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Saturday, September 22, 2018

Seven reasons not to trust Facebook to play cupid

This week Facebook has launched a major new product play, slotting an algorithmic dating service inside its walled garden as if that’s perfectly normal behavior for an ageing social network.

Insert your [dad dancing GIF of choice] right here.

Facebook getting into dating looks very much like a mid-life crisis — as a veteran social network desperately seeks a new strategy to stay relevant in an age when app users have largely moved on from social network ‘lifecasting’ to more bounded forms of sharing, via private messaging and/or friend groups inside dedicated messaging and sharing apps.

The erstwhile Facebook status update has long been usurped by the Snapchat (and now Instagram) Story as the social currency of choice for younger app users. Of course Facebook owns the latter product too, and has mercilessly cloned Stories. But it hardly wants its flagship service to just fade away into the background like the old fart it actually is in Internet age terms.

Not if it can reinvigorate the product with a new purpose — and so we arrive at online dating.

Facebook — or should that be ‘Datebook’ now?! — is starting its dating experiment in Colombia, as its beta market. But the company clearly has ambitious designs on becoming a major global force in the increasingly popular online dating arena — to challenge dedicated longtime players like eHarmony and OkCupid, as well as the newer breed of more specialized dating startups, such as female-led app, Bumble.

Zuckerberg is not trying to compete with online dating behemoth Tinder, though. Which Facebook dismisses as a mere ‘hook up’ app — a sub category it claims it wants nothing to do with.

Rather it’s hoping to build something more along the lines of ‘get together with friends of your friends who’re also into soap carving/competitive dog grooming/extreme ironing’ than, for e.g., the raw spank in the face shock of ‘Bang with Friends‘. (The latter being the experimental startup which tried, some six years ago, to combine Facebook and sex — before eventually exiting to a Singapore-based dating app player, Paktor, never to be heard of again. Or, well, not until Facebook decided to get into the dating game and reminded us all how we lol’d about it.)

Mark Zuckerberg’s company doesn’t want to get into anything smutty, though. Oh no, no, NO! No sex please, we’re Facebook!

Facebook Dating has been carefully positioned to avoid sounding like a sex app. It’s being flogged as a tasteful take on the online dating game, with — for instance — the app explicitly architected not to push existing friends together via suggestive matching (though you’ll just have to hope you don’t end up being algorithmically paired with any exes, which judging by Facebook’s penchant for showing users ‘photo memories’ of past stuff with exes may not pan out so well… ). And no ability to swap photo messages with mutual matches in case, well, something pornographic were to pass through.

Facebook is famously no fan of nudes. Unsurprisingly, then, nor is its buttoned up dating app. Only ‘good, old-fashioned wholesome’ text-based chat-up lines (related to ‘good clean pieces of Facebook content’) here please.

If you feel moved to text an up-front marriage proposal — feeling 100% confident in Facebook’s data scientists’ prowess in reading the social media tea leaves and plucking your future life partner out of the mix — its algorithms will probably smile on that though.

The company’s line is that dating will help fulfil its new mission of encouraging ‘time well spent’ — by helping people forge more meaningful (new) relationships thanks to the power of its network (and the data it sucks out of it).

This mission is certainly an upgrade on Facebook’s earlier and baser interest in just trying to connect every human on planet Earth to every other human on planet Earth in some kind of mass data-swinging orgy — regardless of the ethical and/or moral consequences (as Boz memorably penned it), as if it was trying to channel the horror-loving spirit of Pasolini’s Salò. Or, well, a human centipede.

But that was then. These days, in its mid teens, Facebook wants to be seen as grown up and a bit worth. So its take on dating looks a lot more ‘marriage material’ than ‘casual encounters’. Though, well, products don’t always pan out how their makers intend. So it might need to screw its courage to the sticking place and hope things don’t go south.

From the user perspective, there’s a whole other side here too though. Because given how much baggage inevitably comes with Facebook nowadays, the really burning question is whether any sensible person should be letting Mark Zuckerberg fire cupid’s arrows on their behalf?

He famously couldn’t tell malicious Kremlin propaganda from business as usual social networking like latte photos and baby pics — so what makes you think he’s going to be attuned to the subtle nuances of human chemistry?!

Here are just a few reasons why we think you should stay as far away from Facebook’s dalliance with dating as you possibly can…

  1. It’s yet another cynical data grab
    Facebook’s ad-targeting business model relies on continuous people tracking to function — which means it needs your data to exist. Simply put: Your privacy is Facebook’s lifeblood. Dating is therefore just a convenient veneer to slap atop another major data grab as Facebook tries to find less icky ways to worm its way back and/or deeper into people’s lives. Connecting singles to nurture ‘meaningful relationships’ is the marketing gloss being slicked over its latest invitation to ask people to forget how much private information they’re handing it. Worse still, dating means Facebook is asking people to share even more intimate and personal information than they might otherwise willingly divulge — again with a company whose business model relies upon tracking everything everyone does, on or offline, within its walled garden or outside it on the wider web, and whether they’re Facebook a user or not.
    This also comes at a time when users of Facebook’s eponymous social network have been showing signs of Facebook fatigue, and even changing how they use the service after a string of major privacy scandals. So Facebook doing dating also looks intended to function as a fresh distraction — to try to draw attention away from its detractors and prevent any more scales falling away from users’ eyes. The company wants to paper over growing scepticism about ad-targeting business models with algorithmic heart-shaped promises.
    Yet the real underlying passion here is still Facebook’s burning desire to keep minting money off of your private bits and bytes.
  2. Facebook’s history of privacy hostility shows it simply can’t be trusted
    Facebook also has a very long history of being outright hostile to privacy — including deliberately switching settings to make previously private settings public by default (regulatory intervention has been required to push back against that ratchet) — so its claim, with Dating, to be siloing data in a totally separate bucket, and also that information shared for this service won’t be used to further flesh out user profiles or to target people with ads elsewhere across its empire should be treated with extreme scepticism.
    Facebook also said WhatsApp users’ data would not be mingled and conjoined with Facebook user data — and, er, look what ended up happening there…!!
    ————————————————————————————————–>

    And then there’s Facebook record of letting app developers liberally rip user data out of its platform — including (for years and years) ‘friend data’. Which almost sounded cosy. But Facebook’s friends data API meant that an individual Facebook user could have their data sucked out without even agreeing to a particular app’s ToS themselves. Which is part of the reason why users’ personal information has ended up all over the place — and in all sorts of unusual places. (Facebook not enforcing its own policies, and implementing features that could be systematically abused to suck out user data are among some of the many other reasons.)
    The long and short history of Facebook and privacy is that information given to it for one purpose has ended up being used for all sorts of other things — things we likely don’t even know the half of. Even Facebook itself doesn’t know which is why it’s engaged in a major historical app audit right now. Yet this very same company now wants you to tell it intimate details about your romantic and sexual preferences? Uhhhh, hold that thought, truly.

  3. Facebook already owns the majority of online attention — why pay the company any more mind? Especially as dating singles already have amazingly diverse app choice…
    In the West there’s pretty much no escape from Facebook Inc. Not if you want to be able to use the social sharing tools your friends are using. Network effects are hugely powerful for that reason, and Facebook owns not just one popular and dominant social network but a whole clutch of them — given it also bought Instagram and WhatsApp (plus some others it bought and just closed, shutting down those alternative options). But online dating, as it currently is, offers a welcome respite from Facebook.
    It’s arguably also no accident that the Facebook-less zone is so very richly served with startups and services catering to all sorts of types and tastes. There are dating apps for black singlesmatchmaking services for Muslims; several for Jewish people; plenty of Christian dating apps; at least one dating service to match ex-pat Asians; another for Chinese-Americansqueer dating apps for women; gay dating apps for men (and of course gay hook up apps too), to name just a few; there’s dating apps that offer games to generate matches; apps that rely on serendipity and location to rub strangers together via missed connections; apps that let you try live video chats with potential matches; and of course no shortage of algorithmic matching dating apps. No singles are lonely for dating apps to try, that’s for sure.
    So why on earth should humanity cede this very rich, fertile and creative ‘stranger interaction’ space, which caters to singles of all stripes and fancies, to a social network behemoth — just so Facebook can expand its existing monopoly on people’s attention?
    Why shrink the luxury of choice to give Facebook’s business extra uplift? If Facebook Dating became popular it would inexorably pull attention away from alternatives — perhaps driving consolidation among a myriad of smaller dating players, forcing some to band together to try to achieve greater scale and survive the arrival of the 800lb Facebook gorilla. Some services might feel they have to become a bit less specialized, pushed by market forces to go after a more generic (and thus larger) pool of singles. Others might find they just can’t get enough niche users anymore to self-sustain. The loss of the rich choice in dating apps singles currently enjoy would be a crying shame indeed. Which is as good a reason as any to snub Facebook’s overtures here.
  4. Algorithmic dating is both empty promise and cynical attempt to humanize Facebook surveillance
    Facebook typically counters the charge that because it tracks people to target them with ads its in the surveillance business by claiming people tracking benefits humanity because it can serve you “relevant ads”. Of course that’s a paper thin argument since all display advertising is something no one has chosen to see and therefore is necessarily a distraction from whatever a person was actually engaged with. It’s also an argument that’s come under increasing strain in recent times, given all the major scandals attached to Facebook’s ad platform, whether that’s to do with socially divisive Facebook ads, or malicious political propaganda spread via Facebook, or targeted Facebook ads that discriminate against protected groups, or Facebook ads that are actually just spreading scams. Safe to say, the list of problems attached to its ad targeting enterprise is long and keeps growing.
    But Facebook’s follow on claim now, with Dating and the data it intends to hold on people for this matchmaking purpose, is it has the algorithmic expertise to turn a creepy habit of tracking everything everyone does into a formula for locating love.
    So now it’s not just got “relevant” ads to sell you; it’s claiming Facebook surveillance is the special sauce to find your Significant Other!

    Frankly, this is beyond insidious. (It is also literally a Black Mirror episode — and that’s supposed to be dysfunctional sci-fi.) Facebook is moving into dating because it needs a new way to package and sell its unpleasant practice of people surveillance. It’s hoping to move beyond its attempt at normalizing its business line (i.e. that surveillance is necessary to show ads that people might be marginally more likely to click on) — which has become increasingly problematic as its ad platform has been shown to be causing all sorts of knock-on societal problems — by implying that by letting Facebook creep on you 24/7 it could secure your future happiness because its algorithms are working to track down your perfect other half — among all those 1s and 0s it’s continuously manhandling.
    Of course this is total bunkum. There’s no algorithmic formula to determine what makes one person click with another (or not). If there was humans would have figured it out long, long ago — and monetized it mercilessly. (And run into all sorts of horrible ethical problems along the way.)
    Thing is, people aren’t math. Humans cannot be made to neatly sum to the total of their collective parts and interests. Which is why life is a lot more interesting than the stuff you see on Facebook. And also why there’s a near infinite number of dating apps out there, catering to all sorts of people and predilections.
    Sadly Facebook can’t see that. Or rather it can’t admit it. And so we get nonsense notions of ‘expert’ algorithmic matchmaking and ‘data science’ as the underpinning justification for yet another dating app launch. Sorry but that’s all just marketing.
    The idea that Facebook’s data scientists are going to turn out to be bullseye hitting cupids is as preposterous as it is ridiculous. Like any matchmaking service there will be combinations thrown up that work and plenty more than do not. But if the price of a random result is ceaseless surveillance the service has a disproportionate cost attached to it — making it both an unfair and an unattractive exchange for the user. And once again people are being encouraged to give up far more than they’re getting in return.
    If you believe that finding ‘the one’ will be easier if you focus on people with similar interests to you or who are in the same friend group there’s no shortage of existing ‘life avenues’ you can pursue without having to resort to Facebook Dating. (Try joining a club. Or going to your friends’ parties. Or indeed taking your pick from the scores of existing dating apps that already offer interest-based matching.)
    Equally you could just take a hike up a mountain and meet your future wife at the top (as one couple I know did). Safe to say, there’s no formula to love. And thankfully so. Don’t believe anyone trying to sell you a dating service with the claim their nerdtastic data scientists will hook you up good and proper.
    Facebook’s chance of working any ‘love magic’ will be as good/poor as the next app-based matchmaking service. Which is to say it will be random. There’s certainly no formula to be distilled beyond connecting ‘available to date’ singles — which dating apps and websites have been doing very well for years and years and years. No Facebook dates necessary.
    The company has little more to offer the world of online dating than, say, OkCupid, which has scale and already combines the location and stated interests of its users in an attempt to throw up possible clicks. The only extra bit is Facebook’s quasi-bundling of Events into dating, as a potential avenue to try and date in a marginally more informal setting than agreeing to go on an actual date. Though, really, it just sounds like it might be more awkward to organize and pull off.
    Facebook’s generic approach to dating is also going to offer much less for certain singles who benefit from a more specialized and tailored service (such as a female-focused player like Bumble which has created a service to cater to women’s needs; or, indeed, any of the aforementioned community focused offerings cited above which help people meet other likeminded singles).
    Facebook appears to believe that size matters in dating. And seems to want to be a generic giant in a market that’s already richly catering to all sorts of different communities. For many singles that catch-all approach is going to earn it a very hard left swipe.
  5. Dating takes resource and focus away from problems Facebook should actually be fixing
    Facebook’s founder made ‘fixing Facebook’ his personal priority this year. Which underlines quite how many issues the company has smashing through its plate. We’re not talking little bug fixes. Facebook has a huge bunch of existentially awful hellholes burning through its platform and punching various human rights in the process. This is not at all trivial. Some really terrible stuff has been going on with its platforms acting as the conduit.
    Earlier this year, for instance, the UN blasted Facebook saying its platform had became a “beast” in Myanmar — weaponized and used to accelerate ethnic violence against the Rohingya Muslim minority.
    Facebook has admitted it did not have enough local resource to stop its software being used to amplify ethnic hate and violence in the market. Massacres of Rohingya refuges have been described by human rights organizations as a genocide.
    And it’s not an isolated instance. In the Philippines the country has recently been plunged into a major human rights crisis — and the government there, which used Facebook to help get elected, has also been using Facebook to savage its critics at the same time as carrying out thousands of urban killings in a bloody so-called ‘war on drugs’.
    In India, Facebook’s WhatsApp messaging app has been identified as a contributing factor in multiple instances of mob violence and killings — as people have been whipped up by lies spread like lightning via the app.
    Set against such awful problems — where Facebook’s products are at very least not helping — we now see the company ploughing resource into expanding into a new business area, and expending engineering resource to build a whole new interface and messaging system (the latter to ensure Facebook Dating users can only swap texts, and can’t send photos or videos because that might be a dick pic risk).
    So it’s a genuine crying shame that Facebook did not pay so much close attention to goings on in Myanmar — where local organizations have long been calling for intelligent limits to be built in to its products to help stop abusive misuse.
    Yet Facebook only added the option to report conversations in its Messenger app this May
    So the sight of the company expending major effort to launch a dating product at the same time as it stands accused of failing to do enough to prevent its products from being conduits for human rights abuses in multiple markets is ethically uncomfortable, to say the least.
    Prospective users of Facebook Dating might therefore feel a bit queasy to think that their passing fancies have been prioritized by Zuckerberg & co over and above adding stronger safeguards and guardrails to the various platforms they operate to try to safeguard humans from actual death in other corners of the globe.
  6. By getting involved with dating, Facebook is mixing separate social streams
    Talking of feeling queasy, with Facebook Dating the company is attempting to pull off a tricky balancing act of convincing existing users (many of whom will already be married and/or in a long term relationship) that it’s somehow totally normal to just bolt on a dating layer to something that’s supposed to be a generic social network.
    All of a sudden a space that’s always been sold — and traded — as a platonic place for people to forge ‘friendships’ is suddenly having sexual opportunity injected into it. Sure, the company is trying to keep these differently oriented desires entirely separate, by making the Dating component an opt-in feature that lurks within Facebook (and where (it says) any activity is siloed and kept off of mainstream Facebook (at least that’s the claim)). But the very existence of Facebook Dating means anyone in a relationship who is already on Facebook is now, on one level, involved with a dating app company.
    Facebook users may also feel they’re being dangled the opportunity to sign up to online dating on the sly — with the company then committed itself to being the secret-keeping go-between ferrying any flirtatious messages they care to send in a way that would be difficult for their spouse to know about, whether they’re on Facebook or not.
    How comfortable is Facebook going to be with being a potential aid to adultery? I guess we’ll have to wait and see how that pans out. As noted above, Facebook execs have — in the past — suggested the company is in the business of ‘connecting people, period’. So there’s perhaps a certain twisted logic working away as an undercurrent and driving its impulse to push for ever more human connections. But the company could be at risk of applying its famous “it’s complicated” relationship status to itself with the dating launch — and then raining complicated consequences down upon its users as a result. (As, well, it so often seems to do in the name of expanding its own business.)
    So instead of ‘don’t mix the streams’, with dating we’re seeing Facebook trying to get away with running entirely opposite types of social interactions in close parallel. What could possibly go wrong?! Or rather what’s to stop someone in the ‘separate’ Facebook dating pool trying to Facebook-stalk a single they come across there who doesn’t responded to their overtures? (Given Facebook dating users are badged with their real Facebook names there could easily be user attempts to ‘cross over’.)
    And if sentiments from one siloed service spill over into mainstream Facebook things could get very messy indeed — and users could end up being doubly repelled by its service rather than additionally compelled. The risk is Facebook ends up fouling not feathering its own nest by trying to combine dating and social networking. (This less polite phrase also springs to mind.)
  7. Who are you hoping to date anyway?!
    Outside emerging markets Facebook’s growth has stalled. Even social networking’s later stage middle age boom looks tapped out. At the same time today’s teens are not at all hot for Facebook. The youngest web users are more interested in visually engaging social apps. And the company will have its work cut out trying to lure this trend-sensitive youth crowd. Facebook dating will probably sound like a bad joke — or a dad joke — to these kids.
    Going up the age range a bit, the under ~35s are hardly enamoured with Facebook either. They may still have a profile but also hardly think Facebook is cool. Some will have reduced their usage or even taken a mini break. The days of this age-group using Facebook to flirt with old college classmates are as long gone as sending a joke Facebook poke. Some are deleting their Facebook account entirely — and not looking back. Is this prime dating age-group suddenly likely to fall en masse for Facebook’s love match experiment? It seems doubtful.
    And it certainly looks like no accident Facebook is debuting Dating outside the US. Emerging markets, which often have young, app-loving populations, probably represent its best chance at bagging the critical mass of singles absolutely required to make any dating product even vaguely interesting.
    But in its marketing shots for the service Facebook seems to be hoping to attract singles in the late twenties age-range — dating app users who are probably among the ficklest, trickiest people for Facebook to lure with a late-stage, catch-all and, er, cringey proposition.
    After that, who’s left? Those over 35s who are still actively on Facebook are either going to be married — and thus busy sharing their wedding/baby pics — and not in the market for dating anyway; or if they are single they may be less inclined towards getting involved with online dating vs younger users who are now well accustomed to dating apps. So again, for Facebook, it looks like diminishing returns up here.
    And of course a dating app is only as interesting and attractive as the people on it. Which might be the most challenging hurdle for Facebook to make a mark on this well-served playing field — given its eponymous network is now neither young nor cool, hip nor happening, and seems to be having more of an identity crisis with each passing year.
    Perhaps Facebook could carve out a dating niche for itself among middle-age divorcees — by offering to digitally hand-hold them and help get them back into the dating game. (Although there’s zero suggestion that’s what it’s hoping to do with the service it debuted this week.)
    If Zuckerberg really wants to bag the younger singles he seems most interested in — at least judging by Facebook Dating’s marketing — he might have been better off adding a dating stream to Instagram.
    I mean, InstaLovegram almost sounds like it could be a thing.


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Understanding Renaud Laplanche’s next Upgraded act

Renaud Laplanche spent ten years building LendingClub. In the process, he created an industry from scratch. Circumventing conventional banking channels for consumer credit began in 1996 when Chris Larsen started E-LOAN, which ultimately led to Prosper Marketplace. But LendingClub, which Laplanche founded in 2007, was and remains the poster child for the business of marketplace lending. The industry’s short history has been volatile, characterized by both triumphant hype and utter lack of confidence.

History of the Marketplace Lending Industry, CB Insights

While LendingClub has struggled in the public markets since their late 2014 IPO, they have managed to propel their industry into significance, while rapidly expanding their share of the personal loan market to 10%.

After his well-publicized departure in May 2016, Laplanche got started on his next venture in a hurry. Just a few months later he started Credify, ultimately renamed to Upgrade, a company that bears a striking resemblance to LendingClub. In just two years Upgrade has raised $142 million in funding, while originating more than $1 billion in loans since August 2017.

With Upgrade, Laplanche has the opportunity to start fresh with the benefit of hindsight. The initial promise of LendingClub and their competitors was unbundling the banks. Now, to persist and grow, marketplace lenders have realized they need to rebundle, providing an array of bank-like services to better serve their end customers. This post explores what Laplanche is doing differently this time with Upgrade.

Total Addressable Market ≠ Value Capture

There has been a general recognition across many fintech businesses that marketplace business models aren’t enough. The mutually-beneficial arrangement of marketplace lending is a perfect example. Superior customer experience, expedited loan decision, quick receipt of funds, and lower operational costs without legacy infrastructure were the selling points. Charles Moldow famously called it a “trillion-dollar opportunity” in 2014.

He may still be right, but in order to realize the opportunity, marketplace lenders need to capture a larger, more regular share of borrower’s attention. Loans may be high-volume purchases, but they’re not high-frequency transactions. So when a platform like LendingClub facilitates a loan so someone can refinance their outstanding credit card debt, is there really a relationship with the customer there? Capital is provided, customer service is available, and monthly payments are made. That’s all there is to it.

Total addressable market (TAM) is frequently used to assess opportunity. A critical part of the TAM estimation process might have been overlooked in the early assessments of the alternative lending industry. The large numbers in the figure below reflect an alluring market that LendingClub, Prosper, Avant, Upstart, OneMain, Best Egg and others have attempted to capitalize upon.

The notion of a replacement cycle, which I’ll borrow from Michael Mauboussin, is an important consideration here, particularly in a high volume, low frequency transaction relationship such as consumer lending. Just because a borrower refinances their credit card debt with a loan from LendingClub, there’s little guarantee that all of the money spent on acquiring that customer will lead to future transactions with that customer. Yet, in order for these companies to succeed, the average revenue per user (ARPU) is going to have to rise through some combination of repeat customers and complementary services to deepen the relationship and create new revenue channels.

The market opportunity for marketplace Lenders, LendingClub Investor Day 2017

With this realization in mind, fintech players across the board have focused on deepening relationships with customers to drive sales and lower SG&A costs. Customer acquisition is a major component of the income statement for these companies. The more engagement a lender has with their end customer, the greater the chance they stand to not only be called upon when a borrower needs to borrow again, but ultimately pinpoint opportunities for product recommendations.

And that’s exactly what Upgrade is doing. In many ways, they’re quite similar to LendingClub. Upgrade offers personal loans between $1,000 and $50,000 over three-to-five-year repayment periods at rates competitive with major banks. LendingClub varies a bit in the principal amount offerings and APRs, but they essentially do the same thing. Loans are originated through WebBank, the partner bank that also works with LendingClub. Operationally, there’s a blockchain component for data remediation and security purposes. However, the extent and value of this application are unclear.

Marrying Credit with Financial Wellness

The notion of financial wellness is increasingly popular among consumer fintech companies, as well as incumbent financial institutions. It reflects a transition away from a purely transactional relationship to a fiduciary one, as we’ve also seen in the wealth management industry. The tricky thing about this is that although it may be the right thing to do, late fees and overdraft penalties make up a sizeable portion of traditional bank revenue.

Where Upgrade differs from LendingClub is in their customer engagement model. Upgrade provides several features to customers that resemble a conventional personal financial management (PFM) app. Their Credit Health service offers free advice and monitoring tools, personalized recommendations, and customized updates for individual credit scores and underlying rationale. Additionally, they offer a financial education tool open to the public called Credit Health Insights, which offers tips and tricks for debt management and financial wellness. At the surface, there’s little differentiation here. A free credit score is becoming table stakes for any financial institution, and personalized insights are to be expected.

Upgrade’s borrower value proposition, LendIt 2018 Conference

In Upgrade’s case, however, the framing of the dual service is compelling. Typically, online lenders only approve 10-15% of applicants. While the credit underwriting models are looking for the most compelling borrower profiles who will pay back their loans, the majority of interested borrowers are sent back to the drawing board.

A major focus of Upgrade is to build the credit of the other 85-90% of applicants who are typically rejected so that they improve their profile and obtain a loan in the future. Credit repair and financial wellness are underserved markets today, although companies like Bloom Credit are working to change the record. This product combination helps to unify the interests of Upgrade and borrowers, both approved and rejected.

Reinventing Consumer Credit?

At the LendIt Conference in 2017, Laplanche concluded his presentation with a reference to the Wright Brothers. He discussed how he was enamored with their ability to combine two things to create something entirely new, which in their case was “wheeling and flying.” A year later, he returned to LendIt with a new product release that borrowed from the innovation strategy of Orville and Wilbur.

Upgrade launched a first of its kind product, a Personal Credit Line, a hybrid of a credit card and an unsecured loan. Here’s how it works: customers get approved for up to $50,000 in credit, from which they can draw down as needed. They only pay interest on what’s borrowed, over the course of a 12-60-month timeframe. The interest rate is also fixed over the term of the loan.

Upgrade’s Personal Credit Line, a hybrid of a personal loan and a credit card, Upgrade

The product is built on the premise that the level of innovation in the origination of consumer credit has been somewhat limited. Laplanche attempted to reinvent it once with the creation of LendingClub. In some ways, it worked. Personal loans originated by fintech lenders account for roughly a third of outstanding consumer loans according to Transunion. Now he’s trying to do it again.

First Mover Disadvantage in Consumer Fintech

When I first read the press release for the Personal Credit Line, I thought it was a very compelling way to expand the menu of options to qualified consumers. It puts more control in the hands of the borrower, so they can avoid the vicious cycle of consumer debt. I was also reminded of a comment made by Josh Brown, CEO of Ritholtz Wealth Management, after Wealthfront released their “Portfolio Line of Credit” product in April 2017. He said that while it might sound flashy, there’s nothing holding Schwab or Fidelity back from offering the same product tomorrow.

What’s so challenging about consumer-facing fintech companies is that customers are expensive to acquire, they’re difficult to keep, and products are easy to replicate. Providing a free credit score is easily accessible through a partnership with Equifax or Experian. It’s commoditized. The situation is similar with personal financial management tools. This Personal Credit Line seems awfully similar. What’s to stop Chase or Goldman’s Marcus from offering an identical product, perhaps with even better rates? U.S. Bank just launched a similar product, albeit for a different use case, called Simple Loan. It’s a $100 to $1,000 loan marketed as a payday lending alternative, with a roughly 20% lower interest rate than typical payday lender offers.

There is something to be said for being first to market, but ease of replication limits the defensibility of that position. There is a clear interest in an expansion into new products, which will continue to help Upgrade to differentiate the value proposition to consumers, and maybe one day small businesses. The unfortunate reality is that bigger players with an existing customer base and a lower cost of capital are on their tail.

Forget about Democratization

Renaud Laplanche rings the bell with his team at LendingClub (DON EMMERT/AFP/Getty Images)

The real insight that distinguishes Upgrade from LendingClub is the profile of the users. On the supply side of the marketplace, Upgrade only welcomes institutional investors. LendingClub was, and still is, marketed to individuals and institutions.

The peer-to-peer model turned out to be a little too idealistic to serve as the foundation for a business. The concept of a marketplace is really attractive – the ability to invest in others, as cliché as that may sound, has a philanthropic twist to it that even implies a social good. Or, at the very least, an alignment of interests. Except interests aren’t aligned because of the mercurial nature of retail investors, which makes for unstable sources of capital.

LendingClub’s original business model, in the pure P2P form, was reliant on the ability to create a new asset class. The notion of investing in consumer credit may sound compelling, and return prospects may be even more appealing. But, you can’t bootstrap an asset class and base a business model around retail adoption. LendingClub had to solve for distribution of their service, as well as the dissemination of the broader concept of unsecured consumer lending as an asset class.

On Laplanche’s second go around with Upgrade, there’s no more promise of democratization of a new asset class. Instead, large multi-billion-dollar credit investors own the supply side of the marketplace. As a result, there’s a more stable capital base of institutional investors who know what they’re investing in and the reason why they’re investing in it.

What Laplanche did this time around was base his business model around stability. In this market it can pay to be a follower. LendingClub touts the notion that they have “brought a new asset class to investors,” but that education campaign came at a serious cost. It also invited boiler room-like sales behavior from competitors. Upgrade is stepping in after a decade of marketing to scale an untested industry to the masses. Fortunately, a lot of the work has already been done for them.

How Different Can You Be?

Upgrade is led by as experienced and forward-thinking of a leader as they come in the marketplace lending industry. They expect to originate over $2 billion loans in 2018 and hit profitability by year-end as well. They’re redefining convention when it comes to consumer credit products.

The question, however, remains: how long can the novelty last? Consumer fintech is fiercely competitive. It’s also increasingly occupied by incumbents with far lower costs of capital, large existing customer bases, and the ability to experiment in a way that a startup cannot. The unsecured consumer lending space has attracted mountains of capital in the past five years, but the opportunity is clearly defined. The number of lenders issuing more than 10,000 personal loans per year has more than doubled since 2011.

There’s a network effect component to marketplace lending businesses, particularly as lenders are able to maintain more connected relationships with consumers. But when it comes to standing apart from the rest of the pack, a differentiated product offering isn’t a very wide moat.



https://ift.tt/2O3HlV2 Understanding Renaud Laplanche’s next Upgraded act https://ift.tt/2PSr16O

Friday, September 21, 2018

VCs say Silicon Valley isn’t the gold mine it used to be

In the days leading up to TechCrunch Disrupt SF 2018, The Economist published the cover story, ‘Why Startups Are Leaving Silicon Valley.’

The author outlined reasons why the Valley has “peaked.” Venture capital investors are deploying capital outside the Bay Area more than ever before. High-profile entrepreneurs and investors, Peter Thiel, for example, have left. Rising rents are making it impossible for new blood to make a living, let alone build businesses. And according to a recent survey, 46 percent of Bay Area residents want to get the hell out, an increase from 34 percent two years ago.

Needless to say, the future of Silicon Valley was top of mind on stage at Disrupt.

“It’s hard to make a difference in San Francisco as a single entrepreneur,” said J.D. Vance, the author of ‘Hillbilly Elegy’ and a managing partner at Revolution’s Rise of the Rest Fund, which backs seed-stage companies based outside Silicon Valley. “It’s not as a hard to make a difference as a successful entrepreneur in Columbus, Ohio.”

In conversation with Vance, Revolution CEO Steve Case said he’s noticed a “mega-trend” emerging. Founders from cities like Pittsburgh, Detroit or Portland are opting to stay in their hometowns instead of moving to U.S. innovation hubs like San Francisco.

“The sense that you have to be here or you can’t play is going to start diminishing.”

“We are seeing the beginnings of a slowing of what has been a brain drain the last 20 years,” Case said. “It’s not just watching where the capital flows, it’s watching where the talent flows. And the sense that you have to be here or you can’t play is going to start diminishing.”

Farewell, San Francisco

“It’s too expensive to live here,” said Aileen Lee, the founder of seed-stage VC firm Cowboy Ventures, amid a conversation with leading venture capitalists Spark Capital general partner Megan Quinn and Benchmark general partner Sarah Tavel.

“I know that there are a lot of people in the Bay Area that are trying to work on that problem and I hope that they are successful,” Lee added. “It’s an amazing place to live and we’ve made it really challenging for people to live here and not worry about making ends meet.”

One of Cowboy’s portfolio companies opted to relocate from Silicon Valley to Colorado when it came time to scale their business. That kind of move would’ve historically been seen as a failure. Today, it may be a sign of strong business acumen.

Quinn said that of all 28 of Spark’s growth-stage portfolio companies, Raleigh, North Carolina-based Pendo has the easiest time recruiting folks locally and from the Bay Area.

She advises her Bay Area-based late-stage companies to open a second office outside of the Valley where lower-cost talent is available.

“We often say go to [flySFO.com], draw a three-hour circle around San Francisco where they have direct flights, find a city that has a university and open up a second office as quickly as possible,” Quinn said.

Still, all three firms invest in a lot of companies based in San Francisco. Of Benchmark’s 10 most recent investments, for example, eight were based in SF, according to Crunchbase.

“I used to believe really strongly if you wanted to build a multi-billion dollar company you had to be based here,” Tavel said. “I’ve stopped giving that soap speech.”

Underestimated talent

A lot of Bay Area VCs have been blind to the droves of tech talent located outside the region. Believe it or not, there are great engineers in America’s small- and medium-sized markets too.

At Disrupt, Backstage Capital founder Arlan Hamilton announced the firm would launch an accelerator to further amplify companies led by underestimated founders. The program will have cohorts based in four cities; San Francisco was noticeably absent from that list.

Instead, the firm, which invests in underrepresented founders and recently raised a $36 million fund, will work with companies in Philadelphia, Los Angeles, London and one more city, which will be determined by a public vote. Aniyia Williams, the founder of Tinsel and Black & Brown Founders, will spearhead the Philadelphia effort.

“For us, it’s about closing that wealth gap to address inequity in tech,” Williams said. “There needs to be more active participation from everyone.”

Hamilton added that for her, the tech talent in LA and London is undeniable.

“There is a lot of money and a lot of investors … it reminds me of three years ago in Silicon Valley,” Hamilton said.

Silicon Valley vs. China

Silicon Valley’s demise may not be just as a result of increased costs of living or investors overlooking talent in other geographies. It may be because of heightened competition abroad.

Doug Leone, an early- and growth-stage investor at Sequoia Capital, said at Disrupt that he’s noticed a very different work ethic in China.

Chinese entrepreneurs, he explained, are more ruthless than their American counterparts and they’re putting in a whole lot more hours.

“I’ve had dinner in China until after 10 p.m. and people go to work after 10 p.m.,” Leone recalled.

“We don’t see that in the U.S. I’m not saying the U.S. founders oughta do that but those are the differences. They are similar in character. They are similar in dreams. They are similar in how they want to change the world. They are ultra-driven … The Chinese founders have a half other gear because I think they are a little more desperate.”

Much of this, however, has been said before and still, somehow, Silicon Valley remained the place to be for investors and startup entrepreneurs.

The reality is, those engaged in tech culture are always anxiously awaiting for the bubble to pop, the market to crash and for “peak Valley” to finally arrive.

Maybe, just maybe, Silicon Valley is forever.

Here’s more of our coverage of Disrupt 2018.



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Instagram denies it’s building Regramming. Here’s why it’d be a disaster

Instagram tells me Regramming, or the ability to instantly repost someone else’s feed post to your followers like a retweet, is “not happening”, not being built, and not being tested. And that’s good news for all Instagrammers. The denial comes after it initially issued a “no comment” to The Verge’s Casey Newton, who published that he’d seen screenshots of a native Instagram resharing sent to him by a source.

Regramming would be a fundamental shift in how Instagram works, not necessarily in terms of functionality, but in terms of the accepted norms of what and how to post. You could always screenshot, cite the original creator, and post. But the Instagram has always about sharing your window to the world — what you’ve lived and seen. Regramming would legitimize suddenly assuming someone else’s eyes.

And the result would be that users couldn’t trust that when they follow someone, that’s whose vision would appear in their feed. Instagram would feel a lot more random and unpredictable. And it’d become more like its big brother Facebook whose News Feed has waned in popularity – Susceptible to viral clickbait bullshit, vulnerable to foreign misinformation campaigns, and worst of all, impersonal.

Photographer: Andrew Harrer/Bloomberg via Getty Images

Newton’s report suggested a Instagram reposts would appear under the profile picture of the original sharer, and could regrams could be regrammed once more in turn, showing a stack of both profile thumbnails of who previously shared it. That would at least prevent massive chains of reposts turning posts into all-consuming feed bombs. It could certainly widen what appears in your feed, which some might consider more interesting. It could spur growth by creating a much easier way for users to share in feed, especially if they don’t live a glamorous life themself. And Instagram’s algorithm could hide the least engaging regrams.

These benefits are why Instagram has internally considered building regramming for years. CEO Kevin Systrom told Wired last year “We debate the re-share thing a lot . . . But really that decision is about keeping your feed focused on the people you know rather than the people you know finding other stuff for you to see. And I think that is more of a testament of our focus on authenticity”.

See, right now, Instagram profiles are cohesive. You can easily get a feel for what someone posts and make an educated decision about whether to follow them from a quick glance at their grid. What they share reflects on them, so they’re cautious and deliberate. Everyone is putting on a show for Likes, so maybe it’s not quite ‘authentic’, but at least the content is personal. Regramming would make it impossible to tell what someone would post next, and put your feed at the mercy of their impulses without the requisite accountability. If they regram something lame, ugly, or annoying, it’s the original author who’d be blamed.

Instagram already offers a demand release valve in the form of re-sharing posts to your Story as stickers

Instagram already has a release valve for demand for regramming in the form of the ability to turn people’s public feed posts into Stickers you can paste into your Story. Launched in May, you can add your commentary, complimenting on dunking on the author. There, regrams are ephemeral, and your followers have to pull them out of their Stories tray rather than having them force fed to them via the feed. Effectively, you can reshare others’ content, but not make it a central facet of Instagram or emblem of your identity. And if you want to just make sure a few friends see something awesome you’ve discovered, you can send them people’s feed posts as Direct messages.

Making it much easier to repost to feed instead of sharing something original could turn Instagram into an echo chamber. It’d turn Instagram even more into a popularity contest, with users jockeying for viral distribution and a chance to plug their SoundCloud mixtapes like on Twitter. Personal self-expression would be overshadowed even further by people playing to the peanut gallery. If you want to discover something new and unexpected, there’s a whole Explore page full of it.

Newton is a great reporter, and I suspect the screenshots he saw were real, but I think Instagram should have given him the firm denial right away. My guess is that it wanted to give its standard no comment because if it always outright denies inaccurate rumors and speculation, that means journalists can assume they’re right when it does ‘no comment’.

But once Newton published his report, backlash quickly mounted about how regramming could ruin Instagram. Rather than leaving users worried, confused, and constantly asking when the feature would launch and how it would work, the company decided to issue firm denials after the fact. It became worth diverging from its PR playbook. Maybe it had already chosen to scrap its regramming prototype, maybe the screenshots were just of an early mock-up never meant to be seriously considered, or maybe it hadn’t actually finalized that decision to abort until the public weighed in against the feature yesterday.

In any case, introducing regramming would risk an unforced error. The elemental switch from chronological to the algorithmic feed, while criticized, was critical to Instagram being able to show the best of the massive influx of content. Instagram would eventually break without it. There’s no corresponding urgency fix what ain’t broke when it comes to not allowing regramming.

Instagram is already growing like crazy. It just hit a billion monthly users. Stories now has 400 million daily users and that feature is growing six times faster than Snapchat as a whole. The app is utterly dominant in the photo and short video sharing world. Regramming would be an unnecessary gamble.



from Social – TechCrunch https://ift.tt/2zlOWWN Instagram denies it’s building Regramming. Here’s why it’d be a disaster Josh Constine https://ift.tt/2PWG7In
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Instagram denies it’s building Regramming. Here’s why it’d be a disaster

{rss:content:encoded} Instagram denies it’s building Regramming. Here’s why it’d be a disaster https://ift.tt/2PWG7In https://ift.tt/2zlOWWN September 21, 2018 at 08:05PM

Instagram tells me Regramming, or the ability to instantly repost someone else’s feed post to your followers like a retweet, is “not happening”, not being built, and not being tested. And that’s good news for all Instagrammers. The denial comes after it initially issued a “no comment” to The Verge’s Casey Newton, who published that he’d seen screenshots of a native Instagram resharing sent to him by a source.

Regramming would be a fundamental shift in how Instagram works, not necessarily in terms of functionality, but in terms of the accepted norms of what and how to post. You could always screenshot, cite the original creator, and post. But the Instagram has always about sharing your window to the world — what you’ve lived and seen. Regramming would legitimize suddenly assuming someone else’s eyes.

And the result would be that users couldn’t trust that when they follow someone, that’s whose vision would appear in their feed. Instagram would feel a lot more random and unpredictable. And it’d become more like its big brother Facebook whose News Feed has waned in popularity – Susceptible to viral clickbait bullshit, vulnerable to foreign misinformation campaigns, and worst of all, impersonal.

Photographer: Andrew Harrer/Bloomberg via Getty Images

Newton’s report suggested a Instagram reposts would appear under the profile picture of the original sharer, and could regrams could be regrammed once more in turn, showing a stack of both profile thumbnails of who previously shared it. That would at least prevent massive chains of reposts turning posts into all-consuming feed bombs. It could certainly widen what appears in your feed, which some might consider more interesting. It could spur growth by creating a much easier way for users to share in feed, especially if they don’t live a glamorous life themself. And Instagram’s algorithm could hide the least engaging regrams.

These benefits are why Instagram has internally considered building regramming for years. CEO Kevin Systrom told Wired last year “We debate the re-share thing a lot . . . But really that decision is about keeping your feed focused on the people you know rather than the people you know finding other stuff for you to see. And I think that is more of a testament of our focus on authenticity”.

See, right now, Instagram profiles are cohesive. You can easily get a feel for what someone posts and make an educated decision about whether to follow them from a quick glance at their grid. What they share reflects on them, so they’re cautious and deliberate. Everyone is putting on a show for Likes, so maybe it’s not quite ‘authentic’, but at least the content is personal. Regramming would make it impossible to tell what someone would post next, and put your feed at the mercy of their impulses without the requisite accountability. If they regram something lame, ugly, or annoying, it’s the original author who’d be blamed.

Instagram already offers a demand release valve in the form of re-sharing posts to your Story as stickers

Instagram already has a release valve for demand for regramming in the form of the ability to turn people’s public feed posts into Stickers you can paste into your Story. Launched in May, you can add your commentary, complimenting on dunking on the author. There, regrams are ephemeral, and your followers have to pull them out of their Stories tray rather than having them force fed to them via the feed. Effectively, you can reshare others’ content, but not make it a central facet of Instagram or emblem of your identity. And if you want to just make sure a few friends see something awesome you’ve discovered, you can send them people’s feed posts as Direct messages.

Making it much easier to repost to feed instead of sharing something original could turn Instagram into an echo chamber. It’d turn Instagram even more into a popularity contest, with users jockeying for viral distribution and a chance to plug their SoundCloud mixtapes like on Twitter. Personal self-expression would be overshadowed even further by people playing to the peanut gallery.

Newton is a great reporter, and I suspect the screenshots he saw were real, but I think Instagram should have given him the firm denial right away. My guess is that it wanted to give its standard no comment because if it always outright denies inaccurate rumors and speculation, that means journalists can assume they’re right when it does ‘no comment’.

But once Newton published his report, backlash quickly mounted about how regramming could ruin Instagram. Rather than leaving users worried, confused, and constantly asking when the feature would launch and how it would work, the company decided to issue firm denials after the fact. It became worth diverging from its PR playbook. Maybe it had already chosen to scrap its regramming prototype, maybe the screenshots were just of an early mock-up never meant to be seriously considered, or maybe it hadn’t actually finalized that decision to abort until the public weighed in against the feature yesterday.

In any case, introducing regramming would risk an unforced error. The elemental switch from chronological to the algorithmic feed, while criticized, was critical to Instagram being able to show the best of the massive influx of content. Instagram would eventually break without it. There’s no corresponding urgency fix what ain’t broke when it comes to not allowing regramming.

Instagram is already growing like crazy. It just hit a billion monthly users. Stories now has 400 million daily users and that feature is growing six times faster than Snapchat as a whole. The app is utterly dominant in the photo and short video sharing world. Regramming would be an unnecessary gamble.

uBiome is jumping into therapeutics with a healthy $83 million in Series C financing

23andMe, IBM and now uBiome is the next tech company to jump into the lucrative multi-billion dollar drug discovery market.

The company started out with a consumer gut health test to check whether your intestines carry the right kind of bacteria for healthy digestion but has since expanded to include over 250,000 samples for everything from the microbes on your skin to vaginal health — the largest data set in the world for these types of samples, according to the company.

Founder Jessica Richman now says there’s a wider opportunity to use this data to create value in therapeutics.

To support its new drug discovery efforts, the San Francisco-based startup will be moving its therapeutics unit into new Cambridge, Massachusetts headquarters and appointing former Novartis CEO Joseph Jimenez to the board of directors as well.

The company has a healthy pile of cash to help build out that new HQ, too, with a fresh $83 million Series C, lead by OS Fund and in participation with 8VC, Y Combinator, Dentsu Ventures and others.

The drug discovery market is slated to be worth nearly $86 billion by 2022, according to BCC Research numbers. New technologies — those that solve logistics issues and shorten the time between research and getting a drug to market in particular — are driving the growth and that’s where uBiome thinks it can get into the game.

“This financing allows us to expand our product portfolio, increase our focus on patent assets and further raise our clinical profile, especially as we begin to focus on commercialization of drug discovery and development of our patent assets,” Richman said.

Though its unclear at this time which drug maker the company might partner up with, Richman did say there would be plenty to announce later on that front.

So far, the company has published over 30 peer-reviewed papers on microbiome research, has entered into research partnerships with the likes of the Center for Disease Control (CDC) and leading research institutions such as Harvard, MIT and Stanford and has previously raised $22 million in funding. The additional VC cash puts the total amount raised to $105 million to date.



https://ift.tt/eA8V8J uBiome is jumping into therapeutics with a healthy $83 million in Series C financing https://ift.tt/2NxOVrO

Thursday, September 20, 2018

Cleo, the ‘digital assistant’ that replaces your banking apps, picks up $10M Series A led by Balderton

When Cleo, the London-based ‘digital assistant’ that wants to replace your banking apps, quietly entered the U.S., the company couldn’t have expected to be an instant hit. Many better funded British startups have failed to ‘break America’. However, just four months later, the fintech upstart counts 350,000 users across the pond — claiming more than 600,000 active users in the U.K., U.S. and Canada in total — and says it is adding 30,000 new signups each week. All of which hasn’t gone unnoticed by investors.

Already backed by some of the biggest VC names in the London tech scene — including Entrepreneur First, Moonfruit founder Wendy Tan White, Skype founder Niklas Zennström, Wonga founder Errol Damelin, TransferWise founder Taavet Hinrikus, and LocalGlobe — Cleo is adding Balderton Capital to the list.

The European venture capital firm, which has previously invested in fintech unicorn Revolut and the well-established GoCardless, has led Cleo’s $10 million Series A round, in which I understand most early backers, including Zennström, also followed on. One source told me the Series A gives the hot London startup a post-money valuation of around £30 million (~$39.7m), although Cleo declined to comment.

In a call with co-founder and CEO Barney Hussey-Yeo, he explained that the new capital will be used to continue scaling the company, with further international expansion the name of the game. Hussey-Yeo says Cleo will be targeting Western Europe, the Americas, and Australasia, aiming to launch in a whopping 22 countries in the next 12 months, as Cleo bids to become the “default interface” for millennials interacting and managing their money.

Primarily accessed via Facebook Messenger, the AI-powered chatbot gives insights into your spending across multiple accounts and credit cards, broken down by transaction, category or merchant. In addition, Cleo lets you take a number of actions based on the financial data it has gleaned. You can choose to put money aside for a rainy day or specific goal, send money to your Facebook Messenger contacts, donate to charity, set spending alerts, and more.

However, in the context of traction and Cleo’s broader global ambitions, it is the decision not to become a bank in its own right, that Hussey-Yeo feels is really beginning to bear fruit. His argument has always been that you don’t need to be a bank to become the primary way users interface with their finances, and that without the regulatory and capital burden that becoming a fully licensed bank brings, you can scale much more quickly. I have a feeling that strategy — and its pros and cons — has a long way to play out just yet.



https://ift.tt/2MVmMWs Cleo, the ‘digital assistant’ that replaces your banking apps, picks up $10M Series A led by Balderton https://ift.tt/2xGjO2u

uBeam wireless power’s CEO Meredith Perry steps aside amidst B2B pivot

After repeatedly missing self-imposed deadlines for progress on its wireless charging-at-a-distance phone case, uBeam’s CEO Meredith Perry has decided to shift out of the CEO position and into a board member and senior advisor role. She’d founded the company in 2011 from her dorm room and brought in over $40 million in funding by selling a wide range of elite investors on her vision for a cordless future, including Andreessen Horowitz, Founders Fund, CrunchFund (disclosure: started by TechCrunch’s founder), Marissa Mayer, and Mark Cuban.

Now rather than trying to build its own consumer products like wireless power transmitters and receivers that could charge your phone from across the room using ultrasound frequencies, uBeam is pivoting to licensing its technology for use in other companies’ products.

“Meredith made the decision to step down as CEO. She wanted the company to hire a CEO who had experience in overseeing the rollout of a b2b electronics product” tweeted one of the startup’s lead investors, Mark Suster of Upfront Capital. Axios’ Dan Primack reported the news earlier today. TechCrunch spoke to Perry but she declined to comment on the record.

For the interim, uBeam’s head of HR and finance Jacqueline McCauley who joined in 2016 will lead the company. In a blog post today, she announced that “Meredith felt it was time to bring on a seasoned executive in the electronics field to lead the company through its commercialization phase. The company has begun a search for this new CEO.”

uBeam had wowed investors and AllThingsD conference attendees in 2011 with a demo showing it could deliver at least some power over a distance of few feet. A source at one point said uBeam was holding talks with top retail and dining chains, and insinuated one of the world’s top phone makers might build on its technology.

But the startup made big promises about public demonstrations and the efficiency of its technology it couldn’t keep. In 2015 Perry had told TechCrunch real-life public demos would be ready the next year, which came and went.

In 2016, things started to fall apart. The startup’s former VP of Engineering Paul Reynolds wrote a series of blog posts accusing uBeam’s technology of not working, and noted that “When I left it was an ugly departure, but was reported to the investors as ‘the VP Engineering left for personal reasons’ — personal reasons being ‘sick of putting up with this bullshit’.” He also revealed that uBeam’s original CTO and new CFO had left the company, and that Perry’s co-founder Nora Dweck had sued her over an unfair equity split and settled.

It wasn’t until 2017 that uBeam gave a two limited public demonstrations at the Upfront Ventures conference and to USA Today. It proved that an impractically large uBeam transmitter could deliver enough power over the distance of four to ten feet to make multiple phones signal they were charging. But the company never opened itself up to more scrutiny regarding just how much power it was delivering, how fast a phone would actually charge, and whether the tech could surmount practical issues like phones moving or being blocked by clothing.

Questions began to mount about whether uBeam’s approach could produce a marketable product in a palatable form factor with real utility. In the meantime, larger competitors like WattUp-maker Energous and COTA-maker Ossia have started to make real progress on over the air wireless charging. A recent deep-dive by PC Mag revealed how these two companies are starting to be able to deliver 1 watt of power across a room. But Energous and Ossia executives were careful to be realistic in their predictions about the hurdles to delivering rapid phone charging at a distance and how many years they’d need to get there.

Now with Perry stepping down, uBeam will shift gears and move to the same B2B licensing model Energous and Ossia use. They’ll now be directly competing to get their wireless power transmitters and receivers built into other products such as televisions, sound bar speakers, phone cases, and more. But the industry is taking a while to mature. Energous, a public company that had raised $117 million, is trading at $10.62 down from a peak above $22 earlier this year and $15 in mid-2017. Ossia has only raised $25 million.

A bulky early uBeam transmitter prototype

Apple last year announced it was building a less ambitious AirPower near-field wireless charging pad that could juice up an AirPods case sitting on it. That was supposed to arrive in “early 2018” but there was no mention of it onstage at the recent iPhone XS launch event. Today’s Qi-standard wireless charging pads require direct contact with devices and some fidgeting to get them to connect.

uBeam’s stumbles may make it tough to hire or retain talent, and the organizational disruption amidst direct competition could cost it valuable time as it strives to get its tech ready for licensing. The startup’s audacious idea for a world without wires may still one day come to fruition. There remains big potential in the more technically feasible over the air charging of Internet Of Things devices that don’t need much power. But uBeam could serve as a reminder to fellow startups that grand visions might make it easier to secure funding, but can raise expectations that are much harder to fulfill.



https://ift.tt/2QLeKCm uBeam wireless power’s CEO Meredith Perry steps aside amidst B2B pivot https://ift.tt/2xD3vmT

Eventbrite’s IPO should encourage tech companies to get out while they still can

Eventbrite is having one hell of a debut on the New York Stock Exchange this morning.

Shares of the ticketing startup, founded back in 2006, have shot up over 50 percent in trading on the NYSE. After pricing its shares at $23 in its initial offering, investors have bid up the stock to a whopping $37, putting the company’s valuation at nearly $3 billion.

That’s well above where the ticketing company had hoped to be when it initially set terms for the public offering earlier this month.

The company started trading priced above its share price and nearly doubled its valuation. And if Eventbrite can do it, really almost any later-stage startup should be thinking about the public markets right now.

Performance for the San Francisco ticketing company has been… somewhat lackluster. As we noted when wrote about the company’s offering:

Eventbrite is not profitable and has been losing money since 2016. According to the documents, it posted losses of $40.4 million in 2016 and $38.5 million in 2017. In the first six months of 2018, the company has posted a net loss of $15.6 million. The company is making changes to make up for some of those losses — at the end of August, it announced a new pricing scheme for its customers using the “Essentials” package.

Its revenue is rising though, increasing from $133 million in 2016 to $201 million last year.

Since the beginning of the year tech public offerings have been on a tear. As The Wall Street Journal noted in July, 120 companies had raised $35.2 billion on U.S. exchanges at that point — the best showing for public markets since 2014 and the fourth busiest year since 1995, according to the financial data and analysis service Dealogic.

We’ve noted before that it’s a bit mind-boggling that investors and their portfolio companies wouldn’t be taking more advantage of these heady times. Nothing lasts forever (not even cold November rain) and certainly not markets that have been this bullish for this long.

Some of the reasoning is likely thanks to a market that’s still awash in private equity, sovereign wealth and late-stage dollars. SoftBank has hundreds of billions to invest; private equity firms are beginning to look at growth-stage companies the way that I look at banana cream pies from Cassell’s; and venture firms are beefing up big time to keep up with the Joneses (or in this case, the Blackstoneses).

However, the fun is certainly going to come to an end, and likely sooner rather than later. Early-stage investors are beginning to dole out their advice on lowering cash burn (something that happens every time they see the beginning of the end of the beginning of the end).

With that in mind, later-stage companies should be looking for the exit signs wherever they can find them. Right now, that’s an IPO window that seems to be wide open.



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