Month: September 2020

Sometimes raising venture capital can be as simple as talking to your existing investor and having them wire over another check.

When we last caught up with Petal in January 2019, the startup was hot off its $30 million Series B round and was accelerating its mission to take on the world of credit cards. Petal’s core differentiation is that it looks at the cash flow of potential borrowers rather than traditional credit scores to assess creditworthiness, helping to identify underbanked users who have the ability to be trusted with a credit card, but lack the formal statistics to prove it.

Well, a lot has happened since then. COVID-19 hit, and along the way, the traditional credit score has been rent asunder as millions lost their jobs, had their hours cut back, and changed life circumstances. At the same time, federal stimulus relief in the form of direct payments to taxpayers actually led some credit scores to increase during the pandemic. All of this is to say that underwriting based on prospective cash flow has been a bit more attuned to reality rather than credit scores based on retrospective history.

Now, the New York City-headquartered startup is expanding, and netted a $55 million dollar Series C round led by Valar again, who not only led the company’s Series B, but also its $13 million Series A round back in 2018. This Series C round closed in April just after the COVID-19 pandemic got fully underway and is officially being announced today.

Valar, one of the many vehicles in the Peter Thiel capital universe, has staked its claim in the fintech world, backing companies like Even, Stash, N26, BlockFi, Point Card, and Taxfix. I asked Petal CEO Jason Gross his thoughts on why he took capital from his existing investors two more times, and his line was “if you’ve heard the expression, ‘if it ain’t broke don’t fix it.’” He continued, “Our view has been that if we already have a really great working relationship, and a lot of support and a dynamic that’s been successful in the boardroom, there’s no reason to necessarily change that.”

Gross said that the company’s model has allowed it to handle the storm of changes that have been underway this year. “It’s allowing us to make credit accessible at a period of time when legacy institutions — traditional banks and so on — are being forced to to pull back,” he said. “We’ve been able to continue to accurately understand what’s going on with the financial circumstances of our customers and applicants” allowing the company to “lean in” this year.

He noted the company has brought on “tens of thousands of customers” since the last time TechCrunch chatted with the company.

Outside of fundraising and customer growth, the company has been busy. It launched a second office in Richmond, Virginia last year. It “has a really strong, kind of vibrant and emerging technology scene. It is the largest concentration of colleges in Virginia, and it also is a financial-services-heavy location,” Gross explained. Conveniently, it also shares the same time zone as NYC.

Back last September, the company raised $300 million from Jeffries as a debt facility to finance its credit card, and in February, it recruited Kaustav Das as its new chief risk officer. Das came from small business loan platform Kabbage, which was sold to American Express earlier this year following the heavy economic blow from the pandemic to small businesses across the country.

Petal is now about 100 employees, and the company has been operating entirely remotely since March. Gross says his goal for the next two years is to onboard “hundred of thousands of new customers.”

In addition to Valar, a huge miscellany of funds participated in the round, including “Rosecliff Ventures, Afore Capital, RiverPark Ventures, Great Oaks Venture Capital, GR Capital, Nelstone Ventures, Abstract Ventures, Ride Ventures, Gramercy Fund, Adventure Collective, Starta Ventures, and NFL star Kelvin Beachum, Jr.” The company has now raised about $100 million of equity capital all together.

There’s still no clear path back to any sense of ‘business-as-usual’ as the COVID-19 pandemic continues, but United Airlines is embarking on a new pilot project to see if easy access to COVID-19 testing immediately prior to a flight can help ease freedom of mobility. The airline will offer COVID-19 tests (either rapid tests at the airport, or mail-in at home tests prior to travel) to passengers flying from SFO in San Francisco to Hawaiian airpots, beginning on October 15.

United worked directly with the Hawaiian government and health regulators to meet the state’s requirements when it comes to quarantine measures, so that travellers who return a negative result with this pre-trip tests won’t have to observe the mandatory quarantine period in place upon their arrival. That’s obviously a major barrier to travel to a popular tourist destination like Hawaii, since a two-week quarantine eats up all or more of the typical period of stay for anyone coming from the mainland.

The airline has partnered with two companies to provide the tests: Color for the at-home kit, which is ordered by a physician and provides results within 1-2 days of receiving the sample, and GoHealth Urgent Care, which will be provided the on-site tests at the airport using the Abbot ID NOW rapid COVID-19 test that returns results in just 15 minutes.

If passengers choose the Color option, they’re advised to request the test kit at least 10 days before they fly, and then to provide their sample for testing within 72 hours before they fly, in order to ensure first that they receive the sample kit in time, and second that the results are recent enough that it’s extremely unlikely they’ve contracted COVID-19 in the ensuing time prior to their flight. Passengers choosing this method can even return the sample via a drop box at SFO, with the results arriving after their landing, but still curtailing their mandatory quarantine period once received.

The on-site option will require scheduling a visit to the testing facility in SFO’s international terminal in advance, with tests available between 9 AM to 6 PM PT every day at the airport.

This is just a pilot program, and that’s a very good thing, because it will be crucially important to see what happens as a result of this kind of deployment, and its ability to skip the quarantine period. The two-week quarantine after travelling, which is fairly widely adopted globally at this stage in the pandemic, is intentionally meant to apply in most locations regardless of test results, no matter the source or recency.

That’s because at this stage in testing, the results aren’t anywhere near foolproof – testing has potentially less efficacy at detecting COVID-19 in asymptomatic individuals, for instance, and when viral loads aren’t yet high enough to provide reliable measurement. Those situations can result in false negatives, which isn’t an issue when the 14-day quarantine periods are mandatory and universal.

Tourism, especially domestic U.S. tourism, is vital to the economic wellbeing of states like Hawaii – and widespread testing could be a lever to open up more of this kind of economic activity both elsewhere in the U.S. and internationally. But it’ll require close and careful study, scrutinized by health professionals, as well as improvements in the accuracy and consistency of diagnostics before these measure should expand beyond the pilot stage.

ShareChat, an Indian social network that focuses entirely on serving users in non-English languages, said on Thursday it has raised $40 million from a clutch of investors after the Indian startup added tens of millions of new users in recent months.

The five-year-old Bangalore-based startup said Dr. Pawan Munjal, chief executive and chairman of giant two-wheeler manufacturer Hero MotoCorp, Ajay Shridhar Shriram, chairman of chemical manufacturing company DCM Shriram, and existing investors Twitter, SAIF Partners, Lightspeed Ventures, and India Quotient financed the new round of capital.

Ankush Sachdeva, co-founder and chief executive of ShareChat, told TechCrunch in an interview that the startup’s new fundraise is part of its pre-Series E financing round. TechCrunch understands the startup is engaging with several major VC funds and corporate giants to raise more than $100 million in the next few months.

The new capital will help ShareChat better support creators on its platform, Sachdeva said. ShareChat launched the short-video app Moj in early July, days after New Delhi banned TikTok, which at the time had about 200 million users in India.

In the weeks following TikTok’s ban in India, scores of startups have launched short-video apps in the country. DailyHunt has launched Josh, and Times Internet’s MX Player has launched TakaTak. But Moj has clearly established dominance¹ among short-form video apps.

ShareChat said Moj has amassed over 80 million monthly active users, who are spending about 34 minutes on the platform each day.

ShareChat’s marquee and eponymous app, which caters users in 15 Indian languages, itself has grown significantly. The app has amassed 160 million monthly active users ², up from 60 million during the same period last year. A user on an average spends about 31 minutes on the app each day, the startup said.

The growth of ShareChat in the social media category is a rare success story for the Indian startup ecosystem.

“India could never have dreamt of having a homegrown social media platform, had ShareChat not embarked on the impossible in 2015. ShareChat’s success has given immense hope to India’s startup fraternity, and motivated entrepreneurs to take audacious bets in India’s internet ecosystem,” said Madhukar Sinha, Partner at India Quotient, one of the earliest backers of ShareChat.

In yet another move that is not very common among Indian startups, ShareChat announced earlier this week that it was adding $14 million to its employee stock ownership plan (ESOP) pool, taking the total to $35 million.

Sachdeva told TechCrunch that for a startup of ShareChat’s scale, it is crucial that its employees feel valued, because there are enough other giants in the market looking for their talent.

The new capital will also help the startup build new products and establish deeper partnerships with music labels, Sachdeva said. TechCrunch reported earlier this year that ShareChat had quietly launched a fantasy sports app called Jeet11.

Sachdeva said Jeet11 is gaining good traction and the startup’s foray into fantasy sports and short-video app categories demonstrates how fast it moves.

ShareChat has also been working with advertisers as it solidifies its monetization avenues, he said.

More to follow…

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¹ Instagram reaches about 150 million monthly active users in India, but it’s unclear if more than half of the app’s userbase has embraced Reels yet.

²  Many players in the industry rely on mobile insight firm AppAnnie and Sensor Tower to track the performance of their apps, their portfolio startups’ apps, and those of their competitors. We often cite AppAnnie and Sensor Tower data, too.

According to AppAnnie, ShareChat had fewer than 20 million monthly active users in India last month. Startup founders and other tech executives who TechCrunch has spoken to say that AppAnnie’s data is usually very reliable, and I can tell you that most of the figures companies claim publicly match with what you see on AppAnnie’s dashboard.

But another thing I have heard from many startup founders is that AppAnnie’s data often misses the mark for apps that have a significant portion of their user base in smaller cities and towns. As is the case of ShareChat.

I asked Sachdeva about it, and he said that ShareChat and many other apps that are popular in smaller Indian cities have not integrated AppAnnie’s SDK into their apps. AppAnnie relies on developers integrating its SDK into their apps to be able to assess the performance of that app and others installed on the handset.

This would explain why AppAnnie estimates that WhatsApp, which claims to have over 400 million users in India and is also popular in smaller Indian cities and towns and villages, has about 330 million users.

The parity between the numbers ShareChat has officially shared and what one of the most reliable and widely used third-party firms offers was too significant, and I thought I should mention this. AppAnnie did not share ShareChat’s figure with TechCrunch — an industry executive did.

Within3, a collaboration and communication service for the biotech and pharma industries, has raised over $100 million in new financing, the company said.

The investment came from Insight Partners with participation from Silversmith Capital Partners.

Most of the top 20 pharmaceutical companies already use the Lakewood, Ohio-based company’s service to publish clinical studies, host advisory boards, and collaborate with researchers and other participants in the drug development process, according to a statement from the company.

Within3 said it would use the new funding to continue its product development and build additional capacity to support its growth.

“Investment opportunities in companies like Within3 don’t come around very often,” said Deven Parekh, Managing Director at Insight Partners, in a statement. “The company has seen explosive growth over the last 12 quarters and continues to break new records each month… At a time when collaboration, communication and cooperation is more critical than ever across the global life sciences ecosystem, we are excited to bring our strategic operations expertise to help Within3 scale.”

Parekh, and Insight Partners’ Managing Directors Adam Berger and Ross Devor, will join Within3’s board as a result of the financing.

The COVID-19 pandemic has pushed an increasing number of companies in a variety of industries to pursue virtual collaboration tools and the pharmaceutical and biotech business is no different.

Indeed, given the regulatory requirements, it makes sense that a bespoke toolkit designed around the industry’s more robust needs would raise a heaping amount of cash.

Within3 boasts of users in over 150 countries.

“Global demand for our solution is surging at an unprecedented rate,” said Lance Hill, CEO of Within3, in a statement. “Life science companies are looking for virtual work solutions that exceed the level of engagement of traditional live interactions, meets all their compliance needs, and that will scale across the enterprise. They have found that solution with Within3.”

Switzerland-based machine learning code review startup DeepCode — which bills itself as ‘Grammarly for coders’ — has been acquired by Snyk, a post-unicorn valuation cybersecurity startup which is focused on helping developers secure their code.

Financial terms of the deal have not been disclosed. But the ‘big code’ parsing startup had only raised around $5.2M since being founded back in 2016, per CrunchBase — mostly recently closing a $4M seed round from investors including Earlybird, 3VC and btov Partners last year.

DeepCode CEO and co-founder Boris Paskalev confirmed the whole team is “eagerly” joining Snyk to continue what he couched as “the mission of making semantic AI-driven code analysis available for every developer on the planet”.

“DeepCode as a company will continue to exist (fully owned by Snyk), we will keep and plan to grow the Zurich office and tap into the amazing talent pool here and we will continue supporting and expanding the cutting-edge product offering for the global development community,” Paskalev told TechCrunch.

Asked whether DeepCode’s product will continue to exist as a standalone in the future or whether full assimilation into Snyk’s platform will include closing down the code-review bot it currently offers developers he said no decision has yet been taken.

“We are still to evaluate that in details but the main goal is to maintain/expand the benefits that we offer to all developers and specifically to grow the open-source adoption and engagement,” he said, adding: “Initially clearly nothing will change and the DeepCode product will remain as a standalone product.”

“Both companies have a very clear vision and passion for developer-first and helping developers and security teams to further reduce risk and become more productive,” Paskalev added.

In a statement announcing the acquisition Snyk said it will be integrating DeepCode’s technology into its Cloud Native Application Security platform — going on to tout the benefits of bolting on its AI engine which it said would enable developers to “more quickly identify vulnerabilities”.

“DeepCode’s AI engine will help Snyk both increase speed and ensure a new level of accuracy in finding and fixing vulnerabilities, while constantly learning from the Snyk vulnerability database to become smarter,” wrote CEO Peter McKay. “It will enable an even faster integration for developers, testing for issues while they develop rather than as an additional step. And it will further increase the accuracy of our results, almost eliminating the need to waste time chasing down false positives.”

Among the features that have impressed Snyk about DeepCode, McKay lauded code scanning that’s “10-50x faster than alternatives”; and what he described as an “exceptional developer UX” — which allows for “high precision semantic code analysis in real-time” because scanning is carried out at the IDE and git level.

In its own blog post about the acquisition of the ETH Zurich spin-off, the university writes that the AI startup’s “decisive advantage” is that ‘it has developed the first AI system that can learn from billions of program codes quickly, enabling AI-​based detection of security and reliability code issues”.

“DeepCode is an excellent example of a modern AI system that can learn from data, program codes in this case, yet remain transparent and interpretable for humans,” it adds.

The university research work underpinning DeepCode dates back to 2013 — when its co-founders were figuring out how to combine data-​driven machine learning methods with semantic static code analysis methods based on symbolic reasoning, per the blog post.

DeepCode’s tech currently reaches more than 4M contributing developers, with more than 100,000 repositories subscribed to its service.

YouTube has been relatively quiet about its strategy to battle the flow of misinformation leading into the 2020 U.S. election, but the platform has a few new measures in store.

The video sharing site will begin attaching a box with vetted facts about mail-in voting on any videos that discuss the topic. The new mail-in voting info boxes will link out to the Bipartisan Policy Center, a bipartisan think tank.

YouTube first rolled these info panels out in 2018 and this year expanded them to address misinformation around COVID-19. The platform’s fact-checking info boxes resemble similarly unobtrusive info labels on Twitter and Facebook. While Twitter in particular has begun taking stronger action on election-related posts that break platform rules, social platforms have opted to broadly serve up contextual facts rather than targeting misinformation with more eye-catching warnings.

YouTube is a little late to the party, but it will also add a few features encouraging users to register to vote. Searches about voter registration will soon point users to an info box at the top of the page leading them to state-specific resources like registration deadlines and how to check voter registration status.

Similarly, queries about “how to vote” will point YouTube users to vetted information from non-partisan third-party partners about state voting rules, requirements and deadlines. These searches will surface voting resources in both English and Spanish. The company will also begin surfacing new information in searches for federal candidates for Congress or the presidency.

Like Snapchat, Twitter, and Facebook, YouTube is also launching its own set of original informational election videos that will package facts on voting in the U.S. The YouTube videos take a playful approach, spoofing popular video trends like cooking tutorials. YouTube will also add reminders during “key moments” for the 2020 election reminding users to register and telling them how and where to vote.

The last two regions of the UK now have an official coronavirus contacts tracing app, after the UK government pushed the button to launch the NHS COVID-19 app across England and Wales today.

Northern Ireland and Scotland launched their own official apps to automate coronavirus exposure notifications earlier this year. But the England and Wales app was delayed after a false start back in May. The key point is that the version that’s launched now has a completely different app architecture.

All three of the UK’s official coronavirus contacts tracing apps make use of smartphones’ Bluetooth radios to generate alerts of potential exposure to COVID-19 — based on estimating the proximity of the devices.

A very condensed version of how this works is that ephemeral IDs are exchanged by devices that come into close contact and stored locally on app users’ phones. If a person is subsequently diagnosed with COVID-19 they are able to notify the system, via their public health authority, which will broadcast the relevant (i.e. ‘risky’) IDs to all other devices.

Matching to see whether an app user has been exposed to any of the risky IDs also takes place locally — meaning exposure alerts are not centralized.

The use of this decentralized, privacy-preserving architecture for the NHS COVID-19 app is a major shift vs the original app which was being designed to centralize data with the public health authority.

However the government U-turned after a backlash over privacy and ongoing technical problems linked to trying to hack its way around iOS limits on background access to Bluetooth.

Switching the NHS COVID-19 app to a decentralized architecture has allowed it to plug into coronavirus exposure notification APIs developed by Apple and Google — resolving technical problems related to device detection which caused problems for the earlier version of the app.

In June, the government suggested there were issues with the APIs related to the reliability of estimating distance between devices. Asked about the reliability of the Bluetooth technology the app is used on BBC Radio 4’s Today program this morning, health secretary Matt Hancock said: “What we know for absolute sure is that the app will not tell you to self isolate because you’ve been in close contact with someone unless you have been in close contact. The accuracy with which it does that is increasing all of the time — and we’ve been working very closely with Apple and with Google who’ve done a great job in working to make this happen and to ensure that accuracy is constantly improved.”

The health secretary described the app as “an important tool in addition to all the other tools that we have” — adding that one of the reasons he’d delayed the launch until now was because he didn’t want to release an app that wasn’t effective.

“Everybody who downloads the app will be helping to protect themselves, helping to protect their loves one, helping to protect their community — because the more people who download it the more effective it will be. And it will help to keep us safe,” Hancock went on.

“One of the things that we’ve learnt over the course of the pandemic is where people are likely to have close contacts and in fact the app that we’re launching today will help to find more of those close contacts,” he added.

The England and Wales app does have some of unique quirks — as the government has opted to pack in multiple features, rather than limiting it to only exposure notifications.

These bells & whistles include: risk alerts based on postcode district; a system of QR code check-in at venues (which are now required by law to display a QR code for app users to scan); a COVID-19 symptom checker and test booking feature — including the ability to get results through the app; and a timer for users who have been told to self-isolate to help them keep count of the number of days left before they can come out of quarantine, with pointers offered to “relevant advice”.

“[The app] helps you to easily go to the pub or a restaurant or hospitality venue because you can then click through on the QR code which automatically does the contact tracing that is now mandatory,” said Hancock explaining the thinking behind some of the extra features. “And it helps by explaining what the rules are and the risk in your area for people easily and straightforwardly to be able to answer questions and consult on the rules so it has a whole series of features.”

It remains to be seen whether it was sensible product design to bolt on all these extras — and QR code venue check-ins could carry a risk of confusing users. However the government’s logic appears to be that more features will encourage more people to download the app and thereby increase uptake and utility.

Once widespread, the mandatory venue QR codes will also effectively double as free ads for the app so that could help drive downloads.

More saliently, the Bluetooth exposure notification system depends on an effective testing regime and will therefore be useless in limiting the spread of COVID-19 if the government can’t improve coronavirus test turnaround times — which it has been struggling with in recent weeks, as major backlogs have built up.

Internet law expert, professor Lilian Edwards — who was on an ethics advisory panel for the earlier, now defunct version of the England & Wales app — made this point to BBC Radio 4’s World at One program yesterday.

“My main concern is not the app itself but the interaction with the testing schedule,” she said. The app only sends out proximity warnings to the contacts on upload of a positive test. The whole idea is to catch contacts before they develop symptoms in that seven-day window when they won’t be isolating. If tests are taking five to seven days to get back then by that time the contacts will have developed symptoms and should hopefully be isolating or reporting their symptoms themselves. So if we don’t speed up testing then the app is functionally useless.”

Financial crime as a wider category of cybercrime continues to be one of the most potent of online threats, covering nefarious actives as diverse as fraud, money laundering and funding terrorism. Today, one of the startups that has been building data intelligence solutions to help combat that is announcing a fundraise to continue fueling its growth.

Ripjar, a UK company founded by five data scientists who previously worked together in British intelligence at the Government Communications Headquarters (GCHQ, the UK’s equivalent of the NSA), has raised $36.8 million (£28 million) in a Series B, money that it plans to use to continue expanding the scope of its AI platform — which it calls Labyrinth — and scaling the business.

Labyrinth, as Ripjar describes it, works with both structured and unstructured data, using natural language processing and an API-based platform that lets organizations incorporate any data source they would like to analyse and monitor for activity.

Sources close to the company say that the funding values the startup in the region of £100 million, or about $127 million. Ripjar is currently profitable, the company confirmed.

The funding is being led by Long Ridge Equity Partners, a specialist fintech investor, with previous investors Winton Capital Ltd and Accenture plc also participating. Accenture is a strategic partner: the consultancy/systems integrator uses Ripjar’s tech to work with a number of clients in the financial services sector. Ripjar also has government clients, where its platform is used for counterterrorism work. It declines to disclose any specific names but it does note that its extensive partner list also includes the likes of PWC, BAE Systems, Dow Jones and more.

“We are excited to partner with Long Ridge who bring expertise and resources in scaling fast-growing software companies,” said Jeremy Annis, the co-founder who is both the CEO and CTO of Ripjar. “This investment signals enormous confidence in our world-leading data intelligence technology and ability to protect companies and governments from criminal behaviour which threatens their assets and prosperity. With this funding, we will accelerate the expansion of Ripjar worldwide to provide our customers with the most advanced financial crime solutions, as well as creating new iterations of the Labyrinth platform.”

The startup says that it’s had its biggest year yet — no surprise, given the circumstances. Not only has there been huge shift to online transactions in 2020 because of the rise of the Covid-19 global health pandemic; but a tightening of the world economy has led to more financial scrambling and new nefarious activity, as well as criminal acts to profit from the instability.

That’s led to inking deals with six new enterprise customers and expanding deals with four existing major clients, and Ripjar said that it now has some 20,000 clients globally.

London, as one of the world’s financial centers, has developed a strong reputation for hatching and growing interesting fintech startups, and that has also meant the UK — which also has a strong talent base in artificial intelligence — has become very fertile ground also for startups building services to help protect those fintechs.

Ripjar’s raise, and rise, come within months of two other companies building AI to combat fraud and financial crime also raising money and growing. In July, ComplyAdvantage, which has also been building a database and platform to help combat financial crime, announced a $50 million raise. And a week before that, another UK company also building AI for financial and other cybercrime detection, Quantexa, raised $64.7 million.

Ripjar counts both of these, as well as bigger targets like Palantir, among its competitors. As is most likely, the big institutions that are grappling with financial crime are most likely using a several companies’ technology at the same time.

Indeed, with the issue of money laundering alone a $2 trillion problem (with only 1-2% of that ever identified and recovered), you can see why, at least for right now, banks, governments and others would be willing to put multiple resources on the problem to try to tackle it.

“Financial institutions, corporates and government agencies face ever-increasing risks associated with financial crime and cyber threats” said Kevin Bhatt, a Managing Partner at Long Ridge, in a statement. “We believe Ripjar is well-positioned to provide artificial intelligence solutions that will allow its clients to reduce the cost of compliance, while uncovering new threats through automation. We are incredibly excited to partner with Ripjar to support their continued growth and look forward to working closely with the Ripjar team as they expand to new geographies, customers, and verticals.”

B2B financial service start-up Finom — which provides online financial services for SMEs, freelancers, and the self-employed in Europe — has raised an additional $12 million (€10.3 million) to add to its previous Seed round of €6.5 million last April. The total funding raised in 2020 is now €16.8 million, and this is before the company has done a Series A round. Investors include Target Global (Germany), Cogito Capital (Poland), Entree Capital (Israel), Avala Capital (Germany), Tal Capital (India), and Adfirst Ventures FJ Labs (USA).

The additional investment round will allow Finom to extend its licensed activities, develop product and enter new European markets.

Founded in 2019, Finom is based out of the Netherlands and was founded by the team previously responsible to Modulbank, a B2B online banks in Russia. So far it providing an e-invoicing service in Italy, and will launch in France this October.

Similar to other online challenger banks aimed at SMEs, the company is aiming at countries where there is a relatively low penetration of online SME banking players, such as as Poland, Spain, Austria, Switzerland.

Four years after its foray into the Chinese market followed by rapid and cash-hemorrhaging expansion, WeWork decided to wind down its involvement in the country.

WeWork’s Chinese unit has secured a $200 million investment led by Shanghai-based equity firm Trustbridge Partners, which first backed WeWork China in its Series B round in 2018, the American co-working giant announced. What the release didn’t emphasize is that the latest financing effectively makes Trustbridge Partners the controlling shareholder, leaving WeWork with a minority stake in its Chinese entity.

The investment marks WeWork China’s transition from a subsidiary of a multinational into a Chinese-owned company — with a globally recognized brand, sort of like franchising.

WeWork China will continue its close cooperation with WeWork’s global headquarters to “ensure the consistency of the WeWork brand and satisfication of global members and employees,” a spokesperson said in a statement to TechCrunch.

Other changes are already underway, though. There have been layoffs as part of the sale and “many things remain uncertain,” said the person with knowledge of the matter. WeWork China declined to comment on the matter.

WeWork arrived in China at the height of the country’s co-working boom. Its brand, service and chic design have long attracted well-financed startups and open-minded big corps. Since 2016, more than 100 WeWork spaces have sprung up across 12 cities in China, including dozens it acquired from local rival Naked Hub. It now claims 65,000 members in the country.

It’s also launched a range of initiatives in China, including an on-demand service for customers who don’t want to commit to long-term leases, which could help drive in more revenue.

Globally, WeWork serves 612,000 members in 843 offices across 38 countries. China accounts for roughly one-eight of its locations, down from a share of one-sixth in 2018.

WeWork China is not only competing with cheaper, home-grown alternatives — both private and government-subsidized — but also dealing with a weakening economy in COVID-19 times and uncertain U.S.-China relations. Relinquishing operational control in a cash-burning market seems logical, given all the troubles it already faces back home.

Ahead of its planned initial public offering, which was later postponed, WeWork said trade policy uncertainty could have an adverse impact on its business. It also highlighted China, a lower-priced market, as a drag on its profit margin.

Following the investment, Trustbridge Partners will launch an extensive localization makeover for WeWork China, from “decision-making and management, product and business, through to operations and productivity,” said the WeWork China representative. The new owner will also seek partnerships with local communities, real estate firms and Chinese enterprises during the process.

WeWork China gets a new boss as a result of the sale. Michael Jiang, ann operating partner at Trustbridge Partners, will serve as the acting chief executive. Jiang was previously a senior vice presidnet at Meituan, China’s food delivery and on-demand services giant.