The massive surge of COVID-19-related layoffs has put tech in a unique position. While the startup world is facing layoffs itself, it is also trying to help get people back to work.
Back at the end of 2019, the SoftBank-backed belt-tightening period led to a flurry of crowdsourced spreadsheets with employee names from companies like Oyo, WeWork, Zume and more. The spreadsheets popped up as a bet on the network effect, with the ultimate goal of hoping the sheets land in the hands of a recruiter looking to hire one of hundreds laid off. Now, as COVID-19 cripples the economy, layoffs have surged dramatically past that one period.
On one end, we’ve reported on numbers of tech companies cutting staff, from Oyo, to ZipRecruiter, to TripActions. But on the other, brighter end, we’ve also seen the rise of platforms to connect those laid off and pledges from employers to not fire any employees during this trying time.
In a world where people are laid off on Zoom, tech’s efforts to give community, and a course of action, to those laid off is undeniably important.
So many start-ups have done or are planning layoffs that at this point it would be easier to list the ones that *haven't* cut staff.
So here are some places trying to help laid off employees:
— erin griffith (@eringriffith) April 2, 2020
The current climate of the pandemic, and the massive unemployment that has resulted, means that a spreadsheet with a long list of employee names and unverified contact information doesn’t cut it.
Shannon Anderson, the director of talent at Madrona Venture Group in Seattle, saw her firm’s portfolio companies struggling with layoffs and the changing economy. Two of the portfolio companies, Textio and Rover, laid off staff, along with a number of other companies.
“We wanted to anticipate a reduction in force across the ecosystem,” said Anderson. “It’s a global problem.”
So, to help boost the network of those laid off, Anderson reached out to a number of HR leaders, including Chris Brownridge, the founder of Silver Lining, a job platform for those who have been laid off. He started Silver Lining after he shut down his startup last summer and had to lay off his staff of 20.
“I felt the pain [of layoffs] from the employer side, and it is painful for the employer, especially when you care about [your workers],” he said back in January. “I don’t want to keep seeing spreadsheets thrown around; I think that is not the right answer. We need a standardized way to deal with it, with a community behind it.”
Silver Lining is a platform that lets candidates submit profiles for recruiters from top companies to review. Job seekers on the site range from architects, UX designers, engineers, community managers and more.
Then COVID-19 spread across the world, forcing people to stay home and spend less. The economy’s downturn unevenly impacted companies around the world: where layoffs exist for the travel sector, usage surges exist for the remote work companies. But as a whole, the labor force is struggling, with 6.6 million Americans filing for unemployment just last week alone.
Madrona said it is donating a portion of its budget to help Silver Lining offer more services to those laid off. The firm declined to share the total amount of the donation.
Silver Lining will also now offer coaching, resume writing and emotional support to folks on the platform, Brownridge says. Thanks to donations from Madrona, Skytap, Bandwidth, Voodle, Female Founders Alliance and more, the site is free to use.
The uptick in layoffs has led Boston-based Drafted, a referral startup, to launch a product called the Layoff Network to help those who have been laid off. The startup previously was sending out a newsletter, Layoff List, of weekly list of layoffs with spreadsheets hyperlinked. During the SoftBank layoffs, Olivia Clark, the creator of the newsletter, noticed a surge in traffic — more than 1,000 recruiters subscribed.
Now she says traffic is “up 2,000%” and, in just two weeks, Drafted’s engineering team has productized that newsletter into a job search network.
The Layoff Network connects with recruiters people who have been recommended by their colleagues and “endorsed” for their skills. If you’re laid off, you can sign up and create a profile and ask a previous employer or colleague to recommend you. Clark says this is similar to LinkedIn’s “endorse” feature to make sure the people are credible.
Once the person has been endorsed, they will be added to a talent feed. That is where recruiters can search for nominees, job titles, companies or locations. Unlike a spreadsheet, this is clearly easier to navigate and adds another layer of human touch.
Clark says that the platform will be free for individuals who have been laid off, and who are recruiting or hiring. Drafted has a paid enterprise level that is for organizations that are conducting mass layoffs and want to provide support for former employees.
The grassroots efforts are vast and diverse. Here’s a list that posts companies that are actively hiring. Here’s a list for Canadian tech workers, and one for Colorado’s tech scene. And here’s a live tracker of startups that have issued layoffs, started by the team over at Human Interest, a startup that has nothing to do with layoffs.
Megan Murphy, who created Chicago Superstars for those laid off from the Chicago tech scene, has not received donations or support yet. As the number of unemployed people increases, Murphy says she’s noticing a lack of clarity on which companies are hiring, and which job postings are still active. If a company was hiring for a position in January, it might not be anymore (to help keep costs down).
“I can’t waste time crafting cover letters and custom resumes for jobs that won’t actually move forward,” she said. “There are tons of crowdsourced tools trying to flag who’s actually hiring still, while others are trying to flag who’s instituted a hiring freeze or laid people off, and in the meantime, company career pages aren’t up to date. We need one source of truth — and right now nobody’s really set up to do that.”
1575 Remote Jobs From 100+ Companies Hiring Remotely: https://t.co/pMk38QwvDX
— Brianne Kimmel (@briannekimmel) March 24, 2020
For now, Murphy says she’s getting creative in her own search, and asking for others to do the same. “Virtual communities and experiences are about to be more important than ever.” She notes guerrilla Slack channels and Reddit as an example of organic communication.
As for how she’s able to keep up with the demand of people needing help for their next job? Murphy, who is looking for a job herself after getting laid off, says she has fewer interviews from potential employers, so she’s been able to help those reaching out.
The work done by these entrepreneurs scratches at the same hope that lies within the hundreds of lines of contact information within a crowdsourced layoff spreadsheet: a need for a community in a trying time. And these days, more than most, remind us of the power of having a group of people together in the first place.
When you look at the most successful companies in the world, they are almost never just one simple service. Instead, they offer a platform with a range of services and an ability to connect to it to allow external partners and developers to extend the base functionality that the company provides.
Aspiring to be a platform and actually succeeding at building one are not the same. While every startup probably sees themselves as becoming a platform play eventually, the fact is it’s hard to build one. But if you can succeed and your set of services become an integral part of a given business workflow, your company could become bigger and more successful than even the most optimistic founder ever imagined.
Look at the biggest tech companies in the world from Microsoft to Oracle to Facebook to Google and Amazon. All of them offer a rich complex platform of services. All of them provide a way for third parties to plug in and take advantage of them in some way, even if it’s by using the company’s sheer popularity to advertise.
Michael A. Cusumano, David B. Yoffie, and Annabelle Gawer, who wrote the book The Business of Platforms, wrote an article recently in MIT Sloan Review on The Future of Platforms, saying that simply becoming a platform doesn’t guarantee success for a startup.
“Because, like all companies, platforms must ultimately perform better than their competitors. In addition, to survive long-term, platforms must also be politically and socially viable, or they risk being crushed by government regulation or social opposition, as well as potentially massive debt obligations,” they wrote.
In other words, it’s not cheap or easy to build a successful platform, but the rewards are vast. As Cusmano, Yoffe and Gawer point out their studies have found, “…Platform companies achieved their sales with half the number of employees [of successful non-platform companies]. Moreover, platform companies were twice as profitable, were growing twice as fast, and were more than twice as valuable as their conventional counterparts.”
From an enterprise perspective, look at a company like Salesforce . The company learned long ago that it couldn’t possibly build every permutation of customer requirements with a relatively small team of engineers (especially early on), so it started to build hooks into the platform it had built to allow customers and consultants to customize it to meet the needs of individual organizations.
Eventually Salesforce built APIs, then it built a whole set of development tools, and built a marketplace to share these add-ons. Some startups like FinancialForce, Vlocity and Veeva have built whole companies on top of Salesforce.
Rory O’Driscoll, a partner at Scale Venture Partners, speaking at a venture capitalist panel at BoxWorks in 2014 said that many startups aspire to be platforms, but it’s harder than it looks. “You don’t make a platform. Third party developers only engage when you achieve a critical mass of users. You have to do something else and then become a platform. You don’t come fully formed as a platform,” he said at the time.
If you’re thinking, how you could possibly start a company like that in the middle of a massive economic crisis, consider that Microsoft launched in 1975 in the middle of recession. Google and Salesforce both launched in the late 1990s, just ahead of the dot-com crash and Facebook launched in 2004, four years before the massive downturn in 2008. All went on to become tremendously successful companies
That success often requires massive spending and sales and marketing burn, but when it works the rewards are enormous. Just don’t expect that it’s an easy path to success.
Bustle Digital Group, owner of a portfolio of digital media properties including Bustle itself, says it laid off two dozen staffers today. That includes eliminating the entire staff of The Outline, a culture site that it acquired a year ago.
In a statement, a BDG spokesperson said the company will continue to host The Outline’s archives, and that founder Josh Topolsky will be “exploring alternative path’s forward” for its future.
“The unprecedented impact of COVID-19 has forced us to make some tough business decisions,” a BDG spokesperson said. “Most staff will be taking temporary tiered salary reductions and unfortunately, we have eliminated two dozen positions across the company.”
Topolsky (former editor in chief of Engadget and founder of The Verge) founded The Outline in 2016. The site shifted its publication model over time, laying off its writers while maintaining an editorial team that continued to publish freelance content. It was then acquired by Bustle, and Topolsky went on to launch the tech news site Input under the BDG umbrella.
i’ve been at @outline since before it began. editing it was the best job, and with the best team. hire them, give them money, have them write and edit for you: @jeremypgordon @brandyljensen @drewmillard @nkulw @shujaxhaider @rachelmillman
— Leah Finnegan (@leahfinnegan) April 3, 2020
“[I] am tremendously proud of all the weird, funny, interesting, and brilliant stuff we put into the universe, and all the talented writers we were able to publish,” The Outline’s executive editor Leah Finnegan tweeted this morning. “[T]hank you for reading, and [I] hope you will remember what we did fondly.”
BDG, meanwhile, was founded by CEO Bryan Goldberg (pictured above) in 2013. In the past few years, it hasn’t just acquired The Outline, but also Elite Daily, Mic, Nylon and Gawker. In many cases, the deals came after layoffs or other turmoil.
We’re entering what’s likely to be a brutal few months (or longer) for the media industry, as the COVID-19 pandemic has led to a dramatic pullback in advertising. The layoffs have already started, while BuzzFeed is trying to avoid them by cutting employee pay.
OctoML, a startup founded by the team behind the Apache TVM machine learning compiler stack project, today announced that it has raised a $15 million Series A round led by Amplify, with participation from Madrone Ventures, which led its $3.9 million seed round. The core idea behind OctoML and TVM is to use machine learning to optimize machine learning models so they can more efficiently run on different types of hardware.
“There’s been quite a bit of progress in creating machine learning models,” OctoML CEO and University of Washington professor Luis Ceze told me.” But a lot of the pain has moved to once you have a model, how do you actually make good use of it in the edge and in the clouds?”
That’s where the TVM project comes in, which was launched by Ceze and his collaborators at the University of Washington’s Paul G. Allen School of Computer Science & Engineering. It’s now an Apache incubating project and because it’s seen quite a bit of usage and support from major companies like AWS, ARM, Facebook, Google, Intel, Microsoft, Nvidia, Xilinx and others, the team decided to form a commercial venture around it, which became OctoML. Today, even Amazon Alexa’s wake word detection is powered by TVM.
Ceze described TVM as a modern operating system for machine learning models. “A machine learning model is not code, it doesn’t have instructions, it has numbers that describe its statistical modeling,” he said. “There’s quite a few challenges in making it run efficiently on a given hardware platform because there’s literally billions and billions of ways in which you can map a model to specific hardware targets. Picking the right one that performs well is a significant task that typically requires human intuition.”
And that’s where OctoML and its “Octomizer” SaaS product, which it also announced, today come in. Users can upload their model to the service and it will automatically optimize, benchmark and package it for the hardware you specify and in the format you want. For more advanced users, there’s also the option to add the service’s API to their CI/CD pipelines. These optimized models run significantly faster because they can now fully leverage the hardware they run on, but what many businesses will maybe care about even more is that these more efficient models also cost them less to run in the cloud, or that they are able to use cheaper hardware with less performance to get the same results. For some use cases, TVM already results in 80x performance gains.
Currently, the OctoML team consists of about 20 engineers. With this new funding, the company plans to expand its team. Those hires will mostly be engineers, but Ceze also stressed that he wants to hire an evangelist, which makes sense, given the company’s open-source heritage. He also noted that while the Octomizer is a good start, the real goal here is to build a more fully featured MLOps platform. “OctoML’s mission is to build the world’s best platform that automates MLOps,” he said.
Apple has made a donation to a new fundraising campaign, America’s Food Fund, along with Laurene Powell Jobs, Leonardo DiCaprio, and the Ford Foundation. Together, they’ve contributed $12 million towards the $15 million goal for the new initiative being hosting on fundraising platform GoFundMe. The proceeds will go to benefit World Central Kitchen and Feeding America.
The former was founded in 2020 by Chef José Andrés to provide meals to the hungry in the wake of man-made and natural disasters worldwide. Since its debut, World Central Kitchen has served over 15 million meals across 19 disasters, including Hurricane Dorian in the Bahamas and Hurricane Maria. It has also served 3.7 million meals in 2017-2018 in Puerto Rico.
The organization began its COVID-19 relief efforts by deploying food to cruise ship passengers under quarantine. It’s now working to feed vulnerable communities and frontline medical professionals through mobile distributions and restaurant partners.
Chef José Andrés and World Central Kitchen CEO Claire Babineaux-Fontenot also sat down with Oprah Winfrey on her new Apple TV+ show, “Oprah Talks COVID-19” to discuss their efforts.
Feeding America, meanwhile, is the U.S.’s largest hunger-relief organization serving more than 40 million Americans through a network of 200 food banks and 60,000 food pantries and meal programs with a presence across the U.S. Its COVID-19 relief efforts involve its Response Fund, launched to help member food banks secure the resources they need to continue operations.
The choice to essentially run a GoFundMe campaign for America’s Food Fund is unsual. Frankly, the optics aren’t great here.
Most of the philanthropic efforts from corporations or high net worth individuals so far during the COVID-19 outbreak have involved direct donations to nonprofits, food banks, and other relief efforts. If $15 million is what’s needed now, then the donors involved here should just have given the $15 million. But instead, they’ve donated $12 million and presented this campaign in the hopes that “us regular folks” will pitch in the rest.
“If you are in a position to contribute and you have the means to take action, we hope you will donate today. No dollar amount is too small,” the GoFundMe campaign reads.
That’s asking people who are far more impacted by the coronavirus crisis than Jobs or DiCaprio to step up at a time when job security is questionable, food prices are going up, and the threat of losing work due to infection is also a serious concern. It is wonderful that people are willing to do this, but there’s something just odd about billionaires and millionaires acting like we’re all in this together. They have their yachts, after all. Everyone else is just trying to survive.
The campaign is also losing a percentage of donations to fees. (GoFundMe will charge 2.9% and a $0.30 per donation transaction fee.) An in-cash donation directly to the organizations in need would be preferable. Even a campaign where you can donate online directly to the selected organization would be an improvement.
On World Central Kitchen’s site, for example, there’s a checkbox where you can opt to cover the fees with your donation. On Feeding America’s site, you have the option to commit to a monthly donation and also are told explicitly how much your cash donation will provide, in terms of meals.
To date, several high net worth individuals have donated to various relief efforts during the COVID-19 outbreak on their own. Winfrey, for instance, gave $10 million to coronavirus relief efforts, with $1 million of that towards this new America’s Food Fund campaign. Jeff Bezos donated $25 million to the Amazon Relief Fund. Michael Bloomberg is committing $40 million to fight the spread of the virus in low and middle-income countries. Dolly Parton donated $1 million to coronavirus research. Actors Ryan Reynolds and Blake Lively said they were donating $1 million to food banks.
And through their respective foundations, Bill gates contributed $100 million; Jack Ma pledged $14 million; Ralph Lauren donated $10 million; and Mark Zuckerberg and Priscilla Chan donated $30 million to various COVID-19 efforts.
If you want to donate to a local food bank feeding the hungry — or volunteer — in your own neighborhood, you can do so from Feeding America’s website here. From its search results, you’ll get the web addresses for the food banks in your city. And from their own websites, you can find out how to give directly.
Bluetooth location beacon startup Estimote has adapted its technological expertise to develop a new product designed specifically for curbing the spread of COVID-19. The company created a new range of wearable devices that co-founder Steve Cheney believes can enhance workplace safety for those who have to be co-located at a physical workplace even while social distancing and physical isolation measures are in place.
The devices, called simply the “Proof of Health” wearables, aim to provide contact tracing — in other words, monitoring the potential spread of the coronavirus from person-to-person — at the level of a local workplace facility. The intention is to give employers a way to hopefully maintain a pulse on any possible transmission among their workforces and provide them with the ability to hopefully curtail any local spread before it becomes an outsized risk.
The hardware includes passive GPS location tracking, as well as proximity sensors powered by Bluetooth and ultra-wide-band radio connectivity, a rechargeable battery and built-in LTE. It also includes a manual control to change a wearer’s health status, recording states like certified health, symptomatic and verified infected. When a user updates their state to indicate possible or verified infection, that updates others they’ve been in contact with based on proximity and location-data history. This information is also stored in a health dashboard that provides detailed logs of possible contacts for centralized management. That’s designed for internal use within an organization for now, but Cheney tells me he’s working now to see if there might be a way to collaborate with WHO or other external health organizations to potentially leverage the information for tracing across enterprises and populations, too.
These are intended to come in a number of different form factors: the pebble-like version that exists today, which can be clipped to a lanyard for wearing and displaying around a person’s neck; a wrist-worn version with an integrated adjustable strap; and a card format that’s more compact for carrying and could work alongside traditional security badges often used for facility access control. The pebble-like design is already in production and 2,000 will be deployed now, with a plan to ramp production for as many as 10,000 more in the near future using the company’s Poland-based manufacturing resources.
Estimote has been building programmable sensor tech for enterprises for nearly a decade and has worked with large global companies, including Apple and Amazon . Cheney tells me that he quickly recognized the need for the application of this technology to the unique problems presented by the pandemic, but Estimote was already 18 months into developing it for other uses, including in hospitality industries for employee safety/panic button deployment.
“This stack has been in full production for 18 months,” he said via message. “We can program all wearables remotely (they’re LTE connected). Say a factory deploys this — we write an app to the wearable remotely. This is programmable IoT.
“Who knew the virus would require proof of health vis-a-vis location diagnostics tech,” he added.
Many have proposed technology-based solutions for contact tracing, including leveraging existing data gathered by smartphones and consumer applications to chart transmission. But those efforts also have considerable privacy implications, and require use of a smartphone — something Cheney says isn’t really viable for accurate workplace tracking in high-traffic environments. By creating a dedicated wearable, Cheney says that Estimote can help employers avoid doing something “invasive” with their workforce, since it’s instead tied to a fit-for-purpose device with data shared only with their employers, and it’s in a form factor they can remove and have some control over. Mobile devices also can’t do nearly as fine-grained tracking with indoor environments as dedicated hardware can manage, he says.
And contact tracing at this hyperlocal level won’t necessarily just provide employers with early warning signs for curbing the spread earlier and more thoroughly than they would otherwise. In fact, larger-scale contact tracing fed by sensor data could inform new and improved strategies for COVID-19 response.
“Typically, contact tracing relies on the memory of individuals, or some high-level assumptions (for example, the shift someone worked),” said Brianna Vechhio-Pagán of John Hopkins University’s Applied Physics Lab via a statement. “New technologies can now track interactions within a transmissible, or ~6-foot range, thus reducing the error introduced by other methods. By combining very dense contact tracing data from Bluetooth and UWB signals with information about infection status and symptoms, we may discover new and improved ways to keep patients and staff safe.”
With the ultimate duration of measures like physical distancing essentially up-in-the-air, and some predictions indicating they’ll continue for many months, even if they vary in terms of severity, solutions like Estimote’s could become essential to keeping essential services and businesses operating while also doing the utmost to protect the health and safety of the workers incurring those risks. More far-reaching measures might be needed, too, including general-public-connected, contact-tracing programs, and efforts like this one should help inform the design and development of those.
Modsy, an e-commerce company that creates 3D renderings of customized rooms, has confirmed to TechCrunch that it laid off a number of staff. In addition, several of its executives, including CEO Shanna Tellerman, will take a 25% pay cut. TechCrunch first heard about the layoffs from a source. The company’s confirmation of cuts comes amid a wave of layoffs in the technology and startup communities.
In a statement from the CEO Shanna Tellerman to TechCrunch, Modsy said that “[i]n an effort to maintain a sustainable business during these unprecedented circumstances, we made a round of necessary layoffs and ended a number of designer contracts this week.” The company reaffirmed belief in its “long-term growth plans” in the same statement.
Modsy did not immediately respond when asked about how many individuals were impacted by this layoff. Update: The company declined to share the number of employees impacted.
Modsy bets on individuals looking to glam up their homes by better visualizing the new furniture they want to buy. Users can enter the measurements of their living room and add budget and style preferences, and Modsy will help them with custom designs and finding furniture that fits — literally.
The layoffs show that customer appetite might be changing. Last week, home improvement platform Houzz confirmed that it has scratched plans to create in-house furniture for sale. It also laid off 10 people across three locations: the U.K., Germany and China. Houzz is comparatively larger than Modsy, with a roughly $4 billion valuation. But scratching its in-house plan that would have likely brought in more capital is yet another data point in how e-commerce companies are struggling right now to get consumers to spend on items other than beans, booze and bread starters.
In retrospect there were rumblings that the company was cutting staff. A number of recent reviews from its Glassdoor page note layoffs, with one review from March 25, 2020 calling them “mass” in nature; our original source on the company’s recent cuts also noted their breadth.
You can find other social media posts concerning the company’s layoffs, some noting more than one wave. TechCrunch has not confirmed if the recent layoffs are the first of two, or merely the first set of cuts.
A little over 10 months ago the company was in a very different mood. Back in May of 2019, flush with new capital, Modsy’s CEO said that the “home design space, the inspiration category is thriving.”
“Pinterest just IPO’d, and it seems as if every TV channel is entering the home design category,” she said. “Meanwhile, e-commerce sites have barely changed since the introduction of the Internet.”
China-based Luckin Coffee, the fastest growing growing coffee brand in the world, has dazzled VCs, public market investors and frankly us over the years with its dizzyingly high growth, expanding from a handful of stores and delivery kiosks to tens of thousands in a just a few years, quickly outpacing Starbucks’ aggressive expansion in the world’s second largest economy.
All those numbers though may not be what they seem.
In a filing with the SEC this morning, the company’s board announced that it has initiated an internal investigation into the activities of its former COO Jian Liu, who may have inflated revenues by the company by an early estimate of more than $300 million (RMB2.2 billion). Expenses are believed by the board to be similarly inflated. Legal firm Kirkland & Ellis is the board’s counsel in its internal investigation.
Contact details for Jian Liu could not be located.
The alleged fraud is believed to have begun in the second quarter of 2019, although further details will have to come as the company conducts its investigation. The company told investors in its filing that they shouldn’t rely on the company’s recent financial statements, which are now believed to be inaccurate given the surfacing of this information.
Luckin shares, which trade as American Depositary Receipts, are down 70% right now according to Yahoo Finance.
The announcement of the investigation comes just days after the company appointed two new independent directors to its board. Last week, the company announced that Tianruo Pu, a seasoned accounting executive who was CFO of Zhaopin and UTStarcom, and Wai Yuen Chong, a supply chain executive who had stints at Charoen Pokphand Group and Luckin competitor Starbucks, had joined as independent directors and joined the company’s audit committee.
Luckin Coffee debuted in its IPO in May 2019 with a hot $650.8 million offering on Nasdaq, just a few weeks after raising a private round of funding from Blackrock. The company was notorious for both its stratospheric growth and also for its ample losses, with its 2018 numbers (before the alleged fraud detailed by the company) showing $125 million in revenue and $475 million in losses.
Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.
Yesterday we explored what the SaaS world thinks about churn. A cohort of SaaS executives surveyed by Gainsight are expecting medium-bad churn (our take on their reported forecasts); select software companies will see booming demand; and the impact of churn won’t be felt evenly around the world, leaving some markets stronger than others, offering SaaS startups and their public brethren a chance to grow.
What mattered (read the piece if you have time) is that there is a general expectation that churn will rise as the world’s economy slips in the face of a historic pandemic and its constituent city- and country-wide shutterings. In time, we should see the impact of rising churn in public earnings reports, lower startup valuations, slower growth curves, and changing go-to-market motions.
But, something that we can see today is a falling growth rate among SaaS companies focused on both other businesses and consumers. This is thanks to new data from ProfitWell, a Boston-based software company that helps other firms track their subscription businesses and work to reduce churn. A set of charts provided to TechCrunch detail how the growth rate of SaaS companies, in both B2B and B2C, are falling. Add in a rising churn expectation for the modern software industry, and the market could be in for SaaS’s first patch of hard times in recent memory.
According to ProfitWell CEO and co-founder Patrick Campbell, the following data is predicated on “just under 20,000 subscription [and] SaaS companies” that range “from small startups to Fortune 50 companies.”
Given that we tend to focus a bit more on the B2B world, we’ll start there. The following chart tracks growth amongst business-focused SaaS startups that ProfitWell has data on. Try to spot where the trendlines change, and then check the data associated with the turn:
The investment behemoth had been rumoured to be getting cold feet, when the WSJ reported last month that it was using regulatory investigations as a way to back out of its commitment to buy $3BN in shares from existing WeWork shareholders.
Under the terms of the share buyback deal negotiated last year, WeWork founder Adam Neumann had been set to receive almost $1BN for his shares in the co-working company. The former CEO had already been forced out at that stage after public markets balked over his managerial acumen, as we reported it at the time.
In a press statement issued today SoftBank SVP and chief legal officer, Rob Townsend, writes:
SoftBank remains fully committed to the success of WeWork and has taken significant steps to strengthen the company since October, including newly committed capital, the development of a new strategic plan for WeWork and the hiring of a new, world-class management team. The tender offer was an offer to buy shares directly from other major stockholders and its termination has no impact on WeWork’s operations or customers. The tender offer closing was conditioned on the satisfaction of certain closing conditions the parties agreed to in October of last year for SoftBank’s protection. Several of those conditions were not met, leaving SoftBank no choice but to terminate the tender offer.
SoftBank lists the unfulfilled conditions that have led it to terminate the offer as:
A spokeswomen for WeWork declined to comment on SoftBank withdrawing the offer. But Reuters has reported that a special committee of WeWork’s board said it was “disappointed” by the development and is considering “all of its legal options, including litigation.”
At the time of writing SoftBank had not responded to a request for comment.
Its press note makes a point of emphasizing that “Neumann, his family, and certain large institutional stockholders, such as Benchmark Capital, were the parties who stood to benefit most from the tender offer”.
“Together, Mr. Neumann’s and Benchmark’s equity constitute more than half of the stock tendered in the offering. In contrast, current WeWork employees tendered less than 10 percent of the total,” it writes, adding: “SoftBank previously worked with WeWork to complete an earlier phase of the tender offer that allowed over 4,000 employees to reprice out-of-the-money stock options at lower strike prices, delivering value in excess of $140 million to these employees in the form of reduced exercise prices (where such options would have been worth substantially less or nothing absent such repricing).”
Earlier this week WeWork announced the sale of Meetup, a social networking platform designed to connect people in person, for an undisclosed sum that’s reportedly far less than the $156M acquisition price WeWork paid for it back in 2017.
The novel coronavirus has certainly brought disruption to the hipster white collar co-working and social networking business, as populations are encouraged do to the opposite of mingle. The near term prospects for co-working spaces in a new age of social distancing and encouraged (or enforced) home working look bleak.
Yet, outside Asia, WeWork has to date closed only a tiny minority of its locations globally as a result of the coronavirus pandemic.
Even in heavily affected cities in Europe, such as Madrid and Milan — where governments have imposed strict quarantine measures to try to stem the tide of COVID-19 deaths — WeWork has not taken the step of shuttering co-working spaces.
Instead, in Europe and the US, it has only been temporarily closing buildings or even just individual floors if infections are identified.
It’s a different story in Asia. Per an updated list of building closures on WeWork’s website, the company closed more than 30 locations across cities in India on March 23 — but only after the government imposed a three-week nationwide lockdown, instructing India’s 1.3BN people to stay at home.
Elsewhere, WeWork members may see little reason to break quarantine in order to travel to a shared workspace when, provided they have Internet at home, they can stay where they are and be just as productive without risking spreading or catching the virus — hence the Zoom videoconferencing boom.
WeWork’s handling of the coronavirus crisis has also caused some rifts with its membership, with press reports of members angry at it for refusing refunds for spaces they can’t (in good conscience) use.
It has also faced criticism from members angry it’s prioritizing rent collection from now very cash-strapped small businesses rather than closing down during a public health crisis. (We’ve heard similar stories from members who did not wish to be publicly identified.)
WeWork, meanwhile, has justified staying open in a pandemic by claiming its locations contain people doing essential work.
When we asked the company about its response to the coronavirus last month, it told us: “We are monitoring the coronavirus (COVID-19) pandemic closely and have implemented a number of precautionary measures” — saying then it had strengthened “on-site cleanliness measures” and suspended all internal and member events until further notice, as of March 12.
On the same date it had offered its own staff the option of working from home — though its doors remained open to keycard-holding, fee-paying members.
Google is shutting down Neighbourly, a Q&A social app that it launched in Mumbai two years ago, the company has informed users.
The app, developed by company’s Next Billion Initiative, aimed to give local communities an outlet to seek answers to practical questions about life, routine and more.
At the time of the app’s launch, Google told TechCrunch that it believed that an increase in urban migration, short-term leasing and busy lives had changed the dynamic of local communities and made it harder to share information quite so easily.
The app supported voice-based entry for questions and a range of local languages.
In an email, Google said Neighbourly helped users find answers to over a million questions, but it did not get the traction the company was hoping for. The app will shut down on May 12, but users have another six months to download their data.
“We launched Neighbourly as a Beta app to connect you with your neighbors and make sharing local information more human and helpful. As a community, you’ve come together to celebrate local festivals, shared crucial information during floods, and answered over a million questions,” the company wrote to users.
“But Neighbourly hasn’t grown as we had hoped. In these difficult times, we believe that we can help more people by focusing on other Google apps that are already serving millions of people everyday,” it added, pointing users to explore Google Maps’ Local Guide, which also allows sharing of knowledge with local communities.
The app had such low-traction that third-party intelligence services such as App Annie and Sensor Tower don’t have any substantial data about it. But on Play Store, Neighbourly is listed to have more than 10 million downloads.
Until very recently, it had begun to seem like anyone with a thick enough checkbook and some key contacts in the startup world could not only fund companies as an angel investor but even put himself or herself in business as a fund manager.
It helped that the world of venture fundamentally changed and opened up as information about its inner workings flowed more freely. It didn’t hurt, either, that many billions of dollars poured into Silicon Valley from outfits and individuals around the globe who sought out stakes in fast-growing, privately held companies — and who needed help in securing those positions.
Of course, it’s never really been as easy or straightforward as it looks from the outside. While the last decade has seen many new fund managers pick up traction, much of the capital flooding into the industry has accrued to a small number of more established players that have grown exponentially in terms of assets under management. In fact, talk with anyone who has raised a first-time fund and you’re likely to hear that the fundraising process is neither glamorous nor lucrative and that it’s paved with very short phone conversations. And that’s in a bull market.
What happens in what’s suddenly among the worst economic environments the world has seen? First and foremost, managers who’ve struck out on their own suggest putting any plans on the back burner. “I would love to be positive, and I’m an optimist, buut I would have to say that now is probably one of the toughest times” to get a fund off the ground,” says Aydin Senkut, who founded the firm Felicis Ventures in 2006 and just closed its seventh fund.
It’s a perfect storm for first-time managers,” adds Charles Hudson, who launched his own shop, Precursor Ventures, in 2015.
Hitting pause doesn’t mean giving up, suggests Eva Ho, cofounder of the three-year-old, seed-stage L.A.-based shop Fika Ventures, which last year closed its second fund with $76 million. She says not to get “too dismayed” by the challenges. Still, it’s good to understand what a first-time manager is up against right now, and what can be learned more broadly about how to proceed when the time is right.
Know it’s hard, even in the best times
As a starting point, it’s good to recognize that it’s far harder to assemble a first fund than anyone who hasn’t done it might imagine.
Hudson knew he wanted to leave his last job as a general partner with SoftTech VC when the firm — since renamed Uncork Capital — amassed enough capital that it no longer made sense for it to issue very small checks to nascent startups. “I remember feeling like, ‘Gosh, I’ve reached a point where the business model for our fund is getting in the way of me investing in the kind of companies that naturally speak to me,” which is largely pre-product startups.
Hudson suggests he may have overestimated interest in his initial idea to create a single GP fund that largely backs ideas that are too early for other investors. “We had a pretty big LP based [at SoftTech] but what I didn’t realize is the LP base that’s interested in someone who is on fund three or four is very different than the LP base that’s interested in backing a brand new manager.”
Hudson says he spent a “bunch of time talking to fund of funds, university endowments — people who were just not right for me until someone pulled me aside and just said, ‘Hey, you’re talking to the wrong people. You need to find some family offices. You need to find some friends of Charles. You need to find people who are going to back you because they think this is a good idea and who aren’t quite so orthodox in terms of what they want to see in terms partner composition and all that.'”
Collectively, it took “300 to 400 LP conversations” and two years to close his first fund with $15 million. (Its now raising its third pre-seed fund).
Ho says it took less time for Fika to close its first fund but that she and her partners talked with 600 people in order to close their $41 million debut effort, adding that she felt like a “used car salesman” by the end of the process.
Part of the challenge was her network, she says. “I wasn’t connected to a lot of high-net-worth individuals or endowments or foundations. That was a whole network that was new to me, and they didn’t know who the heck I was, so there’s a lot of proving to do.” A proof-of-concept fund instill confidence in some of these investors, though Ho notes you have to be able to live off its economics, which can be miserly.
She also says that as someone who’d worked at Google and helped found the location data company Factual, she underestimated the work involved in running a small fund. “I thought, ‘Well, I’ve started these companies and run these big teams. How how different could it be? Learning the motions and learning what it’s really like to run the funds and to administer a fund and all responsibilities and liabilities that come with it . . . it made me really stop and think, ‘Do I want to do this for 20 to 30 years, and if so, what’s the team I want to do it with?'”
Investors will offer you funky deals; avoid these if you can
In Hudson’s case, an LP offered him two options, either a typical LP agreement wherein the outfit would write a small check, or an option wherein it would make a “significant investment that have been 40% of our first fund,” says Hudson.
Unsurprisingly, the latter offer came with a lot of strings. Namely, the LP said it wanted to have a “deeper relationship” with Hudson, which he took to mean it wanted a share of Precursor’s profits beyond what it would receive as a typical investor in the fund.
“It was very hard to say no to that deal, because I didn’t get close to raising the amount of money that I would have gotten if I’d said yes for another year,” says Hudson. He still thinks it was the right move, however. “I was just like, how do I have a conversation with any other LP about this in the future if I’ve already made the decision to give this away?”
Fika similarly received an offer that would have made up 25 percent of the outfit’s debut fund, but the investor wanted a piece of the management company. It was “really hard to turn down because we had nothing else,” recalls Ho. But she says that other funds Fika was talking with made the decision simpler. “They were like, ‘If you sign on to those terms, we’re out.” The team decided that taking a shortcut that could damage them longer term wasn’t worth it.
Your LPs have questions, but you should question LPs, too
Senkut started off with certain financial advantages that many VCs do not, having been the first product manager at Google and enjoying the fruits of its IPO before leaving the outfit in 2005 along with many other Googleaires, as they were dubbed at the time.
Still, as he tells it, it was “not a friendly time a decade ago” with most solo general partners spinning out of other venture funds instead of search engine giants. In the end, it took him “50 no’s before I had my first yes” — not hundreds — but it gave him a taste of being an outsider in an insider industry, and he seemingly hasn’t forgotten that feeling.
Indeed, according to Senkut, anyone who wants to crack into the venture industry needs to get into the flow of the best deals by hook or by crook. In his case, for example, he shadowed angel investor Ron Conway for some time, working checks into some of the same deals that Conway was backing.
“If you want to get into the movie industry, you need to be in hit movies,” says Senkut. “If you want to get into the investing industry, you need to be in hits. And the best way to get into hits is to say, ‘Okay. Who has an extraordinary number of hits, who’s likely getting the best deal flow, because the more successful you are, the better companies you’re going to see, the better the companies that find you.”
Adds Senkut, “The danger in this business is that it’s very easy to make a mistake. It’s very easy to chase deals that are not going to go anywhere. And so I think that’s where [following others] things really helped me.”
Senkut has developed an enviable track record over time. The companies that Felicis has backed and been acquired include Credit Karma, which was just gobbled up by Intuit; Plaid, sold in January to Visa; Ring, sold in 2018 to Amazon, and Cruise, sold to General Motors in 2016, and that’s saying nothing of its portfolio companies to go public.
That probably gives him a kind of confidence that it’s harder to earlier managers to muster. Still, Senkut also says it’s very important for anyone raising a fund to ask the right questions of potential investors, who will sometimes wittingly or unwittingly waste a manager’s time.
He says, for example, that with Felicis’s newest fund, the team asked many managers outright about how many assets they have under management, how much of those assets are dedicated to venture and private equity, and how much of their allotment to each was already taken. They did this so they don’t find themselves in a position of making a capital call that an investor can’t meet, especially given that venture backers have been writing out checks to new funds at a faster pace than they’ve ever been asked to before.
In fact, Felicis added new managers who “had room” while cutting back some existing LPs “that we respected . .. because if you ask the right questions, it becomes clear whether they’re already 20% over-allocated [to the asset class] and there’s no possible way [they are] even going to be able to invest if they want to.”
It’s a “little bit of an eight ball to figure out what are your odds and the probability of getting money even if things were to turn south,” he notes.
Given that they have, the questions look smarter still.
In the wake of the financial crisis, Congress passed regulations limiting the types of investments that banks could make into private equity and venture capital funds. As cash strapped investors pull back on commitments to venture funds given the precipitous drop of public market stocks, loosening restrictions on the how banks invest cash could be a lifeline for venture funds.
That’s the position that the National Venture Capital Association is taking on the issue in comments sent to the chairs of the Federal Reserve, the Securities and Exchange Commission and the Federal Deposit Insurance Corp., and the Commodities Future Trading Commission.
The proposed revisions of the Volcker Rule would exclude qualifying venture capital funds from the covered fund definition.
“The loss of banking entities as limited partners in venture capital funds has had a disproportionate impact on cities and regions with emerging entrepreneurial ecosystems — areas outside of Silicon Valley and other traditional technology centers,” NVCA president and chief executive Bobby Franklin wrote. “The more challenging reality of venture fundraising in these areas of the country tends to require investment from a more diverse set of limited partners.”
Franklin cited the case of Renaissance Venture Capital, a Michigan-based regionally focused fund that estimated the Volcker Rule cost them $50 million in potential capital commitments resulting in the loss of a potential $800 million in capital invested in the state of Michigan.
“This narrative unfortunately repeats itself, as we have heard firsthand from investors about how the Volcker Rule has affected venture capital investment and entrepreneurial activity across the country,” wrote Franklin. “The majority of these concerns about the Volcker Rule have come from members located in regions with emerging ecosystems, including states like Ohio, Michigan, North Carolina, New Hampshire, Wisconsin, Georgia, and Virginia, to name a few.”
It’s not only small states that could be impacted by the decision to reverse course on banking investments into venture firms in these uncertain times.
There’s a growing concern among venture investors that — just like in 2008 — their limited partners might find that they’re over-allocated into venture investments given the decline in markets, which would force them to pull back on making commitments to new funds.
“Institutional LPs will run into the same issues they had in 2008. If you used to manage $10B and the market declines and you now manage $6B, the percentage allocated to private equity has now increased relative to the whole portfolio,” Hyde Park Ventures partner, Ira Weiss told a Forbes columnist in a March interview. “They’re really not going to look at new managers. If you’ve done really well as a manager, they will probably re-up but may reduce commitment amounts. This will bleed backwards into the venture market. This is happening at a time when Softbank has already had a lot of trouble and people had not really modulated for that yet, but now they will.”
Some of the largest investment funds have already closed on capital, insulating them from the worst hits. These include funds like New Enterprise Associates and General Catalyst . But newer funds are going to have a harder time raising. For them, giving banks the ability to invest in venture firms could be a big boon — and a confidence boost that the industry needs at a time when investors across the board are getting skittish.
“Fundraising for new funds in 2020 and 2021 might prove to be more difficult as asset managers think about rebalancing their portfolio and/or protecting their assets from the current volatility in the market,” Aaron Holiday told Forbes . “This means that VC investing could slow down in 12 – 24 months after the most recent wave of funds (i.e. 2018 and 2019 vintages) are fully deployed.”
“What do you think of the commercial model for digital mobile payments. How do we make money?” Sharma asked Nandan Nilekani, one of the key architects of the Universal Payments Infrastructure that created a digital payments revolution in the country.
It’s the multi-billion-dollar question that scores of local startups and international giants have been scrambling to answer as many of them aggressively shift their focus to serving merchants and building lending products and other financial services .
New Delhi’s abrupt move to invalidate much of the paper bills in the cash-dominated nation in late 2016 sent hundreds of millions of people to cash machines for months to follow.
India then moved to work with a coalition of banks to develop the payments infrastructure that, unlike Paytm and MobiKwik’s earlier system, did not act as an intermediary “mobile wallet” to serve as an intermediary between users and their banks, but facilitated direct transaction between two users’ bank accounts.
Silicon Valley companies quickly took notice. For years, Google and the likes have attempted to change the purchasing behavior of people in many Asian and African markets, where they have amassed hundreds of millions of users.
In Pakistan, for instance, most people still run errands to neighborhood stores when they want to top up credit to make phone calls and access the internet.
With China keeping its doors largely closed for foreign firms, India, where many American giants have already poured billions of dollars to find their next billion users, it was a no-brainer call.
“Unlike China, we have given equal opportunities to both small and large domestic and foreign companies,” said Dilip Asbe, chief executive of NPCI, the payments body behind UPI.
And thus began the race to participate in the grand Indian experiment. Investors have followed suit as well. Indian fintech startups raised $2.74 billion last year, compared to 3.66 billion that their counterparts in China secured, according to research firm CBInsights.
And that bet in a market with more than half a billion internet users has already started to pay off.
“If you look at UPI as a platform, we have never seen growth of this kind before,” Nikhil Kumar, who volunteered at a nonprofit organization to help develop the payments infrastructure, said in an interview.
In October, just three years after its inception, UPI had amassed 100 million users and processed over a billion transactions. It has sustained its growth since, clocking 1.25 billion transactions in March — despite one of the nation’s largest banks going through a meltdown last month.
“It all comes down to the problem it is solving. If you look at the western markets, digital payments have largely been focused on a person sending money to a merchant. UPI does that, but it also enables peer-to-peer payments and across a wide-range of apps. It’s interoperable,” said Kumar, who is now working at a startup called Setu to develop APIs to help small businesses easily accept digital payments.
Vice-president of Google’s Next Billion Users Caesar Sengupta speaks during the launch of the Google “Tez” mobile app for digital payments in New Delhi on September 18, 2017 (Photo: Getty Images via AFP PHOTO / SAJJAD HUSSAIN)
The Google Pay app has amassed over 67 million monthly active users. And the company has found the UPI pipeline so fascinating that it has recommended similar infrastructure to be built in the U.S.
In August, the Federal Reserve proposed to develop a new inter-bank 24×7 real-time gross settlement service that would support faster payments in the country. In November, Google recommended (PDF) that the U.S. Federal Reserve implement a real-time payments platform such as UPI.
“After just three years, the annual run rate of transactions flowing through UPI is about 19% of India’s Gross Domestic Product, including 800 million monthly transactions valued at approximately $19 billion,” wrote Mark Isakowitz, Google’s vice president of Government Affairs and Public Policy.
Paytm itself has amassed more than 150 million users who use it every year to make transactions. Overall, the platform has 300 million mobile wallet accounts and 55 million bank accounts, said Sharma.
But despite on-boarding more than a hundred million users on their platform, payment firms are struggling to cut their losses — let alone turn a profit.
At an event in Bangalore late last year, Sajith Sivanandan, managing director and business head of Google Pay and Next Billion User Initiatives, said current local rules have forced Google Pay to operate in India without a clear business model.
Mobile payment firms never levied any fee to users as a strategy to expand their reach in the country. A recent directive from the government has now put an end to the cut they were receiving to facilitate UPI transactions between users and merchants.
Google’s Sivanandan urged the local payment bodies to “find ways for payment players to make money” to ensure every stakeholder had incentives to operate.
The firm, backed by SoftBank and Alibaba, has expanded to several new businesses in recent years, including Paytm Mall, an e-commerce venture, social commerce, financial services arm Paytm Money and a movies and ticketing category.
This year, Paytm has expanded to serve merchants, launching new gadgets such as a stand that displays QR check-out codes that comes with a calculator and a battery pack, a portable speaker that provides voice confirmations of transactions and a point-of-sale machine with built-in scanner and printer.
In an interview with TechCrunch, Sharma said these devices are already garnering impressive demand from merchants. The company is offering these gadgets to them as part of a subscription service that helps it establish a steady flow of revenue.
The firm’s Money arm, which offers lending, insurance and investing services, has amassed over 3 million users. The head of Paytm Money, Pravin Jadhav, resigned from the company this week, a person familiar with the matter said. A Paytm spokeswoman declined to comment. (Indian news outlet Entrackr first reported the development.)
Flipkart’s PhonePe, another major player in India’s payments market, today serves more than 175 million users, and over 8 million merchants. Its app serves as a platform for other businesses to reach users, explained Rahul Chari, co-founder and CTO of the firm, in an interview with TechCrunch. The company is currently not taking a cut for the real estate on its app, he added.
But these startups’ expansion into new categories means that they now have to face off even more rivals, and spend more money to gain a foothold. In the social commerce category, for instance, Paytm is competing with Naspers-backed Meesho and a handful of new entrants; and heavily-backed OkCredit and KhataBook today lead the bookkeeping market.
BharatPe, which raised $75 million two months ago, is digitizing mom and pop stores and granting them working capital. And PineLabs, which has already become a unicorn, and MSwipe have flooded the market with their point-of-sale machines.
A vendor holds an Mswipe terminal, operated by M-Swipe Technologies Pvt Ltd., in an arranged photograph at a roadside stall in Bengaluru, India, on Saturday, Feb. 4, 2017. (Photographer: Dhiraj Singh/Bloomberg via Getty Images)
“They have no choice. Payment is the gateway to businesses such as e-commerce and lending that you can monetize. In Paytm’s case, their earlier bet was Paytm Mall,” said Jayanth Kolla, founder and chief analyst at research firm Convergence Catalyst.
But Paytm Mall has struggled to compete with giants Amazon India and Walmart’s Flipkart. Last year, Mall pivoted to offline-to-online and online-to-offline models, wherein orders placed by customers are serviced from local stores. The company also secured about $160 million from eBay last year.
An executive who previously worked at Paytm Mall said the venture has struggled to grow because its goal-post has constantly shifted over the years. It has recently started to focus on selling fastags, a system that allows vehicle owners to swiftly pay toll fees. At least two more executives at the firm are on their way out, a person familiar with the matter said.
Kolla said the current dynamics of India’s mobile payments market, where more than 100 firms are chasing the same set of audience, is reminiscent of the telecom market in the country from more than a decade ago.
“When there were just four to five players in the telecom market, the prospect of them becoming profitable was much higher. They were scaling like crazy. They grew with the lowest ARPU in the world (at about $2) and were still profitable.
“But the moment that number grew to more than a dozen overnight, and the new players started offering more affordable plans to subscribers, that’s when profitability started to become elusive,” he said.
To top that off, the arrival of Reliance Jio, a telecom operator run by India’s richest man, in 2016 in the country with the cheapest tariff plans in the world, upended the market once again, forcing several players to leave the market, or declare bankruptcies, or consolidate.
India’s mobile payments market is now heading to a similar path, said Kolla.
If there were not enough players fighting for a slice of India’s mobile payments market that Credit Suisse estimate could reach $1 trillion by 2023, WhatsApp, the most popular app in the country with more that 400 million users, is set to roll out its mobile payments service in the country in a couple of months.
At the aforementioned press conference, Nilekani advised Sharma and other players to focus on financial services such as lending.
Unfortunately, the coronavirus outbreak that promoted New Delhi to order a three-week lockdown last month is likely going to impact the ability of millions of people to use such services.
“India has more than 100 million microfinance accounts, serviced in cash every week by gig-economy workers, who hawk vegetables on street corners or embroider saris sold in malls, among other things. Three out of four workers make a living by working casually for others or at their family firms and farms. Prolonged shutdowns will impair their ability to repay loans of 2.1 trillion rupees ($28.5 billion), putting the world’s largest microfinance industry at risk,” wrote Bloomberg columnist Andy Mukherjee.
A European coalition of techies and scientists drawn from at least eight countries, and led by Germany’s Fraunhofer Heinrich Hertz Institute for telecoms (HHI), is working on contacts-tracing proximity technology for COVID-19 that’s designed to comply with the region’s strict privacy rules — officially unveiling the effort today.
China-style individual-level location-tracking of people by states via their smartphones even for a public health purpose is hard to imagine in Europe — which has a long history of legal protection for individual privacy. However the coronavirus pandemic is applying pressure to the region’s data protection model, as governments turn to data and mobile technologies to seek help with tracking the spread of the virus, supporting their public health response and mitigating wider social and economic impacts.
Scores of apps are popping up across Europe aimed at attacking coronavirus from different angles. European privacy not-for-profit, noyb, is keeping an updated list of approaches, both led by governments and private sector projects, to use personal data to combat SARS-CoV-2 — with examples so far including contacts tracing, lockdown or quarantine enforcement and COVID-19 self-assessment.
The efficacy of such apps is unclear — but the demand for tech and data to fuel such efforts is coming from all over the place.
In the UK the government has been quick to call in tech giants, including Google, Microsoft and Palantir, to help the National Health Service determine where resources need to be sent during the pandemic. While the European Commission has been leaning on regional telcos to hand over user location data to carry out coronavirus tracking — albeit in aggregated and anonymized form.
The newly unveiled Pan-European Privacy-Preserving Proximity Tracing (PEPP-PT) project is a response to the coronavirus pandemic generating a huge spike in demand for citizens’ data that’s intended to offer not just an another app — but what’s described as “a fully privacy-preserving approach” to COVID-19 contacts tracing.
The core idea is to leverage smartphone technology to help disrupt the next wave of infections by notifying individuals who have come into close contact with an infected person — via the proxy of their smartphones having been near enough to carry out a Bluetooth handshake. So far so standard. But the coalition behind the effort wants to steer developments in such a way that the EU response to COVID-19 doesn’t drift towards China-style state surveillance of citizens.
While, for the moment, strict quarantine measures remain in place across much of Europe there may be less imperative for governments to rip up the best practice rulebook to intrude on citizens’ privacy, given the majority of people are locked down at home. But the looming question is what happens when restrictions on daily life are lifted?
Contacts tracing — as a way to offer a chance for interventions that can break any new infection chains — is being touted as a key component of preventing a second wave of coronavirus infections by some, with examples such as Singapore’s TraceTogether app being eyed up by regional lawmakers.
Singapore does appear to have had some success in keeping a second wave of infections from turning into a major outbreak, via an aggressive testing and contacts-tracing regime. But what a small island city-state with a population of less than 6M can do vs a trading bloc of 27 different nations whose collective population exceeds 500M doesn’t necessarily seem immediately comparable.
Europe isn’t going to have a single coronavirus tracing app. It’s already got a patchwork. Hence the people behind PEPP-PT offering a set of “standards, technology, and services” to countries and developers to plug into to get a standardized COVID-19 contacts-tracing approach up and running across the bloc.
The other very European flavored piece here is privacy — and privacy law. “Enforcement of data protection, anonymization, GDPR [the EU’s General Data Protection Regulation] compliance, and security” are baked in, is the top-line claim.
“PEPP-PR was explicitly created to adhere to strong European privacy and data protection laws and principles,” the group writes in an online manifesto. “The idea is to make the technology available to as many countries, managers of infectious disease responses, and developers as quickly and as easily as possible.
“The technical mechanisms and standards provided by PEPP-PT fully protect privacy and leverage the possibilities and features of digital technology to maximize speed and real-time capability of any national pandemic response.”
Hans-Christian Boos, one of the project’s co-initiators — and the founder of an AI company called Arago –discussed the initiative with German newspaper Der Spiegel, telling it: “We collect no location data, no movement profiles, no contact information and no identifiable features of the end devices.”
The newspaper reports PEPP-PT’s approach means apps aligning to this standard would generate only temporary IDs — to avoid individuals being identified. Two or more smartphones running an app that uses the tech and has Bluetooth enabled when they come into proximity would exchange their respective IDs — saving them locally on the device in an encrypted form, according to the report.
Der Spiegel writes that should a user of the app subsequently be diagnosed with coronavirus their doctor would be able to ask them to transfer the contact list to a central server. The doctor would then be able to use the system to warn affected IDs they have had contact with a person who has since been diagnosed with the virus — meaning those at risk individuals could be proactively tested and/or self-isolate.
On its website PEPP-PT explains the approach thus:
If a user is not tested or has tested negative, the anonymous proximity history remains encrypted on the user’s phone and cannot be viewed or transmitted by anybody. At any point in time, only the proximity history that could be relevant for virus transmission is saved, and earlier history is continuously deleted.
If the user of phone A has been confirmed to be SARS-CoV-2 positive, the health authorities will contact user A and provide a TAN code to the user that ensures potential malware cannot inject incorrect infection information into the PEPP-PT system. The user uses this TAN code to voluntarily provide information to the national trust service that permits the notification of PEPP-PT apps recorded in the proximity history and hence potentially infected. Since this history contains anonymous identifiers, neither person can be aware of the other’s identity.
Providing further detail of what it envisages as “Country-dependent trust service operation”, it writes: “The anonymous IDs contain encrypted mechanisms to identify the country of each app that uses PEPP-PT. Using that information, anonymous IDs are handled in a country-specific manner.”
While on healthcare processing is suggests: “A process for how to inform and manage exposed contacts can be defined on a country by country basis.”
Among the other features of PEPP-PT’s mechanisms the group lists in its manifesto are:
Having a standardized approach that could be plugged into a variety of apps would allow for contacts tracing to work across borders — i.e. even if different apps are popular in different EU countries — an important consideration for the bloc, which has 27 Member States.
However there may be questions about the robustness of the privacy protection designed into the approach — if, for example, pseudonymized data is centralized on a server that doctors can access there could be a risk of it leaking and being re-identified. And identification of individual device holders would be legally risky.
Europe’s lead data regulator, the EDPS, recently made a point of tweeting to warn an MEP (and former EC digital commissioner) against the legality of applying Singapore-style Bluetooth-powered contacts tracing in the EU — writing: “Please be cautious comparing Singapore examples with European situation. Remember Singapore has a very specific legal regime on identification of device holder.”
Dear Mr. Commissioner, please be cautious comparing Singapoore examples with European situation. Remember Singapore has a very specific legal regime on identification of device holder.
— Wojtek Wiewiorowski (@W_Wiewiorowski) March 27, 2020
A spokesman for the EDPS told us it’s in contact with data protection agencies of the Member States involved in the PEPP-PT project to collect “relevant information”.
“The general principles presented by EDPB on 20 March, and by EDPS on 24 March are still relevant in that context,” the spokesman added — referring to guidance issued by the privacy regulators last month in which they encouraged anonymization and aggregation should Member States want to use mobile location data for monitoring, containing or mitigating the spread of COVID-19. At least in the first instance.
“When it is not possible to only process anonymous data, the ePrivacy Directive enables Member States to introduce legislative measures to safeguard public security (Art. 15),” the EDPB further noted.
“If measures allowing for the processing of non-anonymised location data are introduced, a Member State is obliged to put in place adequate safeguards, such as providing individuals of electronic communication services the right to a judicial remedy.”
We reached out to the HHI with questions about the PEPP-PT project and were referred to Boos — but at the time of writing had been unable to speak to him.
“The PEPP-PT system is being created by a multi-national European team,” the HHI writes in a press release about the effort. “It is an anonymous and privacy-preserving digital contact tracing approach, which is in full compliance with GDPR and can also be used when traveling between countries through an anonymous multi-country exchange mechanism. No personal data, no location, no Mac-Id of any user is stored or transmitted. PEPP-PT is designed to be incorporated in national corona mobile phone apps as a contact tracing functionality and allows for the integration into the processes of national health services. The solution is offered to be shared openly with any country, given the commitment to achieve interoperability so that the anonymous multi-country exchange mechanism remains functional.”
“PEPP-PT’s international team consists of more than 130 members working across more than seven European countries and includes scientists, technologists, and experts from well-known research institutions and companies,” it adds.
“The result of the team’s work will be owned by a non-profit organization so that the technology and standards are available to all. Our priorities are the well being of world citizens today and the development of tools to limit the impact of future pandemics — all while conforming to European norms and standards.”
The PEPP-PT says its technology-focused efforts are being financed through donations. Per its website, it says it’s adopted the WHO standards for such financing — to “avoid any external influence”.
Of course for the effort to be useful it relies on EU citizens voluntarily downloading one of the aligned contacts tracing apps — and carrying their smartphone everywhere they go, with Bluetooth enabled.
Without substantial penetration of regional smartphones it’s questionable how much of an impact this initiative, or any contacts tracing technology, could have. Although if such tech were able to break even some infection chains people might argue it’s not wasted effort.
Notably, there are signs Europeans are willing to contribute to a public healthcare cause by doing their bit digitally — such as a self-reporting COVID-19 tracking app which last week racked up 750,000 downloads in the UK in 24 hours.
But, at the same time, contacts tracing apps are facing scepticism over their ability to contribute to the fight against COVID-19. Not everyone carries a smartphone, nor knows how to download an app, for instance. There’s plenty of people who would fall outside such a digital net.
Meanwhile, while there’s clearly been a big scramble across the region, at both government and grassroots level, to mobilize digital technology for a public health emergency cause there’s arguably greater imperative to direct effort and resources at scaling up coronavirus testing programs — an area where most European countries continue to lag.
Germany — where some of the key backers of the PEPP-PT are from — being the most notable exception.
An undertaking that involved combining massive amounts of graphics processing power could provide key leverage for researchers looking to develop potential cures and treatments for the novel coronavirus behind the current global pandemic. Immunotherapy startup ImmunityBio is working with Microsoft’s Azure to deliver a combined 24 petaflops of GPU computing capability for the purposes of modelling, in a very high degree of detail, the structure o the so-called “spike protein” that allows the SARS-CoV-2 virus that causes COVID-19 to enter human cells.
This new partnership means that they were able to produce a model of the spike protein within just days, instead of the months it would’ve taken previously. That time savings means that the model can get in the virtual hands of researchers and scientists working on potential vaccines and treatments even faster, and that they’ll be able to gear their work towards a detailed replication of the very protein they’re trying to prevent from attaching to the human ACE-2 proteins’ receptor, which is what sets up the viral infection process to begin with.
The main way that scientists working on treatments look to prevent or minimize the spread of the virus within the body is to block the attachment of the virus to these proteins, and the simplest way to do that is to ensure that the spike protein can’t connect with the receptor it targets. Naturally-occurring antibodies in patients who have recovered from the novel coronavirus do exactly that, and the vaccines under development are focused on doing the same thing pre-emptively, while many treatments are looking at lessening the ability of the virus to latch on to new cells as it replicates within the body.
In practical terms, the partnership between the two companies included a complement of 1,250 NVIDIA V100 Tensor Core GPUs designed for use in machine learning applications from a Microsoft Azure cluster, working with ImmunityBio’s existing 320 GPU cluster that is tuned specifically to molecular modeling work. The results of the collaboration will now be made available to researchers working on COVID-19 mitigation and prevention therapies, in the hopes that they will enable them to work more quickly and effectively towards a solution.
Since 2012, Dr. Jeanne Loring, the founder of the eponymous Loring Lab at Scripps Research, has been thinking about how to use pluripotent stem cells as a potential treatment for Parkinson Disease.
Now, eight years later, Aspen Neuroscience, the company she founded to bring her research to market has raised $70 million in funding and is set to begin clinical trials.
Roughly 60,000 Americans are diagnosed with Parkinson disease, which destroys parts of the brain responsible for motor function. The disease causes a debilitating loss of movement as a result of the degradation of a specific type of neuron in the brain responsible for the production of dopamine — a chemical that facilitates the brain’s control of mood and movement.
Aspen’s experimental treatment takes skin cells from patients who already have Parkinson’s disease and converts those cells into pluripotent stem cells using the technique that won Shinya Yamanaka and John Gurdon the Nobel Prize for medicine back in 2012.
It was Yamanaka’s discovery that in some ways served as a trigger for the work that Loring and Aspen’s chief executive officer Dr. Howard Federoff would be bringing to market eight years later.
Other cell replacement therapies for Parkinson’s had run into difficulties because patient’s bodies would reject the introduction of foreign neurons — in much the same way that organ transplants are sometimes unsuccessful because a host rejects the foreign tissue.
Aspen’s technology uses the host’s own tissue to develop the stem cells that will become the basis for treatment. A patient who carries a diagnosis of Parkinsons would be consented to give a biopsy and the tissue collected is then placed in a cell culture. The cells are then converted into pluripotent stem cells through the introduction of an inert viral RNA that recodes the cell structure.
Those pluripotent stem cells are then converted into neurons that are then transplanted into a patient to replace the ones that Parkinson’s disease has destroyed.
Federoff and Loring have known each other for years, and when the former vice chancellor for health affairs at the University of California, Irvine heard what Loring and her team was working on he stepped down to join her company as chief executive.
Federoff previously founded MedGenesis Therapeutix, another privately held company working on a treatment for Parkinsons. “Much of what we do for Parkinsons and the extant gene therapy is stabilizing the disease,” says Federoff. “Cells of fibroblasts help to dial the clock back.”
The key is the use of autologous cells — those collected from the same individual that will receive the transplant, says Federoff.
Aspen’s novel approach was compelling enough to win the support of longtime healthcare investors including OrbiMed, ARCH Venture Partners, Frazier Healthcare Partners, Domain Associates, Section 32, and former Y Combinator President, Sam Altman.
Following the new round, Aspen is significantly expanding its board of directors to include Faheem Hasnain, the founder of Gossamer Bio who’s taking the chairman role at Aspen; Tom Daniel a venture partner at ARCH Ventures, and Peter Thompson, a partner at OrbiMed.
Aspen’s first product is currently undergoing investigational new drug (IND)-enabling studies for the treatment of sporadic forms of Parkinson disease, the company said. Its second product uses gene correction and neuron therapy to try to treat genetic forms of Parkinson disease.
According to the company, the financing will support the completion of all remaining investigational studies and FDA submission of the studies relating to the company’s lead product. In addition, the financing will support data collection from a Phase 1 clinical trial and the expansion into Phase 2 randomized studies.
YouTube has been criticized for continuing to host coronavirus disinformation on its video sharing platform during a global health emergency.
Two US advocacy groups which campaign for online safety undertook an 18-day investigation of the video sharing platform in March — finding what they say were “dozens” of examples of dubious videos, including videos touting bogus vaccines the sellers claimed would protect buyers from COVID-19.
They also found videos advertising medical masks of unknown quality for sale.
There have been concerns about shortages of masks for front-line medical staff, as well as the risk of online scammers hawking low grade kit that does not offered the claimed protection against the virus.
Google said last month that it would temporarily take down ads for masks from its ad network but sellers looking to exploit the coronavirus crisis appear to be circumventing the ban by using YouTube’s video sharing platform as an alternative digital shop window to lure buyers.
Researchers working for the Digital Citizens Alliance (DCA) and the Coalition for a Safer Web (CSW) initiated conversations with sellers they found touting dodgy coronavirus wares on YouTube — and were offered useless ‘vaccines’ for purchase and hundreds of masks of unknown quality.
“There was ample reason to believe the offers for masks were dubious as well [as the vaccines], as highlighted by interactions with representatives from some of the sellers,” they said.
Their report includes screengrabs of some of the interactions with the sellers. In one a seller tells the researchers they don’t accept credit cards — but they do accept CashApp, PayPal, Google or Amazon gift cards or Bitcoin.
The same seller offered the researchers vaccines priced at $135 each, and suggested they purchase MMR/Varicella when asked which one is “the best”. Such a vaccine, even if it functioned for MMR/Varicella, would obviously offer no protection against COVID-19.
Another seller was found to be hawking “COVID-19 drugs” using a YouTube account name “Real ID Card Fake Passport Producer”.
“How does a guy calling himself ‘Real ID Card Fake Passport Producer’ even get a page on YouTube?” said Eric Feinberg, lead researcher for CSW, in a statement accompanying the report. “It’s all too easy to get ahold of these guys. We called some of them. Once you contact them, they are relentless. They’ll call you back at all hours and hound you until you buy something. They’ll call you in the middle of the night. They are predators looking to capitalize on our fear.”
A spokesman for the DCA told us the researchers compiled the report based on content from around 60 videos they identified hawking coronavirus-related ‘cures’ or kit between March 6-24.
“There are too many to count. Everyday, I find more,” added Feinberg.
The groups are also critical of how YouTube’s platform risks lending credibility to coronavirus disinformation because the platform now displays official CDC-branded banners under any COVID-19 related material — including the dubious videos their report highlights.
“YouTube also mixes trusted resources with sites that shouldn’t be trusted and that could confuse consumers — especially when they are scared and desperate,” said DCA executive director, Tom Galvin, in a statement. “It’s hard enough to tell who’s legitimate and who’s not on YouTube.”
The DCA and CSW have written letters to the US Department of Justice and the Federal Trade Commission laying out their findings and calling for “swift action” to hold bad actors accountable.
“YouTube, and its parent company Google, are shirking their formal policy that prohibits content that capitalizes off sensitive events,” they write in a letter to attorney general Barr.
“Digital Citizens is sharing this information in the hopes your Justice Department will act swiftly to hold bad actors, who take advantage of the coronavirus, accountable. In this crisis, strong action will deter others from engaging in criminal or illicit acts that harm consumers or add to confusion and anxiety,” they add.
Responding to the groups’ findings a YouTube spokesperson said some of the videos the researchers had identified had not received many views.
After we contacted it about the content YouTube also said it had removed three channels that had been identified by the researchers in the report for violating Community Guidelines.
In a statement YouTube added:
Our thoughts are with everyone affected by the coronavirus around the world. We’re committed to providing helpful information at this critical time, including raising authoritative content, reducing the spread of harmful misinformation and showing information panels, using WHO / CDC data, to help combat misinformation. To date, there have been over 5B impressions on our information panels for coronavirus related videos and searches. We also have clear policies against COVID-19 misinformation and we quickly remove videos violating these policies when flagged to us.
The DCA and CSW also recently undertook a similar review of Facebook’s platform — finding sellers touting masks for sale despite the tech giant’s claimed ban on such content. “Facebook promised CNN when they did a story on our report about them that the masks would be gone a week ago, but the researchers from CSW are still finding the masks now,” their spokesman told us.
Earlier this week the Tech Transparency Project also reported still being able to find masks for sale on Facebook’s platform. It found examples of masks showing up in Google’s targeted ads too.
The Canadian founder of a startup who caught COVID-19 from Justin Trudeau’s wife has launched an initiative to allow anyone to self-report their own case of the disease and publish the results, helping authorities to get ahead of the pandemic.
Operation COVID-19 will visualize both official and suspected cases of the Coronavirus in data lists and on a map, with the aim of saving lives and improving global public health systems. People will be able to self-report the case via an anonymous questionnaire.
The site aims to demonstrate how many official tests — compared to suspected COVID-19 cases — there are.
“The more people who can contribute their COVID-19 experiences, we can turn the table on this pandemic and build more intelligence to save lives,” said co-founder Jillian Kowalchuk.
Kowalchuk is cofounder of “street-smart” safety app Safe & The City, but fell ill with COVID-19 symptoms after meeting the Prime Minister of Canada’s wife, Sophie Trudeau — who later tested positive for the disease — on March 5th at Canada House in London, as she Instagrammed.
She was later dismayed to learn she was refused a test for COVID-19 in a UK hospital and was instead told to go home and self-isolate, making her concerned about the lack of testing and public awareness of the scale of the problem.
“First-hand experiences like this are becoming more common throughout the world as more are refused testing, leaving the majority of COVID-19 cases unknown, under-estimating the severity of the problem, limiting preventative measures and resource mobilization into other needed public health monitoring systems,” she told TechCrunch .
The initiative will collect insights from people who have contracted COVID-19 to provide back to the medical and public health authorities.
In doing so it will create a map visualization of both official and self-reported COVID-19 cases, recovered and deaths to support best practices globally, including more testing.
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.”
Most “Dear Sophie” columns are only accessible for Extra Crunch subscribers; use promo code ALCORN to purchase a one or two-year subscription for 50% off.
If I’m selected in this year’s lottery, how do we craft a strong H-1B petition? If I’m not selected, what are my other options?
— Hoping in Hayward
Thank you for asking the questions that are on the minds of many H-1B first-timers. Don’t worry! Several options exist if you’re not selected.
It’s really important, especially for early-stage companies, to work with experienced attorneys to guide them through this process. Now that USCIS has changed it’s system, if you’re already selected, then having a great attorney is really important to mitigate any remaining risk in the rest of the process. There are lots of wonderful, experienced immigration lawyers out there to choose from.
This year’s new H-1B online lottery registration process ended on March 20. By March 31, U.S. Citizenship and Immigration Services (USCIS) will notify companies whose H-1B candidates have been selected.
If USCIS selects you, your sponsoring employer will have 90 days to submit a complete H-1B petition. Employers can file an H-1B petition up to six months before a candidate’s intended start date.
Immigration law attorney Sophie Alcorn
It’s great that you’re already here in the U.S. H-1B candidates living outside of the U.S. seeking consular processing may face delays coming here for their employment start date depending on when coronavirus-related consulate closures and travel restrictions are lifted. These situations need to be addressed individually.
If meeting a deadline during any step of the process becomes difficult or impossible due to COVID-19, it’s possible to request special handling from the government. The federal government grants extensions under special circumstances, such as floods and hurricanes. The COVID-19 pandemic is a special circumstance.
Because COVID-19 is prompting policy and procedural changes with little or no warning, I recommend consulting an immigration attorney for assistance.
If you haven’t already, assemble the necessary documents as soon as possible. Obtaining documents may take longer now that most universities and companies are closed due to the pandemic.
Sophie’s podcast, Immigration Law for Tech Startups, is available on all major podcast platforms.
Your sponsoring employer will need to assemble documents that demonstrate the appropriate policies and cash flow to hire you. Startups need to be extra careful to meet all the requirements. You should have easily accessible:
A Labor Condition Application (LCA) approved by the U.S. Department of Labor is required with all H-1B petitions. For the LCA, your startup must promise to pay at least the prevailing wage to you and ensure that your employment conditions won’t negatively affect other workers.
If this is a startup and it’s the company’s first H-1B, it must get its Federal Employer Identification Number (FEIN) verified by the Labor Department’s Office of Foreign Labor Certification before starting. That process typically takes a week or so. Timing is key to filing an LCA. Keep in mind that the Labor Department typically makes a decision on whether to certify an LCA within seven business days.
Employers do not need to submit evidence to the Labor Department for an LCA, but they must post a copy of the H-1B notification, which can be done electronically, as well as keep all supporting documents in a file and make it available for public viewing.
The employer will also need to fill out Form I-129 (Petition for a Nonimmigrant Worker), and assemble compelling evidence and supporting documents. Check and double check the form and your documents to avoid mistakes and omissions, which can prompt USCIS to deny a petition. Make sure the info contained in the LCA matches Form I-129. Remember to include all required signatures.
USCIS recently announced that scanned or photocopied signatures will be allowed on all documents and petitions during the COVID-19 emergency. Make sure you pay the proper fees and send your package to the correct address with a way to track that package.
USCIS recently announced the temporary suspension of premium processing for H-1B petitions. The agency expects to resume premium processing for individuals changing status from an F-1 student visa by May 27, and all others by June 29. For an extra fee, premium processing enables employers to receive a decision on a petition within 15 days. Without premium processing, the USCIS California Service Center is currently taking two to four months.
If you don’t get selected in the H-1B lottery, relax! Your startup can sponsor you for an H-1B again next year because there’s no limit on the number of years you can be entered in the lottery, whether you’re inside or outside the U.S. and whether you’re currently employed by them or not. In the meantime, several other visa options exist for individuals like you who qualify for an H-1B:
The following options are available to you if you’re a citizen of Chile, Singapore, Australia, Canada or Mexico:
Fingers crossed that you get selected in the lottery!
All my best,
Have a question? Ask it here; we reserve the right to edit your submission for clarity and or space. The information provided in “Dear Sophie” is general information and not legal advice. For more information on the limitations of “Dear Sophie,” please view our full disclaimer here. You can contact Sophie directly at Alcorn Immigration Law.