Is Wall Street losing its tech enthusiasm?

This is The TechCrunch Exchange, a newsletter that goes out on Saturdays, based on the column of the same name. You can sign up for the email here.

Over the past few months the IPO market made it plain that some public investors were willing to pay more for growth-focused technology shares than private investors. We saw this in both strong tech IPO pricing — the value set on companies as they debut — and in resulting first-day valuations, which were often higher.

One way to consider how far public valuations rose for tech startups, especially those with a software core in 2020, is to ask yourself how often you heard about a down IPO this year. Maybe a single time? At most? (You can catch up on 2020 IPO performance here, if you need to.)

IPO enthusiasm exposed a gap between what many venture capitalists and private investors were paying for tech shares, and what the public market was doing with its own valuation calculations. Insurtech startup Hippo’s $150 million private round from July is a good example. The company was valued at $1.5 billion in the round, a healthy uptick from its preceding private valuation. But if we valued it like the then-newly-public Lemonade, a related company, at the time, Hippo was priced inexpensively.

This week, however, the concept of private investors being more conservative than public investors in certain cases (some eight-figure private rounds happened this year at valuations that were even more bullish than public investor treatment of IPOs, to be clear) took a ding as most big tech companies lost ground, SaaS stocks sold off, and other tech firms struggled to keep up with investor enthusiasm.

Not only tech companies took a beating, but as I write to you on this Friday afternoon, the American stock markets were on a path for their worst week since March, CNBC reported, “led by major tech shares.”

A change in the wind? Perhaps. 

Notable is that it was just in September that VCs seemed resigned to having startup valuations pulled higher by public markets’ endless optimism for related companies. Canaan’s Maha Ibrahim told me during Disrupt 2020 that it was a time when VCs had to “play the game” and pay up for startups, so long as companies were being “rewarded in the public markets for high growth the way that Snowflake” was at the time. A16z’s David Ulevitch concurred.

Perhaps that dynamic is changing as stocks dip. If so, startup valuations could decline en masse, along with the more exotic areas of startup-related finance. The SPAC boom, for example, may wane. Chatting with Hippo’s CEO Assaf Wand this week, he posited that SPACs were a market-response to the public-private valuation gap, an accelerant-cum-bridge to help startups get public while demand was hot for their equity.

Without the same red-hot demand for growth and risk, SPACs could cool. So, too, could private valuations that the hottest startups have taken for granted. Whether what we’re feeling in the wind this week is a hiccup or tipping point is not clear. But the public market’s fever for tech equities may have broken at a somewhat awkward time for Airbnb, Coinbase, DoorDash and other not-quite-yet-IPOs.

Market Notes

It started to snow this week where I live, putting a somewhat sad cap on an otherwise turbulent week. Still! There’s lots from our world to get into. Here’s our week’s market notes:

• Remember when we dug into how quickly startups grew in Q3? Another company that I’ve covered before, Drift, wrote in. The Boston-based marketing software company reported to The Exchange that it grew more than 50% in Q3 compared to the year-ago quarter, with its CEO adding that June and Q3 were the strongest month and three-month periods in its history.
• The fintech boom continued with DriveWealth raising nearly $57 million this week, with the startup being yet another API-driven play. That a company sitting in-between two key startup trends of the year is doing well is not surprising. DriveWealth helps other fintech companies provide users access to the American equities markets. Alpaca, which also recently raised, is working along similar lines.

This week featured two IPOs that we cared about. MediaAlpha’s debut, giving the advertising-and-insurtech company a $19 per-share IPO price, quickly exploded out of the gate. Today the company is worth nearly $38 per share. Why? On its IPO day MediaAlpha CEO Steve Yi said that he had chosen the current moment because public markets had garnered an appreciation for insurtech. His share price growth seems to concur.

Until we look at Root, to some degree. Root, a neo-insurance provider focused on the automotive space, priced at $27 when it debuted this week, $2 above the top-end of its range. The company is now worth less than $24 per share. So, whatever wave MediaAlpha caught appears to have missed Root. 

I honestly don’t know what to make of the difference in the two debuts, but please email in if you do know (you can just reply to this email, and I’ll get your note).

Regardless, I chatted with Root CEO Alex Timm after his company went public. The executive said that Root had laid down plans to go public a year ago, and that it can’t control market noise around the time of its debut. Timm stressed the amount of capital that Root added to its coffers — north of $1 billion — is a win. I asked how the company intended to not fuck up its newly swollen accounts, to which Timm said that his company was going to stay “laser focused” on its core automotive insurance opportunity.

Oh, and Root is based in Ohio. I asked what its debut might mean for Midwest startups. Timm was positive, saying that the IPO could highlight that there are a lot of smart folks and GDP in the middle of the country, even if venture capital tallies for the region remain underdeveloped.

• I know that by now you are tired of earnings, but Five9 did something that other companies struggled to accomplish, namely, beat expectations and bolstered its forward guidance. Its shares soared. The Exchange got on the phone with the call center software company to chat about its latest acquisition and earnings. How did it crush expectations as it did? By selling a product that its market needed when COVID-19 hit, the accelerating digital transformation more broadly, and rising e-commerce spend, which is driving more customer support work onto phone lines, it said. A lot of stuff at once, in other words. 
• Five9 took on a bunch of convertible debt earlier this year, despite making gobs of adjusted profit. I asked its CEO Rowan Trollope how he was going to go about investing cash to take advantage of market tailwinds, while not overspending. He said that the company takes very regular looks at revenue performance, helping it tailor new spend nimbly. It’s apparently working.
• What else? Peek this week at big, important rounds from SimilarWeb, PrimaryBid and EightFold, a company that I have known for some time. Oh, and I covered The Wanderlust Group’s Series B and Teampay’s Series A extension, which were good fun.

Various and Sundry

• What’s going on in the world of venture debt as VC gets back to form? We dug in.
• For the Europhiles amongst us, here’s what’s up with the continent’s VC receipts.
• Here are 10 favorites from recent Techstars demo days.
• And here’s some mathmagic about Databricks, after it was rumored to have an H1 2021 IPO target.
• We’re way out of space this week, but I have some fun stuff in the tank for later, including a Capital G investor’s take on RPA, a call with the CEO of Zapier about no-code/low-code growth and notes from a chat about developer ecosystems with Dell Capital. More on all of that when the news calms down.

Stay safe, and vote.

Alex

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MG Siegler talks portfolio management and fundraising 6 months into the COVID-19 pandemic

This week, GV General Partner (and TechCrunch alum) MG Siegler joined us on Extra Crunch Live for a far-ranging chat about what it takes to foster a good relationship between investor and startup, how portfolio management and investing has changed as the COVID-19 crisis drags on, and what Siegler expects will and won’t stick around in terms of changes in behavior in investment and entrepreneurship once the pandemic passes.

We last caught up with Siegler on the heels of his investment in Universe, a mobile-focused, e-commerce business-building startup. The coronavirus pandemic was relatively new and no one was sure how long it would last or what measures to contain it would look like. Now, with a few months of experience under his belt, Siegler told me that things have relatively settled into a new normal from his perspective as an investor – sometimes for worse, sometimes for better, but mostly just resulting in differences that require adaptation.

This select transcript has been edited for length and clarity. Aside from section headers, all text below is taken from MG Siegler’s responses to my questions.

Business impacts of coping with the pandemic six months on

Just talking about the business side of the equation, I do think that things have sort of stabilized in the day-to-day world here. For us, certainly, I think it’s it’s just as much of a factor though, of just learning how to operate in this in this weird and surreal environment, and knowing how to do remote meetings better. Knowing how to hop on quick Zoom calls, Hangouts, and phone calls, with portfolio companies, to help put out fires, and doing all board meetings remotely, and all that sort of stuff.

That seems like it’s pretty straightforward on paper, but in day-to-day operations, these are all different little learning things that you have to do and come across. I do feel like things are operating in a pretty streamlined manner, or as much as they can be at this point. But, you know, there’s always going to be some more wildcards – like we’re a week away, today, from from the US election.

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The 2020s promise better tech solutions to humanity’s biggest problems

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Let’s think beyond Monday, for a minute, to the trends playing out in technology this coming decade. While humanity’s problems have never been greater, our tools have never been better. Here’s more, from Danny Crichton:

The 2010s were all about executing on the dreams of mobile, cloud, and basic data. Those ideas had historical antecedents going back in some cases decades or more (Vannevar Bush’s description of the internet dates to the 1940s, for instance). But for the first time, we had the infrastructure and the users to actually build these products and make them useful. It was quite possibly the most extensive greenfield opportunity in the history of technology.

Yet, that greenfield is increasingly fallow. Business has cycles and seasonality as much as media reporting does. The easy stuff has been done. Building an app to text people has been done by dozens before. There are a multitude of analytics packages, and payroll providers, and credit card issuers, and more. What’s required this decade is to start to encroach on the harder questions, topics like how we build a better society, make people more empowered to do deep and creative work, and how we can build a more resilient and sustainable planet for all.

None of these topics have pure point solutions — but that is what is going to make this coming decade so damn interesting. It’s going to take intense collaboration, multiple inventions and products, as well as legal and cultural changes, to realize these next improvements. If you have grown sick (as I have) of the latest apps and SaaS products du jour, this decade is going to be an amazing one to experience and build.

In a companion article for Extra Crunch, he explores five key areas of the future, that he calls: Wellness, Climate, Data Society, Creativity and Fundamentals. Here’s an excerpt from the Data Society part:

Data may be ubiquitous, but it’s amazing how much work it can still be to calculate an LTV, or the return on an advertising campaign. No-code tools solve some of these problems, but what we need is a whole revolution in our data tools. We need to be able to sketch out lines of inquiry and have our tools augment our thinking from data. What are we missing? What gaps in our thinking should we be filling in? What data am I lacking to make a fully-formed decision? Am I overly biased toward one statistic versus a more holistic depiction of my situation? From personal decisions to business strategy, we need better tools to abstract the complexity of today’s modern society.

We also need better thinking around how to network knowledge. Roam Research and some other tools are starting to get better at helping users think in terms of a knowledge graph, but there is an incredible amount of potential if these ideas can be democratized and packaged into easier-to-use interfaces. How do we handle the increasing depth of most fields of knowledge and allow more people to get to the frontiers as quickly as possible?

Finally, we need to further our understanding of complexity and chaos and build those theories into the fundamental structures of our society. How do we make governance more adaptable and resilience, so that when massive crises like COVID-19 happen, we don’t see a complete breakdown in our society? Can we create more flexible systems around ownership and property that can create more diverse housing, or material ownership, or intellectual property? Empowering technology (“blockchain!” but could be all kinds of things) coupled with legal changes could dramatically evolve these core elements of our society.

Even today, we are still locked into a mental model built around paper, titles, and maybe if you are lucky, an Excel spreadsheet. There is so much work to be done to empower each of us through data this decade.

Data education

The building blocks of the Data Society concept are getting remade faster than ever this year, as the pandemic has shuttered traditional commerce and education, and forced open alternative approaches. For example, somebody starting a small business today basically has to use a lot of software. But crossing this initial barrier means they can do things like automatically track the lifetime value of each customer. Previous generations of small businesses simply did not have the resources and skills to do such things with the low-tech options available.

That’s the generational power of no-code, as Danny detailed separately on TechCrunch:

In business today, it’s not enough to just open a spreadsheet and make some casual observations anymore. Today’s new workers know how to dive into systems, pipe different programs together using no-code platforms and answer problems with much more comprehensive — and real-time — answers.

It’s honestly striking to see the difference. Whereas just a few years ago, a store manager might (and strong emphasis on might) put their sales data into Excel and then let it linger there for the occasional perusal, this new generation is prepared to connect multiple online tools to build an online storefront (through no-code tools like Shopify or Squarespace), calculate basic LTV scores using a no-code data platform and prioritize their best customers with marketing outreach through basic email delivery services. And it’s all reproducible, as it is in technology and code and not produced by hand.

There are two important points here. First is to note the degree of fluency these new workers have for these technologies, and just how many members of this generation seem prepared to use them. They just don’t have the fear to try new programs, and they know they can always use search engines to find answers to problems they are having.

Second, the productivity difference between basic computer literacy and a bit more advanced expertise is profound. Even basic but accurate data analysis on a business can raise performance substantially compared to gut instinct and expired spreadsheets.

How do we realize this future? Zooming in from the generational perspective, Natasha Mascarenhas takes a closer look at how school teachers are adapting to the pandemic — and the emerging online education world they are entering. Some, at least, seem to be moving into supplemental part-time teaching. While the educational experience is not the same as in-person, it clearly has its own value. Here’s one company as an example:

Outschool is a platform that sells small-group classes led by teachers on a large expanse of topics, from Taylor Swift Spanish class to engineering lessons through Lego challenges. In the past year, teachers on Outschool  have made more than $40 million in aggregate, up from $4 million in total earnings the year prior.

CEO Amir Nathoo estimates that teachers are able to make between $40 to $60 per hour, up from an average of $30 per hour in earnings in traditional public schools. Outschool itself has surged over 2,000% in new bookings, and recently turned its first profit.

Outschool makes more money if teachers join the platform full-time: teachers pocket 70% of the price they set for classes, while Outschool gets the other 30% of income. But, Nathoo views the platform as more of a supplement to traditional education. Instead of scaling revenue by convincing teachers to come on full-time, the CEO is growing by adding more part-time teachers to the platform.

Maybe one day soon, a class about online business will be a graduation requirement for a high school diploma. And we’ll see that sort of education drive more success in the next generation of your local Main Street.

The problems of the coming decade might be harder than ever, but the solutions are there for the making.

Image Credits: Intpro / Getty Images

How to execute a bottom-up SaaS growth plan

The combination of consumer tech product skills and enterprise revenue models fueled this decade’s explosion of SaaS success stories. This week, Caryn Marooney and David Cahn of Coatue management distilled the lessons of this model into a popular how-to article for Extra Crunch. Here’s an excerpt, showing how market leaders approach key metrics and pricing:

The MAP customer value framework:

Metrics: What are the key metrics the customers care about? Is there a threshold of value associated with this metric? Metrics can include things like minutes, messages, meetings, data and storage. Examples:

• Zoom — Minutes: Free with a 40-minute time limit on group meetings.
• Slack — Messages: Free until 10,000 total messages.
• Airtable — Records: Free until 1,200 records.

Activity: How do your customers really use your product? Are they creators? Are they editors? Do different customers use your product differently? Examples:

• Figma — Editors versus viewers: Free to view, starts changing after two edits.
• Monday.com — Creators versus viewers: Free to view, creators are charged $30+/month.
• Smartsheet — Creators versus viewers: Free to view, creators are charged $10+/month.

People: How do your customers fit into a broader organization? Are they mostly individuals? Groups? Part of an enterprise? Examples:

• Superhuman — Individuals only: No free version, $30/month.

• Asana — Small team versus bigger teams: Teams of <15 people can use the product free.

• Atlassian — Free versus team versus enterprise: Pricing scales with size of team.

Image Credits: Nigel Sussman (opens in a new window)

Root keeps the IPO market warm

The stock market was off this week, but not entirely. Root Insurance was the big IPO this week, ending at $24 per share. That’s a bit below its aggressive $27 opening price per share, but is still in the range of its target pricing from the other week. It is, in other words, a success already for the company  — and we’ll see what happens when the entire market stops gyrating around the elections.

“For the Midwest, Ohio-based Root’s IPO is a win,” Alex Wilhelm wrote for Extra Crunch. “The company shows that it is possible to build high-growth technology companies worth billions of dollars far from coastal hubs. For the broader insurtech space, Root’s IPO is a win. The company follows Lemonade to the public markets, setting a strong valuation mark again for the neo-insurance startup market. For similar companies like Clearcover, MetroMile and all startups that related to Root and Lemonade, it’s a good day.”

It’s still looking good for any software company with a growth story, as Alex goes on to say, and it’s looking good for more IPOs this year. Like Airbnb.

But enough about IPOs this year — Alex also built on previous coverage to explore Databricks going public next year, which sounds quite likely at this point.

Across the week

TechCrunch

Why you have to pay attention to the Indian startup scene

Yale may have just turned institutional investing on its head with a new diversity edict

Cloud infrastructure revenue grows 33% this quarter to almost $33B

We need new business models to burst old media filter bubbles

Former Facebook and Pinterest exec Tim Kendall traces ‘extractive business models’ to VCs

Extra Crunch

Good and bad board members (and what to do about them)

New GV partner Terri Burns has a simple investment thesis: Gen Z

As venture capital rebounds, what’s going on with venture debt?

In the ‘buy now, pay later’ wars, PayPal is primed for dominance

Dear Sophie: Any upgrade options for E-2 visa holders interested in changing jobs?

#EquityPod

From Alex:

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast (now on Twitter!), where we unpack the numbers behind the headlines.

A few notes before we get into this. One, we have a bonus episode coming this Saturday focused on this week’s earnings reports. And, second, we did not record video this week. So, if you like watching the show on YouTube, this is not the week for that!

Right, here’s what Natasha, Danny and your humble servant got into this week:

• The huge COVID-related hit that public markets took this week, with tech getting hit extra hard.
• An antitrust brouhaha! As the Vista-Plaid deal (and others) gets a hard look, we wondered what it could all mean for startups a bit more suited for M&A than an IPO.
• Up next we dug into how founders are raising money before they even quit their jobs, a trend that Natasha is digging into.
• From there it was a Danny segment, riffing on his 2020s piece, and diving into where he sees the most ripe chances for startups to truly change the world. We just hope the capital follows the opportunities.
• Then it was time to talk accelerators, with Natasha detailing on the Indie Bio class, and my taking of the show through some recent Techstars companies.
• VCs raised too, with the three of us talking about The Engine and Impact America raising fresh new funds.
• And then we chatted about the Yuanfudao round, and a Series B that The Wanderlust Group just put together.

We capped off with the latest from r2c, and then got the hell off the mics. Catch you all Saturday, and then back to regular programming on Monday morning.

Equity drops every Monday at 7:00 a.m. PDT and Thursday afternoon as fast as we can get it out, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.

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Equity shot: Boo! It’s the Halloween earnings special!

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast (now on Twitter!), where we unpack the numbers behind the headlines.

As promised, the whole gang is back, this time to chew on the biggest, baddest, worstest, and most troubling earnings reports from the current cycle. This week saw Amazon and Alphabet and Microsoft and Apple and Facebook report, along with a host of smaller companies.

Spoiler alert: there were more tricks than treats.

• Danny, Natasha and Alex wanted to get to the bottom of the big tech results, asking what really mattered from each of them?
• Then it was time to dig into themes. We saw plan price increases coming from Netflix and Spotify, advertising getting a boo-st from politics and 2020’s overall meltdown, and boo-ming billions of consumer interest in…desktops.
• After that, a dive into the results of smaller SaaS and cloud companies, picking out trends that might help us see around the corner a bit; is the tech boom slowing, or is corporate growth merely failing to keep up with inflated investor expectations?
• This week felt like a shudder ran through the spine of our economy. The earnings paint a neutral picture, which isn’t exactly an exhale to rejoice over. The coronavirus continues to be a threat that poses a risk to public businesses. For startups, that could mean a less frothy exit market nad lower valuations. And for the public, it means that the uncertain is still ahead of us. So wear a mask.

And with that, the show is back Monday morning. Have a good weekend, everyone.

Equity drops every Monday at 7:00 a.m. PDT and Thursday afternoon as fast as we can get it out, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.

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You can start a venture fund if you’re not rich; here’s how

For years — decades, even — there was little question about whether you could become a venture capitalist if you weren’t comfortable financially. You couldn’t. The people and institutions that invest in venture funds want to know that fund managers have their own “skin in the game,” so they’ve long required a sizable check from the investor’s own pocket before jumping aboard. Think 2% to 3% of the fund’s total assets, which often equates to millions of dollars.

In fact, five years ago, I wrote that the real obstacle to becoming a venture capitalist has less to do with gender than with financial inequality. I focused then on women, who are paid less (especially Black and Hispanic women), and who possess less wealth. But the same is true of anyone of lesser means.

LPs: The ≧1% of a fund capital commitment you expect from GPs makes it hard for POCs to raise funds.

Consider that “for a $20M fund, a 2% commitment with 2 GPs is still a $200K commitment for each partner.” This is out of reach for many of us. https://t.co/bguXpa3CiY

— lolitataub (@lolitataub) October 29, 2020

Thankfully, things are changing, with more ways to help aspiring VCs raise that initial capital commitment. None of these approaches can guarantee success in raising a fund, but they’re paths that other VCs have effectively used in the past when starting out.

1.) Find investors, i.e. limited partners, who are willing to take less than 3% and maybe even less than 1% of the overall fund size being targeted. You’ll likely find fewer investors as that “commit” shrinks. But for example Joanna Rupp, who runs the $1.1 billion private equity portfolio for the University of Chicago’s endowment, suggests that both she and other managers she knows are willing to be flexible based on the “specific situation of the GP.”

Says Rupp, “I think there are industry ‘norms,’ but we haven’t required a [general partner] commitment from younger GPs when we have felt that they don’t have the financial means.”

Bob Raynard, founder of the fund administration firm Standish Management, echoes the sentiment, saying that a smaller general partner commitment in exchange for special investor economics is also fairly common. “You might see a reduced management fee for the LP for helping them or reduced carry or both, and that has been done for years.”

2.) Explore management fee offsets, which investors in venture funds often determine to be reasonable. These aren’t uncommon, says Michael Kim of Cendana Capital, a firm that has stakes in dozens of seed stage funds, because they also offer tax advantages (though the IRS has talked about doing away with these).

How do these work? Say your “commit” was $1 million over 10 years (the standard life of a fund). Instead of trying to come up with $1 million that you presumably don’t have, you can offset up to 80% of that, putting in $200,000 instead but reducing your management fees by that same amount over time so that it’s a wash and you’re still getting credit for the entire $1 million. You’re basically converting fee income into the investment you’re supposed to make.

3.) Use your existing portfolio companies as collateral. Kim had at least two highly regarded managers launch a fund not with a “commit” but rather by bringing to the table ownership stakes in startups they’d funded as angel investors.

In both of these cases, it was a great deal for Kim, who says the companies were quickly marked up. For the fund managers’ part, it meant not having to put more of their own money into the funds.

4.) Make a deal with wealthier friends if you can. When Kim launched his fund of funds to invest in venture managers after working for years as a VC himself, he raised $1 million in working capital from six friends to get it off the ground. The money gave Kim, who had a mortgage at the time and young children, enough runway for two years. Obviously, your friends have to be willing to gamble on you, but sweeteners certainly help, too. In Kim’s case, he gave his friends a percentage of Cendana’s economics in perpetuity.

5.) Get a bank loan. Rupp said she would be uncomfortable if a GP funded his or her commit through a bank loan for several reasons. There’s no guarantee a fund manager will make money from a fund, a loan adds risk on top of risk, and should a manager need liquidity related to that loan, he or she might sell a strongly performing position too early.

That said, loans aren’t uncommon, says Raynard. He says banks with venture capital relationships like Silicon Valley Bank and First Republic are typically happy to lend a fund manager a line of credit to help him or her make capital calls, though he says it does depend on who else is involved with the fund. “As long as it’s a diverse group of LPs,” the banks are comfortable moving forward in exchange for winning over a new fund’s business, he suggests.

6.) Consider the merits of so-called front loading. This is a technique with which “more creative LPs can sometimes get comfortable,” says Kim. It’s also how investor Chris Sacca, now a billionaire, got started when he first turned to fund management. How does it work? Some beginning managers blend their annual management fee of 2.5% of assets under management and pay themselves a higher percentage  — say 5% for each of its first three years — until by the end of the fund’s life, the manager is receiving no management fee at all.

That could mean no income if you aren’t yet seeing profits from your investments. But presumably — especially given pacing in recent years — you, the general partner, have raised another fund by the time that happens so have resources coming in from a second fund.

These are just a few of the ways to get started. There are other paths to take, too, notes Lo Toney of Plexo Capital — which, like Cendana Capital — has stakes in many venture funds. One of these is to use a self-directed IRA to finance that GP commit. Another is to sell a portion of the management company or sell a greater percentage of your carry and use those proceeds to pay your commit. (VCs Charles Hudson of Precursor Ventures and Eva Ho of Fika Ventures avoided that path and suggested that first-time managers do the same if they can.)

Either way, suggests Toney, a former partner with Alphabet’s venture arm, GV, it’s important to keep in mind that there’s no one right way to raise a fund and that it’s no disadvantage in using these strategies to raise a fund. Said Toney via email this week: “I have not seen any data on the front end of a VC’s career that wealth indicates future success.”

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TikTok stars got a judge to block Trump’s TikTok ban

TikTok has won another battle in its fight against the Trump administration’s ban of its video-sharing app in the U.S. — or, more accurately in this case, the TikTok community won a battle. On Friday, a federal judge in Pennsylvania issued an injunction that blocked the restrictions that would have otherwise blocked TikTok from operating in the U.S. on November 12.

This particular lawsuit was not led by TikTok itself, but rather a group of TikTok creators who use the app to engage with their million-plus followers.

According to the court documents, plaintiff Douglas Marland has 2.7 million followers on the app; Alec Chambers has 1.8 million followers; and Cosette Rinab has 2.3 million followers. The creators argued — successfully as it turns out — that they would lose access to their followers in the event of a ban, as well as the “professional opportunities afforded by TikTok.” In other words, they’d lose their brand sponsorships — meaning, their income.

This is not the first time that the U.S. courts have sided with TikTok to block the Trump administration’s proposed ban over the Chinese-owned video sharing app. Last month, a D.C. judge blocked the ban that would have removed the app from being listed in U.S. app stores run by Apple and Google.

That ruling had not, however, stopped the November 12 ban that would have blocked companies from providing internet hosting services that would have allowed TikTok to continue to operate in the U.S.

The Trump administration had moved to block the TikTok app from operating in the U.S. due to its Chinese parent company, ByteDance, claiming it was a national security threat. The core argument from the judge in this ruling was the “Government’s own descriptions of the national security threat posed by the TikTok app are phrased in the hypothetical.”

That hypothetical risk was unable to be stated by the government, the judge argued, to be such a risk that it outweighed the public interest. The interest, in this case, was the more than 100 million users of TikTok and the creators like Marland, Chambers and Rinab that utilized it to spread “informational materials,” which allowed the judge to rule that the ban would shut down a platform for expressive activity.

“We are deeply moved by the outpouring of support from our creators, who have worked to protect their rights to expression, their careers, and to help small businesses, particularly during the pandemic,” said Vanessa Pappas, Interim Global Head of TikTok, in a statement. “We stand behind our community as they share their voices, and we are committed to continuing to provide a home for them to do so,” she added.

The TikTok community coming to the rescue on this one aspect of the overall TikTok picture just elevates this whole story. Though the company has been relatively quiet through this whole process, Pappas has thanked the community several times for its outpouring of support. Though there were some initial waves of “grief” on the app with creators frantically recommending people follow them on other platforms, that has morphed over time into more of a “let’s band together” vibe. This activity coalesced around a big swell in voting advocacy on the platform, where many creators are too young to actually participate but view voting messaging as their way to participate.

TikTok has remained active in the product department through the whole mess, shipping elections guides and trying to ban QAnon conspiracy spread, even as Pakistan banned and then un-banned the app.

Trump administration’s TikTok ban has been delayed

 

 

 

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Facebook hits pause on algorithmic recommendations for political and social issue groups

With just days to go before the U.S. election, Facebook quietly suspended one of its most worrisome features.

During Wednesday’s Senate hearing, Senator Ed Markey asked Facebook CEO Mark Zuckerberg about reports that his company has long known its group recommendations push people toward more extreme content. Zuckerberg responded that the company had actually disabled that feature for certain groups — a fact Facebook had not previously announced.

“Senator, we have taken the step of stopping recommendations in groups for all political content or social issue groups as a precaution for this,” Zuckerberg told Markey.

TechCrunch reached out to Facebook with questions about what kind of groups would be affected and how long the recommendations would be suspended at the time but did not receive an immediate response. Facebook first confirmed the change to BuzzFeed News on Friday.

“This is a measure we put in place in the lead up to Election Day,” Facebook spokesperson Liz Bourgeois told TechCrunch in an email. “We will assess when to lift them afterwards, but they are temporary.”

The cautionary step will disable recommendations for political and social issue groups as well as any new groups that are created during the window of time. Facebook declined to provide additional details about the kinds of groups that will and won’t be affected by the change or what went into the decision.

Researchers who focus on extremism have long been concerned that algorithmic recommendations on social networks push people toward more extreme content. Facebook has been aware of this phenomenon since at least 2016, when an internal presentation on extremism in Germany observed that “64% of all extremist group joins are due to our recommendation tools.” In light of the feature’s track record, some anti-hate groups celebrated Facebook’s decision to hit the pause button Friday.

“It’s good news that Facebook is disabling group recommendations for all political content or social issue groups as a precaution during this election season. I believe it could result in a safer experience for users in this critical time,” Anti-Defamation League CEO Jonathan A. Greenblatt told TechCrunch. “And yet, beyond the next week, much more needs to be done in the long term to ensure that users are not being exposed to extremist ideologies on Facebook’s platforms.”

On Facebook, algorithmic recommendations can usher users flirting with extreme views and violent ideas into social groups where their dangerous ideologies can be amplified and organized. Before being banned by the social network, the violent far-right group the Proud Boys relied on Facebook groups for its relatively sophisticated national recruitment operation. Members of the group that plotted to kidnap Michigan Governor Gretchen Whitmer also used Facebook groups to organize, according to an FBI affidavit.

Militia tied to plot to kidnap Gov. Whitmer was removed from Facebook in boogaloo purge

While it sounds like Facebook’s decision to toggle off some group recommendations is temporary, the company has made an unprecedented flurry of choices to limit dangerous content in recent months, possibly in fear that the 2020 election will again plunge it into political controversy. Over the last three months alone, Facebook has cracked down on QAnon, militias and language used by the Trump campaign that could result in voter intimidation — all surprising postures considering its longstanding inaction and deep fear of decisions that could be perceived as partisan.

After years of relative inaction, the company now appears to be taking seriously some of the extremism it has long incubated, though the coming days are likely to put its new set of protective policies to the test.

Changing how retweets work, Twitter seeks to slow down election misinformation

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iPhones can now tell blind users where and how far away people are

{rss:content:encoded} iPhones can now tell blind users where and how far away people are https://ift.tt/37W232B https://ift.tt/3jJTZ7i October 30, 2020 at 11:01PM

Apple has packed an interesting new accessibility feature into the latest beta of iOS: a system that detects the presence of and distance to people in the view of the iPhone’s camera, so blind users can social distance effectively, among many other things.

The feature emerged from Apple’s ARKit, for which the company developed “people occlusion,” which detects people’s shapes and lets virtual items pass in front of and behind them. The accessibility team realized that this, combined with the accurate distance measurements provided by the lidar units on the iPhone 12 Pro and Pro Max, could be an extremely useful tool for anyone with a visual impairment.

Of course during the pandemic one immediately thinks of the idea of keeping six feet away from other people. But knowing where others are and how far away is a basic visual task that we use all the time to plan where we walk, which line we get in at the store, whether to cross the street, and so on.

The new feature, which will be part of the Magnifier app, uses the lidar and wide-angle camera of the Pro and Pro Max, giving feedback to the user in a variety of ways.

The lidar in the iPhone 12 Pro shows up in this infrared video. Each dot reports back the precise distance of what it reflects off of.

First, it tells the user whether there are people in view at all. If someone is there, it will then say how far away the closest person is in feet or meters, updating regularly as they approach or move further away. The sound corresponds in stereo to the direction the person is in the camera’s view.

Second, it allows the user to set tones corresponding to certain distances. For example, if they set the distance at six feet, they’ll hear one tone if a person is more than six feet away, another if they’re inside that range. After all, not everyone wants a constant feed of exact distances if all they care about is staying two paces away.

The third feature, perhaps extra useful for folks who have both visual and hearing impairments, is a haptic pulse that goes faster as a person gets closer.

Last is a visual feature for people who need a little help discerning the world around them, an arrow that points to the detected person on the screen. Blindness is a spectrum, after all, and any number of vision problems could make a person want a bit of help in that regard.

As ADA turns 30, tech is just getting started helping people with disabilities

The system requires a decent image on the wide-angle camera, so it won’t work in pitch darkness. And while the restriction of the feature to the high end of the iPhone line reduces the reach somewhat, the constantly increasing utility of such a device as a sort of vision prosthetic likely makes the investment in the hardware more palatable to people who need it.

This is far from the first tool like this — many phones and dedicated devices have features for finding objects and people, but it’s not often that it comes baked in as a standard feature.

People detection should be available to iPhone 12 Pro and Pro Max running the iOS 14.2 release candidate that was just made available today. Details will presumably appear soon on Apple’s dedicated iPhone accessibility site.

Microsoft Soundscape helps the visually impaired navigate cities

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Q3 earnings find Apple and Google looking to the future for hardware rebounds

{rss:content:encoded} Q3 earnings find Apple and Google looking to the future for hardware rebounds https://ift.tt/3mDTBcq https://ift.tt/2HSXVps October 30, 2020 at 10:05PM

“5G is a once-in-a-decade kind of opportunity,” Tim Cook told the media during the Q&A portion of Apple’s Q3 earnings call. “And we could not be more excited to hit the market exactly when we did.”

The truth of the matter is its timing was a mixed bag. Apple was, by some accounts, late to 5G. By the time the company finally announced that it was adding the technology across its lineup of iPhone 12 variants, much of its competition had already beat the company to the punch. Of course, that’s not a huge surprise. Apple’s strategy is rarely a rush to be first.

5G networks are only really starting to come into their own now. Even today, there are still wide swaths of users who will have to default to an LTE connection the majority of the time they use their handsets. The arrival of 5G on the iPhone was really as much about future-proofing this year’s models as anything. Consumers are holding onto phones longer, and in the three or four years before it’s time for another upgrade, the 5G maps will look very different.

Clearly, the new iPhone didn’t hit the market exactly when Apple had hoped; the pandemic saw to that. Manufacturing bottlenecks in Asia delayed the iPhone 12’s launch by a month. That’s going to have an impact on the bottom line of your quarterly earnings. The company saw a 20% drop for the quarter, year-over-year. That’s hugely significant, causing the company’s stock to drop more than 4% in extended trading.

Why Apple’s Q4 earnings look different this year

Apple’s diverse portfolio helped curb some of those revenue slides. While the pandemic has generally had a profound impact on consumer spending on “non-essentials,” changing where and how we work has helped bolster Mac and iPad sales, which were up 28% and 46%, respectively, year-over-year. It wasn’t enough to completely stop the iPhone stumble, but it certainly brings the importance of a diverse hardware portfolio into sharp relief.

China was a big issue for the company this time around — and the lack of a new, 5G-enabled iPhone was a big contributor. In greater China (including Taiwan and Hong Kong), the company saw a 28% drop in sales. There are a number of reasons to be hopeful about iPhone sales in Q4, however.

As I noted this morning, smartphone shipments were down almost across the board in China for Q3, per new figures from Canalys. Much of that can be chalked up to Huawei’s ongoing issues with the U.S. government. Long the dominant manufacturer in mainland China, the company has been hamstrung by, among other things, a ban on access to Android and other U.S.-made technologies. Apple’s numbers remained relatively steady compared to the competition and Huawei’s issues could present a big hole in the market. With 5G on its side, this next quarter could prove a banner year for the company.

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Dear Sophie: Would a Trump win abolish the H-1B visa lottery?

Sophie Alcorn Contributor

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

More posts by this contributor

• Dear Sophie: Any upgrade options for E-2 visa holders interested in changing jobs?
• Dear Sophie: What visa options exist for a grad co-founding a startup?

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

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

Extra Crunch members receive access to weekly “Dear Sophie” columns; use promo code ALCORN to purchase a one- or two-year subscription for 50% off.

---

Dear Sophie:

I heard the randomness of the H-1B lottery is going away. What will this mean for our startup’s ability to get an H-1B visa for one of our co-founders?

— Curious in Cupertino

Dear Curious:

Lots going on in immigration this week (as usual!). First, good news for green card applicants: the November 2020 Visa Bulletin did not change from October, when the dates for filing for Adjustment of Status sped up significantly for individuals born in India and China.

About the H-1B lottery: The Department of Homeland Security (DHS), which oversees U.S. Citizenship and Immigration Services (USCIS), this week proposed a rule that ends the random H-1B lottery; instead, USCIS will determine who can apply for an H-1B visa based on the highest salary. DHS says this change will “incentivize employers to offer higher wages.”

The number of H-1B visas issued each year is capped at 85,000. Currently, when demand for H-1Bs outstrips the annual supply, which has been the case since 2013, USCIS uses an electronic random lottery to determine who can apply for an H-1B. For the first time this year, sponsoring companies electronically registered each H-1B candidate for the lottery in March.

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Join Greylock’s Asheem Chandna on November 5 at noon PST/3 pm EST/8 pm GMT to discuss the future of enterprise and cybersecurity investing

The world of enterprise software and cybersecurity has taken multiple body blows since COVID-19 demolished the in-person office, flinging employees across the world and forcing companies to adapt to an all-remote productivity model. The shift has required companies to rethink not only collaboration software, but also the infrastructure that powers it and the best way to protect assets once their security perimeters have been destroyed.

The pandemic has also dramatically increased the usage of digital services, forcing cloud providers to keep up with crushing demands for performance and reliability.

In short — it’s never been a better time to be an enterprise investor (or, possibly, a founder).

So I’m excited to announce our next guest in our Extra Crunch Live interview series: Asheem Chandna from Greylock, one of the top enterprise investors of the past two decades who has worked with multiple important founding teams from whiteboard to IPO. We’re scheduled for Thursday, November 5 at noon PST/3 p.m. EST/8 p.m. GMT (check that daylight savings time math!)

Login details are below the fold for EC members, and if you don’t have an Extra Crunch membership, click through to sign up.

For nearly two decades, Asheem Chandna has invested in enterprise and security startups at Greylock, with massive investment wins in Palo Alto Networks, AppDynamics and Sumo Logic. These days, he continues to invest in cybersecurity with companies like Awake Security and Abnormal Security, data platforms like Rubrik and Delphix, and the stealthy search engine company Neeva. As a leading early-stage investor and mentor in the space, he’s seen a multitude of companies transition from inception to product-market fit to IPO.

We’ll talk about what all the turbulence in enterprise means for the future of startups in the space, how cybersecurity is evolving given the new threat landscape and also discuss a bit about how the public markets and their aggressive multiples for Silicon Valley enterprise startups is changing the strategy of venture capitalists. Plus, we’ll talk about company building, developing founders as leaders and more.

Join us next week with Asheem on Thursday, November 5 at noon PST/3 p.m. EST/8 p.m. GMT. Login details and calendar invite are below.

Event Details

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Nestlé acquires healthy meal startup Freshly for up to $1.5B

Nestlé USA just announced that it has acquired Freshly for $1.5 billion — $950 million plus potential earnouts of up to $550 million based on future growth.

Founded in 2015, Freshly is a New York City-based startup that offers healthy meals delivered to your home in weekly orders, then prepared in a few minutes via microwave or oven,  So you get the benefit of fresh, healthy meals but — unlike signing up with a meal kit startup — you don’t have to spend a lot of time cooking them yourself.

If anything, this sounds even more appealing now, as so many of us are spending most of our time at home, doing our best to cook for ourselves. According to Nestlé’s press release, Freshly is now shipping more than 1 million meals per week across 48 states, with forecasted sales of $430 million for 2020.

The startup raised a total of $107 million from investors including Highland Capital Partners, White Star Capital, Insight Venture Partners and Nestlé itself, which led the Series C in 2017. Today’s announcement describes the earlier investment as giving the food and beverage giant a 16% stake in Freshly and serving as “a strategic move to evaluate and test the burgeoning market.”

“Consumers are embracing ecommerce and eating at home like never before,” said Nestlé USA Chairman and CEO Steve Presley in a statement. “It’s an evolution brought on by the pandemic but taking hold for the long term. Freshly is an innovative, fast-growing, food-tech startup, and adding them to the portfolio accelerates our ability to capitalize on the new realities in the U.S. food market and further positions Nestlé to win in the future.”

In a note to customers, Freshly co-founder and CEO Michael Wystrach said that as a result of the acquisition, his team has plans to triple the number of menu items offered each week. Beyond that, however, he suggested that things won’t change too dramatically:

I can assure you that your meals, pricing, and subscription will remain just as you know them. Freshly will continue to operate as a standalone business to accomplish our core mission to remove the barriers to healthy eating with convenient, nutritious and delicious meal solutions, backed by the power of Nestlé to open new doors for a fresher, faster food delivery to your door. We will continue to maintain our own strict standards and maintain complete control of our products. Our meals will not be changing, and there are no plans to change ingredients or integrate Nestlé products into Freshly meals, but we are excited about potential opportunities for the future.

Nestlé leads $77M round for healthy meal startup Freshly

 

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Facebook is limiting distribution of ‘save our children’ hashtag over QAnon ties

Facebook today confirmed that it will be limiting the distribution of the hashtag “save our children.” Over the past several months, the phrase — and ones like it — have become associated with QAnon. These terms have served to provide a kind of innocuous cover for the popular online conspiracy theory.

A spokesperson for the social network confirmed the move today, noting that child safety resources will be prioritized in search above those potentially tied to QAnon.

“Earlier this week, we stepped up how we enforce our rules against QAnon on pages, events, and groups,” a spokesperson told TechCrunch. “Starting today, we’re limiting the distribution of the ‘save our children’ hashtag given we’ve found that content tied to it is now associated with QAnon. When people search for it, they will now see the credible child safety resources.”

The company finally took action to remove the constellation of dangerous conspiracy theories with a ban on QAnon content across both Facebook and Instagram. It  had previously announced a ban on QAnon groups that “discussed potential violence” but the expanded ban evinced a deeper understanding of how conspiracies draw in and radicalize regular users. The ban has actually proven quite successful so far, making it more more difficult for QAnon-related posts and accounts to be discovered and amplified.

Over the summer, the service began to crack down on QAnon-adjacent hashtags like SaveTheChildren. It even went so far as temporarily blocking the phrase, which, for around a century, has been associated with nonprofit youth organizations. “We temporarily blocked the hashtag as it was surfacing low-quality content,” Facebook told the press at the time. “The hashtag has since been restored, and we will continue to monitor for content that violates our community standards.”

By then, however, the movement had already gained life beyond social media, with several well-attended rallies being held across the U.S. and in different locations across the globe. Organizers have broadly purported to be protesting child exploitation, ranging from accusations of pedophilia among the Hollywood elite to outrage over the Netflix film “Cuties.”

In August, the U.S.-based Save the Children Federation, Inc. released a statement seeking to clarify and distance itself from the trend. “Our name in hashtag form has been experiencing unusually high volumes and causing confusion among our supporters and the general public,” the org wrote. “In the United States, Save the Children is the sole owner of the registered trademark ‘Save the Children.’ While people may choose to use our organization’s name as a hashtag to make their point on different issues, we are not affiliated or associated with any of these campaigns.”

Facebook’s crackdown on QAnon and adjacent #SaveTheChildren content come after the company allowed the dangerous conspiracy theory group to thrive on its platform for years, moving from the fringes of online life into its center. While President Trump and a handful of QAnon-friendly Republican political figures have given the conspiracies a boost, mainstream social networks allowed adherents to ferry the revelations of so-called “Q drops” from the obscure and often extreme message board 8chan into the center of American political life.

Some users happen upon conspiracy content organically, but algorithmic recommendations on platforms like Facebook and YouTube are known to usher users from the edges of conspiracies like QAnon into their often more extreme core ideas. Dedicated QAnon believers are responsible for a number of real-world violent actions, including an armed occupation of the Hoover Dam. Matthew Wright, the man who pled guilty to a terrorism charge for blocking the bridge, explained in a video that his agitation stemmed from President Trump’s failure to arrest his political enemies, which disappointed QAnon believers. Last year, a 29-year-old QAnon adherent shot and killed a mob boss who he believed was part of the “deep state” — a frequent preoccupation of Q followers.

Facebook says it will ban QAnon across its platforms

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