Month: September 2020

The tagline from today’s announcement from the United States Attorney’s office for the Southern District of New York says it all: “Adam Rogas Allegedly Raised $123 Million from Investors Using Financial Statements that Showed Tens of Millions of Dollars of Revenue and Assets that Did Not Exist”.

Rogas, the co-founder and former chief executive and chief financial officer and board member of the Las Vegas-based fraud prevention company, NS8, was arrested by the Federal Bureau of Investigation and charged in Manhattan court with securities fraud, fraud in the offer of sale of securities, and wire fraud earlier today.

Last week, the company laid off hundreds of staff as reports of an investigation by the Securities and Exchange Commission surfaced, according to a report in Forbes.

“This is a rapidly evolving situation,” Lightspeed Ventures told Forbes in a statement. “We are shocked by the news and have taken steps to inform our LPs. It would be premature to comment further at this time.” Lightspeed Ventures helped lead NS8’s $123 million Series A this June. Other investors include Edison Partners, Lytical Ventures, Sorenson Ventures, Arbor Ventures, Hillcrest Venture Partners, Blu Venture Investors, and Bloomberg Beta, per Crunchbase data.

The allegations are, indeed, shocking.

“As alleged, Adam Rogas was the proverbial fox guarding the henhouse,” said Audrey Strauss, the acting U.S. Attorney for the Southern District of New York, in a statement. “While raising over $100 million from investors for his fraud prevention company, Rogas himself allegedly was engaging in a brazen fraud.  Today’s arrest of Rogas ensures that he will be held accountable for his alleged scheme.”

Allegedly, while Rogas was in control of the bank accounts and spreadsheets that detailed its transactions with customers, he cooked the books to show millions in transactions that did not exist.

From January 2019 through February 2020, the FBI alleges that somewhere between 40 percent and 95 percent of the purported total assets on NS8’s balance sheet were fictitious, according to the statement. Over the same period bank Rogas altered bank statements to reflect $40 million in revenue that simply were not there, according to the Justice Department’s allegations.

On the back of that fake financial data, NS8 was able to raise over $120 million from some top tier investment firms including Lightspeed Venture Partners and AXA Ventures. 

Rogas managed to hoodwink not just the investment firms, but the auditors who were conducting due diligence on their behalf. After the round was completed, NS8 did a secondary offering which let Rogas cash out of $17.5 million through personal sales and through a company he controlled, according to the statement from the DOJ.

“It seems ironic that the co-founder of a company designed to prevent online fraud would engage in fraudulent activity himself, but today that’s exactly what we allege Adam Rogas did. Rogas allegedly raised millions of dollars from investors based on fictitious financial affirmations, and in the end, walked away with nearly $17.5 million worth of that money,” said FBI Assistant Director William F. Sweeney Jr. “Within our complex financial crimes branch, securities fraud cases remain among our top priorities. We’ve seen far too many examples of unscrupulous actors engaging in this type of criminal activity, and we continue to work diligently to weed out this behavior whenever and wherever we find it.”

Funding comes in stages.

Understanding these will help you know when and where to go for funding at each stage of your business. Further, it will help you communicate with funders more precisely. What you think when you hear “seed funding” and “A rounds” might be different from what investors think. You both need to be on the same page as you move forward.

Early money stage

The first stage is early money, when cash is invested in exchange for large amounts of equity. This cash, which ranges between $1,000 and $500,000, typically, comes from the three Fs: friends, family and (we don’t like this nomenclature) fools. The last-named folks are essentially “giving” you cash, and these investors are well-aware that you will most likely fail — hence, “fools.”

Your earliest investors should reap the biggest rewards because they are taking the most risk. The assumption is that, ultimately, you’ll make good or improve their investment. The reality, they understand, is that you probably won’t.

Your first money may come from bootstrapping or F&F, and your first big checks may come from an accelerator that pays you about $50,000 for a fairly large stake in your company. Accelerators are essentially greenhouses — or incubators — for startups. You apply to them. If accepted, you get assistance and a small amount of funding.

Why do investors give early money? Because they trust you, they understand your industry and they believe you can succeed. Some are curious about what you are doing and want to be close to the action. Others want to lock you up in case you are successful. In fact, many accelerators have this in mind when they connect with new startups. At its core, the funding landscape is surprisingly narrow. When you begin fundraising, you’ll hear a lot of terminology including descriptions of various funding categories and investors. Let’s talk about them one by one.

Bootstrapping

As the old saying goes, if you need a helping hand, you’ll find it at the end of your arm. With that adage in mind, let’s begin with bootstrapping.

Bootstrapping comes from the concept of “pulling yourself up by your own bootstraps,” a comical image that computer scientists adapted to describe how a computer starts from a powered-down state. In the case of an entrepreneur, bootstrapping is synonymous with sweat equity — your own work and money that you put into your business without outside help.

Bootstrapping is often the only way to begin a business as an entrepreneur. By bootstrapping, you will find out very quickly how invested you are, personally, in your idea.

Bootstrapping requires you to spend money or resources on yourself. This means you either spend your own cash to build an early version of your product, or you build the product yourself, using your own skills and experience. In the case of service businesses — IT shops, design houses and so on — it requires you to quit your day job and invest, full time, in your own business.

Bootstrapping should be a finite action. For example, you should plan to bootstrap for a year or less and plan to spend a certain amount of money bootstrapping. If you blow past your time or money budget with little to show for your efforts, you should probably scrap the idea.

Some ideas take very little cash to bootstrap. These businesses require sweat equity — that is, your own work on a project that leads to at least a minimum viable product (MVP).

Consider an entrepreneur who wants to build a new app-based business in which users pay (or will pay) for access to a service. Very basic Apple iOS and Google Android applications cost about $25,000 to build, and they can take up to six months to design and implement. You could also create a simpler, web-based version of the application as a bootstrapping effort, which often takes far less cash — about $5,000 at $50 an hour.

You can also teach yourself to code and build your MVP yourself. This is often how tech businesses begin, and it says plenty about the need for founders to code or at least be proficient in the technical aspects of their business.

You can’t bootstrap forever. One entrepreneur we encountered was building a dating app. She had dedicated her life to this dating app, spending all of her money, quitting her job to continue to build it. She slept on couches and told everyone she knew about the app, networking to within an inch of her life. Years later it is a dead app in an app store containing millions of dead apps. While this behavior might get results one in a thousand times, few entrepreneurs can survive for a year of app-induced penury, let alone multiple years.

Another entrepreneur we knew was focused on nanotubes. He spent years rushing here and there, wasting cash on flights and taking meetings with people who wanted to sell him services. Many smart investors told him that he should go and work internally at a nanotube business and then branch out when he was ready. Instead, he attacked all angles for years, eventually leading to exhaustion. He’s still at it, however, which is a testament to his intensity.

The headlines aren’t always kind to the National Security Agency, a spy agency that operates almost entirely in the shadows. But a year ago, the NSA launched its new Cybersecurity Directorate, which in the past year has emerged as one of the more visible divisions of the spy agency.

At its core, the directorate focuses on defending and securing critical national security systems that the government uses for its sensitive and classified communications. But the directorate has become best known for sharing some of the more emerging, large-scale cyber threats from foreign hackers. In the past year the directorate has warned against attacks targeting secure boot features in most modern computers, and doxxed a malware operation linked to Russian intelligence. By going public, NSA aims to make it harder for foreign hackers to reuse their tools and techniques, while helping to defend critical systems at home.

But six months after the directorate started its work, COVID-19 was declared a pandemic and large swathes of the world — and the U.S. — went into lockdown, prompting hackers to shift gears and change tactics.

“The threat landscape has changed,” Anne Neuberger, NSA’s director of cybersecurity, told TechCrunch at Disrupt 2020. “We’ve moved to telework, we move to new infrastructure, and we’ve watched cyber adversaries move to take advantage of that as well,” she said.

Publicly, the NSA advised on which videoconferencing and collaboration software was secure, and warned about the risks associated with virtual private networks, of which usage boomed after lockdowns began.

But behind the scenes, the NSA is working with federal partners to help protect the efforts to produce and distribute a vaccine for COVID-19, a feat that the U.S. government called Operation Warp Speed. News of NSA’s involvement in the operation was first reported by Cyberscoop. As the world races to develop a working COVID-19 vaccine, which experts say is the only long-term way to end the pandemic, NSA and its U.K. and Canadian partners went public with another Russian intelligence operation aimed at targeting COVID-19 research.

“We’re part of a partnership across the U.S. government, we each have different roles,” said Neuberger. “The role we play as part of ‘Team America for Cyber’ is working to understand foreign actors, who are they, who are seeking to steal COVID-19 vaccine information — or more importantly, disrupt vaccine information or shake confidence in a given vaccine.”

Neuberger said that protecting the pharma companies developing a vaccine is just one part of the massive supply chain operation that goes into getting a vaccine out to millions of Americans. Ensuring the cybersecurity of the government agencies tasked with approving a vaccine is also a top priority.

Here are more takeaways from the talk, and you can watch the interview in full below:

Why TikTok is a national security threat

TikTok is just days away from an app store ban, after the Trump administration earlier this year accused the Chinese-owned company of posing a threat to national security. But the government has been less than forthcoming about what specific risks the video sharing app poses, only alleging that the app could be compelled to spy for China. Beijing has long been accused of cyberattacks against the U.S., including the massive breach of classified government employee files from the Office of Personnel Management in 2014.

Neuberger said that the “scope and scale” of TikTok’s app’s data collection makes it easier for Chinese spies to answer “all kinds of different intelligence questions” on U.S. nationals. Neuberger conceded that U.S. tech companies like Facebook and Google also collect large amounts of user data. But that there are “greater concerns on how [China] in particular could use all that information collected against populations other than its own,” she said.

NSA is privately disclosing security bugs to companies

The NSA is trying to be more open about the vulnerabilities it finds and discloses, Neuberger said. She told TechCrunch that the agency has shared a “number” of vulnerabilities with private companies this year, but “those companies did not want to give attribution.”

One exception was earlier this year when Microsoft confirmed NSA had found and privately reported a major cryptographic flaw in Windows 10, which could have allowed hackers to run malware masquerading as a legitimate file. The bug was so dangerous that NSA reported the vulnerability to Microsoft, which patched the bug.

Only two years earlier, the spy agency was criticized for finding and using a Windows vulnerability to conduct surveillance instead of alerting Microsoft to the flaw. The exploit was later leaked and was used to infect thousands of computers with the WannaCry ransomware, causing millions of dollars’ worth of damage.

As a spy agency, NSA exploits flaws and vulnerabilities in software to gather intelligence on the enemy. It has to run through a process called the Vulnerabilities Equities Process, which allows the government to retain bugs that it can use for spying.

As people begin to process the announcement from the U.S. Department of Commerce detailing how it plans, on grounds of national security, to shut down TikTok and WeChat — starting with app downloads and updates for both, plus all of WeChat’s services, on September 20, with TikTok following with a shut down of servers and services on November 12 — the CEO of Instagram and the ACLU are among those that are speaking out against the move.

The CEO of Instagram, Adam Mosseri, wasted little time in taking to Twitter to criticize the announcement. His particular beef is the implication the move will have for US companies — like his — that also have built their businesses around operating across national boundaries.

In essence, if the U.S. starts to ban international companies from operating in the U.S., then it opens the door for other countries to take the same approach with U.S. companies.

Meanwhile, the ACLU has been outspoken in criticizing the announcement on the grounds of free speech.

“This order violates the First Amendment rights of people in the United States by restricting their ability to communicate and conduct important transactions on the two social media platforms,” said Hina Shamsi, director of the American Civil Liberties Union’s National Security Project, in a statement today.

Shamsi added that ironically, while the U.S. government might be crying foul over national security, blocking app updates poses a security threat in itself.

“The order also harms the privacy and security of millions of existing TikTok and WeChat users in the United States by blocking software updates, which can fix vulnerabilities and make the apps more secure. In implementing President Trump’s abuse of emergency powers, Secretary Ross is undermining our rights and our security. To truly address privacy concerns raised by social media platforms, Congress should enact comprehensive surveillance reform and strong consumer data privacy legislation.”

Vanessa Pappas, who is the acting CEO of TikTok, also stepped in to endorse Mosseri’s words and publicly asked Facebook to join TikTok’s litigation against the U.S. over its moves.

“We agree that this type of ban would be bad for the industry. We invite Facebook and Instagram to publicly join our challenge and support our litigation,” she said in her own tweet responding to Mosseri, while also retweeting the ACLU. (Interesting how Twitter becomes Switzlerland in these stories, huh?) “This is a moment to put aside our competition and focus on core principles like freedom of expression and due process of law.”

The move to shutter these apps has been wrapped in an increasingly complex set of issues, and these two dissenting voices highlight not just some of the conflict between those issues, but the potential consequences and detriment of acting based on one issue over another.

The Trump administration has stated that the main reason it has pinpointed the apps has been to “safeguard the national security of the United States” in the face of nefarious activity out of China, where the owners of WeChat and TikTok, respectively Tencent and ByteDance, are based:

“The Chinese Communist Party (CCP) has demonstrated the means and motives to use these apps to threaten the national security, foreign policy, and the economy of the U.S.,” today statement from the U.S. Department of Commerce noted. “Today’s announced prohibitions, when combined, protect users in the U.S. by eliminating access to these applications and significantly reducing their functionality.”

In reality, it’s hard to know where the truth actually lies.

In the case of the ACLU and Mosseri’s comments, they are highlighting issues of principles but not necessarily precedent.

It’s not as if the US would be the first country to take a nationalist approach to how it permits the operation of apps. Facebook and its stable of apps, as of right now, are unable to operate in China without a VPN (and even with a VPN things can get tricky). And free speech is regularly ignored in a range of countries today.

But the US has always positioned itself as a standard bearer in both of these areas, and so apart from the self-interest that Instagram might have in advocating for more free market policies, it points to wider market and business position that’s being eroded.

The issue, of course, is a little like an onion (a stinking onion, I’d say), with well more than just a couple of layers around it, and with the ramifications bigger than TikTok (with 100 million users in the U.S. and huge in pop culture beyond even that) or WeChat (much smaller in the U.S. but huge elsewhere and valued by those who do use it).

The Trump administration has been carefully selecting issues to tackle to give voters reassurance of Trump’s commitment to “Make America Great Again,” building examples of how it’s helping to promote U.S. interests and demote those that stand in its way. China has been a huge part of that image building, positioned as an adversary in industrial, defence and other arenas. Pinpointing specific apps and how they might pose a security threat by sucking up our data fits neatly into that strategy.

But are they really security threats, or are they just doing the same kind of nefarious data ingesting that every social app does in order to work? Will the US banning them really mean that other countries, up to now more in favor of a free market, will fall in line and take a similar approach? Will people really stop being able to express themselves?

Those are the questions that Trump has forced into the balance with his actions, and even if they were not issues before, they have very much become so now.

In the midst of IPO week we have to add another name to our future debuts’ list, namely Chime, which announced a huge new round of capital today. The $485 million Series F values the consumer fintech giant at $14.5 billion, a huge figure given that Chime was most recently worth $5.8 billion after raising $700 million last December.

Even more stark is the company’s $1.5 billion valuation set in early 2019. From $1.5 billion to $14.5 billion in less than two years is quite a run for any startup. Powering the latest round there were a host of familiar names, including Tiger, ICONIQ and General Atlantic, along with Dragoneer and DST Global. Names I’m less familiar with like Whale Rock Capital and Access Technology Ventures also took part.

Tucked inside a CNBC article that broke the story was news that Chime is now EBITDA profitable and could be “IPO-ready” in its CEO’s eyes in around a year’s time.

TechCrunch reached out to Chime for clarification on the EBITDA point, asking if the figure is adjusted or not, as many EBTIDA metrics remove the cost of share-based compensation given to their employees. According to Chime, the metric is “true EBITDA,” to which we award an extra five points. In response to a growth question, Chime said that its “transaction and top-line” has tripled compared to the year ago period.

The Chime round and news of its nascent, non-GAAP profitability comes on the heels of a grip of reports on the financial health of a number of European neobanks, or challenger banks as they are often called. The numbers showed huge growth, and steep losses. If Chime’s numbers hold up when we get its eventual S-1 — start your countdowns — it will be among the healthiest of the startups in its cohort in financial terms, we reckon.

Finally, the company is trying to paint itself as something of a software company, and not a fintech company. This is a move to attract better revenue multiples when it comes time to defend its new $14.5 billion valuation. Software companies have flat-out bonkers multiples these days, as evinced by the blockbuster Snowflake debut.

Here’s how Chime thinks of itself, via CNBC:

“We’re more like a consumer software company than a bank,” Britt said. “It’s more a transaction-based, processing-based business model that is highly predictable, highly recurring and highly profitable.”

The key phrases there are “software company” and “highly predictable, highly recurring and highly profitable.” In effect Chime will argue that interchange revenues should fit under the SaaS umbrella given their regularity. Investors will decide how to view that pitch. If it works, maybe fintechs are more valuable than expected. And those fintechs with obvious SaaS components, like Acorns, could be sitting pretty when it comes to making the fintech v. SaaS argument.

Regardless, it’s another huge round for Chime, which makes it a good day for the highly-valued fintech sector.

Unity Software, which sells a game development toolkit primarily for mobile phone app developers, raised $1.3 billion in its initial public offering.

The company, which will begin trading today with the ticker symbol “U”, priced its shares at the top end of its expected range, selling 25 million shares at $52 per share.

The company’s final IPO price came in far ahead of what Unity initially anticipated. The company initially expected to price its public offering between $34 and $42 per share, later raising its offering to $44 and $48 per share.

The public offering values the company at around $13.7 billion, a good step-up from its final private valuation of around $6 billion.

For Unity, the journey to the public markets has been long. The company was founded and as a business that creates software for developers to make and manage their games. In that sense, the company is more like an Adobe or an Autodesk, than a game studio like Activision Blizzard or King.com.

As TechCrunch explained in an earlier story profiling Unity and its public offering:

Users import digital assets (often from Autodesk’s Maya) and add logic to guide each asset’s behavior, character interactions, physics, lighting and countless other factors that create fully interactive games. Creators then export the final product to one or more of the 20 platforms Unity supports, such as Apple iOS and Google Android, Xbox and Playstation, Oculus Quest and Microsoft HoloLens, etc.

The company organizes its business into two areas: tools for content creation and tools for managing and monetizing content. In actuality, the revenue from the managing and monetizing content actually outstrips the revenue the company makes from content creation.

The Unity public offering will be the first big test of investor appetite for this new approach to game development and the business-to-business tools that enable the new wave of gaming.

And it’s important to note (as we do here) that Unity doesn’t generate a lot of revenue off of its position as arguably the most popular game development platform. In fact, Unity has been pretty bad at monetizing the game development engine. It’s the ancillary services for in-game advertising, player matchmaking and other features that have made Unity the bulk of its money.

And there’s still the company’s biggest competitor, Epic Games, waiting in the wings. Here again, the analysis from TechCrunch’s previous reporting is helpful.

[Unity] also will want to benefit from comparisons to Epic Games, given [Epic] was just valued at $17 billion and has much greater public name recognition and hype.

To accomplish this, Unity seems to be underplaying the significance of its advertising business (adtech companies trade at much lower revenue multiples). In the past, Unity referred to its operations in three divisions: Create, Operate and Monetize. At the start of August, the SVP and VP leading the Monetize business switched titles to SVP and VP of Operate Solutions, respectively, and then Unity reported the monetization business as a subset of its Operate division in the S-1.

Consolidating Operate and Monetize into one reporting segment obscures specifics about how much revenue the ads business and the live services portfolio each contribute. As noted above, this segment appears to be dominated by ad revenue which means anywhere from 30% to 50% of Unity’s overall revenue is from ads. That should reduce the revenue multiple public investors are willing to value Unity at relative to recent and upcoming SaaS IPOs.

There isn’t a publicly-traded game engine company to directly benchmark Unity against, nor a roster of equity research analysts at big banks who have expertise in gaming infrastructure. Adobe and Autodesk appear to be relevant businesses to benchmark Unity against with regard to the nature of the non-advertising components of the business and Unity’s stated vision. Compared to Unity, those companies have lower growth rates and generate operating profits though; more recent public listings of SaaS companies like Zscaler and Cloudflare are likely to be valuation comps by investors to the extent they focus on its subscription and usage-based revenue streams since their revenue growth and margins are closer to Unity’s.

Both Epic and Unity are moving to meet each other, Epic by moving downstream, and Unity by moving to higher end applications. And both companies are looking beyond core gaming at other applications as well.

As companies like Facebook, Microsoft, Niantic and others evolve their augmented and virtual reality ecosystems, Epic and Unity may find new worlds to conquer. If public markets can find the cash.

Outschool, which started in 2015 as a platform for homeschooled students to bolster their extracurricular activities, has dramatically widened its customer base since the coronavirus pandemic began.The platform saw its total addressable market increase dramatically as students went home or campus to abide by COVID regulations instituted by the CDC.

Suddenly, live, small-group online learning classes became a necessity for students. Outschool’s services, which range from engineering lessons through Lego challenges to Spanish teaching by Taylor Swift songs, are now high in demand.

“When the CDC warned that school closures may be required, they talked about ‘internet-based tele-schooling,’” co-founder Amir Nathoo said. “We realized they meant classes over video chat, which is exactly what we offer.”

From August 2019 to August 2020, the online educational class service saw a more than 2,000% increase in bookings. But the surge isn’t just a crop of free users piling atop the platform. Outschool’s sales this year are around $54 million, compared to $6.5 million the year prior. It turned its first profit as a result of the COVID-19 crisis, and is making more than $100 million in annual run rate.

While the profitability and growth could be a signal of the COVID-19 era, today Outschool got a vote of confidence that it isn’t just a pandemic-era boom. Today, Jennifer Carolan of Reach Capital announced at TechCrunch Disrupt that Outschool has raised a $45 million Series B round, bringing its total known capital to $55 million.

The round was led by Lightspeed Venture Partners, with participation from Reach Capital, Union Square Ventures, SV Angel, FundersClub, Y Combinator and others.

The cash gives Outschool the chance to grow its 60-person staff, which started at 25 people this year.

Founder Amir Nathoo was programming computer games from the age of five. So when it came to starting his own company, creating a platform that helped other kids do the same felt right.

In 2015, Nathoo grabbed Mikhail Seregine, who helped build Amazon Mechanical Turk and Google Consumer Surveys, and Nick Grandy, a product manager at Clever, another edtech company and YC alum. The trio drummed up a way to help students access experiences they don’t get in school.

To gauge interest, the company tried in-person classes in the SF Bay area, online content and tested across hundreds of families. Finally, they started working with homeschoolers as an early adopter audience, all to see if people would pay for non-traditional educational experiences.

“Homeschooling was interesting to us because we believed that if some new approach is going to change our education system radically for the better, it was likely that it would start outside the existing system,” Nathoo said.

He added that he observed that the homeschooling community had more flexibility around self-directed extracurricular activities. Plus, those families had a bigger stake in finding live, small-group instruction, to embed in days. The idea landed them a spot in Y Combinator in 2016, and, upon graduation, a $1.4 million seed round led by Collab+Sesame.

“We’d all been on group video calls with work, but we hadn’t seen this format of learning in K12 before,” he said. Outschool began rolling out live, interactive classes in small groups. It took off quickly. Sales grew from $500,000 in 2017 to over $6 million in 2019.

The strategy gave Outschool an opportunity to raise a Series A from Reach Capital, an edtech-focused venture capital fund, in May 2019. They began thinking outwards, past homeschooling families: what if a family with a kid in school wants extra activities, snuck in afterschool, on weekends or on holidays?

Today feels remarkably different for the startup, and edtech more broadly. Nathoo says that 87% of parents who purchase classes on Outschool have kids in school. The growth of Outschool’s total addressable market comes with a new set of challenges and goals.

When the pandemic started, Outschool had 1,000 teachers on its platform. Now, its marketplace hosts 10,000 teachers, all of whom have to get screened.

“That has been a big challenge,” he said. “We aren’t an open marketplace, so we had to rapidly scale our supply and quality team within our organization.” While that back-end work is time-consuming and challenging, the NPS score from students has remained high, Nathoo noted.

Outschool has a number of competitors in the live learning space. Juni Learning, for example, sells live small-group classes on coding and science. The company raised $7.5 million, led by Forerunner Ventures, and has around $10 million in ARR. Note earlier that Outschool is at $100 million in ARR.

“We provide a much broader range of learning options than Juni, which is focused just on coding classes,” Nathoo said. Outschool currently lists more than 50,000 classes on its website.

Varsity Tutors is another Outschool competitor, which is more similar to Outschool. Varsity Tutors sells online tutoring and large-group classes in core subjects such as Math and English. Nathoo says that Outschool’s differentiation remains in its focus of small-group teaching and a variety of topics.

As for what’s ahead for Outschool, Nathoo flirts with the idea of contradiction: what if the platform goes in schools?

“When I think about our strategy going forward, I think of new types of classes, international embedding and embedding ourselves back into school,” he said.

Outschool might use its growing consumer business as an engine to get into school districts, which are notoriously difficult to land deals with due to small budgets. But, to Nathoo, it’s important to get into schools to increase access to learning.

“Our vision is to build a global education community that supplements local school,” he said.

NASA is going to be testing out a new precision landing system designed for use on the tough terrain of the Moon and Mars for the first time during an upcoming mission of Blue Origin’s New Shepard reusable suborbital rocket. The ‘Safe and Precise Landing – Integrated Capabilities Evolution’ (SPLICE) system is made up of a number of lasers, an optical camera, and a computer to take all the data collected by the sensors and process it using advanced algorithms, and it works by spotting potential hazards, and adjusting landing parameters on the fly to ensure a safe touchdown.

SPLICE will get a real-world test of three of its four primary subsystems during a New Shepard mission to be flown relatively soon. The Jeff Bezos -founded company typically returns its first-stage booster to Earth after making its trip to the very edge of space, but on this test of SPLICE, NASA’s automated landing technology will be operating on board the vehicle the same way they would when approaching the surface of the Moon or Mars . The elements tested will include ‘terrain relative navigation,’ Doppler radar, and SPLICE’s descent and landing computer, while a fourth major system – lidar-based hazard detection – will be tested on future planned flights.

Currently, NASA already uses automated landing for its robotic exploration craft on the surface of other planets, including the Perseverance rover headed to Mars. But a lot of work goes into selecting a landing zone with a large area of unobstructed ground that’s free of any potential hazards in order to ensure a safe touchdown. Existing systems can make some adjustments, but they’re relatively limited in that regard.

SPLICE is designed to enable more exact landings, and ones that can deal with more nearby hazards, enabling exploration in areas that were previously considered off-limits for landers. That could greatly expand our ability to gain more knowledge and better understanding of the Moon and Mars, which is particularly important as we continue to work towards more human exploration and even potential colonization.

The lidar system mentioned above is a key new ingredient in these SPLICE tests, since we don’t actually know in great detail how well lidar will perform with the terrain on Mars and the Moon, where reflectivity could be quite different from what it is here on Earth within our own atmosphere. Still, NASA is confident it should provide much better precision than radar-based methods for surface mapping and feature detection.

While Checkout.com has kept a low profile for many years, the company raised $380 million within a year and reached an impressive valuation of $5.5 billion. It wants to build a one-stop shop for all things related to payments, such as accepting transactions, processing them and detecting fraud.

You might think that it sounds a bit like Stripe. In an interview at TechCrunch Disrupt, I asked founder and CEO Guillaume Pousaz what makes Checkout.com different from Stripe, Adyen and other companies in the payment space. It comes down to a very different philosophy when it comes to product and market approach.

“We only do enterprise. We really only work with the big merchants. There are a few exceptions here and there but it’s mostly enterprise-only and it’s purely online,” Pousaz said.

“I once met [Stripe CEO] Patrick Collison and I joked with him. I said you might have a million merchants, I have 1,200 merchants but I know every single one by name and they all process tens of millions every year. So I think it’s just a different business,” he added later in the interview.

Checkout.com now has a ton of money sitting in its bank account, but it has been a long and slow journey to reach that level. The company has been around for many years and reached profitability in 2012. It has been spending very meticulously over the years.

When talking about the early days of the company, Pousaz said the team grew really slowly. “We can hire one employee this month. Now we can hire two employees this month,” he said.

Today, the company still tries to remain as lean as possible. “It’s really a matter of discipline. All these companies, they raise a lot of money, they spend a lot of money and I don’t challenge that model. For us, embedding that discipline and frugality in the company in how we run it is something that was important to us,” Pousaz said.

“There’s no problem with spending. Just make sure that when you’re spending, you’re wise about it. You just don’t spray and pray. You see this unfortunately too much with tech companies.”

That’s why Checkout.com mostly invests in its own product. Nearly two-thirds of the company is working in product, IT and engineering. Only 13% of the company is working in sales, which is much less than some of its competitors.

But why did Checkout.com raise hundreds of millions of dollars then? “At some point, you need validation. And the validation was really important for us. When you have Insight, DST, Coatue, GIC, Blossom it changes your dimension,” Pousaz said.

When talking about regulators, Checkout.com has licenses in Brazil, the U.K. and France (for contingency), Hong Kong, Singapore, etc. It’s a never-ending process as the company is still working on licenses in other key markets, such as Japan.

“These regulators are super thorough. You don’t pass because you’re a nice guy, you pass because you have the right processes,” Pousaz said.

I challenged that notion and mentioned the Wirecard collapse. He obviously thinks that Wirecard and Checkout.com are in a different position right now.

“All my money is sitting with JP Morgan, it’s pretty simple. There’s no bank account in the Philippines and funny stuff,” Pousaz said. “The Wirecard story is so big that the real question is — go and ask the question to the auditors. Because the auditors that I have, which for the record is PwC, ask me to show them the bank statements and everything. And there are super thorough, it’s a super long process.”

“How did the Wirecard story happen? I don’t know,” he added.

For a company vaunted for its clandestine government work and strong engineering culture, you can’t help but wonder if the government’s bureaucratic norms and paperwork pushing are starting to flood into the Shire.

When most companies go public, they file a Form S-1 with the SEC, wait a few weeks through the investor road show, and then submit an amended filing with the final details of the offering before trading commences. Simple, easy, effective. No one wants to mess with the SEC, and so top securities law firms work diligently to ensure that everything is in order when that initial form is filed.

Palantir has done nothing of the sort. It filed a confidential draft registration statement back in July. It filed an amendment. It filed another amendment. It filed its official S-1. Then an amendment, and an amendment, and an amendment, and an amendment. And it’s still not trading, so another amendment is in the offing.

Palantir is not a complicated business. It’s a software business (mostly) today with 125 customers, making real revenues, and with a decent story to tell investors. And yet, you can’t help but look agog at the level of complication and paperwork the company has created for itself by just trying to be a little bit different from everyone else.

One part of that compilation was its invention of a direct listing with a lockup. When a company directly lists on a stock exchange, recent tradition holds that insiders are not locked up, which means that they will be allowed to start buying and selling their shares as soon as the company hits the market. For reasons that are known only to Palantir, the company decided to mostly block employee trading, limiting the float that can be expected when it begins trading.

So in today’s 4th amendment to its S-1, we have some updated figures of what the lockup will look like. Palantir will lock up about 80% of shares in the company, allowing about 380 million shares to trade on opening day. Eight million more shares will come on the market in November when certain restricted stock units vest for company employees, and other vested RSUs will also not be beholden to the lockup agreement as they come next year.

This direct listing with lockup was compilation number one. Complication number two is the absolute byzantine ownership structure that Palantir has selected for itself. In a note added this morning in its filing, the company admits that “This is a novel capital structure that differs significantly from those of other companies that have dual or multiple class capital structures.” That’s quite an understatement.

In Palantir’s governance structure, it will have three classes of shares. Class A shares have 1 vote, Class B shares have 10 votes, and Class F shares (for “Founder”) have a variable number of votes that will ensure that Palantir’s founders Alex Karp, Stephen Cohen and Peter Thiel maintain 49.999999% control of the company essentially in perpetuity (or at least, until they want to give it up by selling).

Today, the company provided a handy table on exactly what that all means, since it’s not simple at all. Let’s take a look at a cleaned-up version of their voting table, based on which founders are employed at Palantir at a specific time:

The key here is that so long as the three founders are all actively working at Palantir, their ownership is meant to be capped at 49.999999% of the company. In other words, any other shares they own of the Class A and Class B varietals are included within that ownership number. This is something I have gotten wrong, so mea culpa, although frankly, if you need to file a half dozen amendments to the SEC to explain what you are doing, I feel like I am in good company.

Where it gets bizarre is if one of the three founders leaves. In those scenarios, the three of them collectively will have even more power than if they all actually work at the company simultaneously. For instance, if Thiel leaves the company (which in his case means resigning from the board), the three founders actually increase their voting power collectively from 49.999999% to 64.999999%, assuming Thiel doesn’t sell any of his own shares.What do those calculations ultimately mean? Well, Palantir was graceful enough to put an explanation in its fourth amendment on exactly what it all boils down to:

While the Board retains the power to hire and remove members of our management, which currently includes two of our Founders, the Founders would continue to beneficially own shares of Class F common stock and Class B common stock and be able to exercise control over matters submitted to a vote of our stockholders so long as our Founders who are then party to the Founder Voting Agreement and certain of their affiliates collectively meet the Ownership Threshold on the applicable record date, even if one or more of our Founders resigns from the Company or is terminated. (Emphasis mine)

In other words, if you strike them down, they shall become more powerful than you can possibly imagine, Shareholder.

Palantir in this filing also made clear that there is at least some floor by which the three founders have to collectively own the company. With all three of them onboard, they have to maintain ownership over 100 million shares of the company, or slightly less than 5%. So they can’t, say, own 0.0001% of the company and control 49.999999% of the vote. What a relief!

Look, founder control is a mainstay of modern Silicon Valley tech IPOs. But we’ve never seen such an extensive, interlocking set of systems designed to make a company absolutely impregnable to any form of external governance. I can understand the concerns with Palantir, given its work, its controversies, and the extreme media attention it receives. It probably needs some form of governance that provides it stability amidst the maelstrom. But all of this sets such a bad precedent for the rest of Silicon Valley that I hope it’s recognized in their share price.