Year: 2020

After reading a review of Amazon’s new fitness tracker, Minnesota Senator Amy Klobuchar penned an open letter.

“Recent reports have raised concerns about the Halo’s access to this extensive personal and private health information,” the lawmaker wrote to U.S. Department of Health and Human Services Secretary Alex Azar. “Among publicly available consumer health devices, the Halo appears to collect an unprecedented level of personal information.”

The senator is far from the first critic to express concern about the fitness tracker — the Halo raised eyebrows the moment it was unveiled in August. She is, however, one of the few critics in a position to actually do something about the device, which features both an always-on microphone and asks wearers to perform a full body scan.

“I’m wearing my Fitbit,” Klobuchar says in an interview with TechCrunch. She takes a moment before correcting herself. “Oh, I didn’t put it on this morning. That’s very bad. I wear a Fitbit nearly every day. I sometimes have gone years without doing it, but since, I’d say, about February I’ve been wearing it.”

The senator’s not alone, certainly. According to a January 2020 report from Pew, roughly one-in-five U.S. adults regularly wear a smartwatch or fitness tracker. I’m wearing one as I type this, and chances are pretty good you’re wearing one as well. The Halo may cross a line for some, but the device is far from the first tracker to raise concern among privacy advocates. Klobuchar says that while the Halo’s specific level of data collection, “just cries out for some kind of rules and regulations in place,” stronger scrutiny and regulation is needed for the category across the board.

“I really do think there’s got to be rules in place,” she says. “The reason I’m writing HHS is because they should play a larger role in ensuring data privacy when it comes to health, but between the HHS and the Federal Trade Commission, they’ve got to come up with some rules to safeguard private health information. And I think the Amazon Halo is just the ultimate example of it, but there’s a number of other devices that have the same issues. I’m thinking there’s some state regulations going on and things like that, and we just need federal standards.”

The letter lays out four questions for Azar and the HHS, pertaining to the department’s role in safeguarding health data. Amazon’s defense of the product is two-fold: body scanning and speech collection are optional, and the company does not have direct access to this locally stored data.

Asked for response to the letter, the company tells TechCrunch:

We have been in touch with Senator Klobuchar’s office to address their questions about Amazon Halo. Privacy is foundational to how we designed and built Amazon Halo. Body and Tone are both optional features that are not required to use the product. Amazon does not have access to Body scan images or Tone speech samples. We are transparent about the privacy practices for this service and you can read more in the Amazon Halo privacy whitepaper.

“[The letter is] specifically about that they’re safeguarding the private health information, they’re ensuring security and privacy,” Klobuchar tells TechCrunch. “And even if Amazon Halo is saying they’re doing all of this, we need to have rules of the road in place for any company that does it.”

Health privacy concerns have been top of mind since Google announced plans to acquire Fitbit for $2.1 billion in November 2019. At the time, the deal was expected to close at some point in 2020. That timeline has since proven overly optimistic. In a filing with the Securities and Exchange Commission in August, Fitbit said the closing date could be pushed as late as May 2021.

The COVID-19 pandemic may well have played an issue in that delay, but Google’s biggest hurdle thus far has been government approval. A number of groups and individuals have raised concern over the deal, including Amnesty International. In August, the EU posited that the deal could “further entrench Google’s market position in the online advertising markets by increasing the already vast amount of data that Google could use for personalization of the ads it serves and displays.”

After launching an investigation into the deal, the Commission greenlit the deal earlier this week — with major caveats. At the top of the list is Google’s 10-year commitment to not use Fitbit health data for ad targeting. The E.U. has also reserved the right to extend the safeguard by another 10 years beyond that.

Klobuchar says she believes the privacy caveats were necessary. “I think the decision about if they’re sufficient or not should be made in the U.S. by our own regulators based on the facts. I am glad they created the data silo. […] And I think we need to greatly up our examination of mergers. We should use those mergers to either say ‘no, because they’re so anti-competitive,’ or to put conditions on them.”

Increased antitrust scrutiny has been a key project for the senator. In August 2019, she introduced the Monopolization Deterrence Act with Connecticut Senator Richard Blumenthal. Klobuchar says she hopes to get the bill passed after the new president takes office.

“This new session will be the moment,” she tells TechCrunch. “The Trump administration actually brought these major cases. They were late in the game, but they actually did their job here at the end. But the president wasn’t organized enough in terms of his focus to be able to actually get legislation done on monopolies. And so I think this is going to be incumbent on the Biden administration and the next AG to do that.”

Any meaningful effort to reduce the size and influence of tech corporations will have to go further than simply increasing regulatory scrutiny at the point of acquisition, however. In many cases, that bridge was crossed long ago.

“It’s not just future monopoly mergers being considered,” Klobuchar says. “It’s looking back at what’s happened. That’s what the Facebook suit is. That’s what the Google suit is in a different way. There’s still stuff about DoubleClick and everything, but mostly it’s about how they’re using their monopoly power. So you can be sued for looking back at mergers (that’s what they’re doing at Facebook), but you also can be sued for what we call ‘exclusionary conduct,’ for things that you’ve done that are anti-competitive.”

The Fitbit-wearing senator is quick to close by adding that she’s not anti-technology, per se. “I think the innovations are great. I use them all the time, even though I’ve had some hilarious online ordering experiences, including when I now have six two-pound things of maple yogurt. I mistook it and I thought they were small yogurts in my refrigerator. I think that they’re great, but I think that they can still be great with allowing from our competition, they’ll be better.”

The Justice Department’s historic lawsuit against Google is moving along — albeit very, very slowly. In a status hearing Friday, U.S. District Judge Amit Mehta set a tentative date for the case. The good news and the bad news for both parties involved is that it’s more than two years away.

As CNBC reports, Mehta chose Sept. 12, 2023 as the first day of the trial, which is expected to last weeks. That date could change, but with both the Justice Department and Google agreeing to that timeline it’s a pretty good estimate.

It might be years before the trial, but the DOJ’s lawsuit against Google, filed in October, is already hanging over Silicon Valley’s head. The suit focuses on Google’s search and ads business and accuses the company of maintaining illegal monopolies in those markets. A date in 2023 gives Google plenty of time to sharpen its defenses and do what it wants until then, but it also means the specter of a major regulatory threat will loom large for the foreseeable future.

States are also pursing their own aggressive efforts to regulate the search giant, with two separate major multistate lawsuits similarly focused on Google’s search and advertising power filed this week. Last week, the state of California also asked to join the Justice Department’s lawsuit, with Michigan and Wisconsin following suit on Thursday.

“Their proposed joinder, along with the separate complaint filed today by a coalition of state Attorneys General, underscores the broad and bipartisan consensus that Google’s practices in search and search advertising need antitrust redress,” Deputy Attorney General Jeffrey A. Rosen said of the states deciding to join the suit.

The historic case is the first major federal antitrust action to hit a technology company since the U.S. pursued a case against Microsoft more than two decades ago. That case was settled in 2001, just three years after Google’s founding.

With few regulations in place to rein it in, the tech industry exploded over the course of the last twenty years. Silicon Valley’s innovations are now woven into every market and corner of society imaginable, making the era of the Microsoft antitrust saga looks downright quaint in comparison.

What’s next? That’s the question we ask ourselves here at TechCrunch every day for the past 15 years. The answer, more often than not, comes from the earliest stage founders. That’s why last year, we introduced a new event called TechCrunch Early Stage.

TC Early Stage is all about providing founders access to the top experts across all the core competencies involved in entrepreneurialism, from fundraising to marketing to operations. It quickly became one of the most beloved offerings from TechCrunch, so it should come as no surprise that we’re doubling down in 2021.

Next year, we’ll host two TC Early Stage events (virtually) one on April 1 & 2 and one on July  8 & 9 with different perspectives and content at each.

Here’s how it works:

Experts in fundraising, marketing and operations will give presentations to the audience with plenty of time for live Q&A. These workshops will span the entire startup experience, with speakers that include early-stage investors (lots of investors), legal whizzes, growth gurus, product-market fit wallahs, tech stack experts, recruiting aces and much more, including workshops on pitch breakdowns.

TechCrunch’s goal is to provide founders with insights and new relationships on par with what an accelerator experience provides, only in a single day, and with a much greater variety of experts and investors.

TC Early Stage is designed for founders who are in their early innings, anywhere from pre-seed through Series A, when entrepreneurs need all the guidance they can get. With that in mind, the event’s heart is dozens of breakout sessions run by experts and curated by TechCrunch editors. The breakouts will be long on attendee questions and conversation, and the event is structured so that attendees can easily get to six to eight different breakouts over the course of the day.

Last year, we had sessions on:

• “When It Comes To Fundraising, Timing Is Everything” with Jake Saper
• “Seed Funding Tips and Tricks” with Jeff Clavier
• “What VCs Want In a Term Sheet” with Lior Zorea
• “How To Get People Obsessed with Your Brand” with Emily Heyward
• “How To Sell An Idea When You Don’t Have a Product” with Charles Hudson
• “How To Get Into Y Combinator” with Dalton Caldwell

And that’s just the tip of the iceberg. We’re not in the business of reinventing the wheel and have no plans to fix what ain’t broken. Expect more like this from our 2021 Early Stage events going down on April 1 & 2 and July 8 & 9. You can get a single event ticket at the Early Bird rate of $199 if you’re an early stage founder and $299 if you are a later stage founder, investor or just want to add some more tools to your knowledge kit. But you can save more when you book the dual two-event ticket – there will be different speakers and topics for each event so you won’t want to miss out on both!

Can’t wait to see you there!

While there’s been plenty of recent debate around the gig economy, Jarah Euston argued that it’s time to a rethink a bigger part of the workforce — hourly workers.

Euston, who was previously an executive at mobile advertising startup Flurry and a co-founder at data operations startup Nexla, told me that although 80 million Americans are paid on an hourly basis, the current system doesn’t work particular well for either employers or workers.

On the employer side, there are usually high rates of turnover and absenteeism, while workers have to deal with unpredictable schedules and often struggle to get assigned all the hours they want. So Euston has launched WorkWhile to create a better system, and she’s also raised $3.5 million in seed funding.

WorkWhile, she explained, is a marketplace that matches hourly workers with open shifts — employers identify the shifts that they want filled, while workers say which hours they want to work. That means employers can grow or shrink their workforce as needed, while the workers only work when they want.

“By pooling the labor force … we can provide the flexibility that both sides want,” Euston said.

Image Credits: WorkWhile

WorkWhile screens workers with one-on-one interviews, background checks and tests based on cognitive science, with the goal of identifying applicants who are qualified and reliable.

Employers pay WorkWhile a service fee, while the platform is free for users. And because the startup aims to build a long-term relationship with its workforce, Euston said it will also invest by providing additional benefits, starting with sick leave credits earned when you work and next-day payments to your debit cards.

“It’s hard to find a job that works with you and doesn’t give you a take it or leave it schedule,” said Michael Zavala, one of the workers on the platform, in a statement. “WorkWhile was exactly what I was looking for with the ability to create your own schedule for full time.”

The startup is launching in the San Francisco Bay Area, Los Angeles, Orange County and Dallas-Forth Worth.

Given the broader economic and employment trends during the pandemic, there should plenty of people looking for more work, while Euston said she’s seen a “feast or famine” situation on the employer side — yes, some companies have had to freeze or cut staff, but others have grown rapidly, including WorkWhile customers including restaurant supplier Cheetah, meal delivery service Thistle and horticultural e-commerce company Ansel & Ivy.

The funding, meanwhile, was led by Khosla Ventures,. with participation from Stitch Fix founder and CEO Katrina Lake, Jennifer Fonstad, F7, Siqi Chen, Philipp Brenner, Zouhair Belkoura and Nicholas Plinkington.

“The majority of hourly workers are honest and reliable but some have difficult personal circumstances they need help with,” Vinod Khosla said in a statement. “Companies treat these employees as high turnover and expendable but, if given respect and appropriate support, they can become longer-term, model employees. WorkWhile wants to help solve this problem.”

While there’s been plenty of recent debate around the gig economy, Jarah Euston argued that it’s time to a rethink a bigger part of the workforce — hourly workers.

Euston, who was previously an executive at mobile advertising startup Flurry and a co-founder at data operations startup Nexla, told me that although 80 million Americans are paid on an hourly basis, the current system doesn’t work particular well for either employers or workers.

On the employer side, there are usually high rates of turnover and absenteeism, while workers have to deal with unpredictable schedules and often struggle to get assigned all the hours they want. So Euston has launched WorkWhile to create a better system, and she’s also raised $3.5 million in seed funding.

WorkWhile, she explained, is a marketplace that matches hourly workers with open shifts — employers identify the shifts that they want filled, while workers say which hours they want to work. That means employers can grow or shrink their workforce as needed, while the workers only work when they want.

“By pooling the labor force … we can provide the flexibility that both sides want,” Euston said.

Image Credits: WorkWhile

WorkWhile screens workers with one-on-one interviews, background checks and tests based on cognitive science, with the goal of identifying applicants who are qualified and reliable.

Employers pay WorkWhile a service fee, while the platform is free for users. And because the startup aims to build a long-term relationship with its workforce, Euston said it will also invest by providing additional benefits, starting with sick leave credits earned when you work and next-day payments to your debit cards.

“It’s hard to find a job that works with you and doesn’t give you a take it or leave it schedule,” said Michael Zavala, one of the workers on the platform, in a statement. “WorkWhile was exactly what I was looking for with the ability to create your own schedule for full time.”

The startup is launching in the San Francisco Bay Area, Los Angeles, Orange County and Dallas-Forth Worth.

Given the broader economic and employment trends during the pandemic, there should plenty of people looking for more work, while Euston said she’s seen a “feast or famine” situation on the employer side — yes, some companies have had to freeze or cut staff, but others have grown rapidly, including WorkWhile customers including restaurant supplier Cheetah, meal delivery service Thistle and horticultural e-commerce company Ansel & Ivy.

The funding, meanwhile, was led by Khosla Ventures,. with participation from Stitch Fix founder and CEO Katrina Lake, Jennifer Fonstad, F7, Siqi Chen, Philipp Brenner, Zouhair Belkoura and Nicholas Plinkington.

“The majority of hourly workers are honest and reliable but some have difficult personal circumstances they need help with,” Vinod Khosla said in a statement. “Companies treat these employees as high turnover and expendable but, if given respect and appropriate support, they can become longer-term, model employees. WorkWhile wants to help solve this problem.”

Today Bumble, a popular dating-focused startup, was reported by Bloomberg to have filed IPO documents, albeit privately.

The news that Bumble is pursuing an IPO is not a surprise. TechCrunch covered the story in September, noting the huge revenues that its rival Tinder has managed to accrete, possibly indicative of a sufficiently large market to support two public dating players.

That Bumble has privately filed puts it, along with the crypto-focused Coinbase, as far along the IPO path before we can see their numbers. When they make their S-1 filings public the two companies will provide the market a look into their financial results.

Bumble and Coinbase are preceded in making such disclosures by Roblox, Affirm, and Poshmark. The five companies will join others in seeking IPOs over the next few months.

According to a recent interview with GGV’s Hans Tung — an investor in Affirm and Airbnb and other unicorns — TechCrunch understands that quarters one, three, and four in 2021 could prove to be active IPO periods. Bumble joining the fray in the final weeks of 2020 underscores how active the start of the year could be for highly-priced private companies seeking liquidity while public markets trade near all-time highs.

TechCrunch reached out to Bumble for comment on the IPO report. The company declined to comment.

Bloomberg reports that Bumble could target a valuation of between $6 and $8 billion. This squares with prior reporting. How much revenue the market will require of Bumble to reach those prices, and at what pace of growth, is not clear.

But with the company reaching 100 million users earlier this year, perhaps all the math will pencil out.

Mobile travel app Hopper has been hit hard by the COVID-19 pandemic as consumers canceled their trips and airlines dropped their flights. But the complications around getting airline credits and refunds have since turned into a customer service crisis for the airfare prediction and ticket booking startup, which had been valued at $750 million back in 2018 before reaching unicorn status thanks to an undisclosed round it closed amid COVID lockdowns this year. Currently, hundreds of Hopper customers are trashing the app in their app store reviews, calling Hopper a scam, threatening legal action, and warning others to stay away.

The key complaint among many of these users was not only how their flight was canceled by an airline and that they couldn’t get a refund, but that there was no way to get in touch with someone at Hopper for any help. There wasn’t even a phone number to call, the user reviews said.

These complaints on the app stores have been harsh and a PR disaster for Hopper’s brand.

To give you an idea of what’s being said, here’s a small sampling:

• “No phone number to reach and takes a week or more to get back to an email.”
• “No way to contact customer service no [one] has responded to my inquiries at all. The help tab just sends you in a constant loop.”
• “Warning. This company will take your money. They give zero refunds and there is no one to talk to.”
• “Customer service continues to be an absolute joke. We…put support requests in a week ago, zero response.”
• “Hopper is great if you want your flight cancelled and money never refunded. There is LITERALLY no customer support.”
• “I understand there is a lot of traffic on the app due to COVID, but having to post a review in order to receive any sort of attention and being unable to reach out through the app for my issue was very frustrating.”
• “There is no way to contact anyone. The Contact Us page is just a Q&A page.”
• “I was never refunded and when I reached out to their ‘need help’ I received the generic email which stated someone will get back with me. I waited a week and sent another message and I still have not heard anything. Hopper took my money on a flight that was cancelled by the airline and never notified me.”
• “Not [sic] existing customer support. If you need help your [sic] only option is ‘read a post.’ Buyer beware. It’s a total scam.”
• “I’ve reached out multiple times regarding a flight a credit from April of 2020 and they have yet to provide me with any details or help me with using the credit.”
• “This company is a fraud! Do not use Hopper! I will be getting a lawyer!”
• “Can’t say enough bad things about this service…Have to wait 15 days for response. Unbelievable.”
• “I booked a flight back in June that I still haven’t been refunded for because the airline will only refund the agent directly. Non-existent customer service.”
• “I spent over 3K and 3 months later, still no refund.”
• “I have been waiting seven months for a refund.”

To date, users have left over 550 one-star reviews on iOS and 302 on Android, per Sensor Tower data. Hundreds of these are visible when you sort by “Most Recent” reviews on iOS, which is damaging to what had been, before the pandemic, a trusted and respected travel brand.

@.sp2020##hopper is getting trashed — no customer support? Can’t get refund? ##covid ##travel♬ Trouble’s Coming – Royal Blood

Hopper, to its credit, openly admitted to TechCrunch it’s been massively struggling with what it referred to as “unprecedented volumes of customer support inquiries since the start of the pandemic began,” or 2.5X its normal rate.

The company says it’s currently receiving over 100,000 inbound support requests per month, as consumers and airlines alike changed and canceled their flights. Since April, it’s seen over 980,000 inbound customer service requests.

A number of the inquiries are from customers are asking for refunds due to COVID-related cancellations. Typically, airlines offer a modified flight when they make a schedule change, and many consumers will take this modification. Some customers, however, will want a refund so they can rebook a different flight or because they’ve chosen to cancel their travel plans entirely. The pandemic has exacerbated this problem, driving cancelation rates around five times higher than usual, Hopper says.

Another point of confusion is who should handle these refunds. Hopper says customers can either reach out to the airline directly for a refund for help rebooking or they can ask Hopper to handle it. It also noted a small number of airlines don’t allow refunds, only travel credit. The airlines dictate these policies, which means Hopper can’t just offer to refund everyone — it would have lost too much money to survive, if it did so.

“We would have had to put out about half a billion dollars,” explains Hopper CEO Frederic Lalonde, describing the situation to TechCrunch. We had reached out to understand the situation, given the sizable customer backlash against the previously popular app.

“The way the airline system works is if I refund you as a customer who booked from us, I’m not going to get that money back. We would have put ourselves out of business,” Lalonde saus.

In addition, Hopper doesn’t generally received the refunds itself. They go directly from the airline to the customer. And many customers had to wait on refunds this year due to COVID issues. But there are some exceptions. For a few low-cost carriers, like Frontier, Spirit and others, Hopper does have to process the refund from the airline and then return these to the customers. So in these cases, Hopper’s non-responses to customer support inquiries left customers without options. (We’re documenting how the airlines are responding to our inquires about Hopper refunds here. It’s confusing to say the least.)

But the root of Hopper’s customer service nightmare wasn’t the chaos caused by the pandemic and the airlines’ cancellations themselves. It was how Hopper approached handling the situation.

“We failed our customers,” Lalonde admits. “We had a bunch of people that trusted us.”

He said Hopper has now addressed many of the customer complaints and issues. But many more than still remain. “There’s no universe where that’s what we set out to do,” he adds.

During the course of the year as the customer service crisis escalated, Lalonde says his personal email and mobile phone was published on the web. He’s since opened up several thousands — or maybe even tens of thousands — of emails and voicemails of customers in need of assistance.

In hindsight, one misstep Hopper made is that it didn’t hire more customer service agents to deal with what the pandemic would bring. In fact, Hopper did the opposite — the company furloughed agents in an effort to cut costs and stay in business. At the time, Lalonde explains, there was just too much uncertainty to hire. Stores were out of toilet paper. The Western world had closed for travel. Vaccines had typically taken years to create. This was looking like a long-term, worst-case scenario.

“We had to build an operational plan of zero dollars of revenue for four years. That’s what I gave my board,” Lalonde says.

When lockdowns lifted and travel started to come back, so did some of Hopper’s agents. But the customer service issues, by then, had skyrocketed as airlines canceled and changed schedules at high rates, and began to issue Future Travel Credits (FTC). Instead of adding more agents to help solve customer service problems, Hopper decided to apply automation, with a goal of allowing customers to solve more themselves. During the course of 2020, Hopper automated exchanging flights in the app, redeeming FTC issued by airlines, managing schedule changes, adding self-serve cancellations, and it rolled out follow-up emails to customers after they requested a cancellation.

Lalonde had believed automation would ultimately be more critical to long-term survival than hiring more agents.

“Would it have made a big difference [to add more agents]? Honestly, I don’t really think so. I think it would maybe have gotten 10% more done,” says Lalonde. “Could you find thousands of customers that would have gotten [help] sooner? Yes. But would it really have moved the need on the millionth inbound request we got? No.”

Another area where Hopper fell short was on customer communication.

This is most apparent from the App Store complaints.

Customers may be expressing frustration over refunds, but they’re even angrier that they can’t get in touch with anyone. And Hopper didn’t necessarily do itself any favors here by sending out emails which said it was aiming to get back to customers within 24 hours — an entirely unrealistic promise. (See below)

Image Credits: Hopper email (provided by customer) / Hopper email (provided by customer)

Hopper also chose to shut down its phone line when it realized that 80% of customers were waiting on hold for 45 minutes, even though, arguably, some customers would have preferred that to nothing at all. Instead, it rolled out an online structured triage system that helped prioritize incoming complaints. It even had a button to push if users were stuck at the airport so they could get more urgent assistance.

The problem was customers couldn’t find Hopper’s help features.

“Was our communication strategy broken? Yes,” admits Lalonde.

He says he decided to put the team on actually dealing with the FTC and the refunds, and not talking to people. “That made us look a hell of a lot worse, optically, but we got through a lot of work…because at the end of the day, after the fifth repetitive email, people got just as angry [as when they were ignored].”

Hopper has since apologized to customers and sent out an additional $1.5M in travel credits to its customers, in addition to the refunds it has now processed, to help make up for its issues. It’s still working through the backlog of customer service issues. And it expects another good six months of chaos as the vaccines shipping now aren’t immediately going to solve the airlines’ travel problem.

Over the next two months, Hopper also says it will be increasing its support team by 75% now that future looks more certain. It also plans to roll out in-app updates including a resolution center, escalation path, status check to prevent duplicate requests, and add in-app structured requests, in addition to more communication updates involving email campaigns, better in-app messaging, and website access to check on booking status.

It’s a wonder how a company in this nightmare situation could even survive, much less raise funds, when its brand is being dragged through the mud and hundreds — or even thousands of customers — have been unsatisfied.

As it turns out, Montreal-headquared Hopper will survive, at least in the near-term, thanks to a Canadian government bailout.

In early May, Hopper raised $70 million from both institutional and private investors. The Canadian government chose to save promising tech business impacted by the pandemic with direct financial support. The largest portion of the $70 million round (more than half, but not, say, 99%) included funds from the Business Development Bank of Canada (BDC) and Investissement Quebec. In addition, all of Hopper’s existing investors returned, joined by new investors Inovia and WestCap.

The Canadian government — which Lalonde describes as “more like socialists than you would think” — helped by de-risking the other investors by leading venture rounds into tech businesses that had been doing well pre-pandemic.

“They did this at a very large scale and it’s stabilized the tech sector in Canada,” he says. The new funds now value Hopper “right at unicorn level” in U.S. dollars, Lalonde adds, meaning the business is valued around $1 billion.

One reason why Hopper may have struggled with how to proceed during the pandemic was the sizable uncertainty around the U.S. market, which Lalonde says was “very scary.”

“We never knew what was going to happen. If there had been a better plan there, we probably would have been able to provision a bit more. But we had no idea. The lockdowns were at the state level,” he explains. “If you’re trying to figure out how aggressive you want to be on investing, spending, emergency injections, or how things are going to recover, the more predictability there is at the government level, the easier it is to make a decision. The U.S. wasn’t the most predictable environment,” Lalonde says.

While Hopper’s business is saved for now, the app’s brand reputation has taken a huge hit.

The question now is whether that, too, is recoverable?

“I don’t know,” says Lalonde. “I’ll tell you this, the only way that the only right way to approach that is just keep doing the right thing, one customer at a time.”

General John “Jay” Raymond spoke at TechCrunch Sessions: Space earlier this week where he touched on a variety of subjects. The talk came on the eve of Space Force’s first birthday, having been founded on December 20, 2019.

Space Force commander explains how the new military service operates like a startup and gave advice how startups can learn from the Space Force. The service only has 2,400 people and according to Gen. Raymond, this lean team is possible as he’s actively working to flatten the management structure and empower decision makers. Likewise, he also explained the current geopolitical landscape, saying, in part, “China has got from zero to 60 really quickly” in regards to operating in space. As such, Gen. Raymond is seeking partnerships with allied nations and startups within their borders.

ExtraCrunch subscribers and TechCrunch Session: Space ticket holders can watch the 20 minute interview below.

The latest branch of the US Military was founded just a year ago and will celebrate its first birthday on December 20. General John W. “Jay” Raymond spoke at TechCrunch Sessions: Space and explained how the youngest military branch operates like a startup.

“In some ways, we’re a startup as well,” Gen. Raymond said. “The National Defense Authorization Act provided us great a great opportunity. And that’s to be bold, think differently, start with a clean sheet of paper, and build processes that work for us as needed to operate in the domain we’re responsible for.”

Gen. Raymond explained one of his mantras is big is slow. “And if you’re going to be a big organization, you’re going to be a slower organization,” he said, explaining that his team has worked hard over the last year to “flatten the bureaucracy, reduce layers of command, get the experts that are operating our capabilities, close to a decision-maker, or better yet pushed the decision making down to that to their level.

To this end, the Space Force is tiny compared to other branches of the military. Last week, Gen. Raymond presided over the Space Force’s first basic training graduation. This was a class of seven, who joined the 2,400 servicemen and women who make up the Space Force’s ranks.

“I couldn’t be more thrilled with how with how our organization construct is played out,” Gen. Raymond said. “I’ve had the opportunity to visit a couple of our units where we have done this, and it is already paying dividends. They’re moving at a speed that we would not have been able to do in the past. I would just say every step of though — every step of the way — you have to root out bureaucracy and be conscious about making sure that wherever that decision needs to be made, those folks are empowered to make that decision.

Since its founding, it’s been clear the Space Force has taken a strong stance on gender and racial equality. Gen. Raymond explained why: “We think diversity is a strength.” This doesn’t appear just to be lip service. The Space Force has so far received accolades for its gender and racial balance. The Space Force’s small size allowed Gen. Raymond to stand up a new human capital strategy “that leverages all the authorities that are out there that are that are currently largely left untapped.”

“We have an opportunity to build diversity in from day one, which we think will be a strength,” Gen. Raymond said.

Several other military officials spoke at TechCrunch Sessions: Space. Lt. General John Thompson spoke on how startups can best interact with Space Force. where he oversees research, design, development, and acquisition of satellites and their associated command and control systems for the U.S. Space Force. The general is the Commander of the Space and Missiles Systems Center. He oversees research, design, development, and acquisition of satellites and their associated command and control systems for the U.S. Space Force.

Dr. Will Roper spoke about the evolution of the procurement practices that would put money into the coffers of emerging tech companies developing solutions to the most pressing problems the military sees in the skies. He’s trying to pry open the piggy bank so more of the $60 billion he manages the flow into the bank accounts of entrepreneurs and startups.

The global software as a service (SaaS) industry is sustaining its steep growth trajectory, but developing and pricing professional services is oftentimes a difficult proposition for SaaS companies.

Gartner recently forecast that SaaS revenue worldwide could surpass $140 billion by 2022, which would represent a 40% increase over 2019’s roughly $100 billion. These are heady figures for an industry that gained its footing only 20 years ago.

As someone who has led many investments in SaaS companies, there is clear consensus within boardrooms, assuming compelling sales efficiency metrics: The more ARR the better. It is also clear that looking across the SaaS industry, there is strong consistency in overall software gross margins, generally landing in the 60% to 80% range.

What is much less obvious is how to charge customers for professional services, whether for implementations, consulting work or training.

While historically, in the perpetual software days, such offerings were billed on a time and materials basis or for a fixed fee with a targeted gross margin of say 10%-30%, fast-forward to the recurring revenue model today and these services can be equally profitable but also result in big losses given wide differences in how companies charge for these services.

Looking at SaaS companies, one can see 50-point margin swings, or more, on services revenue, from -30% to 20%. Why do we see such differences in margins for professional services, and what are the implications of these differing approaches for a SaaS company’s strategy?

Are professional services a profit center or a loss leader?

We can start by asking why a company would accept a single-digit or even negative margins on its professional services. For some, it’s a strategy to accelerate its ARR by covering part of that expense by foregoing, say, an implementation fee for a higher annual subscription amount. The view here is to remove some friction out of the sales process by reducing any services fees. This will accelerate new logo velocity, resulting in higher ARR, and thus stronger growth, which should translate into higher stock price appreciation.

To execute this strategy, a SaaS company may increase its subscription price, although not by much. While this allows the provider to offer such services without detailing its cost in a separate line item, is this really the right answer? As with so many questions, the answer depends on many variables, such as: Does it expedite the sales cycle? Would charging for such services make clients more responsive and result in quicker implementations? How much costs do you need to cover such services? What is the impact of doing so on the cash position, profitability and financing needs of the business?

Two professional services pricing strategies

Let’s compare the three-year impact of two professional services pricing strategies, and the resulting impact on the financing needs:

• Company A: Provides professional services with an annual value of $10 million with a -20% gross margin, resulting in a $2 million annual loss. Total losses over the three-year period are $6 million.