Year: 2019

Like Azure last week, AWS reported some slippage in its cloud earnings growth numbers today, dropping from 49 percent growth last year at this time to 37 percent this year. Total revenue increased from Q2 last year from $6.105 billion to $8.381 billion this year. Today’s report puts the company on an astonishing run rate of over $33 billion — just for AWS. That’s a successful company, nevermind one that’s a division of a larger organization.

And Amazon has to be thrilled that it is, as AWS accounted for 13 percent of the company’s total income this quarter, as it continues to help lead the way for the online retailer. All of that is mostly good news by most measures, but the slowing growth in a market that is continuing to accelerate is curious for both Microsoft and Amazon, as both companies continue to dominate the cloud infrastructure market.

Amazon controls approximately 33 percent of the market, while Microsoft accounts for around 16 percent. Regardless of whose numbers you look at, AWS has approximately double the marketshare of Microsoft, but Microsoft remains the only company with double digit marketshare up until this point.

The drop by both companies could simply be attributed to the law of large numbers, which says as big as these two companies are, sustaining the kind of growth rates they were on becomes increasingly difficult over time, even in an accelerating market.

“What we are seeing is the law of large numbers where the revenue gets so high, the growth percent gain gets harder. AWS’s dollar gain is still larger than the number 2-5 [rivals] combined,” Patrick Moorhead, principal analyst at Moor Insights & Strategy told TechCrunch.

As markets mature, growth just naturally slows down, and Amazon couldn’t maintain growth in the 40s forever no matter how hot the market is. Regardless, the revenue remains impressive and AWS continues to help drive Amazon’s success.

Elon Musk’s SpaceX managed to pull off something very few people thought it could — by disrupting one of the most fixed markets in the world with some of the most entrenched and protected players ever to benefit from government contract arrangements: rocket launches. The success of SpaceX, and promising progress from other new launch providers including Blue Origin and Rocket Lab, have encouraged interest in space-based innovation among entrepreneurs and investors alike. But is this a true boom, or just a blip?

There’s an argument for both at once, with one type of space startup rapidly descending to Earth in terms of commercialization timelines and potential upside, and the other remaining a difficult bet to make unless you’re comfortable with long timelines before any liquidity event and a lot of upfront investment.

Cheaper, faster, lighter, better

Image via Getty Images / Andrey Suslov

There’s no question that one broad category of technology at least is a lot more addressable by early-stage companies (and by extension, traditional VC investment). The word ‘satellite’ once described almost exclusively gigantic, extremely expensive hunks of sophisticated hardware, wherein each component would eat up the monthly burn rate of your average early-stage consumer tech venture.

Elon Musk’s tunneling and transportation startup The Boring Company has raised its first outside investment through the sale of $120 million in stock, according to a securities filing.

The details of authorized sale of stock were first reported by Bloomberg News, which reviewed the filing obtained by Prime Unicorn Index.

Steve Jurvetson, a longtime friend, adviser and early backer of Musk’s other companies SpaceX and Tesla, has invested in The Boring Company (TBC).

The investment comes just a two months since the The Boring Company landed a $48.7 million commercial contract to build and operate an underground “people mover” in Las Vegas. After receiving approval from the Las Vegas Convention and Visitors Authority, TBC secured the contract in May to build an underground loop system that shuttles people.

The initial design for the project, dubbed Campus Wide People Mover, or CWPM, will focus on the Las Vegas Convention Center, which is currently in the midst of an expansion that is expected to be completed in time for CES 2021. The newly expanded Las Vegas Convention Center will span about 200 acres once completed. The Las Vegas Convention and Visitors Authority (LVCVA)estimates that people walking the facility would travel two miles from one end to the other, a distance that prompted officials to find a transportation solution.

Since landing the contract in Las Vegas, TBC has ramped up its hiring as it starts to scale up and move beyond the status of Musk pet project. (TBC hasn’t publicized how many people it employs; estimates from various sources put it at more than 80 people, although there’s evidence of overlap between SpaceX and TBC.)

TBC previously raised nearly $113 million last year.

It’s been a while since Google last shared any fundamental financial data about its cloud business. In today’s earnings call, though, Google CEO Sundar Pichai, who recently installed former SAP exec Thomas Kurian as the new head of Google Cloud, announced that this business unit now has an $8 billion annual revenue run rate. That’s up from the $4 billion the company reported in early 2018.

While Google often felt like an also-ran in the cloud wars, it’s clearly starting to make up some ground. “Other cloud providers would have you believe that no one is using Google, which is not true,” Kurian told me when I talked to him earlier this year. Now he can put some numbers behind this claim.

To put that into perspective, AWSs run rate topped $30 billion last quarter while Microsoft Azure is somewhere around $11 billion, though concrete numbers are hard to come by.

“Q2 was another strong quarter for Google Cloud, which reached an annual revenue run rate of over $8 billion and continues to grow at a significant pace,” Pichai said. “Customers are choosing Google Cloud for a variety of reasons: reliability and uptime are critical. Retailers like Lowes are leveraging the cloud as one of the important tools to transform their customer experience and supply chain.”

Pichai also noted that customers want the flexibility to move to the cloud in their own way, something that some of Google’s competitors — and especially Microsoft — focused on before Google got to this point. With Anthos and other initiatives, the company is now catching up, though.

Unsurprisingly, Pichai also stressed Google’s role in pushing AI forward at a time when enterprises are starting to look at how they can make use of this technology.

When it comes to VC, vehicles, and startups, Africa’s ride-hail markets are becoming a multi-wheeled and global affair.

The big players such as Uber and Bolt are competing in Kampala and Nairobi—where in addition to car-service—they offer rickshaw taxis. On-demand motorcycle startups are multiplying and piloting EVs with funds from international partners. And many ride-hail companies in Africa are adapting unique product solutions to local transit needs.

In this analysis, I take a look at the leading startups in the mobility space and how the future of transportation on the continent will increasingly come from new entrants.

Africa’s in the midst of digital innovation boom

Africa’s in the midst of digital innovation boom, the components of which are intersecting rapidly across its 54 countries and 1.2 billion people.

Smartphone penetration is improving and in 2017, the continent saw the largest global increase in internet users—20 percent.

By Partech data, the continent surpassed the $1 billion VC mark in 2018. And greater connectivity and venture funding are fueling thousands of startups in every imaginable sector, including digital-transit.

While reliable markets stats for the size and potential of Africa’s ride-hail markets are sparse, there are some indicators of the sector’s potential.

Car ownership and cars per capita in Africa is among the lowest in the world. Parallel to that, any eyes and ears survey of the continent’s big cities reveals that shared transport by buses, cars, or motorcycles is big business that’s already ingrained in consumer culture. Millions of people daily pay fares to pack onto East and West Africa’s Mutatu and Danfo minibuses and Okada and Boda Boda motorbike taxis.

As Africa continues to urbanize, converts to smartphones, and discretionary consumer spending continues to rise—it all adds up to suggest strong potential for conversion to on-demand mobility services.

Unsurprisingly, the most active markets for ride-hail startups and investment in Africa align with the continent’s top spots for VC and tech activity: primarily Nigeria, Kenya, and South Africa.

There are those who praise the technology as the solution to some of humankind’s gravest problems, and those who demonize AI as the world’s greatest existential threat. Of course, these are two ends of the spectrum, and AI, surely, presents exciting opportunities for the future, as well as challenging problems to be overcome.

One of the issues that’s attracted much media attention in recent years has been the prospect of bias in AI. It’s a topic I wrote about in TechCrunch (Tyrant in the Code) more than two years ago. The debate is raging on.

At the time, Google had come under fire when research showed that when a user searched online for “hands,” the image results were almost all white; but when searching for “black hands,” the images were far more derogatory depictions, including a white hand reaching out to offer help to a black one, or black hands working in the earth. It was a shocking discovery that led to claims that, rather than heal divisions in society, AI technology would perpetuate them.

As I asserted two years ago, it’s little wonder that such instances might occur. In 2017, at least, the vast majority of people designing AI algorithms in the U.S. were white males. And while there’s no implication that those people are prejudiced against minorities, it would make sense that they pass on their natural, unconscious bias in the AI they create.

And it’s not just Google algorithms at risk from biased AI. As the technology becomes increasingly ubiquitous across every industry, it will become more and more important to eliminate any bias in the technology.

Understanding the problem

AI was indeed important and integral in many industries and applications two years ago, but its importance has, predictably, increased since then. AI systems are now used to help recruiters identify viable candidates, loan underwriters when deciding whether to lend money to customers and even judges when deliberating whether a convicted criminal will re-offend.

Of course, data can certainly help humans make more informed decisions using AI and data, but if that AI technology is biased, the result will be as well. If we continue to entrust the future of AI technology to a non-diverse group, then the most vulnerable members of society could be at a disadvantage in finding work, securing loans and being fairly tried by the justice system, plus much more.

Fortunately, the issue around bias in AI has come to the fore in recent years, and more and more influential figures, organizations and political bodies are taking a serious look at how to deal with the problem.

The AI Now Institute is one such organization researching the social implications of AI technology. Launched in 2017 by research scientists Kate Crawford and Meredith Whittaker, AI Now focuses on the effect AI will have on human rights and labor, as well as how to safely integrate AI and how to avoid bias in the technology.

In May last year, the European Union put in place the General Data Protection Regulation (GDPR) — a set of rules that gives EU citizens more control over how their data is used online. And while it won’t do anything to directly challenge bias in AI technology, it will force European organizations (or any organization with European customers) to be more transparent in their use of algorithms. This will put extra pressure on companies to ensure they’re confident in the origins of the AI they’re using.

And while the U.S. doesn’t yet have a similar set of regulations around data use and AI, in December 2017, New York’s city council and mayor passed a bill calling for more transparency in AI, prompted by reports the technology was causing racial bias in criminal sentencing.

Despite research groups and government bodies taking an interest in the potentially damaging role biased AI could play in society, the responsibility largely falls to the businesses creating the technology, and whether they’re prepared to tackle the problem at its core. Fortunately, some of the largest tech companies, including those that have been accused of overlooking the problem of AI bias in the past, are taking steps to tackle the problem.

Microsoft, for instance, is now hiring artists, philosophers and creative writers to train AI bots in the dos and don’ts of nuanced language, such as to not use inappropriate slang or inadvertently make racist or sexist remarks. IBM is attempting to mitigate bias in its AI machines by applying independent bias ratings to determine the fairness of its AI systems. And in June last year, Google CEO Sundar Pichai published a set of AI principles that aims to ensure the company’s work or research doesn’t create or reinforce bias in its algorithms.

Demographics working in AI

Tackling bias in AI does indeed require individuals, organizations and government bodies to take a serious look at the roots of the problem. But those roots are often the people creating the AI services in the first place. As I posited in “Tyrant in the Code” two years ago, any left-handed person who’s struggled with right-handed scissors, ledgers and can-openers will know that inventions often favor their creators. The same goes for AI systems.

New data from the Bureau of Labor Statistics shows that the professionals who write AI programs are still largely white males. And a study conducted last August by Wired and Element AI found that only 12% of leading machine learning researchers are women.

This isn’t a problem completely overlooked by the technology companies creating AI systems. Intel, for instance, is taking active steps in improving gender diversity in the company’s technical roles. Recent data indicates that women make up 24% of the technical roles at Intel — far higher than the industry average. And Google is funding AI4ALL, an AI summer camp aimed at the next generation of AI leaders, to expand its outreach to young women and minorities underrepresented in the technology sector.

However, the statistics show there is still a long way to go if AI is going to reach the levels of diversity required to stamp out bias in the technology. Despite the efforts of some companies and individuals, technology companies are still overwhelmingly white and male.

Solving the problem of bias in AI

Of course, improving diversity within the major AI companies would go a long way toward solving the problem of bias in the technology. Business leaders responsible for distributing the AI systems that impact society will need to offer public transparency so that bias can be monitored, incorporate ethical standards into the technology and have a better understanding of who the algorithm is supposed to be targeting.

But without regulations from government bodies, these types of solutions could come about too slowly, if at all. And while the European Union has put in place GDPR that in many ways tempers bias in AI, there are no strong signs that the U.S. will follow suit any time soon.

Government, with the help of private researchers and think tanks, is moving quickly in the direction and trying to grapple with how to regulate algorithms. Moreover, some companies like Facebook are also claiming regulation could be beneficial. Nevertheless, high regulatory requirements for user-generated content platforms could help companies like Facebook by making it nearly impossible to compete for new startups entering the market.

The question is, what is the ideal level of government intervention that won’t hinder innovation?

Entrepreneurs often claim that regulation is the enemy of innovation, and with such a potentially game-changing, relatively nascent technology, any roadblocks should be avoided at all cost. However, AI is a revolution that will continue whether it’s wanted or not. It will go on to change the lives of billions of people, and so it clearly needs to be heading in an ethical, unbiased direction.

Governments and business leaders alike have some serious questions to ponder, and not much time to do it. AI is a technology that’s developing fast, and it won’t wait for indecisiveness. If the innovation is allowed to go on unchecked, with few ethical guidelines and a non-diverse group of creators, the results may lead to a deepening of divisions in the U.S. and worldwide.

It looks like the mid-range Pixel 3a is the hit Google surely hoped it would be.

Alphabet reported some pretty good earnings today, but the company’s report tends to be pretty generic, given that it doesn’t provide details for its different business units inside of Google and its other segments. That’s not to say there isn’t good news there for Google. On today’s call, Google CEO Sundar Pichai shared some new stats for the company’s phone line.

“With the launch of Pixel 3a in May, overall Pixel unit sales in Q2 grew more than 2x year over year,” Pichai announced. Part of this growth, he noted, is due to Google greatly expanded its distribution network beyond its own store and Verizon to also include T Mobile, Sprint, US Cellular, Spectrum Mobile and others. He also stressed that the Pixel 3a received Google’s highest Net Promotor Score rating yet.

It surely helps that the Pixel 3a is relatively affordable and compares well to flagship phones without any major tradeoffs. When it launched, reviews were generally very positive, too, which surely helped as well. Unlike previous Pixel launches, the first batch Pixel 3a phones also didn’t face any major hardware problems, something that regularly plagued Google’s earlier efforts.

In 2017, Matthew Peltier walked barefoot into a pitch meeting with venture capitalists. Young, male, man bun intact, he certainly resembled the stereotypical successful entrepreneur, but it was his startup, an app designed to bring social media stars and their fans into conversation, that drew skepticism.

Shimmur, as it was called, ultimately succeeded in raising about $7 million from Greycroft, Arena Ventures, Right Side Capital Management and Techstars, according to PitchBook, but the business never took off. That is until a pivot to direct messaging in 2018 attracted the support of Hollywood talent manager Guy Oseary and his Sound Ventures investment partner Ashton Kutcher, who jumped on board to relaunch Shimmur, now known as Community.

The Santa Monica-based company has raised nearly $35 million in the form of two convertible notes following a recapitalization that occurred alongside its rebranding earlier this year, TechCrunch has learned. Investors, including the Sony Innovation Fund, have valued the text marketing platform at upwards of $200 million, sources tell TechCrunch. A spokesperson for Community, however, said there is currently “no valuation attached to the company” because of the nature of the recap and convertible notes, and declined to comment further on fundraising activity.

Community has yet to complete a public launch and is in the process of onboarding both companies and celebrities. We’re told efforts to generate attention for the business will increase in the next couple of weeks.

Shimmur was initially conceived of in 2014 as a Reddit-style mobile application that encouraged users to join “Tribes,” or groups, where they could create and upload content about their favorite YouTube or Instagram stars. Social media accounts affiliated with Shimmur went dark in 2017, and in early 2018 the site began redirecting to Digits.Chat, a service currently in private beta assumedly linked to Community. Now in their second act, Peltier and Community co-founder Josh Rosenheck are committed to building a platform for influencers and fans to interact at scale.

Questions of Community’s business began to surface in January 2019, when Ashton Kutcher took to Twitter to subtly promote the service with a phone number and a simple request to text him. Naturally, many assumed the tweet included the actor and investor’s personal cell number. In reality, he’d been working with Community to develop a better method of communication with his followers. This week, the actor resurfaced on Twitter to promote the service again. This time stating that the phone number included in the tweet would be “the only place [he] responds to public queries” because the “open web has just become too toxic.”

Just text me it’s easier. +1 (319) 519-0576

— ashton kutcher (@aplusk) July 23, 2019

This reporter, of course, followed up Kutcher on his offer and sent a text to his now preferred contact. Instantaneously, I received this reply: “Ashton here. This is an auto-text to let you know I got your message, the rest will be from me. Click the link so I can respond to you. I likely can’t respond to everything but I’ll try to be in touch. Dream bigger.” The message was accompanied by a link to a Community sign-up page for Kutcher-specific updates. The fine print read that the personal messages and automated text alerts from Kutcher “may be marketing in nature,” but little other information was provided.

While Kutcher has used his large Twitter following to spread awareness for Community, Guy Oseary has remained mum. Sources tell TechCrunch, however, that Oseary is a “co-founder” of Community, further evidence he’s put money in the business and perhaps adopted a co-founder title because of the nature of his investment. Oseary is not only a co-founder of Sound Ventures alongside Kutcher, but he’s also a longtime executive at Maverick, an entertainment and music management business behind the likes of Madonna and U2. His network would be much more valuable to Community than VC dollars.

Sound Ventures, Kutcher and Oseary’s venture capital fund, did not respond to a request for comment. Community declined to name its investors, but did say Oseary is “not a co-founder,” declining to provide additional details on his affiliation with the business.

On its website, Community describes itself as a tool that enables its clients, e.g. influencers, musicians, athletes, brands, actors, their agents and others, to have direct and meaningful communication with their “community members” using a 10-digit phone number provided by Community: “Imagine getting to know and interact with your audience as individuals—with names and faces, interests and opinions, hometowns and pronouns. Imagine reaching every single one of them,” the company writes.

Peltier, in the company’s first blog post published in June, emphasized the power of text messaging, citing an Adobe statistic that 90% of text messages are read within three seconds. Peltier also described Community’s business model, noting that they are not an ads business, rather, clients pay Community monthly or annual service fees “for 100% audience reach and limitless segmentation, in a climate free from bullying and toxicity.” Community’s terms of service agreement additionally states that once a subscription is initiated, clients can create and send text marketing campaigns to promote themselves or products with members of their community.

If Community sounds familiar — it should. Its efforts to leverage SMS to facilitate celebrity-fan relationships is akin to SuperPhone. Founded by musician Ryan Leslie in 2015, SuperPhone is a mobile messaging platform designed to meet the needs of entrepreneurs, entertainers and anyone else that juggles clients or sales contacts.

“SuperPhone is the first foray into personal relationship management,” Leslie told TechCrunch last year. The startup has raised a total of roughly $5 million at a $10 million valuation, according to PitchBook. In a blog post addressing Kutcher’s January tweet, Leslie welcomed the competition to the text marketing space.

“The game is changing, messaging is here to stay, and platforms are stepping up to help you leverage the power of this currently undervalued direct communication channel,” Leslie wrote. “This is my game. SuperPhone was conceived, developed, deployed, and battle-tested years before this week’s A-list endorsement of text over social.”

We reached out to SuperPhone for comment and in a very on-brand reply, a spokesperson for the business told me to submit my phone number to Leslie here and “unlike Ashton, Ry will text you right back once you introduce yourself.”

Earlier this month, TechCrunch held its annual Mobility Sessions event, where leading mobility-focused auto companies, startups, executives and thought leaders joined us to discuss all things autonomous vehicle technology, micromobility and electric vehicles.

Extra Crunch is offering members access to full transcripts key panels and conversations from the event, including our panel on micromobility where TechCrunch VC reporter Kate Clark was joined by investors Sarah Smith of Bain Capital Ventures, Michael Granoff of Maniv Mobility, and Ted Serbinski of TechStars Detroit.

The panelists walk through their mobility investment theses and how they’ve changed over the last few years. The group also compares the business models of scooters, e-bikes, e-motorcycles, rideshare and more, while discussing Uber and Lyft’s role in tomorrow’s mobility ecosystem.

Sarah Smith: It was very clear last summer, that there was essentially a near-vertical demand curve developing with consumer adoption of scooters. E-bikes had been around, but scooters, for Lime just to give you perspective, had only hit the road in February. So by the time we were really looking at things, they only had really six months of data. But we could look at the traction and the adoption, and really just what this was doing for consumers.

At the time, consumers had learned through Uber and Lyft and others that you can just grab your cell phone and press a button, and that equates to transportation. And then we see through the sharing economy like Airbnb, people don’t necessarily expect to own every single asset that they use throughout the day. So there’s this confluence of a lot of different consumer trends that suggested that this wasn’t just a fad. This wasn’t something that was going to go away.

For access to the full transcription below and for the opportunity to read through additional event transcripts and recaps, become a member of Extra Crunch. Learn more and try it for free. 

Kate Clark: One of the first panels of the day, I think we should take a moment to define mobility. As VCs in this space, how do you define this always-evolving sector?

Michael Granoff: Well, the way I like to put it is that there have been four eras in mobility. The first was walking and we did that for thousands of years. Then we harnessed animal power for thousands of years.

And then there was a date — and I saw Ken Washington from Ford here — September 1st, 1908, which was when the Model T came out. And through the next 100 years, mobility is really defined as the personally owned and operated individual operated internal combustion engine car.

And what’s interesting is to go exactly 100 years later, September 2008, the financial crisis that affects the auto industry tremendously, but also a time where we had the first third-party apps, and you had Waze and you had Uber, and then you had Lime and Bird, and so forth. And really, I think what we’re in now is the age of digital mobility and I think that’s what defines what this day is about.

Ted Serbinski: Yeah, I think just to add to that, I think mobility is the movement of people and goods. But that last part of digital mobility, I really look at the intersection of the physical and digital worlds. And it’s really that intersection, which is enabling all these new ways to move around.

Image via Getty Images / Jackie Niam

Clark: So Ted you run TechStars Detroit, but it was once known as TechStars Mobility. So why did you decide to drop the mobility?

Serbinski: So I’m at a mobility conference, and we no longer call ourselves mobility. So five years ago, when we launched the mobility program at TechStars, we were working very closely with Ford’s group and at the time, five years ago, 2014, where it started with the connected car, auto and [people saying] “you should use the word mobility.”

And I was like “What does that mean?” And so when we launched TechStars Mobility, we got all this stuff but we were like “this isn’t what we’re looking for. What does this word mean?” And then Cruise gets acquired for a billion dollars. And everyone’s like “Mobility! This is the next big gold rush! Mobility, mobility, mobility!”

And because I invest early-stage companies anywhere in the world, what started to happen last year is we’d be going after a company and they’d say, “well, we’re not interested in your program. We’re not mobility.” And I’d be scratching my head like, “No, you are mobility. This is where the future is going. You’re this digital way of moving around. And no, we’re artificial intelligence, we’re robotics.”

And as we started talking to more and more entrepreneurs, and hundreds of startups around the world, it became pretty clear that the word mobility is actually becoming too limiting, depending on your vantage where you are in the world.

And so this year, we actually dropped the word mobility and we just call it TechStars Detroit, and it’s really just intersection of those physical and digital worlds. And so now we don’t have a word, but I think we found more mobility companies by dropping the word mobility.

Apple has entered into a deal to acquire a majority of Intel’s modem business, TechCrunch has learned. The deal, valued at around $1 billion includes Intel IP and employees, with Apple bringing over 2,200 new roles and bringing its modem portfolio up 17,000 patents. 

The deal confirms earlier rumors that Apple would acquire the business in order to permanently uncouple itself from Qualcomm, the source of much contention for both parties over the last several years.