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SpaceX’s Starship SN4 launch vehicle prototype explodes after static engine fire test

By Darrell Etherington

SpaceX had just conducted yet another static fire test of the Raptor engine in its Starship SN4 prototype launch vehicle on Friday when the test vehicle exploded on the test stand. This was the fourth static fire test of this engine on this prototype, so it’s unclear what went wrong vs. other static fire attempts.

This was a test in the development of Starship, a new spacecraft that SpaceX has been developing in Boca Chica, Florida. Eventually, the company hopes to use it to replace its Falcon 9 and Falcon Heavy rocket, but Starship is still very early in its development phase, whereas those vehicles are flight-proven, multiple times over.

SpaceX had just secured FAA approval to fly its Starship prototype for short, suborbital test flights earlier this week. The goal was to fly this SN4 prototype for short distances following static fire testing, but that clearly won’t be possible now, as the vehicle appears to have been completely destroyed in the explosion following Friday’s test, as you can see below in the stream from NASASpaceflight.com.

The explosion occurred around 1:49 PM local time in Texas, roughly two minutes after it had completed its engine test fire. We’ve reached out to SpaceX to find out more about the cause of today’s incident, and whether anyone was potentially hurt in the explosion. SpaceX typically takes plenty of safety precautions when running these tests, including ensuring the area is well clear of any personnel or other individuals.

This isn’t the first time one of SpaceX’s Starship prototypes has met a catastrophic end; a couple of previous test vehicles succumbed to pressure testing while being put through their paces. This is why space companies test frequently and stress test vehicles during development – to ensure that the final operational vehicles are incredibly safe and reliable when they need to be.

SpaceX is already working on additional prototypes, including assembling SN5 nearby in Boa Chica, so it’s likely to resume its testing program quickly once it can clear the test stand and move in the newest prototype. This is a completely separate endeavor from SpaceX’s work on the Commercial Crew program, so that historic first test launch with astronauts on board should proceed either Saturday or Sunday as planned, depending on weather.

Twitter, Reddit challenge US rules forcing visa applicants to disclose their social media handles

By Zack Whittaker

Twitter and Reddit have filed an amicus brief in support of a lawsuit challenging a U.S. government rule change compelling visa applicants to disclose their social media handles.

The lawsuit, brought by the Knight First Amendment Institute at Columbia University, the Brennan Center for Justice and law firm Simpson Thacher & Bartlett, seeks to undo both the State Department’s requirement that visa applicants must disclose their social media handles prior to obtaining a U.S. visa, as well as related rules over the retention and dissemination of those records.

Last year, the State Department began asking visa applicants for their current and former social media usernames, a move that affects millions of non-citizens applying to travel to the United States each year. The rule change was part of the Trump administration’s effort to expand its “enhanced” screening protocols. At the time, it was reported that the information would be used if the State Department determines that “such information is required to confirm identity or conduct more rigorous national security vetting.”

In a filing supporting the lawsuit, both Twitter and Reddit said the social media policies “unquestionably chill a vast quantity of speech” and that the rules violate the First Amendment rights “to speak anonymously and associate privately.”

Twitter and Reddit, which collectively have more than 560 million users, said their users — many of which don’t use their real names on their platforms — are forced to “surrender their anonymity in order to travel to the United States,” which “violates the First Amendment rights to speak anonymously and associate privately.”

“Twitter and Reddit vigorously guard the right to speak anonymously for people on their platforms, and anonymous individuals correspondingly communicate on these platforms with the expectation that their identities will not be revealed without a specific showing of compelling need,” the brief said.

“That expectation allows the free exchange of ideas to flourish on these platforms.”

Jessica Herrera-Flanigan, Twitter’s policy chief for the Americas, said the social media rule “infringes both of those rights and we are proud to lend our support on these critical legal issues.” Reddit’s general counsel Ben Lee called the rule an “intrusive overreach” by the government.

It’s not known how many, if any, visa applicants have been denied a visa because of their social media content. But since the social media rule went into effect, cases emerged of approved visa holders denied entry to the U.S. for other people’s social media postings. Ismail Ajjawi, a then 17-year-old freshman at Harvard University, was turned away at Boston Logan International Airport after U.S. border officials searched his phone after taking issue with social media postings of Ajjawi’s friends — and not his own.

Abed Ayoub, legal and policy director at the American-Arab Anti-Discrimination Committee, told TechCrunch at the time that Ajjawi’s case was not isolated. A week later, TechCrunch learned of another man who was denied entry to the U.S. because of a WhatsApp message sent by a distant acquaintance.

A spokesperson for the State Department did not immediately comment on news of the amicus brief.

SpaceX gets FAA permission to fly its Starship spacecraft prototype

By Darrell Etherington

SpaceX has received authorization from the Federal Aviation Administration (FAA) to fly suborbital missions with its Starship prototype spacecraft, paving the way for test flights at its Boca Chica, Texas site. SpaceX has been hard at work readying its latest Starship prototype for low-altitude, short duration controlled flight tests, and conducted another static engine fire test of the fourth iteration of its in-development spacecraft earlier today.

Officially, the FAA has granted SpaceX permission to conduct what it terms “reusable launch vehicle” missions, which essentially means that the Starship prototype is now cleared to take-off from, and land back at, the launch site SpaceX operates in Boca Chica. The Elon Musk-led space company has already conducted similar tests, but previously used its ‘Starhopper’ early prototype, which was smaller than the planned production Starship, and much more rudimentary in design. It was basically used to prove out the capabilities of the Raptor engine that SpaceX will use to propel Starship, and only for a short hop test using one of those engines.

Since that flight last year, SpaceX has developed multiple iterations of a full-scale prototype of Starship, but thus far they haven’t gotten back to the point where they’re actively flying any of those. In fact, multiple iterations of the Starship prototype have succumbed during pressure testing – though SN4, the version currently being prepared for a test flight, has passed not only pressure tests, but also static test fires of its lone Raptor engine.

The plan now is to fly this one for a short ‘hop’ flight similar to the one conducted by Starhopper, with a maximum altitude of around 500 feet. Should that prove successful, the next version will be loaded with more Raptor engines, and attempt a high altitude test launch. SpaceX is quickly building newer version of Starship in succession even as it proceeds with testing the completed prototypes, in order to hopefully shorten the total timespan of its development.

There’s something of a clock that SpaceX is working against: It was one of three companies that received a contract award from NASA to develop and build a human lander for the agency’s Artemis program to return to the Moon. NASA aims to make that return trip happen by 2024, and while the contract doesn’t necessarily require that each provided have a lander ready in that timeframe, it’s definitely a goal, if only for bragging rights among the three contract awardees.

Going to war with Twitter, Trump threatens critical social media legal protections

By Taylor Hatmaker

Accusing Twitter of censorship for adding a contextual label to false claims he made about the 2020 election process, President Trump has again declared war on social media companies.

After the White House told reporters that the president would soon announce an executive order “pertaining to social media,” the draft of that order is out in circulation. We’ve reviewed the draft, and while its contents are somewhat shocking by the standards of a normal administration, this isn’t the first time we’ve seen the Trump administration lash out at social media companies over accusations of political bias. In fact, we may be seeing the same executive order now that circulated in draft form last year.

A draft of an executive order is just that: a draft. Until the administration actually introduces or signs an order, its wishes — and threats — should be taken with a grain of salt. But we can get an idea of what this White House has in mind for punishing social media companies for ongoing unfounded claims of anti-conservative censorship.

The president’s draft order tries to exert control over social media companies in a few ways. The most ominous of those is by attacking a law known as Section 230 of the Communications Decency Act. That law, often regarded as the legal infrastructure for the social internet, shields online platforms from legal liability for the content their users create. Without the law, Twitter or Facebook or YouTube (or Yelp or Reddit or any website with a comments section, including this one) could be sued for the stuff their users post.

Whether you think they should be held more accountable for their content or not, in a world without Section 230, social media companies would never have been able to scale into the services we use today.

The draft order attacks this legal provision by claiming that that part of the law means that “an online platform that engaged in any editing or restriction of content posted by others thereby became itself a ‘publisher,'” implying that a company would then be legally liable for things its users say. This is a misleading interpretation at best and one that seems specifically intended to let the White House intimidate companies like Twitter into moderating platforms even less.

This interpretation is a willful inversion of what the law really intends. Sen. Ron Wyden (D-OR), who co-authored Section 230, often says that the law provides companies with both a sword and a shield. The “shield” protects companies from legal liability and the “sword” allows them to make moderation decisions without facing liability for that either.

While Trump is trying to intimidate social media companies into doing even less moderation — such as Twitter labeling the falsehood he tweeted — the consensus beyond this politically expedient viewpoint is that social media should actually be removing and contextualizing more of the potentially harmful content on their platforms.

“Members across the spectrum, including far-right House and Senate leaders, are agitating for government regulation of internet platforms,” Wyden wrote in a prescient TechCrunch op-ed two years ago calling for tech companies to step up or face an existential threat.

“Even if the government doesn’t take the dangerous step of regulating speech, just eliminating the [Section] 230 protections is enough to have a dramatic, chilling effect on expression across the internet.”

Beyond attacking Twitter’s moderation decisions through Section 230, the draft executive order says the White House will reestablish a “tech bias” reporting tool, presumably so it can unsystematically collect anecdotal evidence that he and his supporters are being unfairly targeted on social platforms. According to the order, the White House would then submit those reports to the Justice Department and the Federal Trade Commission (FTC). The order would further rope in the FTC to make a public report of complaints and “consider taking action” against social media companies that “restrict speech.”

It’s not clear what kind of action, if any, the FTC would have legal ground to take.

The order also asks the Commerce Secretary to file a petition that would require the Federal Communications Commission to “clarify” parts of Section 230 — a role the commission isn’t likely eager to embrace.

“Social media can be frustrating. But an executive order that would turn the FCC into the president’s speech police is not the answer,” Democratic FCC commissioner Jessica Rosenworcel tweeted on Thursday morning.

The order also calls for the U.S. Attorney General William Barr to form a working group of state attorneys general “regarding the enforcement of state statutes” to collect information about social media practices, another presumably legally unsound exercise in partisanship. Barr, a close Trump ally, has expressed his own appetite for dismantling tech’s legal protections in recent months.

While Trump’s executive order may prove toothless, there is some appetite for dismantling Section 230 among tech’s critics in Congress — a branch of the government with much more power to hold companies accountable.

The most prominent of those threats is currently the EARN-IT Act, a Senate bill introduced in March that would amend Section 230 “to allow companies to “‘earn’ their liability protection” under the guise of pressuring them to crack down on enforcement against child sexual exploitation. The executive order doesn’t directly connect to that proposal, but sounding the war drums against the tech industry’s key legal provision will likely signal Trump’s Republican allies to double down on those efforts.

In response to the circulating draft executive order, Twitter declined to comment when reached by TechCrunch, and Facebook and Google did not respond to our emails. The Internet Association, the lobbying group that represents the interests of internet companies, was out with a statement opposing the president’s efforts on Thursday morning:

“Section 230, by design and reinforced by several decades of case law, empowers platforms and services to remove harmful, dangerous, and illegal content based on their terms of service, regardless of who posted the content or their motivations for doing so.

“Based on media reports, this proposed executive order seems designed to punish a handful of companies for perceived slights and is inconsistent with the purpose and text of Section 230. It stands to undermine a variety of government efforts to protect public safety and spread critical information online through social media and threatens the vibrancy of a core segment of our economy.”

The group also pointed to the fact that political figures rely on social media to successfully broadcast their thoughts to millions of followers every day—80 million, in Trumps’ case.

The ACLU also weighed in on the executive order Thursday morning. “Much as he might wish otherwise, Donald Trump is not the president of Twitter,” said ACLU Senior Legislative Counsel Kate Ruane. “This order, if issued, would be a blatant and unconstitutional threat to punish social media companies that displease the president.”

“Ironically, Donald Trump is a big beneficiary of Section 230. If platforms were not immune under the law, then they would not risk the legal liability that could come with hosting Donald Trump’s lies, defamation, and threats.”

Dear Sophie: Can I work in the US on a dependent spouse visa?

By Walter Thompson
Sophie Alcorn Contributor
Sophie Alcorn is the founder of Alcorn Immigration Law in Silicon Valley and 2019 Global Law Experts Awards’ “Law Firm of the Year in California for Entrepreneur Immigration Services.” She connects people with the businesses and opportunities that expand their lives.

Here’s another edition of “Dear Sophie,” the advice column that answers immigration-related questions about working at technology companies.

“Your questions are vital to the spread of knowledge that allows people all over the world to rise above borders and pursue their dreams,” says Sophie Alcorn, a Silicon Valley immigration attorney. “Whether you’re in people ops, a founder or seeking a job in Silicon Valley, I would love to answer your questions in my next column.”

“Dear Sophie” columns are accessible for Extra Crunch subscribers; use promo code ALCORN to purchase a one- or two-year subscription for 50% off.


Dear Sophie:

My spouse’s startup is transferring her to the U.S. to help set up an office there. Will I be able to go with her and work in the U.S.? How long will it take for me to get a work permit? How long will we be able to stay?

— Hopeful in Hyderabad

 

Dear Hopeful:

Congratulations on starting an exciting new adventure with your family. U.S. immigration law allows visa holders to bring their spouse and dependent children with them to the U.S. and you can check out this podcast on the topic. Dependent children are defined as children who are under the age of 21 and unmarried. Whether or not the spouse can get a work permit, which is called an Employment Authorization Document (EAD), depends on which dependent visa the spouse receives.

Autonomous aviation startup Xwing raises $10M to scale its software for pilotless flights

By Kirsten Korosec

Autonomous aviation startup Xwing locked in a $10 million funding round before COVID-19 hit. Now the San Francisco-based startup is using the capital to hire talent and scale the development of its software stack as it aims for commercial operations later this year — pending FAA approvals.

The company announced Wednesday its Series A funding round, which was led by R7 Partners, with participation from early-stage VC Alven, Eniac Ventures and Thales Corporate Ventures. Xwing has already hired several key executives with that fresh injection of capital, including Terrafugia’s former co-founder and COO Anna Dietrich and Ed Lim, a Lockheed Martin and Aurora Flight Sciences veteran who more recently led guidance navigation and control for Uber’s autonomous car division as well as Zipline’s AV delivery drone.

Xwing is different from some of the other autonomous aviations startups that have popped up in recent years. The startup isn’t building autonomous helicopters and planes. Instead, it’s focused on the software stack that will enable pilotless flight of small passenger aircraft.

Xwing is also aircraft agnostic. The company’s engineers are focused on the key functions of autonomous flight, such as sensing, reasoning and control. The software stack, which is designed to work across different kinds of aircraft, is integrated into existing aerospace systems. That strategy of retrofitting existing aircraft will speed up deployment, while maintaining safety and keeping costs in check, according to founder and CEO Marc Piette. It also is a straighter path towards regulatory approval.

“It’s more effective for us to not constrain ourselves to a given vehicle and to develop technology that is considered more of an enabler— from a marketing perspective — than going full stack, Piette said when asked if Xwing would ever try to build an autonomous aircraft from the groundup.

Since Xwing’s last funding round — $4 million in summer 2018 — the company has been developing its tech and working with the FAA to receive flight certification for pilotless aircraft. Once approved, the company will seek to commercialize pilotless flights.

The startup hasn’t named any commercial partners yet. And Piette hasn’t provided details about its commercial strategy either, although he said to expect more announcements this year.

Xwing is already working with Bell for NASA’s Unmanned Aircraft Systems (UAS in the NAS) program, an initiative meant to mature the key remaining technologies that are needed to integrate unmanned aircraft in U.S. airspace. The program plans to hold demonstration flights this summer.

Mammoth Biosciences partners with GSK to develop handheld CRISPR-based COVID-19 test

By Darrell Etherington

California-based Mammoth Biosciences has signed a powerful partner for its development of a CRISPR-based test for COVID-19, which would aim to delivery accurate, fast results using a handheld, disposable testing platform. Mammoth Biosciences will be using its DETECTR platform to develop the test, which recently received validation through a peer-reviewed study published in Nature.

Already, Mammoth has its DETECTR platform under evaluation by the FDA for an Emergency Use Authorization (EUA), and partnering with GSK and its consumer healthcare division sets up Mammoth to potentially scale its development and distribution to widespread commercial and consumer availability. Mammoth and GSK aim to have a COVID-19-specific test based on DETECTR ready for FDA evaluation before the end of this year.

The goal is to make it available first to healthcare facilities in the U.S.. It can provide a lot of advantages vs. current solutions for health facility testing, since it provides results in under 20 minutes and can be conducted fully on site using a nasal swab collected from a patient. It’s also fully disposable, making it more convenient and ultimately safer for healthcare professionals to use.

After that, the partners plan to expand availability, ultimately offering the test direct to consumers for over-the-counter use. The nature of the test means it’s not much more difficult to administer than may other at-home diagnostics, which h could further reduce the risk of transmission for infected individuals and make tests much more accessible and widespread.

Note that this likely won’t happen before at least next year given the current development timeline, but given the nature of the ongoing global pandemic, it definitely seems like we’ll still be interested in expanding testing capabilities as one of our ongoing strategies of mitigating the impact of SARS-CoV-2 and COVID-19.

As Jack Ma and SoftBank part ways, the open and globalized era of tech comes ever closer to an end

By Danny Crichton

It would be one of the greatest startup investments of all time. Masayoshi Son, riding high in the klieg lights of the 1990s dot-com bubble, invested $20 million dollars into a fledgling Hong Kong-based startup called Alibaba. That $20 million investment into the Chinese e-commerce business would go on to be worth about $120 billion for SoftBank, which still retains more than a quarter ownership stake today.

That early check and the rise, fall, and rise of Son and Alibaba’s Jack Ma helped to cement an intricately connected partnership that has endured decades of ferocious change in the tech industry. Ma joined SoftBank’s board in 2007, and the two have been tech titans together ever since.

So it is notable and worth a minute of reflection that SoftBank announced overnight that Jack Ma would be leaving SoftBank’s board after almost 14 years.

In some ways, perhaps the news shouldn’t be all that surprising. Jack Ma has been receding from many of his duties, most notably leaving the chairmanship of Alibaba last year.

Yet, one can’t help connect the various dots of news that hovers between the two companies and not realize that the partnership that has endured so much is now increasingly fraying, and due to forces far beyond the ken of the two dynamos.

On one hand, there is a pecuniary point: SoftBank has been rapidly selling Alibaba shares the past few years after decades of going long as it attempts to shore up its balance sheet amidst intense financial challenges. According to Bloomberg in March, SoftBank intended to sell $14 billion of its Alibaba shares, and that was after $11 billion in realized returns on Alibaba stock in 2019 from a deal consummated in 2016. It’s just a bit awkward for Ma to be sitting on a board that is actively selling his own legacy.

Yet, there is more here. Jack Ma has become a figure in the fight against COVID-19, and has burnished China’s image (and his own) of responding globally to the crisis. In the process, though, there has been blowback, as concerns about the quality of face masks and other goods have been raised by health authorities.

And of course, there is the deepening trade war, not just between the United States and China, but also between Japan and China. Japan’s government is increasingly looking for a way to find a “China exit” and become more self-sufficient in its own supply chains and less financially dependent on Chinese capitalism.

Meanwhile, the Trump administration has been seeking out avenues of decoupling the U.S. from China. Overnight, the largest chip fab in the world, TSMC, announced that it would no longer accept orders from China’s Huawei following new export controls put in place by the U.S. last week and its announcement of a new, $12 billion chip fab plant in Arizona.

SoftBank itself has gotten caught up in these challenges. As an international conglomerate, and with the Vision Fund itself officially incorporated in Jersey, it has confronted the tightening screws of U.S. regulation of foreign ownership of critical technology companies through mechanisms like CFIUS. Its acquisition of ARM Holdings a few years ago may not have been completed if it had tried today, given the environment in the United Kingdom or the U.S.

So it’s not just about an investor and his entrepreneur breaking some ties after two decades in business together. It’s about the fraying of the very globalization that powered the first wave of tech companies — that a Japanese conglomerate with major interests in the U.S. and Europe could invest in a Hong Kong / China startup and reap huge rewards. That tech world and the divide of the internet and the world’s markets continues unabated.

Everlywell gains first FDA authorization for a standalone, at-home, COVID-19 test sample collection kit

By Darrell Etherington

Everlywell was one of the first startups to announce that it was working on a self-administered, at-home COVID-19 diagnostic kit, but it initially sought out to ship kits before regulators made clear that this was not in line with its guidelines. Everlywell then became intent on working with the FDA to secure a proper Emergency Use Authorization for its kits before sending any to consumers, and that approach has paid off with the U.S. drug regulator issuing an EUA for Everlywell’s tech today.

Everlywell‘s COVID-19 Test Home Collection Kit is the first standalone sample collection kit to be granted a proper EUA by the FDA. Other kits have been in use through physician-prescribed and directed collection, and others still have been authorized specifically for use with one test (where provider of both kit and test are the same). This approval is unique because Everlywell is offering its sample kit independent of any specific testing lab, and can work with a variety of labs to potentially provide a broader testing footprint.

The test kits are then sent to one of two labs currently authorized under separate EUAs for COVID-19 testing, and the administration notes that this could expand to other test providers in future should they file for an EUA and provide the requisite data that goes along with the verification required for that emergency approval. The FDA cites Everlywell’s work in collecting and presenting data from studies including those supported by the Bill and Melinda Gates Foundation to show that samples collected at home using its nasal swab collection method remain stable during shipping.

That data is also now available to others looking to provide similar test kit offerings, the FDA notes, which should reduce the burden of proof on anyone looking to gain authorization for a competing product. That could potentially open up testing even further, reducing a bottleneck that many public health professionals see as one of the key drivers of a successful recovery.

“The authorization of a COVID-19 at-home collection kit that can be used with multiple tests at multiple labs not only provides increased patient access to tests, but also protects others from potential exposure,” said Jeffrey Shuren, M.D., J.D., director of the FDA’s Center for Devices and Radiological Health in a statement provided to TechCrunch. “Today’s action is also another great example of public-private partnerships in which data from a privately funded study was used by industry to support an EUA request, saving precious time as we continue our fight against this pandemic.”

US-China trade enters new era after overnight Huawei, Foxconn and TSMC announcements

By Danny Crichton

There has been a steady drumbeat of news on the U.S.-China trade front since the start of the Trump administration. President Trump has made decoupling from China’s economy on on-again, off-again proposition. There was the trade conflict with weekly changes in American tariff policy, the threats against ZTE and Huawei, the responses from China against Qualcomm and NXP and the launch of new restrictions on China investment in U.S. startups and telecom infrastructure.

With COVID-19 and the ensuing global economic collapse, much of that conflict was put on the back burner. A tentative agreement between the U.S. and China — agreed to before the worst of the pandemic — seemed to get even broader support as the economic indicators from the globe’s two superpowers started to trickle out.

Then this week happened, and in almost no time at all, the U.S.-China trade detente has been torn apart.

Overnight, there were three critical stories that are going to reshape U.S.-China trade for the foreseeable future, with plenty more stories lurking beneath the surface.

First, you have the announcement this morning from the Department of Commerce that the Trump administration is going to ban Huawei from using U.S. software and hardware in certain strategic semiconductor processes, a move designed to limit the leading Chinese chip manufacturer from growing its market power and technological capabilities. Earlier yesterday, the administration also announced an extension to the government’s export ban on Huawei and ZTE.

The Trump administration has threatened moves like this since almost the president’s first day in office, and Commerce even couched the language, saying that it is “narrowly and strategically” targeting the Chinese company. Nonetheless, Huawei’s importance as one of China’s leading technology companies can’t be overstated, and the two moves combined is already being perceived as a direct assault on China’s recovering economy.

Second, you have a major announcement overnight from TSMC — the world’s largest chip foundry and one of the only foundries that can handle the manufacturing of the most advanced chips — that the Taiwanese company will invest and launch a major, $12 billion factory in Arizona. The release says that the factory will be capable of producing the world’s most advanced 5-nanometer chips when it launches in a couple of years. The announcement came after weeks of debate in Washington aimed at cutting off TSMC’s ability to build chips for mainland Chinese companies like Huawei — a move that TSMC argued would dramatically hurt its profitability and ability to invest in further R&D.

Third, you had the announcement this morning that Foxconn’s profits dived 90% due to COVID-19 and declining smartphone shipments. Foxconn, a Taiwanese hardware assembly company (among many other things), has been caught in the smoldering U.S.-China trade conflict, and even attempted at one point to build its own $10 billion manufacturing facility in Wisconsin with Trump’s felicity only to scuttle that plan entirely in an embarrassing setback.

Meanwhile, the trade deal that had calmed tensions between DC and Beijing appears increasingly in doubt.

And that’s just what happened overnight.

There are so many individual data points on U.S.-China trade that it can be hard to see the patterns. Policies have hardened, policies have softened, but at its core the U.S. and China have attempted to keep the trade flowing, if only to maintain growth in their economies. That’s what coupling has been all about: while there can be massive disagreements between the two sides, each has something the other wants. China wants to build and grow, while America wants to design and buy.

The past few months of COVID-19 have changed that calculus, as has an election year in the United States, where wariness of China has hit record, bipartisan highs, according to polls. The intense conflagration of the American economy, with tens of millions jobless and growth stalled for the time being, means that even more intense scrutiny is being placed on anything that might be harming the country’s financial math. We are now seeing the fruits of that new normal.

There will be more decoupling maneuvers in the coming weeks. There will also almost certainly be a renegotiation of the U.S.-China trade deal, despite comments that neither side is interested in reopening those discussions.

Yet, the real interesting dynamic to watch is going to be Taiwan, which is home to strategically critical sectors of the chip industry. TSMC’s announcement accepts the reality of decoupling, but attempts to work around it by recoupling the United States to the safety of Taiwan. Taiwanese companies and the island’s politicians have avoided ceding its technology to other countries, creating a dependence that they have hoped would protect the island in the event of a mainland Chinese invasion. After all, if the Pentagon can’t get its chips, it’s going to have to intervene, or so the thinking holds.

In this new world though, TSMC building an American factory doesn’t undermine that narrative, it actually strengthens the bonds between the U.S. and Taiwan. More jobs, more trade, more travel and, ultimately, a deeper appreciation of the importance of each other. The question is how far the Trump administration is willing to go here. Taiwan is bidding to rejoin the World Health Organization, where it was an observer up to 2016. How deep are those ties? Will the U.S. go beyond its own diplomatic framework to intensely push for Taiwan’s reentry in spite of Chinese opposition?

That’s what is next, but what is clear today is that the world of semiconductors, of internet infrastructure, of the tech ties that have bound the U.S. and China together for decades — they are frayed and are almost gone. It’s a new era in supply chains and trade, and an open world for new approaches to these huge existing industries.

FDA reiterates risks of antimalarial drug use for COVID-19, as study into efficacy ends early due to deaths

By Darrell Etherington

The U.S. Food and Drug Administration (FDA) has issued a new warning about the known side effects of hydroxychrloroquine and chloroquine, two antimalarial drugs (also used in the treatment of chronic rheumatoid arthritis and lupus), on the same day that a group of researchers published a paper in the Journal of the American Medical Association about their termination of a study investigating the potential of chloroquine as a potential COVID-19 treatment.

The drugs can have dangerous side-effects, and the study written about in the AMA journal was ended early because the “primary outcome” was the death of study participants, with 22 deaths resulting. Before it was abruptly ended, the researchers found a lethality rate of 39 percent in the group of its subjects who took high dosages, and 15 percent in the low dosage group, with an overall lethality rate of 27 percent.

“Our study raises enough red flags to stop the use of a high-dosage regimen, because the risks of toxic effects overcame the benefits,” the researchers said in their findings.

The FDA’s alert on April 24 does’ make specific mention of this study, but the 81-person phase II clinical trial represents one of the largest to date. The FDA notice does advise that reports they have received of deaths in COVID-19 patients receiving hydroxychloroquine, either alone or in tandem with other drugs including an antibiotic known as azithromycin (which all patients in the investigation published in the AMA journal were taking) can result in “abnormal heart rhythms such as QT interval prolongation, dangerously rapid heart rate called ventricular tachycardia and ventricular fibrillation, and in some cases, death.”

Hydroxychloroquine and chloroquine gained widespread attention because Donald Trump advocated them as likely effective treatments for COVID-19, despite a lack of significant scientific evidence or any clinical suites done about their safety, likely due to early, small-scale investigations that showed they might have some potential. He repeatedly touted the drugs as proven safe, since they have been cleared for use previously in treating other medical conditions, but didn’t appear to grasp that this does not mean they aren’t dangerous or perhaps deadly when taken in the context of other conditions, or for individuals with other risk characteristics.

LabCorp’s at-home COVID-19 test kit is the first to be authorized by the FDA

By Darrell Etherington

LabCorp’s at-home COVID-19 test, which is called ‘Pixel,’ has received the first Emergency Use Authorization (EUA) for such a test missed by the U.S. Food and Drug Administration (FDA). The test is an at-home collection kit, which provides sample collection materials including a nasal swab to the user, who then uses the included shipping package to return the sample to a lab for testing.

Until now, the FDA has not authorized any at-home testing or sample collection kits for use, and in fact clarified its guidelines to specifically note that their use was not authorized under its guidelines when a number of startup companies debuted similar products for at-home collection and round-trip testing with labs already certified to run molecular RT-PCR tests to detect the presence of COVID-19.

The FDA notes that only LabCorp’s COVID-19 RT-PCR test has received this authorization, and that it still requires any such test to have an EUA before they can being offering services, whether or not the test is administered at home with the help of guidance from an authorized medical professional via telemedicine. Some labs facilitating at home serology tests using an exception in the FDA guidelines, but these are not viewed by the agency as tests that can confirm a case of COVID-19.

Opening up at-home testing (even via just sample collection, vs. full at-home test administration) is a big step in terms of a change in the way the agency has operated thus far. The FDA has recently updated its guidelines to note that it is working with at-home test providers to determine the best way to make those available to the public, since it “sees the public health value in expanding the availability of COVID-19 testing through safe and accurate tests that may include home collection.”

LabCorp is a U.S. medical diagnostics company with over 40 years of experience, including at-home testing via its Pixel line for colorectal cancer, diabetes, and cardiac lipid conditions. It seems like the FDA is favoring long-standing industry experience in terms of who it’s willing to open up authorizations for with at-home collection, which is likely due to the potential for increased error when you add unsupervised self-collection, packing and logistics into the mix.

Testing for COVID-19 in the U.S. currently relies on drive-through sites, as well as in-clinic and hospital testing. These tests have a high bar for access in terms of risk profile and symptom presentation, and their administration also exposes the healthcare professionals running them to risk of contracting the infection themselves. At-home testing could increase overall testing rates, while decreasing risk to frontline healthcare workers, providing a better picture of the true extent and depth of the COVID-19 pandemic.

Spiro Wave emergency ventilator gains FDA authorization to address COVID-19 demand

By Darrell Etherington

A new project designed to help address the growing need for ventilator hardware in order to treat the most serious cases of COVID-19 achieved an important milestone today, getting FDA Emergency Use Authorization (EUA) for its units to be used and scaled for production. The hardware, dubbed ‘Spiro Wave,’ is an emergency automated resuscitator that can be produced for under $5,000, and that a team of engineers, doctors and researchers has already begun producing and delivering to care facilities.

The Spiro Wave essentially replicates the functionality of a manual resuscitator, a portable device is typically operated manually to provide ventilation to emergency patients in case of emergency, but it automated the process, while still working with the same types of bags that are typically used with the manual version for easier sourcing of supplies.

Spiro Wave is based on MIT’s open-source E-Vent prototype design, which was created by researchers at the institution as one way to alleviate the shortage that resulted from the COVID-19 crisis. From that design, the team behind Spiro Wave, which includes the co-founders of Newly, 10XBeta and Boyce Technologies, were able to go from design to production of their emergency ventilator in just a few weeks.

Manufacturing partner Boyce says that it can hopefully ramp production not as much as 500 per day, at its Long Island City production facility in Queens, and the first few hundred are already shipping out to facilities in NYC starting this week. The team is also now looking for international production scaling assistance with partners who are registered to produce medical devices with the FDA in order to increase supply even further.

The team behind this note that it’s not meant to replace a full-fledged ventilator, but that it will instead help alleviate the drain on those resources used in emergency care situations where a respirator would be just as effective, but where the manual version is impractical in terms of staffing and prolonged use. Like so many other measures granted EUA, this may not be an ideal replacement for fully FDA-approved equipment and therapies, but it’s an innovative, scalable solution that could mean big differences in the level of care at overburdened healthcare facilities.

Curative received FDA emergency use authorization for its novel COVID-19 tests

By Jonathan Shieber

The diagnostics startup Curative has received an emergency use authorization from the Food and Drug Administration for its novel test to determine COVID-19 infection.

The company says that its tests have already been used by the City of Los Angeles since late March and have tested over 53,000 city residents.

Curative’s tests use an oral-fluid sample collected by having the subject cough to produce sputum, which release the virus from deep in the lungs, according to a spokesperson.

Here’s how the letter digitally signed by the FDA’s chief science officer, Denise Hinton, describes the Rucative test:

To use your product, SARS-CoV-2 nucleic acid is first extracted, isolated and purified from oropharyngeal (throat) swab, nasopharyngeal swab, nasal swab, and oral fluid specimens. The purified nucleic acid is then reverse transcribed into cDNA followed by PCR amplification and detection using an authorized real-time (RT) PCR instrument. The Curative-Korva SARS-Cov-2 Assay uses all commercially sourced materials or other authorized materials and authorized ancillary reagents commonly used in clinical laboratories as described in the authorized procedures submitted as part of the EUA request. 

Curative, which was first covered by DotLA, is processing the tests in conjunction with Korva Labs, a testing facility associated with UCLA.

These tests hope to get around the supply chain shortages that constrain the number of tests the US can conduct. Currently, the US is still experiencing a shortage of test kits because the supply chain for critical components used in test kits has been disrupted by the global COVID-19 pandemic, the company said.

Curative is working to build alternatives to many of the sample collection and extraction kit components and what it calls more scalable RNA extraction methods that don’t rely on the use of magnetic silica beads.

The company was initially founded in January 2020 to focus on a novel test for sepsis, but pivoted to focus on COVID-19 testing as the disease swept across the globe.

“Our goal is to assemble an orthogonal supply chain to supply coronavirus test kits. Doing so will help us avoid buying materials that would constrain public health and CDC laboratories from ramping up production,” the company said on its website. “We are also working to partner with other operations looking to spin up testing facilities to help them source necessary reagents.”

Curative says that its test is better for two reasons. Its sampling method reduces the risk of exposure for healthcare workers and requires less Personal Protective Equipment and its use of an alternative supply chain means it can scale tests rapidly.

The company can already process roughly 5,000 tests per day and is manufacturing 20,000 test kits over the same period. Test results can be delivered in around 31 hours.

“Broad access to testing is critical to our nation’s response to COVID-19 and with this authorization, we can continue scaling and distributing our test nationwide,” said Fred Turner, the chief executive and founder of Curative Inc. “Our work with the Cities of Los Angeles and Long Beach has helped thousands of people access testing at drive-through facilities and we are fully equipped to expand that access to help thousands more across the country. At the same time, we are continuing to work with the FDA to validate our test for at-home collection, which would expand access even more.”

With the new authorization, the company is going to begin working with additional distributors around the country.

The Curative tests are already used by Los Angeles, Long Beach and through testing organized by LA County and the LA County Fire and Sherrif’s Department. The tests aren’t being sold directly to consumers and must be ordered by a physician, the company said.

Backed by the venture firm DCVC, Curative has already been the subject of some controversy when its investor sent a letter to limited partners indicating they’d be able to get access to the Curative tests upon request.

The firm wrote:

“… please let us know as soon as possible if you are experiencing COVID-19 symptoms and are unable to get tested. Through a unique relationship with one of our portfolio companies, we will expedite delivery of a test kit (simple, fast, safe saliva/cheek swab) that should provide results within 1-3 days via return by mail.”

In a subsequent blog post, the partners at DCVC explained their outreach.

With changes in regulations enabling telemedicine across state lines, we wanted to make sure everyone DCVC knows was aware of Carbon’s excellent care and full suite of testing. And yes, that includes people who work at our Limited Partners, who are making difficult decisions for themselves and their families in difficult times like the rest of us.

With Carbon moving at the pace they do with their fast, friendly electronic on-boarding, and with Curative’s testing capability likely ramping to 10,000+ tests a day in the next ten days, the combined health care firepower can indeed “expedite” care for everybody.

Was our language a little boastful? Yes, no excuses. And we’re sorry if folks got the wrong idea. No one is “jumping in line.” We will always strive to point out to our friends and community where they can get quick access to quality care as well as access to other cutting-edge technology in our portfolio.

Accurate testing remains the most important feature of any effort to contain the COVID-19 outbreak and a number of startup companies are working on novel diagnostics.

As Harvard University epidemiologist, William Hanage told Business Insider, “Figuring out what’s actually going on in the community is the key part of dealing with this pandemic.”

GM delivers first ventilators under 30,000-unit government contract

By Kirsten Korosec

Ventilators assembled by GM and Ventec Life Systems were delivered to hospitals Thursday night with more making their way to facilities today and through the weekend, the first in a 30,000-unit order with the U.S. government.

The deliveries, which went to hospitals in Chicago and Olympia Fields, Ill., are a milestone for the two companies that launched an effort less than a month ago to make thousands of ventilators for hospitals during the COVID-19 pandemic.

GM and Ventec announced a partnership March 20 to help increase production of respiratory care products such as ventilators. The companies had initially focused on making Ventec’s critical care ventilators called VOCSN, a higher end multi-function device that includes a ventilator, oxygen concentrator, cough assist, suction and nebulizer. The device, which has more than 700 components, was cleared in 2017 by the FDA.

GM investigated the feasibility of sourcing the materials needed as well as what it would take to build a new clean room and production line within its Kokomo, Ind. factory. GM estimated it would cost about $750 million, a price that included retrofitting a portion of the engine plant, purchasing materials to make the ventilators and paying the 1,000 workers needed to scale up production, the source said. The remaining $250,000 of estimated costs came from Ventec.

The Trump Administration balked at the price tag, putting a contract with the U.S. government in limbo. GM and Ventec planned to push ahead anyway, even as President Trump used Twitter to criticize the automaker and its CEO Mary Barra . Trump then signed a presidential directive ordering GM to produce ventilators and to prioritize federal contracts, just hours after the automaker announced plans to manufacture the devices.

In spite of the scuffle, GM did reach a $490 million contract with the federal government to produce 30,000 ventilators by the end of August. Under the contract, GM is producing a different critical care ventilator from Ventec called the VOCSN V+Pro, a simpler device that has 400 parts. The other more expensive and complex machine had a multi-function capability.

To speed its ability to build ventilators, the government contract calls for the VOCSN unit with ventilator capability only, according to GM.

Production began this week with one shift of workers and is ramping up. Eventually, GM has plans to add a second and then a third shift in the coming weeks, according to a company spokesperson. More than 1,000 workers will be needed over the three shifts.

To date, 10 ventilators have been delivered to Franciscan Health in Olympia Fields. Another 10 were expected to be delivered Friday afternoon to Weiss Memorial Hospital in Chicago. A third shipment of 34 ventilators will be delivered Saturday to the Federal Emergency Management Agency at the Gary/Chicago International Airport for distribution to other locations where the need is the greatest, according to GM.

The need for ventilators is urgent as cases of COVID-19 pop up with increasing frequency as widespread testing begins. While some people with COVID-19 reported more mild symptoms, others have experienced severe respiratory problems and need to be hospitalized. The shortage has prompted automakers including Ford and Volkswagen to investigate ways of ramping up ventilator production. Ford and GE Healthcare have licensed a ventilator design from Airon Corp and plan to produce as many as 50,000 of them at a Michigan factory by July.

Automakers are also making face masks, face shields and Powered Air-Purifying Respirators (PAPRs) for healthcare workers.

Trump’s hype for state lockdown protests puts Twitter and Facebook’s new COVID-19 policies to the test

By Taylor Hatmaker

A new flurry of tweets from President Trump is pushing the limits of social platform policies designed explicitly to keep users safe from the spread of the novel coronavirus, both online and off.

In a series of rapid-fire messages on Friday morning, Trump issued a call to “LIBERATE” Virginia, Minnesota, and Michigan, all states led by Democratic governors. Trump’s tweets promoted protests in those states against ongoing public safety measures, many designed by his own administration, meant to keep residents safe from the virus. Trump also shared the messages on his Facebook page.

In the case of Minnesota, the tweet was not a generic message to his supporters in the state—it referenced a Friday protest event by its name, “Liberate Minnesota.”

LIBERATE MINNESOTA!

— Donald J. Trump (@realDonaldTrump) April 17, 2020

LIBERATE VIRGINIA, and save your great 2nd Amendment. It is under siege!

— Donald J. Trump (@realDonaldTrump) April 17, 2020

In Minnesota, the in-person protest event gathered a group of Trump supporters outside the St. Paul home of Minnesota Governor Tim Walz to protest the state’s ongoing lockdown. According to a reporter on the scene Friday, the protest had attracted attendees in the “low hundreds” so far and few were practicing social distancing or wearing masks. The event was organized on Facebook.

Scheduled start time was noon and the crowd looks to be in the low hundreds. This is *only* an eyeball estimate. There’s also a fair number of drivebys – vehicles with flags or writing on the sides driving down Summit, honking, waving to protesters.

— Patrick Condon (@patricktcondon) April 17, 2020

“President Trump has been very clear that we must get America back to work very quickly or the “cure” to this terrible disease may be the worse option!” the event’s Facebook description states. In a later disclaimer, event organizers encourage attendees to exercise “personal responsibility” at the protest, stating that they “are not responsible for your current health situation or future health.”

Over the last month, Facebook and Twitter both rolled out relatively aggressive new policies designed to protect users from content contradicting the guidance of health experts, particularly anything that could result in real-world harm.

The president’s tweets contradict his administration’s own guidance, detailed yesterday in coordination with health experts, on reopening state economies. Earlier this week, Trump claimed that a president has “total authority” to reopen the national economy, a sentiment that his tweets Friday appeared to undermine.

Trump’s calls to action in support of state-based protests would also appear to contradict both Twitter and Facebook’s new rules specific to the pandemic, which in both cases explicitly forbid any COVID-19 content that could result in the real-world spread of the virus.

In late March, Twitter updated its safety policy to prohibit any tweets that “could place people at a higher risk of transmitting COVID-19.” The stance banned tweets claiming social distancing doesn’t work as well as anything with a “call to action” that could promote risky behaviors, like encouraging people to go out to a local bar.

On April 1, Twitter again broadened its definition for the kind of harmful COVID-19 content it forbids, stating that it would “continue to prioritize removing content when it has a clear call to action that could directly pose a risk to people’s health or well-being.”

Facebook similarly  expanded its platform rules to match the existential health threat posed by the coronavirus. In guidance on its policies for the pandemic, Facebook says that it “remove[s] COVID-19 related misinformation that could contribute to imminent physical harm.” As an example, the company noted that it in March it began removing “claims that physical distancing doesn’t help prevent the spread of the coronavirus.”

Social media companies signaled early in the U.S. spread of the coronavirus that they would take health misinformation—and the safety of their users—more seriously than ever. In some instances, this tough talks appears to have manifested in improvements: Facebook, which has generally been more proactive about health misinformation compared to other topics, moved to promote health expertise and limit the spread of misleading coronavirus content on the platform, even announcing that it would notify anyone who had interacted with COVID-19 misinformation with a special message in their newsfeed.

When asked about the protest events and the president’s tweets, Twitter pointed TechCrunch to its existing COVID-19 policy page. Facebook did not provide answers to questions about the protests organized on its platform by the time of publication.

COVID-19 could have its own PATRIOT Act, but we need privacy guarantees

By Walter Thompson
Heather Federman Contributor
Heather Federman is a privacy lawyer and VP of Privacy and Policy at BigID, a New York-based company that uses AI to help organizations be better privacy stewards for their customers by accurately tracking personal data, governing access to sensitive information and complying with privacy regulations. Previously, she headed up privacy at Macy's and American Express.

With COVID-19 infections climbing in the U.S., officials are desperate for ways to track and control the spread, especially with limited testing available.

Google and Apple announced a joint effort last Friday to create a voluntary anonymous contact tracing network enabled by Android and iOS that would monitor the spread of infections by keeping track of people who are infected and those with whom they come into contact. People would download mobile apps from public health officials that would notify them if they had come into close proximity with infected people who also are using the network. The system would use Bluetooth Low Energy (BLE) transmissions, rather than GPS, so the location would not be tracked, and the tracking data would be stored on the phone and not in a centralized database — all of which will help maintain the privacy of participants.

However, there are numerous other COVID-19 mitigation efforts that are not as privacy-friendly because they employ location tracking and, most likely, central data storage.

Google announced it will release “Community Mobility Reports” that show trends over time by geography based on anonymized aggregated data from phones of people who have turned on the Location History setting. Facebook and other companies are providing to epidemiologists from around the world anonymized, aggregated data from mobile phones as part of the COVID-19 Mobility Data Network.

And the Centers for Disease Control (CDC) is tracking the anonymized movements of American citizens based on location data from mobile advertising companies. While privacy advocates consider these sort of tracking mechanisms to be invasive and unsettling, this data does help to reveal the public spaces still drawing crowds and guide subsequent policy decisions, but it raises concerns.

While I applaud government efforts to more effectively stop the spread of infections, there needs to be specific conditions and limitations on how this data is used, or we as a nation will face serious consequences. The government must mobilize to combat this invisible enemy, but we must also have parameters for how data is protected and used. Specifically, we need five guarantees.

Temporality

The PATRIOT Act, passed just six weeks after 9/11, gave the government unprecedented power to spy on American citizens. This may have made sense at the time, but the government continues to vacuum up millions of phone calls and text messages to this day. If companies like Google and Facebook are willing to share data with the government, there needs to be a clear and defined period as to the time span of the sharing and the retention period of that shared data.

Civil liberties

Following the September 11th attacks, law enforcement departments like the NYPD conducted illegal surveillance activities of the local Muslim population. That program has been compared to the Japanese-American internment camps of World War II and the FBI’s surveillance of African Americans who opposed segregation in the civil rights movement.

We must not allow this current pandemic to become another example of civil liberties falling by the wayside. The data being shared to protect us now cannot be used for surveillance or discrimination tactics, now or in the future.

Transparency

Any company that shares sensitive data with the government, such as location data, must be required to provide timely and fulsome transparency reports that are easy for the public to interpret.

Limited use and purpose specification

The OECD’s Fair Information Practice Principles (FIPPs) state that personal data should not be used for any purpose beyond the specified purpose of the data processing activity. We’ve witnessed numerous media exposés and regulatory actions against companies sharing location data for secondary purposes. In this case, location data collected and used to limit the spread of the virus should only be used for that specific purpose.

Data security

The government’s well-meaning intentions to protect citizens does not automatically mean it will secure their sensitive data. If anything, there will likely be an uptick in cybercrime during the pandemic. The government owes it to its citizens to ensure the appropriate administrative, technical and physical safeguards are in place.

As U.S. officials explore their options, it’s unclear what lessons from history or types of data protections, if any, are actually being discussed. We can only go on what we’ve heard from news reports: Palantir, the data mining company that uses War on Terror tools to track Americans, is in talks with the CDC to do data collection related to disease tracking.

Facial recognition company Clearview AI, which has been harshly criticized for selling its software to law enforcement, private companies and authoritarian regimes, is talking to state agencies about using its data-driven insights to track infections. Unacast has been giving local counties social-distancing grades based on citizens’ location data.

Let freedom ring

The U.S. does need to find a practical path forward. There are actually several different types of location data collected, used and shared by a variety of different commercial entities — so it would be best to first determine which data is most valuable and who are the key  partners. Doctors, researchers, academics, ethicists and legal experts should be actively included in conversations with these tech companies.

In addition, privacy preserving techniques must be used when sharing location data. The Apple-Google joint effort is the latest; others include Private Kit: Safe Paths and MIT’s SafeTrace platform, which also allow users to voluntarily share data through means that are anonymized, decentralized and encrypted.

The challenge here is that it’s difficult to actually guarantee that anonymized data (data that has no chance of identifying a person) is truly anonymous, without being subject to additional contractual, technical and administrative controls. And platforms that rely on users voluntarily submitting their location and health status could end up with a low adoption rate, leading to skewed and inaccurate results.

Should it then be left up to our government to mandate all American citizens with a smartphone share their location data in the name of public health? Whatever happens, now, more than ever, it’s imperative that our local, state and federal authorities take into account the various data sharing proposals in a manner that puts the American citizen first.

The intersection of small business, tech and our financial system is more important than ever

By Walter Thompson
Ann Marie Mehlum Contributor
Ann Marie Mehlum serves on several boards, including Summit Bank, and is a senior advisor at FS Vector, Fenway Summer’s advisory affiliate. Previously, she was associate administrator of Capital Access at SBA.
Javier Saade Contributor
Javier Saade serves on several boards, is venture partner at Fenway Summer and is a senior advisor at FS Vector, Fenway Summer’s advisory affiliate. Previously, he was associate administrator and chief of investment and innovation at SBA.

The two of us oversaw the U.S. Small Business Administration’s capital, investment, loan and innovation programs serving America’s small businesses. The nation is rooting for our 30 million small businesses. They employ more than half of the country and create most net new jobs, and 80% of them have less than 60 days cash on hand.

The world has never experienced dislocation of labor and business activity at this scale and speed. We applaud Congress and the White House for stepping up with a $2 trillion relief package, of which, $350 billion is being injected into America’s small businesses. Another $250 billion is being contemplated and negotiated as we write this.

Washington has been talking regularly with the financial sector, and for small business relief to be effective, banks of all sizes, fintechs, other tech companies, community banks and other capital conduits need to be involved in the solution. There is an urgent need to deploy the funds, and technology will be critical to that end.

Two encouraging developments  occurred on Wednesday: 1) SBA launched a new AWS-powered gateway for a streamlined lender entry point and 2) an application for non-bank, non-insured (read: fintech) lenders was made available. Good steps for sure, but retrofits always come with limitations at their root.

Looking back to move forward, the crisis of 2008 was in many ways a “dress rehearsal” of what we are experiencing now. While there are some similarities, the pandemic’s massive toll on virtually every sector of the economy is happening simultaneously, as evidenced by the fact that 17 million people have filed for jobless claims.

The financial crisis was driven by excess risk in the financial system whose shock rippled through our economy with some level of predictability. The number of exogenous factors of the pandemic’s effect on our economy are more interconnected, more widely spread and faster to hit than those in 2008.

This 21st century problem requires 21st century solutions, and that requires fresh thinking, from policy-to-execution. The large part of our economy that lives at the intersection of small business and the financial system is expecting this thinking and execution.

It must be pointed out that some constraints and limitations of implementing the CARES Act are not regulatory in nature — they are born out of legacy technologies that slow banks down. The antiquated systems of our government agencies, such as SBA’s much talked about and clunky E-Tran system, do not help either.

Government agencies, let alone their systems, were not built to deal with anything of this magnitude and urgency. But the inherent scalability, penetration, infrastructure, algorithmic capability and plumbing of financial technology should be brought to bear, and now! More on this below.

The financial system has significant tech adoption lags, organizational inertia and regulatory constraints — all contributing to the chaotic nature of the programs’ implementation. The design of a potential fourth phase of relief should take this into account. While pumping more money into small businesses is a good decision, the process and its underpinning needs to be improved.

We want regulators and agencies to help minimize the impact to American small businesses and implement the CARES Act in the spirit of what Congress intended. We don’t believe much cash has reached taxpaying citizens or small businesses as of this writing. According to the latest figures, SBA has guaranteed 25% of the relief. While this is an encouraging marker, it is still a small fraction of the $350 billion.

Probably more important for people to understand is that when banks secure loan guarantees, that does not immediately translate to funded loans injecting cash into small businesses.

For cash to move, a few things would help smooth the glide path from CARES Act to small businesses: 1) finalizing definitive guidance on bank notes; 2) enhancing secondary market liquidity; 3) developing a 21st century digital interface for more streamlined touch points for all stakeholders; and 4) opening the pathway to new players, including fintech companies as service providers, rails or lenders themselves.

This is important because SBA has been tasked to increase its capacity by a factor of at least 50. All of its credit programs combined put out $25 billion a year. The task at hand: $350 billion in 8-12 weeks. We know SBA has been working 24×7 — along with Treasury, FRB and other agencies — on systems, technology and execution, but there are real friction points working against solving the problem at hand.

The Federal Reserve’s liquidity backstop for SBA loans is welcome news, but it will take time to develop. Equally welcome news is FDIC’s easing on community bank leverage ratios. Regulators are considering relaxing additional prudent and temporary requirements and limits. This all assists the endeavor, yet there are still unanswered questions keeping lenders of all stripes on the sidelines.

The use of digital constructs and 21st century technology is highly needed due to the amount of dollars, number of loans and the short window we have to deploy them. We urge the SBA, other agencies and regulators to deploy energy and resources to leverage digital finance and financial technology.

Financial technology can help streamline applications, comply with know-your-customer and anti-money laundering rules and application automation. Technology also improves origination, underwriting, loan disbursement and loan servicing, and should be leveraged. Millions of small businesses, the most vulnerable ones in fact, don’t use bank credit. Yet many use Square to accept payments, for example. Fintech now has an open door to participate — good! We encourage regulators to fully leverage the collective capabilities of technology.

Not everyone has a printer, let alone the ability to walk into a bank — but most small businesses and their owners have mobile phones and a digital footprint. A number of fintech companies provide technology to banks themselves, and in those cases, banks should use this time with alacrity to leverage those capabilities. To be clear, fintech is no longer an innovation experiment, given the $200 billion that has been invested in financial technology since the financial crisis.

There is immeasurable pressure to get capital out on the one hand, but on the other, tight regulations create an equally forceful pull. COVID-19 has put a spotlight on the need to usher in a financial system that works for all, and technology is central to that. If there is a time to try new constructs, that time is now!

The problem with losing a job is that it is very hard to re-create. Preserving them, which is the guiding principle of all the recent government action — is energy better spent. Let’s focus on preserving jobs and providing relief to our economy’s beating heart — small businesses.

Tesla resurrects long-range RWD Model 3 for the Chinese market

By Kirsten Korosec

Tesla is now producing and selling the long-range rear-wheel drive version of its Model 3 electric vehicle at its Shanghai factory, a month after receiving approval from the Chinese government.

The move might not be a milestone, but it’s notable because Tesla discontinued production of the long-range RWD Model 3 in the U.S. and now only offers that variant as a dual-motor all-wheel drive. It also marks a shift from Tesla’s initial plan to sell a more basic version of the Model 3 in China.

The standard-range-plus Model 3 can travel 276 miles on a single charge, according to Tesla’s China website. The same website says the long-range RWD Model 3 has 668 km, or 415-mile range. Those range estimates are based on the New European Driving Cycle, a forgiving standard that Europe replaced several years ago with the WLTP. The real-word range is likely much lower.

Tesla model 3 long range RWD china

Image Credits: Tesla/screenshot

Tesla started producing a standard-range-plus rear-wheel-drive version of the Model 3 at its Shanghai factory late last year. The first deliveries began in early January. The March approval from the Ministry of Industry and Information Technology gave Tesla permission to add another variant to its Chinese portfolio.

Eventually, Tesla plans to manufacture the Model Y electric vehicle at the China factory.

New guidance on SBA loans means most startups are still excluded from $349 billion stimulus

By Jonathan Shieber

Under new guidance issued by the Small Business Administration it seems non-profits and faith-based groups can apply for the Paycheck Protection Program loans designed to keep small business afloat during the COVID-19 epidemic, but most venture-backed companies are still not covered.

Late Friday night, the Treasury Department updated its rules regarding the “affiliation” of private entities to include religious organizations but keep in place the same rules that would deny most startups from receiving loans.

(b) If you are a faith-based organization, *no affiliation rules apply to you,* because the SBA just said so. Out of nowhere. At like 10pm on a Friday night.

It doesn't matter if you have a zillion employees; as long as any 1 entity has <500 employees, it can get a #PPPloan.
4/ pic.twitter.com/V0x3Vx6G7x

— Doug Rand (@doug_rand) April 4, 2020

The NVCA and other organizations had pushed Treasury Secretary Steve Mnuchin to clarify the rules regarding startups and their potential eligibility for loans last week. And House Republican leader Kevin McCarthy even told Axios that startups would be covered under the revised regulations.

Apparently that didn’t happen, as Mark Suster, the managing partner of Los Angeles-based Upfront Ventures, noted in a tweet.

2/ There are rumors that the PPP Loan program may still fix the Affiliate Rule next week. Until fixed, it's nearly impossible for most VC-backed startups to apply because it would require huge legal lift to amend all of the charters of these companies to change control provisions

— Mark Suster (@msuster) April 4, 2020

At its essence, the issue for startups seems to be centered on the board rights that venture investors have when they take an equity stake in a company. For startups with investors on the board of directors, the decision-making powers that those investors hold means the startup is affiliated with other companies that the partner’s venture firm has invested in — which could mean that they’re considered an entity with more than 500 employees.

“[If] there’s a startup that’s going gangbusters right now, they shouldn’t apply for a PPP loan,” wrote Doug Rand, the co-founder of Seattle-based startup Boundless Immigration, and a former Assistant Director for Entrepreneurship in the Office of Science and Technology Policy during the Obama administration, in a direct message. “But most startups are getting killed because, you know, the economy is mostly dead.”

The $2 trillion CARES Act passed by Congress and signed by President Trump was designed to help companies that are adversely affected by the economic fallout resulting from the COVID-19 outbreak in the US and their employees — whether those businesses are directly affected because their employees can’t leave home to do their jobs or indirectly, because demand for goods and services has flatlined.

While some tech startups have seen demand for their products actually rise during these quarantined days, many companies have watched as their businesses have gone from one to zero.

The sense frustration among investors across the country is palpable. As the Birmingham-based investor, Matt Hottle, wrote, “After 4 days of trying to help 7 small businesses navigate the SBA PPP program, the program went to shit on launch. I’m contemplating how many small businesses, counting on this money, are probably locked out. I feel like I/ we failed them.”

After 4 days of trying to help 7 small businesses navigate the @SBAgov PPP program, the program went to shit on launch. I’m contemplating how many small businesses, counting on this money, are probably locked out. I feel like I/ we failed them.

— Matt Hottle (@MattRedhawk) April 4, 2020

And although the rules around whether or not many startups are eligible remain unclear, it’s probably wise for companies to file an application, because, as the program is currently structured, the $349 billion in loans are going to be issued on a first-come, first-served basis, as Suster flagged in his tweets on the subject.

General Catalyst is advising its companies that are also backed by SBIC investors to apply for the loans, because that trumps any other rules regarding affiliation, according to an interview with Holly Maloney Burbeck, a managing director at the firm.

And there’s already concerns that the money could run out. In a tweet, the President announced that he would request more money from Congress “if the allocated money runs out.”

I will immediately ask Congress for more money to support small businesses under the #PPPloan if the allocated money runs out. So far, way ahead of schedule. @BankofAmerica & community banks are rocking! @SBAgov @USTreasury

— Donald J. Trump (@realDonaldTrump) April 4, 2020

“Congress saw fit to allow Darden to get a forgivable small business loan—actually a taxpayer-funded grant—for like every Olive Garden in America. But Congress somehow neglected to provide comparable rescue measures for actual small businesses that have committed the sin of convincing investors that they have the potential to employ a huge number of people if they can only survive,” Rand wrote in a direct message. “The Trump administration has full authority to ride to the rescue, and they did… but only for large religious organizations.”

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