Human rights NGO, Amnesty International, has written to the EU’s competition regulator calling for Google’s acquisition of wearable maker Fitbit to be blocked — unless meaningful safeguards can be baked in.
In a letter addressed to the blocs competition chief, Margrethe Vestager, Amnesty writes: “The commission must ensure that the merger does not proceed unless the two business enterprises can demonstrate that they have taken adequate account of the human rights risks and implemented strong and meaningful safeguards that prevent and mitigate these risks in the future.”
The letter urges the commission to take heed of an earlier call by a coalition of civil society groups also raising concerns about the merger for “minimum remedies” that regulators must guarantee before any approval.
In a report last year the NGO attacked the business model of Google and Facebook — arguing that the “surveillance giants” enable human rights harm “at a population scale.”
Amnesty warns now that Google is “incentivized to merge and aggregate data across its different platforms” as a consequence of that surveillance-based business model.
“Google’s business model incentivizes the company to continuously seek more data on more people across the online world and into the physical world. The merger with Fitbit is a clear example of this expansionist approach to data extraction, enabling the company to extend its data collection into the health and wearables sector,” it writes. “The sheer scale of the intrusion of Google’s business model into our private lives is an unprecedented interference with our privacy, and in fact has undermined the very essence of privacy.”
We’ve reached out to the commission and Google for a response to Amnesty’s letter. Update: A commission spokesperson confirmed it’s received the letter and said it will reply in due course.
Google’s plan to gobble Fitbit and its health tracking data has been stalled as EU regulators dig into competition concerns. Vestager elected to open an in-depth probe in August, saying she wanted to make sure the deal wouldn’t distort competition by further entrenching Google’s dominance of the online ad market.
The commission has also voiced concerns about the risk of Google locking other wearable device makers out of its Android mobile ecosystem.
However concerns over Google’s plan to gobble up Fitbit range wider than the risk of it getting more market muscle if the deal gets waved through.
Put simply, letting sensitive health data fall into the hands of an advertising giant is a privacy trash fire.
Amnesty International is just the latest rights watcher to call for the merger to be blocked. Privacy campaign groups and the EU’s own data protection advisor have been warning for months against letting the tech giant gobble up sensitive health data.
The commission’s decision to scrutinize the acquisition rather than waiving it through with a cursory look has led Google to make a number of concessions in an attempt to get it cleared — including a pledge not to use Fitbit data for ad targeting and to guarantee support for other wearables makers to operate on Android.
In its letter, Amnesty argues that the “safeguards” Google has offered are not enough.
“The company’s past practice around privacy further heighten the need for strict safeguards,” it warns, pointing to examples such as Google combining data from advertising network DoubleClick after it had acquired that business with personal data collected from its other platforms.
“The European Data Protection Board has recognized the risks of the merger, stating that the “combination and accumulation of sensitive personal data” by Google could entail a “high level of risk” to the rights to privacy and data protection,” it adds.
As well as undermining people’s privacy, Google’s use of algorithms fed with personal data to generate profiles of internet users in order to predict their behavior erodes what Amnesty describes as “the critical principle that all people should enjoy equal access to their human rights.”
“This risk is heightened when profiling is deployed in contexts that touch directly on people’s economic, social and cultural rights, such as the right to health where people may suffer unequal treatment based on predictions about their health, and as such must be taken into account in the context of health and fitness data,” it suggests.
“This power of the platforms has not only exacerbated and magnified their rights impacts but has also created a situation in which it is very difficult to hold the companies to account, or for those affected to access an effective remedy,” Amnesty adds, noting that while big tech companies have faced a number of regulatory actions around the world none has so far been able to derail what it calls “the fundamental drivers of the surveillance-based business model.”
So far the commission has stood firm in taking its time to consider the issue in detail.
A series of extensions mean a decision on whether to allow the Google-Fitbit merger may not come until early 2021. Though we understand the bloc’s national competition authorities are meeting to discuss the merger at the start of December so it’s possible a decision could be issued before the end of the year.
Per EU merger law, the commission college takes the final decision — with a requirement to take “utmost account” of the opinion of the member states’ advisory committee (though it’s not legally binding).
So it’s ultimately up to Brussels to determine whether Google-Fitbit gets green lit.
In recent years, competition chief Vestager, who is also EVP for the commission’s digital strategy, has said she favors tighter regulation as a tool for ensuring businesses comply with the EU’s rules, rather than blocking market access or outright bans on certain practices.
She has also voiced opposition to breaking up tech giants, again preferring to advocate for imposing controls on how they can use data as a way to rebalance digital markets.
To date, the commission has never blocked a tech/digital merger (it has in telecoms, where it stepped in in 2016 to block Hutchison’s proposed acquisition of Telefonica UK) though it has had its fingers burnt by big tech’s misleading filings — so has its own reputation to consider above reaching for the usual rubber stamp.
Simultaneously, EU lawmakers are working on a proposal for an ex ante regulation to address competition concerns in digital markets that would put specific rules and obligations on dominant players like Google — again in areas such as data use and data access.
That plan is due to be presented early next month — so it’s another factor that may be adding to delay the commission’s Google-Fitbit decision.
Andreessen Horowitz (a16z) has closed a pair of funds totaling $4.5 billion, the firm confirmed in a blog post this morning. The firm has raised $1.3 billion for an early-stage fund focused on consumer, enterprise and fintech; and closed a $3.2 billion growth-stage fund for later-stage investments. The firm did not immediately respond to request for comment.
The funds may seem somewhat typical, given the size of new funds that venture firms have been raising in recent years. Still, these are extraordinary amounts given that a16z, with offices in Menlo Park and San Francisco, was founded just 11 years ago.
Just as extraordinary, they bring the firm’s total assets under management to $16.5 billion.
It was just 20 months ago that a16z closed its most recent pair of funds — a $2 billion late-stage fund, and a $740 million flagship early-stage fund.
It also announced a separate, $515 million crypto-focused fund back in April of this year, its second such vehicle. And, in February, it rolled out its third biotech and healthcare investing fund, which closed with $750 million in capital commitments.
That’s a lot of capital to capture in one year. Then again, its limited partners have had reason to feel optimistic about its portfolio. In January, for example, the fintech company Plaid, whose Series C round a16z joined in late 2018, was acquired by Visa for a hefty $5.3 billion after raising roughly $310 million altogether.
The Justice Department recently sued to block the deal on antitrust grounds, but even if it’s unwound, industry observers like Plaid’s prospects.
The firm is also an investor in the soon-to-be-publicly traded accommodations marketplace Airbnb, though notably, according to Airbnb’s S-1, a16z does not own enough of the company to be listed on the filing, despite that it led the company’s Series B round in 2011 and despite that general partner Jeff Jordan sits on the company’s board and would need to list any ownership position as a result.
We’ve asked if it sold part or all of its stake, possibly earlier this year, and are awaiting word back.
Another of a16z’s portfolio companies, the pay-as-you-go lending company Affirm, has also filed to go public. Andreessen Horowitz first participated in the company’s Series B round back in 2015. It is also not listed on Affirm’s S-1 filing, meaning it owns less than 5% of the company.
And the firm is an investor in the game company Roblox, whose $150 million Series G round it led earlier this year. Roblox made its S-1 public earlier this week; a16z is not listed on it.
On the early-stage side, the firm is often characterized by its flashy deals, including its $100 million valuation of voice-chat app Clubhouse and $75 million valuation of Y Combinator graduate Trove.
A16z also recently launched a TxO accelerator, which uses a donor-advised fund to invest in underrepresented founders. Led by a16z partner Nait Jones, TxO has invested $100,000 each in an initial cohort of seven companies in exchange for 7% of ownership stake.
The donor-advised fund launched with $2.2 million in initial commitments, with Ben and Felicia Horowitz announcing they would match up to $5 million. Any returns from companies in the fund will be repurposed into the investment vehicle. The firm has declined to share the fund’s total size to date.
Currently, a16z employs 185 people, most recently hiring Anthony Albanese, the chief regulatory officer at the New York Stock Exchange, as an operating partner for its cryptocurrency team.
One of a16z’s biggest wins so far appears to be GitHub, which sold to Microsoft in a $7.5 billion all-stock deal in 2018 and from which a16z reportedly pocketed more than $1 billion. When it invested in the company, it wrote the biggest check it had issued at the time: $100 million. The terms were enough for a16z to win the deal against some tough competition, including Benchmark, which was also trying to woo GitHub at the time, as general partner, Peter Fenton, said recently.
It is also an early investor in the cryptocurrency exchange Coinbase, which was last valued by its private investors at $8 billion and is reportedly contemplating an IPO, possibly early next year. And a16z owns a stake in Robinhood, the popular trading app that in September was valued at $11.7 billion.
Robinhood, too, is said to be contemplating an IPO in the near future.
Repeat founders who have a proven track record, good references, and in the best cases, an exit to point to will have an easy time making inroads with venture capitalists. Earlier this week, for example, the former founders of Udemy and altMBA raised more than $4 million for a startup with no name or final product.
However, broad strokes in an environment as nuanced and dynamic as VC never make sense. As early stage evolves and more capital flows into the sector, some investors actually prefer first-time founders; it all depends on the type of venture capitalist you ask.
“We look for founders who have not had a demonstrable exit before because we think that it can actually taint your perspective,” Darabi said during an Extra Crunch Live. “We look for, instead, founders [who] have had a front row seat of success, or had some product experience where you’re watching from third base but not necessarily the person that takes the whole show home.”
The preference comes directly because of TMV’s investment cadence. TMV invests between $500,000 to $1.5 million into startups that have valuations between $10 million to $15 million. Startups that have heavy market signals or hype will likely exceed that range, and thus become out of reach. For example, a Y Combinator company raised $16 million in a seed round at a $75 million valuation before Demo Day.
As a result, TMV sources founders who have not yet made the leap and want an institutional investor to help them start their first company.
A coalition of 135 startups and tech companies with services in verticals including travel, accommodation and jobs have written to the European Commission to urge antitrust action against Google — warning that swift enforcement is needed or some of their businesses may not survive.
They also argue the Commission needs to act now or it risks undermining its in-train reform of digital regulations — which is due to be lay out in draft form early next month.
The letter has been inked by veteran Internet players such as Booking.com, Expedia, Kayak, Opentable, Tripadvisor and Yelp, co-signing along with a raft of (mostly) smaller European startups across all three verticals.
A further 30 co-signatories are business associations and organizations in related and other areas such as media/publishing — making for a total of 165 entities calling for Google to face swift antitrust banhammers.
A European Commission spokesperson confirmed to TechCrunch it’s received the Google critics’ letter — saying it will reply “in due course”.
While there have been complaints on this front before — the Commission has said it’s been hearing rumblings of discontent in the travel segment since for years at this point — a growing coalition of businesses (including some based in the US) are bandying together to pressure the EU antitrust chief to clip Google’s wings — with, for example, jobs-related businesses joining the travel startups whose complaints we reported on recently.
Reuters, which obtained the letter earlier, reports that the coalition is the largest ever to complain in concert to the EU’s competition division.
In the letter, which TechCrunch has reviewed, the group argues that Google is violating a 2017 EU competition enforcement decision over Google Shopping that barred the tech giant from self-preferencing and unfairly demoting rivals.
The group argues Google is unfairly leveraging its dominant position in Internet search to grab marketshare in the verticals where they operate — pointing to a feature Google displays at the top of search results (called ‘OneBoxes’) where it points Internet users to its own services, simultaneously steering them away from rival services.
The Commission is considering limiting such self-preferencing in forthcoming legislative proposals that it wants to apply to dominant ‘gatekeeper’ Internet platforms — which Google would presumably be classified as.
For, now, though no such ex ante regulation exists — and the coalition argues the Commission needs to pull its finger out and flex its existing antitrust powers to stop Google’s market abuse before its too late for their businesses.
“Google’s technical integration of its own specialised search services into its near monopoly general search service continues to constitute a clear abuse of dominance,” they argue in the letter to Vestager.
“Like no service before, Google has amassed data and content relevant for competition on such markets at the expense of others – us,” they go on. “Google did not achieve its position on any such market by competing on the merits. Rather, there is now global consensus that Google gained unjustified advantages through preferentially treating its own services within its general search results pages by displaying various forms of grouped specialised search results.”
A similar complaint about Google unfairly pushing its own services at the expense of rivals’ can be found in the US Department of Justice’s antitrust lawsuit against it, filed just last month — which is doubtless giving succour to Google complainants to redouble their efforts in Europe.
Back in 2017, the Commission found Google to be a dominant company in Internet search. Under EU law this means it has a responsibility not to apply the same types of infringing behavior identified in the Google Shopping case in any other business vertical, regardless of its marketshare.
Antitrust chief Margrethe Vestager has gained a reputation for taking on big tech during her first (and now second term) stint as the Commission’s competition chief — now combined with an EVP role shaping digital strategy for the bloc.
But while, on her watch, Google has faced enforcement over its Shopping search (2017), Android mobile OS (2018) and AdSense search ad brokering business (2019), antitrust complainants say the regulatory action has done nothing to dislodge the tech giant’s dominance and restore competition to those specific markets or elsewhere.
“The Commission’s Google Search (Shopping) decision of 27 June 2017 (was supposed to) set a precedent that Google is not permitted to promote its own services within the search results pages of its dominant general search service. However, as of today, the decision did not lead to Google changing anything meaningful,” the coalition argues in the letter dated November 12, 2020.
The Commission contends its Shopping decision has let to a significant increase in the rate of display of offers from competitors to Google in its Shopping units (up 73.5%), also pointing to a rate of near parity between Google offers on Shopping units getting clicks and rivals’ offers being clicked on. However, if Google is compensating for losing out on (some) marketshare in Shopping searches by dialling up its marketshare in other verticals (such as travel and jobs) that’s hardly going to sum to a balanced and effective antitrust remedy.
It’s also interesting to note that the signatures on the latest letter include the Foundem CEO: aka the original shopping comparison engine complainant in the Google Shopping case.
In further remarks today, the Commission spokesperson told us: “We continue to carefully monitor the market with a view to assessing the effectiveness of the remedies,” adding: “Shopping is just one of the specialised search services that Google offers. The decision we took in June 2017 gives us a framework to look also at other specialised search services, such as Google jobs and local search. Our preliminary investigation on this is ongoing.”
On the Commission’s forthcoming Digital Services Act and Digital Markets Act package, the coalition suggests a lack of action to rein in abusive behavior by Google now risks making it impossible for those future regulations to correct such practices.
“If, in the pending competition investigations, the Commission accepts Google’s current conduct as ‘equal treatment’, this creates the risk of pre-defining and hence devaluing the meaning of any future legislative ban on self-preferencing,” they warn, adding that: “Competition and innovation will continue to be stifled, simply because the necessary measures to counter the further anti-competitive expansion are not taken right now.”
Additionally, they argue that a legislative process is simply too slow to be used as an antitrust corrective measure — leaving their businesses at risk of not surviving Google in the meanwhile.
“While a targeted regulation of digital gatekeepers may help in the long run, the Commission should first use its existing tools to enforce the Shopping precedent and ensure equal treatment within Google’s general search results pages,” they urge, adding that they generally welcome the Commission plan to regulate “dominant general search engines” but emphasize speed is of the essence.
“We face the imminent risk of being disintermediated by Google. Many of us may not have the strength and resources to wait until such regulation really takes effect,” they add. “Action is required now. If Google were allowed to continue the anti-competitive favouring of its own specialised search services until any meaningful regulation takes effect, our services will continue to lack traffic, data and the opportunity to innovate on the merits. Until then, our businesses continue to be trapped in a vicious cycle – providing benefits to Google’s competing services while rendering our own services obsolete in the long run.”
Asked for its response to the group’s criticism of its business practices, a Google spokesperson send this statement: “People expect Google to give them the most relevant, high quality search results that they can trust. They do not expect us to preference specific companies or commercial rivals over others, or to stop launching helpful services which create more choice and competition for Europeans.”
The European Commission has laid out a first set of antitrust charges against Amazon focused on its dual role as a platform for other sellers but also a retailer itself on its own platform — and its cumulative use of third party merchant data to underpin Amazon’s own retail decisions.
Competition chief Margrethe Vestager said its preliminary conclusion is the ecommerce giant has abused its market position in France and Germany, its biggest markets in the EU, via its use of big data to “illegally distort” competition into online retail markets.
“We do not take issue with the success of Amazon. Or its size. Our concern is very specific business conduct which appears to distort genuine competition,” she said at a press conference announcing the formal charges.
The action stems from a 2015 sectoral ecommerce enquiry carried out by the bloc’s competition division. The Commission subsequently announced a formal investigation of Amazon’s use of data from sellers on its platform in July last year, though it had begun looking into concerns about whether third party sellers were being placed at a data-disadvantage by the ecommerce giant as far back as 2018.
As part of the investigation, EU regulators obtained a massive data set from Amazon — covering over 80M transactions and more than 100M product listings on its European marketplaces — to analyse how its business uses merchant data.
“Amazon is data driven. It’s a highly automated company — where business decisions are based on algorithmic tools,” said Vestager. “Our investigation shows that very granular, real-time business data relating to third party sellers’ listings and transactions on the Amazon platform systematically feed into the algorithm of Amazon’s retail business. It is based on these algorithms that Amazon decides what new products to launch, the price of each individual offer, the management of inventories, and the choice of the best supplier for a product.”
The competition chief said its preliminary concern is thus that third party sellers are unable to compete on the merits as a result of the big data advantage Amazon gleans from its access to third party sellers’ data.
“Amazon has, for example, access to data on the number of ordered and shipped units of sellers’ products, revenues on the marketplace, the number of visits to sellers’ offers, information relating to shipping — including the past performance of the seller, the consumers’ claims on the sellers’ products including the activated guarantees. And Amazon gets this data from every seller, every listed product, every purchase on its platform,” she said. “Our concern is not about Amazon retail — about the insights that Amazon retail has into the sensitive business data of one particular seller. Rather they are about the insights that Amazon retail has about the accumulated business data of more than 800,000 active sellers in the European Union covering more than 1BN products.
“In other words this is a case about big data.”
Vestager said the investigation has shown Amazon is able to aggregate and combine individual seller data in real time and to draw what she described as “precise and targeted” conclusions from it.
That capability gives is a huge advantage over individual sellers on its platform who do not have access to the same level of big data to help their business decisions, is the contention.
“Many retailers will have to invest heavily to identify products of interest and bring them to the consumers — taking risks when they invest in new products or when choosing a specific price level. Our concern is that Amazon can avoid some of those risks by using the data that it has access to,” added Vestager.
Reached for comment on the charges, an Amazon spokesperson sent this statement:
We disagree with the preliminary assertions of the European Commission and will continue to make every effort to ensure it has an accurate understanding of the facts. Amazon represents less than 1% of the global retail market, and there are larger retailers in every country in which we operate. No company cares more about small businesses or has done more to support them over the past two decades than Amazon. There are more than 150,000 European businesses selling through our stores that generate tens of billions of Euros in revenues annually and have created hundreds of thousands of jobs.
Amazon will now have a chance to respond to the charges, after which the Commission will assess the evidence and take a decision on whether it believes there has been an infringement of EU competition law. If it believes there has it has the power to order an end to infringing conduct and impose a fine of up to 10% of a company’s annual worldwide turnover.
In the two markets EU regulators found Amazon to be dominant, with more than 70% of consumers in France and more than 80% in Germany who made online purchases bought something from Amazon in the last 12 months.
Vestager specified the Commission is defining the market as “platforms providing marketplace services” rather than more general retail.
Also today, the commissioner announced a second competition investigation into Amazon — this one focused on the Buy Box and Prime loyalty program. Vestager said regulators decided to split the Amazon cases so an ongoing investigation into the Buy Box and Prime doesn’t slow down progress on the big data probe.
Detailing the concerns around Buy Box and Prime she said: “Looking into Amazon’s data use revealed that Amazon may have set certain rules on its platform that artificially favors both its own retail offers as well as the offers of sellers that use Amazon’s logistics and delivery services. For this reason we have decided to open a second investigation into these business practices.”
While European regulators move forward with antitrust action related to Amazon’s marketplace practices, the ecommerce giant is also in the antitrust crosshairs of US lawmakers.
Last month it was one of a number of tech giants called out in an antitrust report by the U.S. House Judiciary Committee. The report argues Amazon wields monopoly power over SMEs via its dominance of online retail — which in turn enables it to “self-preference and disadvantage competitors in ways that undermine free and fair competition”.
Amazon’s response to the US committee’s scrutiny was a fierce rebuttal — saying it accounts for only a tiny fraction of global retail and isn’t even the largest US retailer by revenues. It also claimed its interests align with the third party sellers on its platform, denying there’s any conflict of interests.
This story is developing — refresh for updates…
I’ve worked at TechCrunch for a little over a year, but this was one of the hardest weeks on the job so far.
Like many people, I’ve been distracted in recent days. As I write this, I have one eye on my keyboard and another on a TV that sporadically broadcasts election results from battleground states. Despite the background noise, I’m completely impressed with the TechCrunch staff; it takes a great deal of focus and energy to set aside the world’s top news story and concentrate on the work at hand.
Monday feels like a distant memory, so here’s an overview of top Extra Crunch stories from the last five days. These articles are only available to members, but you can use discount code ECFriday to save 20% off a one or two-year subscription. Details here.
Marketplaces created for B2B activity are surging in popularity. According to one report, transactions in these venues generated around $680 billion in 2018, but that figure is predicted to reach $3.6 trillion by 2024.
The COVID-19 pandemic is helping startups that innovate in areas like payments, financing, insurance and compliance.
Even so, according to Merritt Hummer, a partner at Bain Capital Ventures, “B2B marketplaces cannot simply remain stagnant, serving as simple transactional platforms.”
The startups that are first to market with innovative “adjacent services will emerge as winners in the next few years,” she advises.
For this morning’s edition of The Exchange, Alex Wilhelm interviewed three executives at cloud and SaaS companies to find out how well Q3 2020 has been treating them:
As one Twitter commenter noted, Alex doesn’t just talk to the best-known tech execs; he reaches out to a wide range of people, and it shows in the quality of his reporting.
New Regulation Crowdfunding guidelines the SEC released this week allow companies to directly raise up to $5 million each year from individual investors, an increase from the previous limit of $1.07 million.
“Life has gotten easier in other ways as well for founders pursuing this fundraising type and the platforms that seek to simplify it,” reports Lucas Matney, who interviewed Wefunder CEO Nicholas Tommarello.
Funding for seed-stage startups slumped 32% last quarter compared to 2019, so “the tide could be turning” for founders who were reluctant to raise from a giant pool of small dollars, Lucas found.
Reaching scale is paramount for software companies, so growth is a top priority.
In a guest post for Extra Crunch, Drift CEO David Cancel explains that too many SaaS and cloud companies waste time trying out a number of solutions before finding the right recipe.
“I can tell you that there absolutely is a repeatable process to building a successful SaaS business,” he says, “one that can reliably guide you to product-market fit and then help you quickly scale.”
Companies that hope to eliminate longstanding inequities in the workplace can’t just rely on doing what they think is right. Without a data-driven approach, subjective judgments and implicit bias tend to negate good intentions.
Many startups don’t hire full-time HR managers until they’ve reached scale, but this comprehensive post lays out several critical factors for creating — and maintaining — a fair pay model.
News broke this week that Airbnb plans to to raise approximately $3 billion in a public filing that would allow it to reach a valuation in the $30 billion range.
Our expert unicorn wrangler Alex Wilhelm says curious investors should ask themselves the following:
“People at the end of their career write memoirs,” Starling Bank founder Anne Boden told TechCrunch’s Steve O’Hear. “I’m at the beginning.”
In Boden’s new book, “Banking On It,” she shares the story of how (and why) she decided to found a challenger bank, eventually parting with colleagues who launched competitor Monzo.
“This is really putting down on paper where we are at the moment,” she said. “It’s been written over several years, and I’m hoping to use this to inspire a generation of entrepreneurs.”
Natasha Mascarenhas and Alex Wilhelm collaborated on Monday’s edition of The Exchange to report on how investors became less likely to fund female founders since the beginning of the COVID-19 pandemic.
Drawing on data from multiple sources, Alex and Natasha found that startups led by women and mixed-gender founding teams received 48% less VC funding in Q3 2020 than in Q2, even though overall funding bounced back.
“From fear in late Q1, to a middling Q2, to a boom in Q3,” they wrote. “It was an impressive comeback. For some.”
Natasha Mascarenhas has owned TechCrunch’s edtech beat since she came aboard at the start of 2020, just a few months before the pandemic led to widespread school closures.
She’s reported on countless funding rounds and interviewed founders and investors who are active in the space, but she recently spotted a new trend: “M&A activity is buzzier than usual.”
Alex Wilhelm shrugged off his Election Day distractions long enough to write a column that comprehensively examined fintech investment activity over the last quarter.
In Q3 2020, “60% of all capital raised by financial technology startups came from just 25 rounds worth $100 million or more,” he reports.
Are these mega-rounds funding “the next crop of unicorns?” It’s too early to say, but it’s clear that pandemic-fueled uncertainty is driving consumers into the arms of companies like Robinhood, Chime, Lemonade and Root.
In 1,316 words, Alex captures the state of play in insurtech, banking, wealth management and payments investing: “Now, we just want to see some ******* IPOs.”
Five years ago, Terri Burns was a product manager at Twitter. Today, she’s the first Black woman — and the youngest person — to be promoted to partner at Google Ventures.
In a Q&A with Natasha Mascarenhas, Burns talked about her plans for the new role, as well as her investment thesis.
“I don’t know what it actually means to build a sustainable business and venture is a really great way to sort of learn that,” said Burns.
Are founders and investors really leaving Silicon Valley for greener pastures? Now that investors are limited to virtual interactions, are they being more hands-on with their portfolio companies?
In an Extra Crunch Live chat hosted by Darrell Etherington, GV General Partner MG Siegler talked about how the pandemic is — and is not — shaping the way he does business.
“I do feel like things are operating in a pretty streamlined manner, or as much as they can be at this point,” he said.
“But, you know, there’s always going to be some more wildcards — like we’re a week away, today, from the U.S. election.”
Thank you very much for reading Extra Crunch; I hope you have a great weekend.
European lawmakers are pressing major e-commerce and media platforms to share more data with each other as a tool to fight rogue traders who are targeting consumers with coronavirus scams.
After the pandemic spread to the West, internet platforms were flooded with local ads for PPE of unknown and/or dubious quality and other dubious coronavirus offers — even after some of the firms banned such advertising.
The concern here is not only consumers being ripped off but the real risk of harm if people buy a product that does not offer the protection claimed against exposure to the virus or even get sold a bogus coronavirus “cure” when none in fact exists.
In a statement today, Didier Reynders, the EU commissioner for justice, said: “We know from our earlier experience that fraudsters see this pandemic as an opportunity to trick European consumers. We also know that working with the major online platforms is vital to protect consumers from their illegal practices. Today I encouraged the platforms to join forces and engage in a peer-to-peer exchange to further strengthen their response. We need to be even more agile during the second wave currently hitting Europe.”
The Commission said Reynders met with 11 online platforms today — including Amazon, Alibaba/AliExpress, eBay, Facebook, Google, Microsoft/Bing, Rakuten and (TechCrunch’s parent entity) Verizon Media/Yahoo — to discuss new trends and business practices linked to the pandemic and push the tech companies to do more to head off a new wave of COVID-19 scams.
In March this year EU Member States’ consumer protection authorities adopted a common position on the issue. The Commission and a pan-EU network of consumer protection enforcers has been in regular contact with the 11 platforms since then to push for a coordinated response to the threat posed by coronavirus scams.
The Commission claims the action has resulted in the platforms reporting the removal of “hundreds of millions” of illegal offers and ads. It also says they have confirmed what it describes as “a steady decline” in new coronavirus-related listings, without offering more detailed data.
In Europe, tighter regulations over what e-commerce platforms sell are coming down the pipe.
Next month regional lawmakers are set to unveil a package of legislation that will propose updates to existing e-commerce rules and aim to increase their legal responsibilities, including around illegal content and dangerous products.
In a speech last week, Commission EVP Margrethe Vestager, who heads up the bloc’s digital policy, said the Digital Services Act (DSA) will require platforms to take more responsibility for dealing with illegal content and dangerous products, including by standardizing processes for reporting illegal content and dealing with reports and complaints related to content.
A second legislative package that’s also due next month — the Digital Markets Act — will introduce additional rules for a sub-set of platforms considered to hold a dominant market position. This could include requirements that they make data available to rivals, with the aim of fostering competition in digital markets.
MEPs have also pushed for a “know your business customer” principle to be included in the DSA.
Simultaneously, the Commission has been pressing for social media platforms to open up about what it described in June as a coronavirus “infodemic” — in a bid to crack down on COVID-19-related disinformation.
Today the Commission gave an update on actions taken in the month of September by Facebook, Google, Microsoft, Twitter and TikTok to combat coronavirus disinformation — publishing its third set of monitoring reports. Thierry Breton, commissioner for the internal market, said more needs to be done there too.
“Viral spreading of disinformation related to the pandemic puts our citizens’ health and safety at risk. We need even stronger collaboration with online platforms in the coming weeks to fight disinformation effectively,” he said in a statement.
The platforms are signatories of the EU’s (non-legally binding) Code of Practice on disinformation.
Legally binding transparency rules for platforms on tackling content such as illegal hate speech look set to be part of the DSA package. Though it remains to be seen how the fuzzier issue of “harmful content” (such as disinformation attached to a public health crisis) will be tackled.
A European Democracy Action Plan to address the disinformation issue is also slated before the end of the year.
In a pointed remark accompanying the Commission’s latest monitoring reports today, Vera Jourová, VP for values and transparency, said: “Platforms must step up their efforts to become more transparent and accountable. We need a better framework to help them do the right thing.”
“More than 50% of our founders still are in their current jobs,” said John Vrionis, co-founder of seed-stage fund Unusual Ventures.
The fund, which closed a $400 million investment vehicle in November 2019, has noticed that more and more startup employees are thinking about entrepreneurship as the pandemic has shown how much room there is for new innovation. To gain a competitive advantage, Unusual is investing small checks into founders before they’re full-time.
Unusual, which cuts an average of eight checks per year into seed-stage companies, isn’t doling out millions to every employee who decides to leave Stripe. The firm is conservative with its spending and takes a more focused approach, often embedding a member from the firm into a portfolio company. It’s not meant to scale to dozens of portfolio companies a year, but instead requires a methodical approach.
One with a healthy pipeline of companies to choose from.
In an Extra Crunch Live chat, Vrionis and Sarah Leary, co-founder of Nextdoor and the firm’s newest partner, said lightweight investing matters in the early days of a company.
“There were a lot of teams that needed capital to start the journey, but frankly, it would have been over burdensome if they took on $2 or $3 million,” Leary said. “[New founders] want to be in a place where they have enough money to get going but not too much money that they get locked into a ladder in terms of expectations that they’re not ready to take advantage of.” The checks that Unusual cuts in pre-seed often range between $100,000 to half a million dollars.
Leary chalks up the boom to the disruption in consumer behavior, which opens up the opportunity for new companies to win.
Before the 2016 election, Vice Ventures founder and general partner Catharine Dockery was bullish about the future of recreational cannabis in the United States.
“We saw quite a bit more optimism around national legalization, with the feeling that a wave of states legalizing recreational use would be the final push needed” to see drug reform, she said. It was good news for Dockery, who was planning to launch a firm investing in categories like cannabis, CBD, psychedelics and sex tech.
She announced a $25 million fund in June 2019, but the national policy landscape had shifted considerably.
“The vitriol and division around the election really haven’t left room for substantive discussions. I think this will eventually change, but don’t have high hopes for much policy debate until the election is complete, if at all,” she said. “In a time of uncertainty, we’re taking a small step back.”
Along with many VC firms, Vice Ventures has raised the bar regarding which startups it will fund, but several investors told TechCrunch they were split about how they’re making decisions in the closing days of the presidential campaign. After a booming summer, some said momentum is increasing, while others told us that expectations have never been higher for startups.
“If anything, the pace is increasing,” said Alexa von Tobel of Inspired Capital. Traditionally, she said founders scale back on fundraising efforts close to the winter holidays because investors’ vacation mentality is kicking in. This year, “I think we’ll continue to see founders taking advantage of the ample flow of capital right now and shore up resources so they can enter 2021 on strong footing,” she said.
While that may be good news for founders, von Tobel said Inspired Capital is not giving too much weight to the election internally.
“We think of ourselves as patient capital, focused on looking for the best companies no matter the timing,” she said. “While we know the election will create noise and have an impact on businesses long term, it does not have a place in our process right now.”
Inspired Capital invests more broadly in the early-stage environment, which plays a part in its ability to invest through crises and turbulence. It seems that firms that have more niche investment theses have been more likely to change their pace ahead of the election.
Menlo Ventures, the 44-year-old venture firm with offices in Menlo Park and San Francisco, is taking the wraps of its fifteenth early-stage fund today, a vehicle it closed with $500 million in capital commitments.
It’s the same amount that Menlo announced last year for a growth-stage fund, the second in the firm’s history.
We talked with managing director Venky Ganesan earlier this week about the new fund. It will not, notably, include longtime Menlo managing director Mark Siegel, who joined the firm 24 years ago after a business development stint at Netscape, and who — like peers Bill Gurley of Benchmark and Todd Chaffee of IVP — is now making room for some of the firm’s more recent additions.
Ganesan also said that Menlo, which invests in consumer, enterprise, frontier tech, and healthcare startups, might index a bit more on health-related bets, which is unsurprising but also interesting in an historical context.
Gilead Sciences was actually incubated at Menlo back in 1987, but the firm dropped its life sciences practice for roughly 20 years before resuscitating it in 2017, hiring Greg Yap as a partner to lead related investments. At the time, Yap’s mandate was to invest roughly 15% of the firm’s last, $450 million, early-stage fund into tech-driven life sciences, but Ganesan can imagine that even more of its new fund will be poured into tech-driven health and medical startups.
As for check sizes, Ganesan said that Menlo will continue to do the occasional seed round but that it’s far more focused on Series A and B deals, writing initial checks of between $8 million to $15 million at the Series A for a targeted 20% of each startup, and checks beginning at $12 million to $14 million at the Series B stage. (Its later-stage fund makes the bigger bets beyond that.)
Menlo has long counted Washington State as its anchor tenant, and this fund is no different, having secured a $125 million commitment from its investment board.
A newer investor, says Ganesan, is the State of New Mexico Investment Council, which is one of three new investors in the fund — all of which were introduced to Menlo through other investors, and all of which agreed to back the firm via Zoom.
Given the firm’s recent exits, institutional interest in the new fund isn’t surprising. Menlo led Uber’s Series B round back in 2011, and according to the firm, even before Uber’s IPO last year, Menlo had already earned $973 million — or a 93x return — on its $10.5 million investment by selling nearly half of its Uber stock to a syndicate led by SoftBank.
Another big win for the firm has been Roku, which makes a variety of digital media players for video streaming and went public in 2017. At the time, its shares traded at around $15 each; today its shares trade at $233 apiece.
Meanwhile, Menlo has active portfolio companies that also appear poised to produce returns for its investors. The consignment company Poshmark said late last month that it has confidentially submitted to securities regulators a draft registration statement for its IPO, for example. And Chime, a start-up that delivers banking services through mobile phone, closed a round of funding last month that valued the company at $14.5 billion.
True Ventures, the now 15-year-old firm with offices in Palo Alto, California, and San Francisco, is taking the wraps off two new funds this morning: It has closed its seventh early-stage fund with $465 million, and capped its fourth opportunity-type fund — used to back its own breakout portfolio companies — with $375 million.
It’s a lot of committed capital for True, which was founded and continues to be led by Jon Callaghan and Phil Black. Then again, the firm is larger than it once was, with 35 people across the firm, including 10 others on the investing side, as well as other colleagues across the firm’s finance, operations and platform teams.
It’s especially easy to understand why True would raise another, slightly larger opportunity fund (its last closed with $285 million in 2018, and its last early-stage fund closed with $350 million at the same time). It was through one such vehicle that True was able to invest so much in the consumer fitness company Peloton, including its Series F round.
When the company went public last fall, pricing at $7.2 billion, True was the company’s second-largest outside shareholder. Roughly one year later, Peloton is now valued at more than $38 billion by public market investors — and True is still involved.
We talked with Callaghan and Black earlier this week about how and when True unwinds a position like that in a publicly traded portfolio company. We also talked about the firm’s continued emphasis on creating a support network for its founders and their teams, whether they worry the center of startup investing is shifting out of the Bay Area and more. Much of chat, below, has been edited for length.
TC: New year, bigger funds?
PB: The numbers are bigger but a function of a lot of people who would like to be a part of what we are doing, for which we’re grateful. We also have a much larger team.
JC: More than 90% of our LPs re-upped; we had way more demand than we had supply for, including because we think it’s important to bring in new capital from new relationships every time we raise a fund, usually from people who we’ve known for a long time. We’re actively engaged with our LP base, and it provides us with new thinking.
TC: Are many, or any, of these VC firms? It seems increasingly that everyone is an investor in everyone else’s fund.
PB: We have funds of funds, like Greenspring Associates and Foundry Group Next [as investors]. I do think you see [venture funds investing in venture funds] when it comes to smaller, sub $50 million funds, but it’s not applicable for us.
TC: Over time, you’ve written fairly small early checks for 20% of a company. Is that still possible to do in this market?
JC: Our core business remains exactly the same. We’re writing $1 million to $3 million from day one to a founder or small team. We’ve kind of honed it in terms of how we look at things . . . we’ve invested $15 million into our platform dating back 10 years or so [to bring to bear the breadth of our team and broader network]. If I’m on your board, and I’m your only point of contact, then I’m the weak link.
TC: You have Founder Camp, True University and numerous culture initiatives. How would you rate the firm in terms of diversity?
JC: We’re working hard to do better, but we’re not good enough as an industry, and we’re part of that industry. We’ve funded incredibly powerful women entrepreneurs and some people of color but not enough, and we’re looking at long-term solutions right now. We’re also very focused on fellowships [through which True has recruited 165 college students over the years to work at True-backed startups, half of whom have landed full-time employment with the companies afterward, says the firm].
We’ve always focused on gender equality and skewed more heavily toward women in the last two classes, but we’re also focused on diverse candidates and on diverse backgrounds. We need to provide more pathways into tech and startups, and through fellowships, we can access students before they’re thinking about career tracts.
TC: One of your portfolio companies, Peloton, is having an especially good year. Have you sold out of that position? How do you think about returning money to LPs after a company goes public?
JC: We are still holders of the company’s stock and I’m still on board.
PB: It’s really case-by-case whether we sell the shares or distribute them. It takes time because we’re such large shareholders typically, that our ability to get capital back is gated by public markets and [the] volume [of what we own]. As for whether we distribute cash or shares, usually LPs like the shares. A lot of family offices and fund of funds would prefer the shares because they refer them over to their public [market] groups. Certain others, especially European investors, prefer cash for tax or other reasons.
TC: We’re starting to see more SPACs, or special purpose acquisition companies, launched by venture funds. What do you make of these?
PB: Jon and I have been around long enough to remember when SPACs were a four-letter word. I think they’re a better instrument today than 20 years ago. Some of our companies are thinking about them; there’s a lot of curiosity around what it means to raise a SPAC or go public via a SPAC. People are in information-finding mode. We as a firm have not thought we should raise a SPAC ourselves.
JC: I think the innovation around access to capital is really interesting. I think it’s too soon to tell how it will work out for the founders and the companies. It is pretty complicated. We’re watching it closely.
TC: True is often ahead of the curve. You were investing in hardware companies like Fitbit and Peloton ahead of a lot of other generalist firms. The same was true of digital health and biology. What’s interesting to you right now?
JC: Our job is to listen to what our founders are sending to us, and one space we’re thinking about is the future of work — what happens not in one year but five years. The second is a theme that we’re calling the roaring ’20s, and by that I mean we’re studying post-World War I and World War II and how consumer behavior changed and what might happen after this pandemic when there is a vaccine.
TC: Can you drill down a bit more on these?
JC: We’re thinking about art, music, dining, travel, entertainment . . . What happens when Broadway opens up? You can imagine hybrid experiences. Regarding the future of work, I’m not sure we’ll spend a lot of time on Zoom initially [once the world has re-opened], but [we think about] virtual access to everything so employees who are remote have more [at their fingertips], along with what happens to suburbs versus cities, which we already have some insight into through [past and current portfolio companies] Blue Bottle [Coffee] and Sweetgreen and Madison Reed .
TC: A lot of companies are making remote work permanent. Do you think this is as sweeping a trend as it seems, and how does that change the Bay Area if so?
JC: We had a virtual offsite recently and in the last 30 seconds, everyone was talking about whether we could get access to COVID tests so we could get everyone together.
People thrive on human contact; I think they need to be together. And my point of view is that the Bay Area is sill Florence in the Renaissance and that it will be just fine. It’s going to take a while, but this is still where a lot of talent wants to be for all kinds of reasons.
Lead Edge Capital, a software-focused venture firm with one office in New York and another in California, was founded just 11 years ago. Yet it’s already managing $3 billion in assets through a process that founder Mitchell Green half-kiddingly refers to as “rinse and repeat.”
As he describes its model, Lead Edge raises money from wealthy, networked individuals, then it claws its way into companies, helps them, turns them into valuable references, and when those companies sell or go public, the firm raises more money from people who like the firm’s returns.
It sounds simple but it isn’t, says Green, who cut his teeth as an associate at Bessemer Venture Partners and at a Tiger Fund-affiliate called Eastern Advisors. Managing 500 investors, which is now the case, is “harder than it looks.”
That’s true even with two partners: Brian Neider, who first crossed paths with Green at Bessemer, and Nimay Mehta, who joined the firm in 2011. That’s true despite a dozen employees who Green says are “zero to five years out of college” and cold-call companies all day,
It’s a lot of work, even with four investors who are also operating partners and who, in that capacity, sometimes serve as board members on behalf of Lead Edge. These are former eBay president Lorrie Norrington, former Netsuite CFO Ron Gill, former Dell CFO Jim Schneider, and former Dell president Paul Bell. (“If you’ve already got a couple of VCs on your board,” says Green, “I think the company gets more benefit from putting operators on the board.”)
Not that anyone is complaining. On the contrary, Lead Edge has been having a very good run, which explains how its fund sizes have so quickly ballooned, from a $52 million debut vehicle to a $138 million fund, a $290 million fund, a $520 million vehicle, and now a $950 million fifth fund. (Lead Edge also spins up special purpose vehicles on the side one to two times a year when it wants an especially big bite of a certain company.)
Some of its largest returns by dollars have come via Alibaba’s IPO, Spotify’s IPO, and the sale of Duo Security to Cisco, companies on which it made big bets. Green has said the firm invested $300 million into Alibaba in the years leading up to its IPO; more than $150 million into Spotify in the years leading up to its IPO; and more than $90 million into Duo.
This year is proving fortuitous to Lead Edge’s backers, too, including thanks to the recent direct listing of Asana and the sale of Signal Sciences to Fastly.
That’s saying nothing about the Alibaba affiliate ANT Group, into which Lead Edge has poured $160 million over the years and that’s now expected to become the world’s largest IPO (although the offering has been delayed for now by China’s securities regulator).
Given these wins, it’s maybe it’s not so surprising that the firm’s investor base would continue to build on itself, and in the process turn into a highly competitive advantage for the firm, according to Green.
Indeed, when asked how Lead Edge differentiates itself from other growth-stage investors, he cites the firm’s pool of backers, which includes former Xerox CEO Anne Mulcahy, former Charles Schwab CEO David Pottruck, and former ESPN CEO Steve Bornstein, among the hundreds of other individuals who’ve written checks to Lead Edge that range from $250,000 to $50 million.
While he won’t say who some of the biggest of those investors are in terms of dollars committed, he has no qualms in crediting them collectively with the firm’s success — or going out of his way to keep them happy. Last night, for example, he played host to some of them at his Southern California home. He doesn’t seem to mind it.
“People want us for our LP network,” says Green. “That’s what we’re known for, 100%.”
For founders who have a startup idea — but few engineering skills to make it a reality — making the team’s first technical hire can be a daunting task.
Nontechnical founders will face greater challenges when it comes to sourcing and recruiting engineering talent, but another factor that raises the stakes: They must often act quickly to find someone who could very well end up with co-founder status.
We interviewed a handful of startup founders and technical leaders to get their thoughts about how nontechnical founders should approach the hiring process for engineer no. 1.
Their advice spanned how to handle technical interviews, sourcing technical talent, how to decide whether your first engineering hire should become CTO — and how to best kick the can down the road if you’re not ready to start worrying about bringing on an engineer quite yet. Everyone I spoke to was quick to caution that their tips weren’t one-size-fits-all and that overcoming limited knowledge often comes down to tapping the right people to help you out and lend a greater understanding of your options.
I’ve broken down these tips into a digestible guide that’s focused on four areas:
Knowing what you’re looking for obviously depends a good deal on what you need. Founders have more flexibility if they’re just aiming to get engineers on board so they can get an MVP out the door, but technical expertise is only part of the equation if you’re aiming to hire for someone that may end up being a co-founder or CTO.
TechCrunch is thrilled to announce the 20 companies pitching in Startup Battlefield. Over the next five days, founders from around the world will be connecting in remotely to pitch live on the virtual TechCrunch Disrupt 2020 stage. Our most competitive batch to-date, startups will be vying for $100,000 in equity-free prize money, the attention of tier-1 investors and global press.
The competition is stiff. The selected startups have undergone a rigorous application process, with a 2% acceptance rate. This year’s batch is exceptional. From green engine design to social networking video tools, GIS construction management to central American banking platforms for women, adaptive Sub-Saharan African transportation to healthcare affordability , these companies make ground breaking innovations in their verticals. Startups featured run the gamut – water conserving vertical farming in India, screen-less interfaces, security tech, multi-lingual adaptive children’s learning toys, and even 3-D printed rocket fuel.
Teams have trained for weeks with the Startup Battlefield team to hone their pitches, polish their live demos, and strengthen their business launch strategy. Monday through Thursday, startups will pitch live for six minutes followed by a six minute Q&A session with our expert judges. On Friday, the finalist companies selected will pitch again for the final Startup Battlefield round – this time with a new set of judges.
Startup Battlefield starts on Monday, September 14th at 10:30am Pacific Time, with Startup Battlefield moderator and TechCrunch Senior Writer Anthony Ha. To watch the live stream simply log in to TechCrunch.com. You can also gain access to the full Disrupt 2020 experience here.
Let’s check out the companies:
Session 1: 10:30am – 11:35am PT
Session 2: 10:30am – 11:35am PT
Session 3: 10:30am – 11:35am PT
Session 3: 10:40am – 11:45am PT
Finals begin at 10:40am PT. Companies will be announced online Thursday night.
*As a part of Startup Alley, companies are eligible for the Wild Card. These are the companies selected for Wild Card and can compete in Startup Battlefield. They are selected only days before the event.
As any startup grows, getting new products out the door and securing that next round of funding are always top priorities.
But security, all too often, falls by the wayside. After all, why would you invest money in something that you hope never happens when you could be funneling cash back into the business?
Fostering a corporate culture that embraces cybersecurity best practices keeps customer data safe and your company’s reputation intact. But security isn’t something you can easily tack on later. It must be ingrained in your company’s culture, and it’s so much easier to start in the early days of your company than scrambling in the aftermath of a data breach.
But how do you get there?
Bugcrowd helps companies dip into a huge pool of cybersecurity talent — including hackers and security researchers — to find vulnerabilities. By helping companies identify flaws, they can shore up their defenses before malicious hackers break in. Few know better than Ellis — who’s run Bugcrowd for close to a decade — which policies, procedures and protections companies have put in place to get there.
Extra Crunch subscribers can log in and watch the video below.