platforms providing a conduit for corporate interests to cheaply and easily manufacture ‘politicized’ speech looks to be another under-scrutinized risk for democratic societies.
Among the services Public First lists on its website are “policy development”, “qualitative and quantitative opinion research”, “issues-based campaigns”, “coalition-building” and “war gaming”. (Here, for example, is a piece of work the firm carried out for Google — where its analysis-for-hire results in a puffy claim that the tech giant’s digital services are worth at least $70BN in annual “economic value” for the UK.)
Public First’s choice of office location, in Tufton Street, London, is also notable as the area is home to an interlinked hub of right-leaning think tanks, such as the free market Center for Policy Studies and pro-Brexit Initiative for Free Trade. These are lobby vehicles dressed up as policy wonks which put out narratives intended to influence public opinion and legislation in a particular direction without it being clear who their financial backers are.
Some of the publicity strategies involved in this kind of work appear to share similarities with tactics used by Big Tobacco to lobby against anti-smoking legislation, or fossil fuel interests’ funding of disinformation and astroturfing operations to create a perception of doubt around consensus climate science.
“A lot of what used to get sold in this space essentially was access [to policymakers],” says one former public relations professional, speaking on background. “What you’re seeing an increasingly amount of now is the ‘technification’ of that process. Everyone’s using those kinds of tools — clearly in terms of trying to understand public sentiment better and that kind of thing… But essentially what they’re saying is we can set up a set of politicized issues so that they can benefit you. And that’s an interesting change. It’s not just straight defence and attack; promote your brand vs another. It’s ‘okay, we’re going to change the politics around an issue… in order to benefit your outcome’. And that’s fairly sophisticated and interesting.”
Mat Hope, editor of investigative journalism outlet DeSmog — which reports on climate-related misinformation campaigns — has done a lot of work focused on Tufton Street specifically, looking at the impact the network’s ‘policy-costumed’ corporate talking points have had on UK democracy.
“There is a set of organisations based out of offices in and around 55 Tufton Street in Westminster, just around the corner from the Houses of Parliament, which in recent years have had an outsized impact on British democracy. Many of the groups were at the forefront of the Leave campaign, and are now pushing for a hard or no-deal Brexit,” he told us, noting that Public First not only has offices nearby but that its founders and employees “have strong ties to other organisations based there”.
“The groups regularly lobby politicians in the interests of specific companies or big industry through the guise of grassroots or for-the-people campaigns,” he added. “One way they do this is through targeting adverts or social media posts, using groups with benign sounding names. This makes it hard to trace the campaign back to any particular company, and gives the issue an impression of grassroots support that is, on the whole, artificial.”
Ad platforms such as Facebook which profit by profiling people offer cheap yet powerful tools for corporate interests to identify and target highly specific sub-sets of voters. This is possible thanks to the vast amounts of personal data they collect — an activity that’s finally coming under significant regulatory scrutiny — and custom ad tools such as lookalike audiences, all of which enables behavioral microtargeting at the individual user/voter level.
Lookalike audiences is a powerful ad product that allows Facebook advertisers to upload customer data yet also leverage the company’s pervasive people-profiling to access new audiences that they do not hold data on but who have similar characteristics to their target. These so-called lookalike audiences can be tightly geotargeted, as well as zeroed in on granular interests and demographics. It’s not hard to see how such tools can be applied to selectively hit up only the voters most likely to align with a business’ interests.
The upshot is that an online advertiser is able to pay little to tap into the population-scale reach and vast data wealth of platform giants — turning firehose power against individual voters who they deem — via focus group work or other voter data analysis — to be aligned with a corporate agenda. The platform becomes a propaganda machine for manufacturing the appearance of broad public engagement and grassroots advocacy for a self-interested policy change.
The target voter, meanwhile, is most likely none the wiser about why they’re seeing politicized messaging. It’s that lack of transparency that makes the activity inherently anti-democratic.
The UK’s Digital, Culture, Media and Sport committee raised Facebook’s lookalike audiences as a risk to democracy during a recent enquiry into online disinformation and digital campaigning. It went on to recommend an outright ban on political microtargeting to lookalike audiences online. Though the UK government has so far failed to act on that or its fuller suite of recommendations. (Nor has Facebook responded to increasingly loud calls from politicians and civic society to ban political and issue ads altogether.)
Even a code of conduct published by the International Public Relations Association (IPRA) emphasizes transparency — with member organizations committing to “be open and transparent in declaring their name, organisation and the interest they represent”. (Albeit, the IPRA’s member list is not itself public.)
While online targeting of social media users remains a major problem for democracies, on account of the lack of transparency and individual consent to targeting (or, indeed, to data-based profiling), in recent years we’ve also seen more direct efforts by companies to use their own technology tools to generate voter pressure.
Examples such as ride-hailing giant Uber which, under its founding CEO, Travis Kalanick, became well known for a ‘push button’ approach to mobilizing its user base by sending calls to action to lobby against unfavorable regulatory changes.
Airbnb has also sought to use its platform-reach to beat against local authority rule changes that threaten its ‘home sharing’ business model.
However it’s the opaque tech-fuelled targeting enabled by ad platforms like Facebook that’s far more problematic for democracies as it allows vested interests to generate self-interested pressure remotely — including from abroad — while remaining entirely shielded from view.
Fixing this will require regulatory muscle to enforce existing laws around personal data collection (at least where such laws exist) — and doing so in a way that prevents microtargeting from being the cheap advertising default. Democracies should not allow their citizens to be mirrored in the data because it sets them up to be hollowed out; their individuals aggregated, classified and repackaged as all-you-can-eat attention units for whoever is paying.
And likely also legislation to set firm boundaries around the use of political and campaigning/issue ads online. Turning platform power against the individual is inherently asymmetrical. It’s never going to be a fair fight. So fair ground rules for digital political campaigning — and a proper oversight regime to enforce them — are absolutely essential.
Another democratic tonic is transparency. Which means raising awareness about tech-fuelled tactics that are designed to generate and exploit data-based asymmetries in order to hack and manipulate public opinion. Such skewed stuff only really works when the target is oblivious to what’s afoot. In that respect, every little disclosure of these ‘dark arts’ and the platforms that enable them provides a much-needed counter boost for critical thinking and democracy.
Recently reelected, Indonesian President Joko Widodo announced a desire to move the nation’s capital from Jakarta to the East Kalimantan region, citing environmental concerns, the most exigent of these being the fact that Jakarta is literally sinking due to the uncontrolled extraction of groundwater. Widodo said he wished to separate Indonesia’s government from its business and economic hub in Jakarta.
However, what would a move from Jakarta do to Indonesia’s burgeoning startup economy?
According to Widodo, studies have determined that the best site for the proposed new capital is between North Penajam Paser and Kutai Kertanegara, both located in East Kalimantan. The basis of this selection is due to studies highlighting the region’s relative protection from natural disasters, especially when compared to other regions. This would definitely be a benefit for the governmental heart of Indonesia, ensuring continuous administrative functions in a disaster-prone region. Other governments have separated administrative centers from their economic hubs with varying degrees of success, with some examples being Brazil’s creation of Brasília, as well as Korea’s projected move from Seoul to Sejong.
What is most interesting to note from prior examples is that these newer branched-out cities are non-surprisingly, heavily government-centric. In Brasília, roles tied to the government make up nearly 40% of all jobs, while in Sejong, a lack of facilities like public transit and commercial mall space cause many to commute into Sejong for government work, instead of permanently settling in the area. Given the semi-undeveloped nature of East Kalimantan, these anecdotes are quite troubling if the government is actually moving to North Penajam Paser or Kutai Kertanegara.
These facts raise the question of economic impacts of such governmental moves. In fact, one may even opine that while these moves do allow for governmental growth, ultimately, they may hurt the country economically due to a divestment between both government and economic hubs. In this specific instance, it is most important to analyze the impact of such a move on Indonesia’s startup economy, as the nation is one the world’s leaders in startup growth.
Indonesia has emerged as a startup hub within Southeast Asia in recent years, with its population of over 260 million marking it as the world’s fourth-most populous country. Additionally, Indonesia’s mobile-first population has enabled the full embrace of the internet era, with 95% of all internet users in Indonesia connected to the web via a mobile device.
Similarly, startup growth has boomed in the island archipelago, with several Indonesian-based unicorns disrupting local, regional, and global economies. Softbank-backed ecommerce giant Tokopedia is currently in talks for a pre-IPO funding round, while emerging super-app Gojek controls significant portions of the ride-sharing industry in Asia, simultaneously expanding into separate industries to include digital payments, food delivery, and even video-streaming. Additionally, online travel portal Traveloka (in which Expedia has a minority stake) has recently entered the financial services space, furthering its impact within Asia. These specific examples of high-growth startups demonstrate a population hungry for innovation, further driving the developing startup economy.
WeWork’s efforts to cut costs following the ouster of its chief executive officer and a delayed initial public offering looks to be impacting its subsidiaries. Meetup, which WeWork acquired for a reported $200 million in 2017, announced a round of layoffs this morning, TechCrunch has learned.
The company, which helps people foster in-person connections by facilitating events across the globe, has shed as much as 25% of its workforce, most of which were employees of the company’s engineering department, sources tell TechCrunch.
“Meetup’s top priority is building the best possible product for our community of more than 44 million members around the world,” a representative of the company said in a statement provided to TechCrunch. “Today we made some organizational changes with that goal in mind, including restructuring across some of our departments.”
The news follows WeWork’s own well-documented attempts at restructuring its high-loss business. Late last month, SoftBank provided the over-valued co-working business a much-needed lifeline in the form of a $5 billion loan, a $3 billion tender offer and another $1.5 billion in equity funding, according to The Wall Street Journal. That’s in addition to the billions already invested by the Japanese telecom giant, which now owns a roughly 80% stake. SoftBank’s mountain of cash had previously valued WeWork at an eye-popping $47 billion; the latest investment package, however, valued the company at just $8 billion.
Understandably, WeWork’s new leadership (former vice chairman Sebastian Gunningham and former president and chief operating officer Artie Minson are serving as co-CEOs) seem to be hyper-focused on its new cost-cutting strategy. Multiple reports have indicated the business is weighing sales of several of its subsidiaries, including Meetup, Managed by Q and Conductor. We’ve asked Meetup whether its parent company enforced the staff cuts and will update this story if we hear back.
As for WeWork, it must make a concerted effort to boost its balance sheet in the next few months if it plans to stay committed to a 2020 IPO. The company initially revealed its IPO prospectus in August, disclosing revenue north of $1.5 billion in the six months ending June 30 on losses of $904.6 million. Shortly after, its co-founder and former CEO Adam Neumann’s misbehaviors were published in a number of incriminating stories by The Wall Street Journal and other outlets. Neumann’s trashed reputation coupled with WeWork’s mounting losses forced the company to replace its founding CEO and shelve its IPO, which would have been the second-largest offering of 2019 behind only Uber.
Meetup, founded in 2002, was one of the first IRL social networks. Today’s cuts are not the first since WeWork came into the picture, according to earlier reporting by Gizmodo. Meetup shed roughly 10% of its staff amid negotiations for the acquisition and underwent cultural changes as managers pushed for growth and “more aggressiveness in the workplace.”
The future of Meetup is unclear. WeWork may move forward with a sale of the business or pressure its own cost-cutting measures on the company. In a recent email to Meetup members, CEO David Siegel wrote that he appreciated the recent outpouring of support from the community, as it became apparent the company was in a precarious position because of its owner.
“As you may be aware, there has been significant news about our parent company, WeWork, and what this means for the future of Meetup,” Siegel wrote. “As Meetup’s CEO, I want to personally tell you we’re as committed as ever to bringing people together in person.
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 wrote about how SoftBank is screwing up. Before that, I noted All Raise’s expansion, Uber the TV show and the unicorn from down under.
Uber Head of Payments Peter Hazlehurst addresses the audience during an Uber products launch event in San Francisco, California, on September 26, 2019. (Photo by Philip Pacheco / AFP) (Photo credit should read PHILIP PACHECO/AFP/Getty Images)
The sheer number of startup players moving into banking services is staggering,” writes my Crunchbase News friends in a piece titled “Why Is Every Startup A Bank These Days.”
I’ve been asking myself the same question this year, as financial services business like Brex, Chime, Robinhood, Wealthfront, Betterment and more raise big rounds to build upstart digital banks. North of $13 billion venture capital dollars have been invested in U.S. fintech companies so far in 2019, up from $12 billion invested in 2018.
This week, one of the largest companies to ever emerge from the Silicon Valley tech ecosystem, Uber, introduced its team focused on developing new financial products and technologies. In a vacuum, a multibillion-dollar public company with more than 22,000 employees launching one new team is not big news. Considering investment and innovation in fintech this year, Uber’s now well-documented struggles to reach profitability and the company’s hiring efforts in New York, a hotbed for financial aficionados, the “Uber Money” team could indicate much larger fintech ambitions for the ride-hailing giant.
As it stands, the Uber Money team will be focused on developing real-time earnings for drivers accessed through the Uber debit account and debit card, which will itself see new features, like 3% or more cash back on gas. Uber Wallet, a digital wallet where drivers can more easily track their earnings, will launch in the coming weeks too, writes Peter Hazlehurst, the head of Uber Money.
This is hardly Uber’s first major foray into financial services. The company’s greatest feature has always been its frictionless payments capabilities that encourage riders and eaters to make purchases without thinking. Uber’s even launched its own consumer credit card to get riders cash back on rides. It’s no secret the company has larger goals in the fintech sphere, and with 100 million “monthly active platform consumers” via Uber, Uber Eats and more, a dedicated path toward new and better financial products may not only lead to happier, more loyal drivers but a company that’s actually, one day, able to post a profit.
The TechCrunch team is heading to Berlin again this year for our annual event, TechCrunch Disrupt Berlin, which brings together entrepreneurs and investors from across the globe. We announced the agenda this week, with leading founders including Away’s Jen Rubio and UiPath’s Daniel Dines. Take a look at the full agenda.
This week on Equity, I was in studio while Alex was remote. We talked about a number of companies and deals, including a new startup taking on Slack, Wag’s woes and a small upstart disrupting the $8 billion nail services industry. Listen to the episode here.
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.