Wrapping our look at how the venture capital asset class invested in 2020, today we’re taking a peek at Europe’s impressive year, and Asia’s slightly less invigorating set of results. (We’re speaking soon with folks who may have data on African VC activity in 2020; if those bear out, we’ll do a final entry in our series concerning the continent.)
After digging into the United States’ broader venture capital results from last year with an extra eye on fintech and unicorn investing, at least one trend was clear: venture capital is getting later and larger (as expected).
Record dollar amounts were being invested, but across falling deal volume. More money and fewer rounds meant larger rounds, often going to the late and super-late stage startups in the market.
Unicorns are feasting, in other words, while some younger startups struggle to raise capital.
There have been some encouraging signs of seed activity, mind, but full-year data made it clear that in America, the more mature startups had the best of it.
Let’s discuss key data points from the two reports. This will be illustrative, brief and painless. Into the data!
Compared to historical investment levels, KPMG’s European VC report describes a venture capital scene at its peak. Q4 2020 saw $14.3 billion invested into EU startups across 1,192 deals, the highest dollar amount charted and a modest besting of the previous record set in Q3 2020.
However, despite impressive investment totals, the number of deals that the money was spread over proved lackluster.
The Q4 2020 deal count was the lowest on record since the continent’s deal peak in Q1 2019. Squinting at the provided chart, it appears that deal volume in Europe has fallen from around 2,200 in that peak quarter, to Q4’s fewer than 1,200 deals.
Web infrastructure company Cloudflare is releasing a new tool today that aims to provide a way for health agencies and organizations globally tasked with rolling out COVID-19 vaccines to maintain a fair, equitable and transparent digital queue – completely free of charge. The company’s ‘Project Fair Shot’ initiative will make its new Cloudflare Waiting Room offering free to any organization that qualifies, essentially providing a way from future vaccine recipients to register and gain access to a clear and constantly-updated view of where they are in line to receive the preventative treatment.
“The wife of one of Cloudflare’s executives in our Austin was trying to register her parents for the COVID-19 vaccine program there,” explained Cloudflare CEO Matthew Prince via email. “The registration site kept crashing. She said to her husband: why doesn’t Cloudflare build a queuing feature to help vaccine sites? As it happened, we had exactly such a feature under development and scheduled to be launched in early February.”
After realizing the urgency of the need for something like this tool to help alleviate the many infrastructure challenges that come up when you’re trying to vaccinate a global population against a viral threat as quickly as possible, Cloudflare changed their release timetable and devoted additional resources to the project.
“We talked to the team about moving up the scheduled launch of our Waiting Room feature,” Prince added. “They worked around the clock because they recognized how important helping with vaccine delivery was. These are the sorts of projects that really drive our team: when we can use our technical expertise and infrastructure to solve problems with broad, positive impact.”
On the technical side, Cloudflare Waiting Room is simple to implement, according to the company, and can be added to any registration website built on the company’s existing content delivery network without any engineering or coding knowledge required. Visitors to the site can register and will receive a confirmation that they’re in line, and then will receive a follow-up directing them to a sign-up page for the organization administering their vaccine when it’s their turn. Further configuration options allow Waiting Room operators to offer wait time estimates to registrants, as well as provide additional alerts when their turn is nearing (though that functionality is coming in a future update).
As Prince mentioned, Waiting Room was already on Cloudflare’s project roadmap, and was actually intended for other high-demand, limited supply allocation items: Think must-have concert tickets, or the latest hot sneaker release. But the Fair Shot program will provide it totally free to those organizations that need it, whereas that would’ve been a commercial product. Interested parties can sign up at Cloudflare’s registration page to get on the waitlist for availability.
“With Project Fair Shot we stand ready to help ensure everyone who is eligible can get equitable access to the COVID-19 vaccines and we, along with the rest of humanity, look forward to putting this disease behind us,” Prince explained.
Late last year, Solugen, a startup using synthetic biology to take hydrocarbons out of the chemicals industry, decided against pursuing a new round of funding that would have valued the company at over $1 billion, TechCrunch has learned.
Instead, the Houston-based bio-manufacturing company raised an internal round of roughly $30 million from existing investors and continued working on its latest project — a new bio-based manufacturing process for a high-value specialty chemical that can act as an anti-corrosive agent.
That work represents a potentially lucrative new product line for the company and charts a course for a host of other businesses that are refashioning the basic building blocks of life in an attempt to supplant chemistry with biology for manufacturing and production.
If Solugen can get its high-value chemical into commercial production, the company can follow the path that sustainable tech companies like Tesla have mastered — moving from a pricy specialty product into the mass market. And rather than over-promise and underdeliver, Solugen wanted to get the product line right first before raising big bucks, according to people familiar with the company’s thinking.
As the world looks to move away from oil and its byproducts to reduce greenhouse gas emissions and slow down or reverse global climate change, the chemicals industry is in the crosshairs as a huge target for disruption. Vehicle electrification solves only one part of the oil problem. The extractive industry doesn’t just produce fuel, but also the chemicals that make up most of the products that defined consumer goods in the twentieth century.
Chemicals are everywhere and they’re a huge business.
Companies like Zymergen raised hundreds of millions of dollars last year to develop industrial applications for synthetic biology, and they’re not alone. Startups including Geltor, Impossible Foods, Ginkgo Bioworks, Lygos, Novomer and Perfect Day have all raised significant amounts of capital to reduce the environmental footprint of food, chemicals, ingredients and plastics through synthetic biology.
Some of these companies are seeing early success in food replacements and ingredients, but the promise of biologically based chemicals have been elusive — until now.
Solugen’s new product will produce glucaric acid, a tough-to-make chemical that can be used in water treatment facilities and as an anti-corrosive agent — and the company can make it with a zero carbon (or potentially carbon negative) manufacturing process, according to Solugen co-founder and chief technology officer, Sean Hunt.
The glucaric acid from Solugen is cheaper to produce and more environmentally friendly than existing phosphonates that are used for water treatment — and the company has the benefit of competing against chemicals manufacturers in China.
Given the continuing tensions between the two countries, the U.S. is looking to make more high-value products — including chemicals — domestically, and Solugen’s technology is a good way forward to have home-grown supplies of critical materials.
Solugen still intends to raise more capital, the company just wanted to wait until its latest production plant for the acid came online, according to Hunt.
It’s also the fruit of years of planning. The two co-founders, Hunt and Gaurab Chakrabarti, first realized they could potentially use the technology they’d developed to make specialty chemicals back in 2017, according to Hunt. But first the company had to make the hydrogen peroxide as a precursor chemical, Hunt said.
“It’s advantageous for us to focus on this,” said Hunt. “As we scale, we can enter more commodity-type markets down the road.”
It’s all part of the notable strides the entire industry is making, said Hunt. “Synthetic biology has really made significant strides,” he said. “We have our commercial plant coming online this summer [and it proves] synthetic biology has gotten to the point where we can compete on price and performance.”
So the capital infusion will come as the company gets closer to the completion of these commercial scale facilities.
“It’s not like we were sitting on a term sheet and we said no,” Hunt said. “We want to make sure that we are hitting the milestones and the goals at a commensurate pace which is this year. I’m extremely bullish and optimistic of 2021.”
Solugen’s co-founder sees the path that his company is on as one that other startups working in the synthetic biology space will pursue to bring profitable products to market at the higher end before competing with more sustainable versions of commodity chemicals.
“How do you start a company that has this level of capital intensity?” Hunt asked. “You can start in the fine chemicals space where everything sells for tens to hundreds of dollars per pound. For us, glucaric acid is that specialty chemical and then we will do commodity.”
This morning, while checking the latest price for shares of recent IPO Poshmark, I noticed that they were down from their first-day results. The company’s pricing was more than strong, and its first trading results were nearly comical.
After setting a $35 to $39 per-share IPO price range, Poshmark sold shares in its IPO at $42 apiece. Then it opened at $97.50. Such was the exuberance of the stock market regarding the the used goods marketplace’s debut.
But today it’s worth a more modest $76.30 — for this piece we’re using all Yahoo Finance data, and all current prices are those from yesterday’s close ahead of the start of today’s trading — which sparked a question: How many recent tech IPOs are also down from their opening price?
So The Exchange, ever at your service, raced around to collect the data. And what did we find? Most hot tech IPOs have held onto their gains, and many have actually run up the score in the ensuing weeks.
Lemonade is a great example. It first targeted a $23 to $26 per-share IPO price. That rose to $26 to $28 per share, then it priced at $29 per share. It opened at $50.06 per share, closing the day worth $69.41.
And today? A single Lemonade share will set you back $145.21. The company is now worth $8.22 billion, despite only posting Q3 revenues of $17.8 million, a decline from the year-ago period (for more on why that is, and why it isn’t as bad as you might initially think, read this.)
Analysts anticipate that Lemonade will post revenues of $18.91 million in Q4 2020, again via Yahoo Finance, putting the company on an annualized run rate of 109x. For a business running with net margins of -173.6% in its most recent quarter. And that’s after Lemonade announced a large share sale!
All this is to say that the fiery optimism fueling dazzling IPO debuts has the potential to keep pushing them higher. Which you can view as troubling, if you are a boring index funder like myself, enticing, if you are a founder looking to go public in the near-future, and potentially irksome if you are a VC annoyed when upside leaks to parties other than yourself.
This brings us to our data set. Below, I’ve collated a host of recent IPOs, their opens and their current prices. Only one has shed value.
And then we reexamined eight 2020 offerings that you will recall so we could run the same exercise. The results were not what I expected and indicate a stock market — let alone an IPO market — sufficiently inflated to warrant the whispered moniker of bubble.
Let’s have some fun.
Creative Fabrica is best known as a marketplace for digital files, like fonts, graphics and machine embroidery designs, created for crafters. Now the Amsterdam-based startup is planning to expand into new verticals, including yarn crafts and projects for kids, with a $7 million Series A round led by Felix Capital. FJ Labs and returning investor Peak Capital also participated.
The new funding brings Creative Fabrica’s total raised to about $7.6 million, including its 2019 seed round.
Before launching Creative Fabrica in 2016, co-founders Anca Stefan and Roemie Hillenaar ran a digital agency. The startup was created to make finding digital files for creative projects easier. It started as a marketplace, but now also includes a showcase for finished projects, tools for creating fonts and word art, and a subscription service called the Craft Club. The company currently claims more than one million users around the world, with about 60% located in the United States and 20% in the United Kingdom, Canada and Australia.
Creative Fabrica’s sellers make money in a couple of ways. If their digital assets are purchased individually, they get 50% of revenue. Files downloaded through the subscription service are assigned points, with creators receiving revenue at the end of the subscription period based on the number of points they accumulate.
Hillenaar, the company’s chief executive officer, told TechCrunch that Creative Fabrica launches new verticals based on what they see users sharing on their platform. For example, its designs are often used for die-cutting, and it recently launched POD (print on demand) files and digital embroidery verticals based on user interest.
Many of the files sold on Creative Fabrica include a commercial license and about 35% of its users actively sell the crafts they make. There are several other marketplaces that offers digital downloads for crafters and designers, including Etsy and Creative Market. Hillenaar said Creative Fabrica’s automated curation gives it more control over copyright infringement than Etsy, which means its users have more assurance that they can sell things made with its files without running into issues. While Creative Market also sells fonts, vector graphics and other files, it is mostly targeted toward publishers and website designers. Creative Fabrica’s focus on crafters means it files are designed to work with home equipment like Silhouette, a die-cutting machine.
Creative Fabrica also focuses on the entire creative process of a crafter or the “full funnel,” Hillenaar added. For example, someone who wants to make decorations for a birthday party can look through projects shared to the platform for inspiration, download digital materials and then start crafting using Creative Fabrica’s tutorials. Since many of Creative Fabrica’s crafts involve equipment like desktop die-cutting machines or sewing and embroidery machines, the platform offers a series of comprehensive tutorials to help crafters get started.
As Creative Fabrica expands into verticals like yarn crafts (it already offers knitting and crochet patterns) and kids projects, it’ll compete more directly with site likes Ravelry, which many yarn crafters rely on for patterns and services like Kiwi Crate that supply materials and instructions for children. Hillenaar said Creative Fabrica’s value proposition is focusing on the many people who take part in several different kinds of crafts.
According to a report from the Association for Creative Industries, about 63% of American households are involved with some form of craft. Out of that number, most partake in multiple kinds of projects.
“Somebody who is knitting is also likely to do die-cutting or woodworking, or another type of craft,” he said. “We believe that with our holistic view on this market we can cater to your whole creative crafting side instead of focusing on just one niche.”
iSTOX, a digital securities platform that wants to make private equity investment more accessible, has added new investors from Japan to its Series A round, bringing its total to $50 million. Two of its new backers are the government-owned Development Bank of Japan and JIC Venture Growth Investments, the venture capital arm of Japan Investment Corporation, a state-backed investment fund.
Other participants included Juroku Bank and Mobile Internet Capital, along with returning investors Singapore Exchange, Tokai Tokyo Financial Holdings and Hanwha Asset Management.
Founded in 2017 and owned by blockchain infrastructure firm ICHX, iSTOX’s goal is to open private capital opportunities, including startups, hedge funds and private debt, that are usually limited to a small group of high-net-worth individuals to more institutional and accredited investors. (It also serves accredited investors outside of Singapore, as long as they meet the country’s standards by holding the equivalent amount in assets and income.) iSTOX’s allows users to make investments as small as SGD $100 (about USD $75.50) and says it is able to keep fees low by using blockchain technology for smart contracts and to hold digital securities, which makes the issuance process more effective and less costly.
iSTOX’s Series A round was first announced in September 2019, when the company said it had raised an undisclosed amount from Thai investment bank Kiatnakin Phatra Financial Group while participating in the Monetary Authority of Singapore (MAS) FinTech Regulatory Sandbox. The Singaporean government has been especially supportive of blockchain technology, launching initiatives to commercialize its use in fintech, data security, logistics and other sectors.
iSTOX completed the sandbox program in February 2020, and was approved by the MAS for the issuance, custody and trading of digitized securities. The new funding will be used for geographical expansion, including in China, where it already has an agreement in the city of Chongqing, and Europe and and Australia, where it is currently working on issuance deals. iSTOX also plans to add new investment products, including private issuances that investors can subscribe to in “bite-size portions.”
In a press statement, iSTOX chief commercial officer Oi Yee Choo said, “Capital markets are transforming rapidly because of advancements in technology. The regulator MAS and our institutional investors have been far-sighted and progressive, and they support the change wholeheartedly.”
The company is among several Asia-based fintech platforms that want to democratize the process of investing. For retail investors, there are apps like Bibit, Syfe, Stashaway, Kristal.ai and Grab Financial’s investment products.
Since iSTOX works with accredited and institutional investors, however, its most direct competitors include the recently-launched DBS Digital Exchange, which is also based in Singapore. iSTOX’s advantage is that it offers more kinds of assets. Right now, it facilitates the issuance of funds and bonds, but this year, it will start issuing private equity and structured products as well. The company’s securities are also fully digitized, which means they are created on the blockchain, instead of being recorded on the blockchain after they are issued, which means iSTOX is able to offer faster settlement times.
In a speech to the European Parliament today marking the inauguration of U.S. president Joe Biden, the president of the European Commission has called for Europe and the U.S. to join forces on regulating tech giants, warning of the risks of “unfiltered” hate speech and disinformation being weaponized to attack and undermine democracies.
Ursula von der Leyen pointed to the shock storming of the U.S. capital earlier this month by supporters of outgoing president Donald Trump as an example of how wild claims being spread and amplified online can have tangible real-world consequences, including for democratic institutions.
“Just a few days ago, several hundred [Trump supporters] stormed the Capitol in Washington, the heart of American democracy. The television images of that event shocked us all. That is what happens when words incite action,” she said. “That is what happens when hate speech and fake news spread like wildfire through digital media. They become a danger to democracy.”
European institutions are also being targeted with “hate and contempt for our democracy spreading unfiltered through social media to millions of people”, she warned, pointing to similarly disturbing attacks that have taken place in the region in recent years. Such as an attempt by right-wing extremists in Germany to storm the Reichstag building last summer and the 2016 murder of U.K. politician Jo Cox by a fascist extremist.
“Of course, the storming of the [U.S.] Capitol was different. But in Europe, too, there are people who feel disadvantaged and are very angry,” she said, suggesting feelings of exclusion and injustice can make people vulnerable to believing the “rampant” conspiracy theories that platforms have allowed to circulate freely online, and which she characterized as “often a confused mixture of completely absurd fantasies”.
“We must make sure that messages of hate and fake news can no longer be spread unchecked,” she added, reiterating the case for regulating social media by pressing the case for imposing “democratic limits on the untrammelled and uncontrolled political power of the internet giants”.
The European Commission has already set out its blueprint for overhauling the region’s digital rulebook when it unveiled the draft Digital Services Act and Digital Markets Act last month. Although it won’t be including hard legal limits on disinformation in the package — preferring to continue with a voluntary, but beefed up code of conduct for content that falls into a grey area where it may be harmful but isn’t actually illegal.
Von der Leyen said the aim for the regulations is to ensure “if something is illegal offline it must also be illegal online”. The Commission has also said the tech policy package is about forcing platforms to take more responsibility for the content they spread and monetize.
But it’s not yet clear how the proposed laws will ultimately tackle the tricky issue of how assessments are made to remove (or reinstate) speech; and whether platforms will continue to make those judgements (under a regulator’s guidance and watchful eye), or whether they end up entirely independent of platform control.
What the Commission has suggested is closer to the former but the proposal has to go through the EU’s co-legislative process — so such details are likely to be debated and could be amended prior to adoption into law.
“We want the platforms to be transparent about how their algorithms work. We cannot accept a situation where decisions that have a wide-ranging impact on our democracy are being made by computer programs without any human supervision,” von der Leyen went on. “And we want it laid down clearly that internet companies take responsibility for the content they disseminate.”
She also reiterated the concern expressed in recent days about the unilateral actions taken by tech giants to close down Trump’s megaphone — echoing comments by political leaders across Europe earlier this month who dubbed the display of raw platform power, from companies like Twitter, as “problematic”; and said it must result in regulatory consequences for tech giants.
“No matter how right it may have been for Twitter to switch off Donald Trump’s account five minutes after midnight, such serious interference with freedom of expression should be based on laws and not on company rules,” she said, adding: “It should be based on decisions of politicians and parliaments and not of Silicon Valley managers.”
In the speech, the EU president also expressed hope that the Biden administration will be inclined to arc toward Europe’s agenda on digital regulation — as part of the anticipated post-Trump reboot of EU-U.S. relations.
The Commission recently adopted a new transatlantic agenda in which it laid out a number of policy areas it hopes for joint-working with the U.S. — with tech governance key among the areas of hoped for policy cooperation.
Von der Leyen reiterated the idea that a joint Trade and Technology Council could be “a first step” toward the EU and US fashioning a “digital economy rulebook that is valid worldwide”.
“It is in this digital field that Europe has so much to offer the new government in Washington”, she suggested. “The path we have taken in Europe can be an example for approaches at international level. As has long been the case with the General Data Protection Regulation.
“Together we could create a digital economy rulebook that is valid worldwide: From data protection and privacy to the security of technical infrastructure. A body of rules based on our values: human rights and pluralism, inclusion and protection of privacy.”
While there’s evidently a keen appetite in the EU to reset U.S. relations post-Trump, it remains to be seen how much of a policy reboot the Biden administration will usher in, vis-à-vis big tech.
He has not been as vocal a critic of platform giants as other Democratic challengers for the presidency. And the Obama administration, which he of course served in, had very cosy ties to Silicon Valley.
Concerns have also been raised in recent days about Biden’s potential picks for a key appointment at the justice office — in light of antitrust probes of big tech versus the prospective appointees’ deep links to tech giants and/or promotion of historical mergers. So it hardly looks like a model for a full and clean reset.
While the tricky issue of pro-privacy reform of U.S. surveillance laws — which EU commissioners have warned will be needed to resolve the legal uncertainty clouding data transfers from the region to the U.S. (and which tech giants themselves have largely avoided in their own lobbying) — seems likely to need legislation from Congress, rather than being a change that could be driven solely by the Biden administration.
The chances of the incoming president being inclined to champion such a relatively wonky tech-policy issue when he has so much else in his “needs urgent attention” in-tray also seem relatively slim. But even slender odds can look promising after the Trump era.
The fourth quarter of 2020 was as busy as you imagined, with super late-stage startups reaching new valuation thresholds at a record pace, and total venture capital funding in the United States recording its second-best result of all time.
That’s according to data released recently by CB Insights, which complements our look back at 2020’s venture capital year in America from yesterday.
At the time, we noted that American startups raised an average of $428 million each day last year, a sum that helps illustrate how rapid the private markets moved during the odd period.
But a peek at aggregate results for the world’s largest VC market provides only part of the picture. We need to narrow our lens and peer more deeply into standout categories to understand how the U.S. venture capital market managed to post its biggest year ever in terms of dollars invested, despite seeing deal volume slip for a second consecutive year.
First, we want to how unicorns performed in Q4 2020. This column noted in late December that it felt like unicorn creation was rapid in the quarter; how did that hold up?
And then we’ll take a look dig into PitchBook data concerning the fintech sector, a huge recipient of venture capital time, attention and money.
Fintech’s 2020 is a good perspective to view both the year and its wild final quarter. So this morning, as America itself resets, let’s take a moment to understand last year just a little bit better as we get into this new one.
One of the most curious things about the unicorn era is the rising bet it represents. I’ve written about this before so I will be brief: Nearly every quarter, the number of unicorns — private companies worth $1 billion or more — goes up.
The private market is able to create more unicorns than it has been historically able to exit them.
Some of these companies exit, sometimes in group fashion. But, quarter after quarter, the number of unexited unicorns rises. This means that the bet on expected future liquidity from venture capitalists and other private investors keeps ratcheting higher.
A four-year antitrust investigation into PC games geo-blocking in the European Union by distribution platform Valve and five games publishers has led to fines totalling €7.8 million (~$9.4M) after the Commission confirmed today that the bloc’s rules had been breached.
The geo-blocking practices investigated since 2017 concerned around 100 PC video games of different genres, including sports, simulation and action games.
In addition to Valve — which has been fined just over €1.6M — the five sanctioned games publishers are: Bandai Namco (fined €340k), Capcom (€396k), Focus Home (€2.8M), Koch Media (€977k) and ZeniMax (€1.6M).
The Commission said the fines were reduced by between 10% and 15% owing to cooperation from the companies, with the exception of Valve who it said chose not to cooperate (a “prohibition Decision” rather than a fine reduction was applied in its case).
Valve has been contacted for comment.
The antitrust investigation begun in February 2017, with a formal statement of objections issued just over two years later when the Commission accused the companies of “entering into bilateral agreements to prevent consumers from purchasing and using PC video games acquired elsewhere than in their country of residence” in contravention of EU rules.
The mechanisms used by the companies to prevent certain cross-border sales of certain PC games were geo-blocked Steam activation keys and bilateral licensing and distribution agreements to restrict certain cross-border sales.
EU lawmakers has now found that these business practices partitioned certain European markets according to national borders — denying regional consumers the benefits of the EU’s Digital Single Market to shop around for the best offer.
Commenting in a statement, EVP Margrethe Vestager, who heads up competition policy for the bloc, said: “Today’s sanctions against the ‘geo-blocking’ practices of Valve and five PC video game publishers serve as a reminder that under EU competition law, companies are prohibited from contractually restricting cross-border sales. Such practices deprive European consumers of the benefits of the EU Digital Single Market and of the opportunity to shop around for the most suitable offer in the EU.”.
According to the Commission’s investigation, geo-blocking of Steam activation keys prevented activation of certain of the five games’ publishers titles outside of Czechia, Poland, Hungary, Romania, Slovakia, Estonia, Latvia and Lithuania.
It said agreements between the companies to geo-block activation keys had lasted between one and five years and were found to have been implemented at various times between September 2010 and October 2015.
While four of the games publishers (not Capcom) were found to have entered into licensing and distribution agreements with various PC games distributors (not Value) in the European Economic Area (EEA) which contained clauses which restricted cross-border sales of the affected titles within the EEA, including the aforementioned Central and Eastern European countries.
The Commission said these agreements lasted generally longer (“between three and 11 years”), and were implemented at different times between March 2007 and November 2018.
Since the investigation started, EU lawmakers have passed a regulation against unjustified geo-blocking. Although the legislation only applies to PC video games distributed on CDs or DVDs, not to downloads. So games are only partially covered.
A Commission review of how the geo-blocking regulation is operating, published last November, discussed a possible extension of its scope in a range of areas, including for games. However it did not make a strong case for that change. (It also found demand for cross-border access to games (and software generally) relatively low vs other content services.)
But while games distributed via digital downloads look set to remain outside the scope of the EU’s unjustified geo-blocking regulation, the fines against Valve et al show that geo-blocking can still be a legal minefield as contractual agreements to restrict cross-border sales run counter to the bloc’s antitrust rules.
The specific breaches are of Article 101 of the Treaty on the Functioning of the European Union (TFEU) and Article 53 of the Agreement on the European Economic Area which prohibit agreements between companies that prevent, restrict or distort competition within the EU’s Single Market, per the Commission.
After two days locked up in an Italian prison, American Max Craddock was finally able to make his case to a judge.
“It’s not a weapon of war,” his lawyer told the investigating magistrate. “It’s a toy they sell to children.”
Craddock had been arrested in the Sardinian port city of Olbia in June 2018 after trying to board a private party bus with a collectible flamethrower from Elon Musk’s latest startup, The Boring Company. Craddock had painted his flamethrower black, and written on it the name of a floating music festival in the Bahamas he had attended the previous year while starring in reality TV show Unanchored.
Alarmed by the sight of what he thought was a gun, the bus driver refused to drive off, and then called the police.
“They were very chill at first,” Craddock told TechCrunch in a recent phone interview. “But as the night went on, it kept getting worse. I spent the first night in jail in Olbia and then they took me to prison.”
When Craddock managed to get a lawyer, she told him the judge would probably just let him go with a warning. Instead, the magistrate ordered him back to his cell. That was when Craddock, pictured below, learned possession of a flamethrower in Italy can carry a 10-year prison sentence.
A few months later, author John Richardson was sitting down to work at his home in London, when there was a loud knock at the door. He opened it and five police officers barged in wearing tasers and tactical gear.
“I think a couple of them also had handguns,” Richardson told TechCrunch. “But I’m slightly hazy on that because my legs went wobbly.”
The police officers sat Richardson down on his sofa and informed him that they had a warrant to search the premises. “I was, like, what’s going on here?” Richardson recalled. “Then something clicked and I said, ‘Is this about the flamethrower?’ ”
The raid was indeed about his flamethrower.
Craddock and Richardson are not the only Boring Company customers to have fallen foul of law enforcement.
More than 1,000 flamethrower purchasers abroad have had their devices confiscated by customs officers or local police, with many facing fines and weapons charges. In the U.S., the flamethrowers have been implicated in at least one local and one federal criminal investigation. There have also been at least three occasions in which the Boring Company devices have been featured in weapons hauls seized from suspected drug dealers.
The upshot: What Musk and his army of fans thought was just another of his money-spinning larks is having real-world consequences for people and countries not in on the joke.
The Boring Company did not respond to detailed questions from TechCrunch for this story.
Inspired by Los Angeles traffic, Musk launched The Boring Company in December 2016. The startup’s mission was to solve urban traffic jams by moving cars through tiny tunnels. But re-engineering sewer tunneling technology to build a revolutionary subterranean transportation network doesn’t come cheap. In an effort to drum up awareness and funds, Musk announced in December 2017 a limited run of novelty flamethrowers designed and branded by The Boring Company.
It was a scheme that had produced results earlier that year. Musk raised $1 million just weeks after launching sales of a $20 Boring Company hat.
“I’m a big fan of Spaceballs, the movie,” Musk told Joe Rogan during an infamous podcast in 2018. “They have a flamethrower in the merchandising section of Spaceballs, and, like, the kids love that one.”
The device uses a standard propane gas canister and is functionally similar to propane torches for melting ice, killing weeds or applying roofing materials. But with its rifle-style stock, pistol grip and sci-fi styling, the Boring Company’s flamethrower had a very different aesthetic — more post-apocalyptic party accessory than everyday yard maintenance.
Musk did his best to hype sales, tweeting to his Twitter followers, which numbered about 22 million at the time: “Flamethrower obv best way to light your fireplace/BBQ. No more need to use a dainty ‘match’ to ignite!”
Flamethrower obv best way to light your fireplace/BBQ. No more need to use a dainty “match” to ignite! If no wood, just drop your flamethrower in fire place! It will generate way more warmth than a quaint pile of logs.
— Elon Musk (@elonmusk) June 9, 2018
He also threw a launch party in Los Angeles, where Craddock was one of the first 1,000 customers to collect a flamethrower, just before his European trip. “I removed the gas canister, put the flamethrower in my carry-on, and had no trouble on the flights,” he said.
Musk’s influence and the appeal of the product provided a winning combination.
“I had no intention of going around setting fire to stuff,” said Richardson. “I just thought it looked pretty cool, and was something I could potentially flip for a lot more money down the line.”
The Boring Company would make 20,000 flamethrowers and sell them at $500 each, netting the young company $10 million.
The 20,000 flamethrowers quickly sold out, with orders flooding in from around the world. As the shipping date neared, however, The Boring Company realized its scorching new product could also be a legal hot potato.
“We are told that various countries would ban shipping of it, that they would ban flamethrowers,” Musk told Rogan in 2018. “So, to solve this problem for all of the customs agencies, we labelled it, ‘Not a Flamethrower.’ “
“Did it work? Was it effective?” asked Rogan. “I don’t know. I think so. Yes,” Musk replied.
The correct answer was no.
In London, the flamethrower came to the attention of Operation Viper, a rapid response team dedicated to tackling gun crime. Working with customs officials, Viper tracked Musk’s flamethrowers en route to the nation’s capital. “There has been a debate as to whether these are firearms,” one of the Viper officers wrote in an email to Richardson. “Similar flamethrowers have been seized right across London.” One Londoner had his laptop and several cellphones confiscated along with the flamethrower.
Flamethrower raids were also happening around the UK and across Europe. A YouTube vlogger in Manchester was targeted by police after featuring the Boring Company’s gadget in one of his videos, while up to 1,000 purchasers in Switzerland had devices confiscated and were issued fines. One took his case to court, saying the flamethrower was little different from a school Bunsen burner. He lost.
Without the immediacy of a Customs check, the backlash to Musk’s flamethrowers in the United States took longer to arrive. But in June 2019, a Democratic lawmaker in the New York State Senate introduced a bill that would criminalize owning and using Musk’s flamethrower.
“Elon Musk’s Boring Company released a new flamethrower… without any concern to the training of the purchasers or their reasons for buying,” reads S1637. “This bill establishes that owning and using a flamethrower is a criminal act, unless it is used for agricultural, construction or historical collection purposes. These dangerous devices should not be sold to civilians, and use needs to be restricted to trained professionals.”
Not every police force believes that new laws are necessary — finding that existing ones are enough. In June 2020, police in Springfield, Mass., stopped a car for a missing inspection sticker. One of the officers noticed what he thought was a rifle hidden beneath a seat — actually a Boring Company flamethrower. Its owner, passenger Brandon McGee, was charged with carrying a dangerous weapon and an “infernal machine” (a device for endangering life or property using fire).
The same month, FBI agents executing a search warrant against a Pennsylvania man, Brandon Althof Long, stumbled across his Boring Company flamethrower propped against a wall. Long had been indicted by a federal grand jury on charges of conspiracy to riot and cause civil disorder, and conspiracy to use fire to commit a felony, during riots in Ohio protesting police brutality.
The agents seized the flamethrower out of concern for their safety, which a U.S. district judge later ruled lawful. “Other individuals could be located inside the house and the flamethrower could have been used to endanger officers as they retreated from Long’s home,” she wrote.
Novel items like flamethrowers are rarely specified in law, says Ryan Calo, a law professor and co-founder of the Tech Policy Lab at the University of Washington. “Some items – like guns or spring knives – are weapons ‘per se,’ meaning that they are always weapons. But most statutes have an ‘or other deadly weapon’ clause as well, meaning that anything that is capable of causing serious bodily harm, even a rock, can be a weapon in the right circumstances,” he said.
The problem is, what circumstances? A flame-spouting weed-killer might not attract the interest of police, whereas a similar device styled like an assault rifle is more likely to be considered threatening. “And if you use the item during the commission of another crime, this can lead to a distinct offense of using a deadly weapon to commit a felony,” said Calo.
For all Musk’s portrayal of the Not a Flamethrower as just an entertaining toy, police forces — and criminals — in North America are increasingly treating them as dangerous weapons. In rural Wisconsin, a two-year narcotics investigation led police to arrest two men in July 2020 with a hoard of drugs, cash and weapons. Among the cocaine, pistols and assault rifles prominently displayed in the traditional seizure photo was a Boring Company flamethrower. Similar seizures were displayed by police in Canada in December and again this month.
Guelph Police Service lays out items seized including Not a Flamethrower, the novelty item sold by The Boring Company. Image credit: Guelph Police
No company has complete control over what customers do with its products. However, this isn’t the first time a product connected to Musk has been misused.
Tesla, the electric automaker led by Musk, has been criticized for naming its advanced driver assistant system Autopilot and for calling the $10,000 add-on option Full Self-Driving (FSD) even though the driver must remain engaged at all times and is legally liable. A German court has banned the company from using the terms “Autopilot” or “full potential for autonomous driving” on its website or in other marketing materials.
Safety advocates have argued that using terms like Autopilot and FSD misrepresents the capabilities of the system. The name, along with the lack of an in-cabin camera that monitors the driver, has led owners to push well beyond the bounds of the system.
Videos showing Tesla owners misusing Autopilot and FSD abound on YouTube. Some have had run-ins with law enforcement. One Canadian man was charged for sleeping in his Tesla as it drove down the highway.
John Richardson eventually got his Not a Flamethrower back from the Metropolitan police. He now intends to keep it out of the public eye, at least until it’s worth selling. “I’m happy to sit on it for however long,” he said. “And if there is a zombie apocalypse, at least I’ve got one.”
For now, Craddock remains the only person that TechCrunch can identify as having been incarcerated solely for possessing a Not A Flamethrower. “It was a hair-raising experience,” he said. “I’m in the middle of nowhere in Sardinia, on 24-hour lockdown with an older guy giving off Mafia vibes.”
After nearly a week in prison, Craddock was abruptly handed his belongings (flamethrower aside) and set free. “My lawyer asked the judge, ‘Do you really want to be the guy on international news keeping an American in jail over this toy?’,” he said. “I think that was the key to getting me out.”
Craddock took the first plane home. He says he now regrets taking the flamethrower abroad, and carrying it in public: “I would have preferred not to have spent that week in an Italian prison but now I’ve got a hell of a story.”
He also has another flamethrower.
“As soon as I got back, I built myself a new one,” said Craddock. “You can follow YouTube videos with links to all the things you need. It’s pretty simple.”
Adthena is expanding its partnership with market research company Kantar by acquiring Kantar’s paid search business.
The two companies announced an agreement earlier this month, through which Adthena data will be integrated into Kantar’s ad intelligence product. Now, through this new acquisition, Adthena said Kantar search clients will get access to the Adthena product suite.
Kantar moved into the paid search business in 2012 by acquiring AdGooroo (not surprisingly, it eventually rebranded the offering).
“As search continues to become the barometer by which all advertising efforts are measured, the importance of having access to the best intelligence possible cannot be understated,” said Adthena CEO Ian O’Rourke in a statement. “And this acquisition of Kantar’s paid search assets, in combination with our Kantar partnership, will enable us to break new ground for brands and agencies while also helping us to continue upon our growth trajectory.”
O’Rourke previously told me that Adthena stands out thanks to its “Whole Market View,” using artificial intelligence to create visualizations of all the keywords in paid and organic search used to find a business and their competitors.
The financial terms of the acquisition were not disclosed, but Adthena confirmed that some Kantar team members will be joining the company.
Despite a pandemic that sparked a global recession, 2020 was still a record year for venture capital investments into American startups.
According to data shared by PitchBook and the National Venture Capital Association, investors poured $156.2 billion into domestic startups last year, or around $428 million for each day of the year. The huge sum of money, however, was itself dwarfed by the amount of liquidity that American startups generated, some $290.1 billion.
The exit-value figure was a record as well, as were the 321 rounds worth $100 million — nearly one for each day of the year.
But while the U.S. venture capital market in 2020 was hot, it was not newly so. In 2018 and 2019, VCs invested around $140 billion into domestic startups, making last year’s $156 billion result a record, but not a shocking departure from previous years.
A first read of the data indicates that the U.S. venture capital market is still getting larger in scale and later-stage in focus. But inside those well-worn trends are a host of notable movements that both underscore what we observed last year in real time, and teach us something new about today’s venture capital market.
So far, 2021’s startup financing and exit market appears to be the mirror of what we saw in late 2020. So we’d best understand the past so we can forecast what we’ll see in Q1 of 2021.
To avoid getting too lost in the data, we’ll proceed by stage, pulling out key facts for each step of the startup lifecycle. Feel free to scroll to the one that makes the most sense for where your company is, or fund invests today.
In the U.S., seed deal count was high in 2020, around 5,227 per PitchBook’s estimates. Those rounds were worth just over $10 billion, making it the third year in a row in which American seed-stage startups managed around $10 billion in capital against around 5,000 rounds.
Boring, yeah? Not really. Inside those numbers are the whole year’s ups-and-downs: the fact that the seed data is so close to 2018 and 2019 levels is almost silly.
The real surprise from seed, per PitchBook’s report, is that these valuations actually fell on a year-over-year basis in 2020. This, despite the fact that seed deal sizes rose.
Considering these two trends at once, it appears likely that, on average, VC ownership as a percentage of seed-stage companies rose in 2020.
Frankly I was just surprised to see a form of startup valuation decrease after expanding for nearly a decade.
Welcome back to The TechCrunch Exchange, a weekly startups-and-markets newsletter. It’s broadly based on the daily column that appears on Extra Crunch, but free, and made for your weekend reading. Click here if you want it in your inbox every Saturday morning.
Ready? Let’s talk money, startups and spicy IPO rumors.
It was yet another week of startups that became unicorns going public, only to see their valuation soar. Already marked up by their IPO pricing, seeing so many unicorns achieve such rich public-market valuations made us wonder who was mispricing whom.
It’s a matter of taste, a semantic argument, a tempest in a teacup. What matters more is that precisely no one knows what anything is worth, and that’s making a lot of people rich and/or mad.
This is not a new theme. I’ve touched on it for years, but what matters for us today is that there appear to be three distinct valuation bands for companies, and the gaps between them do not appear ready to shrink. You could even argue that they have widened.
Band 1 is the private capital cohort. These are the folks who valued Affirm at $19.93 per share in its September 2020 round and Roblox at $4 billion in February of 2020. Now Affirm is worth $116.58 per share, and Roblox is worth $29.5 billion. Whoops?
Band 2 is the long-term public investing cohort. These are folks critical in the IPO pricing context. They are willing to pay more for startups than the private capital crew. Affirm was not worth under $20 per share to this group, instead it was worth $49 per share just a few months later. Whoops?
Band 3 is the retail cohort, the /r/WallStreetBets, meme-stock, fintech Twitter rabble that are both incredibly fun to watch and also the sort of person you wouldn’t loan $500 to while in Las Vegas. They are willing to pay nearly infinite money for certain stocks — like Tesla — and often far more than the more conservative public money. Demand from the retail squad can greatly amplify the value of a newly listed company by making the supply/demand curve utterly wonky. This is how you get Poshmark more than doubling a strong IPO valuation on its first day.
Most investors do well in today’s world. Though Band 1 likes to blame Band 2 for not being willing to pay Band 3 prices, it always sounds like the private capital folks are merely complaining about sharing some of the winnings with another party.
Regardless, who really knows what anything is worth? I was recently chatting with an early-stage founder who has a history of investing — narrowing it down to 17,823 people, I know — about the price of software companies both private and public and why they may or may not make sense. He said that old valuation models at banks presumed that software companies’ growth would go to zero over time, and that profits would be rare among SaaS concerns. Both concepts were wrong, so prices went up.
But I have yet to have anyone explain to me why companies that would have been valued at 10x next year’s revenues can now get, at median, 18.1x. I have a working theory of what’s going on, but none of it points to sanity, or pricing that is grokkable through a lens that isn’t hype.
(You can hit reply to this email and tell me why I am dumb if you’d like. I will buy the person with the best valuation explanation coffee when the world works again.)
On the milestone front, it was a huge week for leaving the private markets and joining the Big Kid Club. Namely for Affirm and Poshmark, which priced well and started to trade. And for Bumble, which filed to go public. They are targeting a good IPO window.
But there was lots more going on, including a milestone that caught my eye. M1 Finance, a fintech startup that brings together lots of pieces of the fintech playbook into a single service, reached $3 billion in assets under management (AUM) this week. The company had reached $2 billion in AUM last September, after reaching $1 billion in February of 2020.
Why do we care? The company previously told TechCrunch that it works to generate revenues worth around 1% of AUM. If that percentage has held past its October, 2020 Series C, the company just added around $10 million in ARR in under half a year. That’s a pace of revenue creation that made me sit up and take notice. (Shoutout Josh for never shutting up about the Midwest.)
But I really bring up the M1 Finance milestone for a different reason. Namely that I am consistently surprised at how deep certain markets are. Neobanks that are still growing; the OKR software market’s surprising depth; the ability of M1 to accrete deposits in a market with so many incumbents and well-funded startups.
Perhaps this is why prices make no sense; if you can’t see the edge limits of TAM, can anything be overpriced?
Moving on, some quick notes on things from the week that mattered:
Aziz Gilani, a managing director at Mercury Fund and an advocate of Texas (observe his Twitter handle), wrote in late regarding our query for investor notes on the Visa-Plaid breakup. You can read the rest here.
But who are we to deprive you of useful notes. And Gilani is a nice person. So, here are his $0.02:
My big take-away on the Plaid/Visa deal falling apart is about how fast everything in 2021 is moving. Arguably the biggest advantage of SPACs over direct listings and IPOs is how fast those liquidity events can get done. In a world in which valuation[s] change week to week, the delays created by the DOJ can kill a deal – even if the DOJ would eventually lose in court.
I’m philosophically super negative about the government imposing their will, but I’m also personally excited about the current wave of insurgent startups not getting gobbled up by the FAANGs of the world. For the last several years too many startups fell victim to the “quick exit” mentality personified by Mint selling so fast to Intuit. With fast/cheap capital freely available, today’s crop of startups are going big.
Worth chewing on.
What a week. I have only a few things left for you, including some early-stage rounds that I could not get thanks to waves arms around generally but wanted to flag all the same.
Group Nine Media revealed last month that it was forming a SPAC (short for special purpose acquisition corporation) in order to raise money for acquisitions.
The company has now moved forward with those plans, announcing last night that it had priced the SPAC’s IPO at $10 per unit, to raise a total of $200 million. It’s now trading on Nasdaq under the ticker symbol GNACU; as of 2:53 p.m. Eastern shares were up 6.55%. (Eventually, the Class A common stock will be listed as GNAC and warrants will be listed separately as GNACW.) The offering is expected to close on January 20.
The acquisition corporation, like Group Nine itself, is led by CEO Ben Lerer (pictured above). Imagination Capital Partner Richard D. Parsons and Reddit Chief Operating Officer Jen Wong are also on the board of directors.
Group Nine was formed in 2016 with backing from Discovery, merging Thrillist, NowThis, The Dodo and Seeker. It subsequently acquired PopSugar, with co-founder Brian Sugar becoming president of both Group Nine and now Group Nine Acquisition Corp.
SPACs, also known as blank-check corporations, have become an increasingly popular way for companies to raise money from the public markets. In its initial filing, Group Nine said it would use the funding “for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination.”
It’s official. 2020 was one of the warmest years on record either edging out or coming in just behind 2016 for the warmest year in recorded history according to data from US government agencies.
The National Aeronautics and Space Administration had the year just tied with 2016, while the National Oceanic and Atmospheric Administration put the figure just behind 2016’s totals.
No matter the ranking, the big picture for the climate isn’t pretty according to scientists from NASA’s Goddard Institute for Space Studies (GISS) in New York and the Washington, DC-based NOAA.
“The last seven years have been the warmest seven years on record, typifying the ongoing and dramatic warming trend,” said GISS Director Gavin Schmidt, in a statement. “Whether one year is a record or not is not really that important – the important things are long-term trends. With these trends, and as the human impact on the climate increases, we have to expect that records will continue to be broken.”
That’s a dire message for the nation considering the cost of last year’s record-breaking 22 weather and climate disasters. At least 262 people died and scores more were injured by climate-related disasters, according to the NOAA.
And the combination of wildfires, droughts, heatwaves, tornados, tropical cyclones, and severe weather events like hail storms in Texas and the derecho that wrecked the Midwest cost the nation $95 billion.
Homes are engulfed in flames in Vacaville, California during the LNU Lightning Complex fire on August 19, 2020. – As of the late hours of August 18,2020 the Hennessey fire has merged with at least 7 fires and is now called the LNU Lightning Complex fires. Dozens of fires are burning out of control throughout Northern California as fire resources are spread thin. (Photo by JOSH EDELSON/AFP via Getty Images)
Both organizations track temperature trends to get some sort of picture of the impact that human activities — specifically greenhouse gas emissions — have on the planet. The image that comes into focus is that human activity has already contributed to increasing Earth’s average temperature by more than 2 degrees Fahrenheit since the industrial age took hold in the late 19th century.
Most troubling to scientists is that this year’s near record-setting temperatures happened without a boost from the climatic weather phenomenon known as El Niño, which is a large-scale ocean-atmosphere climate interaction linked to a periodic warming.
“The previous record warm year, 2016, received a significant boost from a strong El Niño. The lack of a similar assist from El Niño this year is evidence that the background climate continues to warm due to greenhouse gases,” Schmidt said, in a statement.
The warming trends the word is experiencing are most pronounced in the Arctic, according to NASA. There, temperatures have warmed three times as a fast as the rest of the globe over the past 30 years, Schmidt said. The loss of Arctic sea ice — whose annual minimum area is declining by about 13 percent per decade — makes the region less reflective, which means more sunlight is being absorbed by oceans, causing temperatures to climb even more.
These accelerating effects of climate change could be perilous for the world at large, Katharine Hayhoe, a professor at Texas Tech University wrote in an email to The Washington Post.
“What keeps us climate scientists up in the dead of night is wondering what we don’t know about the self-reinforcing or vicious cycles in the Earth’s climate system,” Hayhoe wrote. “The further and faster we push it beyond anything experienced in the history of human civilization on this planet, the greater the risk of serious and even dangerous consequences. And this year, we’ve seen that in spades… It’s no longer a question of when the impacts of climate change will manifest themselves: They are already here and now. The only question remaining is how much worse it will get.”
Here we are again. Again.
Yes, it’s another morning in which we have to discuss a venture-backed technology company going public at a price above its IPO range.
This time it’s Poshmark, which priced its IPO at $42 per share last night, comfortably ahead of its $35 to $39 range that already greatly boosted the company’s valuation. The consumer-to-consumer used fashion marketplace sold 6.6 million shares at its IPO price, raising a gross $277.2 million before other possible shares are sold.
According to Crunchbase data, that’s the biggest round Poshmark has raised in its history.
The company was able to so greatly boost its valuation in the process that the resulting dilution is minute. This is the late-2020, early-2021 IPO market in action: Pick a private company, boost its worth greatly in its public offering when comparing to its last private valuation, send it to trade, and watch its worth — usually — soar.
Then venture capitalists get to complain that Wall Street is underpricing their children while, from where I sit, it always appears that the VCs who put the last money into the company before its public offering tend to do even better than the bankers.
A useful question to ask: whom is underpricing whom?
But this morning we have some work to do. First, what are Poshmark’s final simple, and diluted valuations, what revenue multiples does it sport today, and, what do we think its final pricing means for public markets in general?
A hint: Nothing that follows is bearish.
There are a few ways to consider Poshmark’s value. One is to use its simple share count, a figure that doesn’t include vested-yet-unexercised stock options and RSUs. Another is to include those shares.
Here are the resulting valuations:
A security flaw in Ring’s Neighbors app was exposing the precise locations and home addresses of users who had posted to the app.
Ring, the video doorbell and home security startup acquired by Amazon for $1 billion, launched Neighbors in 2018 as a breakaway feature in its own standalone app. Neighbors is one of several neighborhood watch apps, like Nextdoor and Citizen, that lets users anonymously alert nearby residents to crime and public-safety issues.
While users’ posts are public, the app doesn’t display names or precise locations — though most include video taken by Ring doorbells and security cameras. The bug made it possible to retrieve the location data on users who posted to the app, including those who are reporting crimes.
But the exposed data wasn’t visible to anyone using the app. Rather, the bug was retrieving hidden data, including the user’s latitude and longitude and their home address, from Ring’s servers.
Another problem was that every post was tied to a unique number generated by the server that incremented by one each time a user created a new post. Although the number was hidden from view to the app user, the sequential post number made it easy to enumerate the location data from previous posts — even from users who aren’t geographically nearby.
Ring Neighbors app (left), and the data it was pulling in, including location data (right). (Image: TechCrunch)
The Neighbors app appeared to have about 4 million posts by the end of 2020.
Ring said it had fixed the issue.
“At Ring, we take customer privacy and security extremely seriously. We fixed this issue soon after we became aware of it. We have not identified any evidence of this information being accessed or used maliciously,” said Ring spokesperson Yassi Shahmiri.
Ring currently faces a class-action suit by dozens of people who say they were subjected to death threats and racial slurs after their Ring smart cameras were hacked. In response to the hacks, Ring put much of the blame on users for not using “best practices” like two-factor authentication, which makes it harder for hackers to access a user’s account with the user’s password.
After it emerged that hackers were reportedly creating tools to break into Ring accounts and over 1,500 user account passwords were found on the dark web, Ring made two-factor authentication mandatory for every user.
The smart tech maker has also faced increasing criticism from civil rights groups and lawmakers for its cozy relationship with hundreds of U.S. police departments that have partnered with Ring for access to homeowners’ doorbell camera footage.
Grab Financial Group said today it has raised more than $300 million in Series A funding, led by South Korean firm Hanhwa Asset Management, with participation from K3 Ventures, GGV Capital, Arbor Ventures and Flourish Ventures.
The Financial Times reports that the funding values Grab Financial, a subsidiary of ride-hailing and delivery giant Grab, at $3 billion. Both K3 Ventures and GGV Capital were early investors in Grab, which was founded in 2012.
Back in February 2020, Grab announced it had raised $856 million in funding to grow its payment and financial services. That news came during speculation that Grab and Gojek, one of it top rivals, were finally getting closer to a merger after lengthy discussions.
But the Grab-Gojek talks stalled, and Gojek is now reportedly in talks to merge with Indonesia e-commerce platform Tokopedia instead. According to Bloomberg, the combined company would be worth $18 billion, making it a more formidable rival to Grab.
In its funding announcement, Grab Financial Group said its total revenues grew more than 40% in 2020, compared to 2019. This driven by strong consumer adoption of services like AutoInvest, an investment platform that allows users to invest small amounts of money at a time through the Grab app and insurance products. Grab Financial announced the launch of several financial products for consumers and SMEs in August 2020.
Usagea of digital financial services by consumers and SMEs in Southeast Asia increased during the COVID-19 pandemic. According to a report published by Google, Temasek and Bain & Company in November, usage of banking apps and online payments, remittances, insurance products and robo-advisor investment platforms all grew in 2020, and the region’s financial services market may be reach $60 billion in revenue by 2025.
A consortium between Grab-Singtel was also among several firms awarded a full digital-banking license by the Monetary Authority of Singapore in December 2020.
In a press statement, Hanhwa Asset Management chief executive officer Yong Hyun Kim said, “We expect GFG to continue its expontential growth on the back of an innovative business model which supports the changing broader lifestyle of consumers, as well as its highly synergistic relationship with Grab, the largest Southeast Asian unicorn.”
The last we heard from Luther.ai, the startup was participating in the TechCrunch Disrupt Battlefield in September. The company got a lot of attention from that appearance, which culminated in a $3.2 million seed round it announced today. While they were at it, the founders decided to change the company name to Human AI, which they believe better reflects their mission.
Differential VC led the round joined by Village Global VC, Good Friends VC, Beni VC and Keshif Ventures. David Magerman from Differential will join the startup’s Board.
The investors were attracted to Human AI’s personalized kind of artificial intelligence, and co-founder and CEO Suman Kanuganti says that the Battlefield appearance led directly to investor interest, which quickly resulted in a deal four weeks later.
“I think overall the messaging of what we delivered at TechCrunch Disrupt regarding an individual personal AI that is secured by blockchain to retain and recall [information] really set the stage for what the company is all about, both from a user standpoint as well as from an investor standpoint,” Kanuganti told me.
As for the name change, he reported that there was some confusion in the market that Luther was an AI assistant like Alexa or a chatbot, and the founders wanted the name to better reflect the personalized nature of the product.
“We are creating AI for the individual and there is so much emphasis on the authenticity and the voice and the thoughts of an individual, and how we also use blockchain to secure ownership of the data. So most of the principle lies in creating this AI for an individual human. So we thought, let’s call it Human AI,” he explained.
As Kanuganti described it in September, the tool allows individuals to search for nuggets of information from past events using a variety of AI technologies:
“It’s made possible through a convergence of neuroscience, NLP and blockchain to deliver seamless in-the-moment recall. GPT-3 is built on the memories of the public internet, while Luther is built on the memories of your private self.”
The company is still in the process of refining the product and finding its audience, but reports that so far they have found interest from creative people such as writers, professionals such as therapists, high tech workers interested in AI, students looking to track school work and seniors looking for a way to track their memories for memoir purposes. All of these groups have the common theme of having to find nuggets of information from a ton of signals and that’s where Human AI’s strength lies.
The company’s diverse founding team includes two women, CTO Sharon Zhang and designer Kristie Kaiser, along with Kanuganti, who is himself an immigrant. The founders want to continue building a diverse organization as they add employees. “I think in general we just want to attract a diverse kind of talent, especially because we are also Human AI and we believe that everyone should have the same opportunity,” Zhang told me.
The company currently has 7 full time employees and a dozen consultants, but with the new funding is looking to hire engineers and AI talent and a head of marketing to push the notion of consumer AI. While the company is remote today and has employees around the world, it will look to build a headquarters at some point post-COVID where some percentage of the employees can work in the same space together.