Year: 2018

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast where we unpack the numbers behind the headlines.

This week was fun for a few reasons. First, it was our own Connie Loizos’s first time leading, and it was our very first regular episode that included us recording remotely. I mention that as Matthew Lynley and I were in different places, meaning that we had a bump or two to smooth out. Your patience is more than appreciated.

Happily, we didn’t have to adventure alone, as Jonathan Abrams of Founders Den was on hand to help us cart through the news.

Up first: A huge round for Rover, bringing even more money into the dog- and pet-focused space. As you’ll surely recall, this is not the first time that a tectonic sum has been disbursed into the pet-care vertical. Hell, Rover’s $155 in new capital, while impressive, still can’t touch Wag’s epic $300 million infusion that happened earlier in the cycle.

While we were on the subject, another Softbank-backed company made waves: Uber . Yes, our favorite and least favorite topic is back.

This time Uber released yet another grip of statistics relating to its financial performance in the first quarter. The big picture? More gross spend, more net revenue, smaller losses. But how you measure Uber’s pace of financial improvement depends on how you measure its losses and its remaining markets.

This being Equity, however, we couldn’t avoid the IPO topic. So, in order:

• A Foxconn subsidiary will soon be making big waves in China with a huge debut;
• A Dutch payments unicorn is going public on the back of great results;
• GreenSky went out, and did pretty ok, which was a change of pace from recent debuts.

All that and we had a laugh. Thanks for listening in, and we are back next week.

When former Google CEO Eric Schmidt was asked about Elon Musk’s warnings about AI, he had a succinct answer: “I think Elon is exactly wrong.”

“He doesn’t understand the benefits that this technology will provide to making every human being smarter,” Schmidt said. “The fact of the matter is that AI and machine learning are so fundamentally good for humanity.”

He acknowledged that there are risks around how the technology might be misused, but he said they’re outweighed by the benefits: “The example I would offer is, would you not invent the telephone because of the possible misuse of the telephone by evil people? No, you would build the telephone and you would try to find a way to police the misuse of the telephone.”

Schmidt, who has pushed back in the past against AI-related concerns from Musk and scientist Stephen Hawking, was interviewed on-stage today at the VivaTech conference in Paris.

While he stepped down as executive chairman of Google’s parent company Alphabet in December, Schmidt remains involved as a technical advisor, and he said today that his work is now focused on new applications of machine learning and artificial intelligence.

After wryly observing that Schmidt had just given the journalists in the audience their headlines, interviewer (and former Publicis CEO) Maurice Lévy asked how AI and public policy can be developed so that some groups aren’t “left behind.” Schmidt replied that government should fund research and education around these technologies.

“As [these new solutions] emerge, they will benefit all of us, and I mean the people who think they’re in trouble, too,” he said. He added that data shows “workers who work in jobs where the job gets more complicated get higher wages — if they can be helped to do it.”

Schmidt also argued that contrary to concerns that automation and technology will eliminate jobs, “The embracement of AI is net positive for jobs.” In fact, he said there will be “too many jobs” — because as society ages, there won’t be enough people working and paying taxes to fund crucial services. So AI is “the best way to make them more productive, to make them smarter, more scalable, quicker and so forth.”

While AI and machine learning were the official topics of the interview, Levy also asked how Google is adapting to Europe’s GDPR regulations around data and privacy, which take effect today.

“From our perspective, GDPR is the law of the land and we have complied with it,” Schmidt said.

Speaking more generally, he suggested that governments need to “find the balance” between regulation and innovation, because “the regulations tend to benefit the current incumbents.”

What about the argument that users should get some monetary benefit when companies like Google build enormous businesses that rely on users’ personal data?

“I’m perfectly happy to redistribute the money — that’s what taxes are for, that’s what regulation is for,” Schmidt said. But he argued that consumers are already benefiting from these business models because they’re getting access to free services.

“The real value is not the data but in the industrial construction of the firm which uses the data to solve a problem to make money,” he said. “That’s capitalism.”

After two years coming down the pipe at tech giants, Europe’s new privacy framework, the General Data Protection Regulation (GDPR), is now being applied — and long time Facebook privacy critic, Max Schrems, has wasted no time in filing four complaints relating to (certain) companies’ ‘take it or leave it’ stance when it comes to consent.

The complaints have been filed on behalf of (unnamed) individual users — with one filed against Facebook; one against Facebook-owned Instagram; one against Facebook-owned WhatsApp; and one against Google’s Android.

Schrems argues that the companies are using a strategy of “forced consent” to continue processing the individuals’ personal data — when in fact the law requires that users be given a free choice unless a consent is strictly necessary for provision of the service. (And, well, Facebook claims its core product is social networking — rather than farming people’s personal data for ad targeting.)

“It’s simple: Anything strictly necessary for a service does not need consent boxes anymore. For everything else users must have a real choice to say ‘yes’ or ‘no’,” Schrems writes in a statement.

“Facebook has even blocked accounts of users who have not given consent,” he adds. “In the end users only had the choice to delete the account or hit the “agree”-button — that’s not a free choice, it more reminds of a North Korean election process.”

We’ve reached out to all the companies involved for comment and will update this story with any response.

The European privacy campaigner most recently founded a not-for-profit digital rights organization to focus on strategic litigation around the bloc’s updated privacy framework, and the complaints have been filed via this crowdfunded NGO — which is called noyb (aka ‘none of your business’).

As we pointed out in our GDPR explainer, the provision in the regulation allowing for collective enforcement of individuals’ data rights in an important one, with the potential to strengthen the implementation of the law by enabling non-profit organizations such as noyb to file complaints on behalf of individuals — thereby helping to redress the imbalance between corporate giants and consumer rights.

That said, the GDPR’s collective redress provision is a component that Member States can choose to derogate from, which helps explain why the first four complaints have been filed with data protection agencies in Austria, Belgium, France and Hamburg in Germany — regions that also have data protection agencies with a strong record defending privacy rights.

Given that the Facebook companies involved in these complaints have their European headquarters in Ireland it’s likely the Irish data protection agency will get involved too. And it’s fair to say that, within Europe, Ireland does not have a strong reputation for defending data protection rights.

But the GDPR allows for DPAs in different jurisdictions to work together in instances where they have joint concerns and where a service crosses borders — so noyb’s action looks intended to test this element of the new framework too.

Under the penalty structure of GDPR, major violations of the law can attract fines as large as 4% of a company’s global revenue which, in the case of Facebook or Google, implies they could be on the hook for more than a billion euros apiece — if they are deemed to have violated the law, as the complaints argue.

That said, given how freshly fixed in place the rules are, some EU regulators may well tread softly on the enforcement front — at least in the first instances, to give companies some benefit of the doubt and/or a chance to make amends to come into compliance if they are deemed to be falling short of the new standards.

However, in instances where companies themselves appear to be attempting to deform the law with a willfully self-serving interpretation of the rules, regulators may feel they need to act swiftly to nip any disingenuousness in the bud.

“We probably will not immediately have billions of penalty payments, but the corporations have intentionally violated the GDPR, so we expect a corresponding penalty under GDPR,” writes Schrems.

Only yesterday, for example, Facebook founder Mark Zuckerberg — speaking in an on stage interview at the VivaTech conference in Paris — claimed his company hasn’t had to make any radical changes to comply with GDPR, and further claimed that a “vast majority” of Facebook users are willingly opting in to targeted advertising via its new consent flow.

“We’ve been rolling out the GDPR flows for a number of weeks now in order to make sure that we were doing this in a good way and that we could take into account everyone’s feedback before the May 25 deadline. And one of the things that I’ve found interesting is that the vast majority of people choose to opt in to make it so that we can use the data from other apps and websites that they’re using to make ads better. Because the reality is if you’re willing to see ads in a service you want them to be relevant and good ads,” said Zuckerberg.

He did not mention that the dominant social network does not offer people a free choice on accepting or declining targeted advertising. The new consent flow Facebook revealed ahead of GDPR only offers the ‘choice’ of quitting Facebook entirely if a person does not want to accept targeting advertising. Which, well, isn’t much of a choice given how powerful the network is. (Additionally, it’s worth pointing out that Facebook continues tracking non-users — so even deleting a Facebook account does not guarantee that Facebook will stop processing your personal data.)

Asked about how Facebook’s business model will be affected by the new rules, Zuckerberg essentially claimed nothing significant will change — “because giving people control of how their data is used has been a core principle of Facebook since the beginning”.

“The GDPR adds some new controls and then there’s some areas that we need to comply with but overall it isn’t such a massive departure from how we’ve approached this in the past,” he claimed. “I mean I don’t want to downplay it — there are strong new rules that we’ve needed to put a bunch of work into into making sure that we complied with — but as a whole the philosophy behind this is not completely different from how we’ve approached things.

“In order to be able to give people the tools to connect in all the ways they want and build committee a lot of philosophy that is encoded in a regulation like GDPR is really how we’ve thought about all this stuff for a long time. So I don’t want to understate the areas where there are new rules that we’ve had to go and implement but I also don’t want to make it seem like this is a massive departure in how we’ve thought about this stuff.”

Zuckerberg faced a range of tough questions on these points from the EU parliament earlier this week. But he avoided answering them in any meaningful detail.

So EU regulators are essentially facing a first test of their mettle — i.e. whether they are willing to step up and defend the line of the law against big tech’s attempts to reshape it in their business model’s image.

Privacy laws are nothing new in Europe but robust enforcement of them would certainly be a breath of fresh air. And now at least, thanks to GDPR, there’s a penalties structure in place to provide incentives as well as teeth, and spin up a market around strategic litigation — with Schrems and noyb in the vanguard.

Schrems also makes the point that small startups and local companies are less likely to be able to use the kind of strong-arm ‘take it or leave it’ tactics on users that big tech is able to use to extract consent on account of the reach and power of their platforms — arguing there’s a competition concern that GDPR should also help to redress.

“The fight against forced consent ensures that the corporations cannot force users to consent,” he writes. “This is especially important so that monopolies have no advantage over small businesses.”

Image credit: noyb.eu

Dot, a new U.K. startup de-cloaking today, aims to make it easy to invest in property without the hassle of taking out a traditional ‘buy to let’ mortgage. The company is founded by Gray Stern, who previously co-founded London-based Buy to Let mortgage lender Landbay, and so knows at least a thing or two about investing in property. Namely, that it doesn’t need to be as arduous as it currently is.

In fact, Dot’s headline draw is that it makes property ownership a one-click affair via the “Dot Button” it wants to embed on property listings sites, including estate agents and property developers. Under the hood of the offering is what the startup describes as a “point-of-sale finance and management solution” that can be wrapped around any property that meets Dot’s lending criteria.

If you want to purchase the property as an investment, you simply click the button, pay the required deposit, and Dot will acquire and manage the property on your behalf, advancing 70 percent of the purchase price in the form of its pre-approved or “instant mortgage”. In addition, the property is furnished and Dot takes out buildings, contents and rent guarantee insurance. After those expenses, you receive monthly rent from the property, minus management fees and interest paid on your Dot mortgage.

Technically, once the property is purchased it is moved into a passive investment structure: an SPV known as a “Dot Container”. This structure holds the asset on your behalf (you effectively become the SPV’s beneficial owner/shareholder).

When you’re ready to sell, in theory a Dot Container can move from owner to owner without conveyancing, and can be refinanced without requiring new mortgage documents (via Dot Platform, Dot’s mortgage marketplace). Alternatively, the property can be put on the open market. Either way, as the SPV’s sole shareholder, you benefit from any increase in the valuation of the property, less the remaining balance of the mortgage.

“Dot enables anyone with a 30 percent deposit to become a professional property investor instantly, with none of the hassle of being a landlord,” explains Stern. “We do this by providing U.K. and U.S. estate agents and property developers with a pre-approved finance and management solution — a Dot Container — that can hold any suitable property. The agent can then offer Dot as a payment option (via the embedded Dot Button), turning their previously static listings into turnkey investments that anyone, anywhere can buy online on a fully financed and managed basis.

“Every Dot Container comes complete with a pre-approved mortgage, insurance, legal/conveyancing, tax compliance and reporting, lettings and management, furnishings and everything else required to turn that property into a compliant, well-managed and good-looking rental home. Dot takes care of the entire end-to-end process… and because we are lending a large portion of the total cost we have a vested interest in managing your property well”.

Stern says that Dot differs from property crowd-investing type platforms, such as Property Partner or Bricklane, which typically let you buy shares in a portion of a property or a property portfolio and aren’t coupled with a financing option.

“Dot’s solution is for sole investors or couples looking to build property portfolios that they control, we do not offer fractional ownership,” he adds. “Our clients own the asset and while they give Dot management rights, they can also remove Dot at any time, sell at any time, refinance their loans at any time. Dot’s challenge is to make our offer sufficiently compelling that they won’t want to”.

Meanwhile, Dot has raised $1.5 million in a pre-seed round from Stage Dot O, an L.A.-based venture-build firm run by Roofstock co-founder Devin Wade and ex hedge fund manager Mike Self.

Here’s a fun thing for a Friday: go back and see what your Twitter timeline looked like 10 years ago.

Twitter has pretty powerful search settings, but Andy Baio — of Kickstarter fame and more — did the heavy-lifting for us all by sharing a link that let’s you look at your timeline exactly a decade ago, assuming you followed the same people.

Try it here. (The search will work even if you didn’t have an account 10 years ago.)

The mix is eerily quiet, with far fewer retweets and likes than the current time — Twitter hadn’t yet introduced the ‘automatic’ retweet, people were still doing it manually — and no nested replies or link previews, while there are ghosts of once-major social media services, such as TwitPic, TinyURL.

Certainly, it’s a fun way to see how Twitter has morphed, both in terms of features and the actual dialogue of users. The latter, in my experience at least, seems more driven by status update-style tweets than discussions or dialogue and there’s precious little content from media at that time, too. Given how things are today, with polarized opinions and armies of trolls, perhaps the old days of Twitter did have their benefits.

You can, of course, tweak the settings to change the date, language and more to explore past Twitter.

Enjoy — and maybe retweet a decade-old tweet or two while you’re there.

The San Francisco Municipal Transportation Agency has officially made available its permit application for electric scooters to operate in the city as part of a one-year pilot program. Part of that means companies like Bird, Lime and Spin will need to at least temporarily remove their scooters from city sidewalks while their applications are being processed.

Lime, Bird and Spin — all of which deployed their scooters in March without permission from the city — have until June 7 to submit their applications. At that time, the SFMTA will review all the applications and aim to let companies know if they qualify by the end of June.

As part of a new city law, which goes into effect June 4, scooter companies will not be allowed to operate their services in San Francisco without a permit. Given that the SFMTA won’t start reviewing applications until the 7th, that means scooter companies will need to remove their scooters from city sidewalks by June 4. If they don’t, each companies respective scooters will be at risk of impound and fines of up to $100 per scooter.

“San Francisco supports transportation innovation, but it cannot come at the price of public safety,” SF City Attorney Dennis Herrera wrote in a press release. “This permit program represents a thoughtful, coordinated and effective approach to ensure that San Francisco strikes the right balance. We can have innovation, but it must keep our sidewalks safe and accessible for all pedestrians. We can have convenience, but it can’t sacrifice privacy and equity along the way. This program is a strong step forward. It provides the framework to ensure that companies operating in the public right of way are doing so lawfully and are accountable for their products.”

And if any company violates the law by operating electric scooters without a permit will automatically be denied a permit. The SFMTA’s application asks about things like scooter availability, proposed fleet sizes in disadvantaged communities, options for low-income people, processes for charging and deploying scooters, insurance and rider education. At a Board of Supervisors meetings in April some supervisors and members of the public expressed concerns around the lack of helmets and people riding on sidewalks. That’s where rider education would come in.

In order to submit an application, each company must make out a $5,000 check to the SFMTA to cover evaluation costs. If issued the permit, companies must then pay an annual permit fee of $25,000, as well as a $10,000 public property repair and maintenance endowment. Companies must also share trip data with the city.

Earlier this month, the city of San Francisco laid out its requirements for companies seeking to obtain electric scooter permits. The city will issue permits for no more than five companies during the 24-month pilot program. The program would grant up to 2,500 scooters to operate, but it’s not yet clear how many scooters each company would be allowed to deploy.

Since Bird, Lime and Spin deployed their scooters, a couple of other companies have signaled their interest in electric scooters. Lyft, for example, is looking to launch a service in San Francisco. And Uber also has its eyes on electric scooters. In April, Uber CEO Dara Khosrowshahi told me the company plans to “look at any and all options” that would help move transportation options in ways that are city-friendly. And just earlier today, a company called GOAT launched some electric scooters over in Austin.

A patent case that began back in 2011 has reached a conclusion, with Samsung ordered to pay about $539 million to Apple over infringements of the latter’s patents in devices that are now long gone. The case has dragged on for years as both sides argued about the finer points of how much was owed per device, what could be deducted, and so on. It’s been eye-wateringly boring, but at least it’s over now. Maybe.

The patents in question are some things we take for granted now, UI cues like “rubber-banding” at the bottom of a list or using two fingers to zoom in and out. But they were all part of the “boy have we patented it” multi-touch gestures of which Steve Jobs was so proud. In addition there were the defining characteristics of the first iPhone, now familiar (black round rectangle with a big screen, etc). At any rate Apple sued the dickens out of Samsung over them.

The case was actually decided long ago — in 2012, when the court found that Samsung had clearly and willfully infringed on the patents in question and initial damages were set at a staggering $1 billion. We wrote it up then, when it was of course big news:

Since then it’s all been about the damages, and Samsung won a big victory in the Supreme court that said it only had to pay out based on the profit from the infringing component.

Unfortunately for Samsung, the “infringing component” for the design patents seems to have been considered by the jury as being the entire phone. The result is that a great deal of Samsung’s profits from selling the infringing devices ended up composing the damages. It sets a major precedent in the patent litigation world, although not necessarily a logical one. People started arguing about the validity and value of design patents a long time ago and they haven’t stopped yet.

CNET has a good rundown for anyone curious about the specifics. Notably, Samsung said in a statement that “We will consider all options to obtain an outcome that does not hinder creativity and fair competition for all companies and consumers.” Does that mean they’re going to take it as high as the Supreme Court (again) and drag the case out for another couple years? Or will they cut their losses and just be happy to stop paying the legal fees that probably rivaled the damages assigned? Hopefully the latter.

Snapchat is taking another shot at location after its always-on coordinate-broadcasting Snap Map proved a bit invasive for some users. Snapchat now lets you send your on-going real-time location to a friend, or request theirs, which show up on the Snap Map and within your message thread.

Essentially, this is location sharing built for the intimacy people love about Snapchat, rather than the foreign and a little freaky idea of giving a wide swath of your contacts access to your whereabouts through Snap Map. As Facebook, Instagram, and WhatsApp ruthlessly exploit their clones of Stories, it’s the more private, close friends features like this and ephemeral messaging that are Snapchat’s best shot at staying relevant.

TechCrunch was tipped off to the location feature by our reader Chand Sethi (thanks!) and now Snapchat confirms it’s been slowly rolling out to iOS and Android users over the past few weeks. Snap Map, which launched last June, has always offered the option to only share with specific friends instead of all of them. Still, the whole idea of location broadcasting might have scared some users into staying in only-me Ghost Mode. This new feature is Snap’s chance to get them on board, one friend at a time.

Now when you long-press on a friend’s name or hit the three-line hamburger button on a chat thread, you’ll get the option to Send Location or Request location. It only works with bi-directional friends, so you can’t ask for the spot of your favorite Snap star if they don’t follow you back, and you can turn off getting requests in your settings if people are spamming you.

Location shared through this feature will only update live for eight hours after you last open the app. You can cancel someone’s access at any time through the Snap Map. And if you’ve never enabled it, you’ll go through the location consent flow first.

By letting users dip their toes in, Snapchat could get more users active on Snap Map. After its June 2017 launch, it hit 35 million daily viewers, but that number was at 19 million and sinking by November, according to leaked data. In February when it launched on web, Snapchat said it had 100 million monthly users — but since Snap never shares monthly user numbers and instead relies on daily counts, the fact that it had to go with a monthly stat here showed some insecurity about its popularity.

Along with Discover, Snap Map represent one of the app’s best differentiators. Investing in improvements here is wise. After all, it might only be a matter of time before we see an Insta Map.

Essential, the smartphone company helmed by Android co-creator Andy Rubin, is trying to sell itself and has cancelled development of its next phone, Bloomberg reports.

The report states that Essential has hired Credit Suisse Group AG to advise them on potentially selling itself. The company raised $330 million from investors, including Rubin’s own Playground Global, Tencent Holdings and the Amazon Alexa Fund. The news of a potential sale accompanies news that the company has ended development on its next smartphone, a major blow for a company aimed to challenge companies like Apple and Samsung with a device that it hoped would hold its own.

“We always have multiple products in development at the same time and we embrace canceling some in favor of the ones we think will be bigger hits,” an Essential spokesperson told TechCrunch. “We are putting all of our efforts towards our future, game-changing products, which include mobile and home products.”

The Essential phone went on sale in August for $699 with a bold, reduced bezel design that was soon present on a variety of smartphones. A report from IDC suggested that the company only sold 88,000 phones in 2017. Sluggish sales prompted the company to slash $200 off the price of the phone just months later, earning it a price that one of my colleagues called the “best deal in smartphones.”

Though Essential’s smartphone is still on sale, without a clear plan to continue their smartphone line, it’s pretty dubious how they’ll continue their dream of a unified experience centered around the company’s ambient OS. The company has already detailed some of their work on Essential Home, a home assistant hub that would include a circular display that could also deliver visual notifications.

Essential was always setting itself up for a David/Goliath battle, but it seems that nine months after showing off their flagship smartphone they’ve realized they weren’t quite ready to go up against the giants.

OpenStack is one of the most important and complex open-source projects you’ve never heard of. It’s a set of tools that allows large enterprises ranging from Comcast and PayPal to stock exchanges and telecom providers to run their own AWS-like cloud services inside their data centers. Only a few years ago, there was a lot of hype around OpenStack as the project went through the usual hype cycle. Now, we’re talking about a stable project that many of the most valuable companies on earth rely on. But this also means the ecosystem around it — and the foundation that shepherds it — is now trying to transition to this next phase.

The OpenStack project was founded by Rackspace and NASA in 2010. Two years later, the growing project moved into the OpenStack Foundation, a nonprofit group that set out to promote the project and help manage the community. When it was founded, OpenStack still had a few competitors, like CloudStack and Eucalyptus. OpenStack, thanks to the backing of major companies and its fast-growing community, quickly became the only game in town, though. With that, community events like the OpenStack Summit started to draw thousands of developers, and with each of its semi-annual releases, the number of contributors to the project has increased.

Now, that growth in contributors has slowed and, as evidenced by the attendance at this week’s Summit in Vancouver.

In the early days, there were also plenty of startups in the ecosystem — and the VC money followed them, together with some of the most lavish conference parties (or “bullshit,” as Canonical founder Mark Shuttleworth called it) that I have experienced. The OpenStack market didn’t materialize quite as fast as many had hoped, though, so some of the early players went out of business, some shut down their OpenStack units and others sold to the remaining players. Today, only a few of the early players remain standing, and the top players are now the likes of Red Hat, Canonical and Rackspace.

And to complicate matters, all of this is happening in the shadow of the Cloud Native Computing Foundation (CNCF) and the Kubernetes project it manages being in the early stages of the hype cycle.

Meanwhile, the OpenStack Foundation itself is in the middle of its own transition as it looks to bring on other open-source infrastructure projects that are complementary to its overall mission of making open-source infrastructure easier to build and consume.

Unsurprisingly, all of this clouded the mood at the OpenStack Summit this week, but I’m actually not part of the doom and gloom contingent. In my view, what we are seeing here is a mature open-source project that has gone through its ups and downs and now, with all of the froth skimmed off, it’s a tool that provides a critical piece of infrastructure for businesses. Canonical’s Mark Shuttleworth, who created his own bit of drama during his keynote by directly attacking his competitors like Red Hat, told me that low attendance at the conference may not be a bad thing, for example, since the people who are actually in attendance are now just trying to figure out what OpenStack is all about and are all potential customers.

Others echoed a similar sentiment. “I think some of it goes with, to some extent, what’s been building over the last couple of Summits,” Bryan Thompson, Rackspace’s senior director and general manager for OpenStack, said as he summed up what I heard from a number of other vendors at the event. “That is: Is open stack dead? Is this going away? Or is everything just leapfrogging and going straight to Kubernetes on bare metal. And I don’t want to phrase it as ‘it’s a good thing,’ because I think it’s a challenge for the foundation and for the community. But I think it’s actually a positive thing because the core OpenStack services — the core projects — have just matured. We’re not in the early science experiment days of trying to push ahead and scale and grow the core projects, they were actually achieved and people are actually using it.”

That current state produces fewer flashy headlines, but every survey, both from the Foundation itself and third-party analysts, show that the number of users — and their OpenStack clouds — continues to grow. Meanwhile, the Foundation is looking to bring up attendance at its events, too, by adding container and CI/CD tracks, for example.

The company that maybe best exemplifies the ups and downs of OpenStack is Mirantis, a well-funded startup that has weathered the storm by reinventing itself multiple times. Mirantis started as one of the first OpenStack distributions and contributors to the project. During those early days, it raised one of the largest funding rounds in the OpenStack world with a $100 million Series B round, which was quickly followed by another $100 million round in 2015. But by early 2017, Mirantis had pivoted from being a distribution and toward offering managed services for open-source platforms. It also made an early bet on Kubernetes and offered services for that, too. And then this year, it added yet another twist to its corporate story by refocusing its efforts on the Netflix-incubated Spinnaker open-source tool and helping companies build their CI/CD pipelines based on that. In the process, the company shrunk from almost 1,000 employees to 450 today, but as Mirantis CEO and co-founder Boris Renski told me, it’s now cash-flow positive.

So just as the OpenStack Foundation is moving toward CI/CD with its Zuul tool, Mirantis is betting on Spinnaker, which solves some of the same issues, but with an emphasis on integrating multiple code repositories. Renski, it’s worth noting, actually advocated for bringing Spinnaker into the OpenStack foundation (it’s currently managed on a more ad hoc basis by Netflix and Google).

“We need some governance, we need some process,” Renski said. “The [OpenStack] Foundation is known for actually being very good and effectively seeding this kind of formalized, automated and documented governance in open source and the two should work together much closer. I think that Spinnaker should become part of the Foundation. That’s the opportunity and I think it should focus 150 percent of their energy on that before it builds its own thing and before [Spinnaker] goes off to the CNCF as yet another project.”

So what does the Foundation think about all of this? In talking to OpenStack CTO Mark Collier and Executive Director Jonathan Bryce over the last few months, it’s clear that the Foundation knows that change is needed. That process started with opening up the Foundation to other projects, making it more akin to the Linux Foundation, where Linux remains in the name as its flagship project, but where a lot of the energy now comes from projects it helps manage, including the likes of the CNCF and Cloud Foundry. At the Sydney Summit last year, the team told me that part of the mission now is to retask the large OpenStack community to work on these new topics around open infrastructure. This week, that message became clearer.

“Our mission is all about making it easier for people to build and operate open infrastructure,” Bryce told me this week. “And open infrastructure is about operating functioning services based off of open source tool. So open source is not enough. And we’ve been, you know, I think, very, very oriented around a set of open source projects. But in the seven years since we launched, what we’ve seen is people have taken those projects, they’ve turned it into services that are running and then they piled a bunch of other stuff on top of it — and that becomes really difficult to maintain and manage over the long term.” So now, going forward, that part about maintaining these clouds is becoming increasingly important for the project.

“Open source is not enough,” is an interesting phrase here, because that’s really at the core of the issue at hand. “The best thing about open source is that there’s more of it than ever,” said Bryce. “And it’s also the worst thing. Because the way that most open source communities work is that it’s almost like having silos of developers inside of a company — and then not having them talk to each other, not having them test together, and then expecting to have a coherent, easy to use product come out at the end of the day.”

And Bryce also stressed that projects like OpenStack can’t be only about code. Moving to a cloud-native development model, whether that’s with Kubernetes on top of OpenStack or some other model, is about more than just changing how you release software. It’s also about culture.

“We realized that this was an aspect of the foundation that we were under-prioritizing,” said Bryce. “We focused a lot on the OpenStack projects and the upstream work and all those kinds of things. And we also built an operator community, but I think that thinking about it in broader terms lead us to a realization that we had last year. It’s not just about OpenStack. The things that we have done to make OpenStack more usable apply broadly to these businesses [that use it], because there isn’t a single one that’s only running OpenStack. There’s not a single one of them.”

More and more, the other thing they run, besides their legacy VMware stacks, is containers and specifically containers managed with Kubernetes, of course, and while the OpenStack community first saw containers as a bit of a threat, the Foundation is now looking at more ways to bring those communities together, too.

What about the flagging attendance at the OpenStack events? Bryce and Collier echoed what many of the vendors also noted. “In the past, we had something like 7,000 developers — something insane — but the bulk of the code comes down to about 200 or 300 developers,” said Bryce. Even the somewhat diminished commercial ecosystem doesn’t strike Bryce and Collier as too much of an issue, in part because the Foundation’s finances are closely tied to its membership. And while IBM dropped out as a project sponsor, Tencent took its place.

“There’s the ecosystem side in terms of who’s making a product and selling it to people,” Collier acknowledged. “But for whom is this so critical to their business results that they are going to invest in it. So there’s two sides to that, but in terms of who’s investing in OpenStack and the Foundation and making all the software better, I feel like we’re in a really good place.” He also noted that the Foundation is seeing lots of investment in China right now, so while other regions may be slowing down, others are picking up the slack.

So here is an open-source project in transition — one that has passed through the trough of disillusionment and hit the plateau of productivity, but that is now looking for its next mission. Bryce and Collier admit that they don’t have all the answers, but if there’s one thing that’s clear, it’s that both the OpenStack project and foundation are far from dead.