Year: 2020

24 Jun 2020

Biased AI perpetuates racial injustice

The murder of George Floyd was shocking, but we know that his death was not unique. Too many Black lives have been stolen from their families and communities as a result of historical racism. There are deep and numerous threads woven into racial injustice that plague our country that have come to a head following the recent murders of George Floyd, Ahmaud Arbery and Breonna Taylor.

Just as important as the process underway to admit to and understand the origin of racial discrimination will be our collective determination to forge a more equitable and inclusive path forward. As we commit to address this intolerable and untenable reality, our discussions must include the role of artificial intelligence (AI) . While racism has permeated our history, AI now plays a role in creating, exacerbating and hiding these disparities behind the facade of a seemingly neutral, scientific machine. In reality, AI is a mirror that reflects and magnifies the bias in our society.

I had the privilege of working with Deputy Attorney General Sally Yates to introduce implicit bias training to federal law enforcement at the Department of Justice, which I found to be as educational for those working on the curriculum as it was to those participating. Implicit bias is a fact of humanity that both facilitates (e.g., knowing it’s safe to cross the street) and impedes (e.g., false initial impressions based on race or gender) our activities. This phenomenon is now playing out at scale with AI.

As we have learned, law enforcement activities such as predictive policing have too often targeted communities of color, resulting in a disproportionate number of arrests of persons of color. These arrests are then logged into the system and become data points, which are aggregated into larger data sets and, in recent years, have been used to create AI systems. This process creates a feedback loop where predictive policing algorithms lead law enforcement to patrol and thus observe crime only in neighborhoods they patrol, influencing the data and thus future recommendations. Likewise, arrests made during the current protests will result in data points in future data sets that will be used to build AI systems.

This feedback loop of bias within AI plays out throughout the criminal justice system and our society at large, such as determining how long to sentence a defendant, whether to approve an application for a home loan or whether to schedule an interview with a job candidate. In short, many AI programs are built on and propagate bias in decisions that will determine an individual and their family’s financial security and opportunities, or lack thereof — often without the user even knowing their role in perpetuating bias.

This dangerous and unjust loop did not create all of the racial disparities under protest, but it reinforced and normalized them under the protected cover of a black box.

This is all happening against the backdrop of a historic pandemic, which is disproportionately impacting persons of color. Not only have communities of color been most at risk to contract COVID-19, they have been most likely to lose jobs and economic security at a time when unemployment rates have skyrocketed. Biased AI is further compounding the discrimination in this realm as well.

This issue has solutions: diversity of ideas and experience in the creation of AI. However, despite years of promises to increase diversity — particularly in gender and race, from those in tech who seem able to remedy other intractable issues (from putting computers in our pockets and connecting with machines outside the earth to directing our movements over GPS) — recently released reports show that at Google and Microsoft, the share of technical employees who are Black or Latinx rose by less than a percentage point since 2014. The share of Black technical workers at Apple has not changed from 6%, which is at least reported, as opposed to Amazon, which does not report tech workforce demographics.

In the meantime, ethics should be part of a computer science-related education and employment in the tech space. AI teams should be trained on anti-discrimination laws and implicit bias, emphasizing that negative impacts on protected classes and the real human impacts of getting this wrong. Companies need to do better in incorporating diverse perspectives into the creation of its AI, and they need the government to be a partner, establishing clear expectations and guardrails.

There have been bills to ensure oversight and accountability for biased data and the FTC recently issued thoughtful guidance holding companies responsible for understanding the data underlying AI, as well as its implications, and to provide consumers with transparent and explainable outcomes. And in light of the crucial role that federal support is playing and our accelerated use of AI, one of the most important solutions is to require assurance of legal compliance with existing laws from the recipients of federal relief funding employing AI technologies for critical uses. Such an effort was started recently by several members of Congress to safeguard protected persons and classes — and should be enacted.

We all must do our part to end the cycles of bias and discrimination. We owe it to those whose lives have been taken or altered due to racism to look within ourselves, our communities and our organizations to ensure change. As we increasingly rely on AI, we must be vigilant to ensure these programs are helping to solve problems of racial injustice, rather than perpetuate and magnify them.

24 Jun 2020

IPOs that could happen soon, cannot happen soon enough

Earlier today we took a look at two companies that have filed to go public, nCino and GoHealth. The pair join Lemonade in a march toward the public markets.

But those three firms are hardly alone. We know that DoorDash filed privately earlier this year (it also raised a pile of cash lately, so its IPO may not be in a hurry), and Postmates filed privately last year.

Even more, there are a number of companies whose IPOs we anticipate in short order. So, what follows is our incredibly scientific survey of impending IPOs, starting with those closest to the gate. This list is focused on companies that were at one point venture-backed startups, even if they have become behemoths in the intervening years.

We’ll start with companies that have filed and are moving toward debuts in the next few weeks:

  • nCino: This SaaS company is growing nicely, and has pretty good overall economics. We covered its financial history here. Its debut will be a win for North Carolina.
  • GoHealth: A Chicago success story that was swallowed by private equity last year, GoHealth is now an incredibly complicated company and offering that features lots of long-term indebtedness. But, its exit should provide reasonable returns to its current owner’s backers, who held onto the firm for less than a year before trying to flip it.
  • Lemonade: Lemonade’s IPO is an important moment for a number of modern insurance companies like Root, MetroMile, Kin and others. Not that they all sell the same type of insurance, mind, they don’t. Lemonade does rental and home insurance, while Root and MetroMile are focused on autos, for example. But if Lemonade manages a strong offering, it could provide tailwind to its fellow neo-insurance providers all the same.
  • Agora: We’re catching up on the Agora debut. The China-based company’s IPO filing details a company that provides other companies and developers the ability to “embed real-time video and voice functionalities into their applications without the need to develop the technology or build the underlying infrastructure themselves” via APIs. This sounds a bit like what Daily.co is building, if you recall that round. Agora is a company that has good operating income and net income before “accretion on convertible redeemable preferred shares to redemption value.” With that in hand, the company’s earnings are sharply negative. Read that how you want. Agora wants to raise between $280 million and $315 million.

And, next, companies that have filed privately but are still hanging back:

And here are companies that are making the sort of noise that one might make before finally going public:

All of the above is a jam, and I am stoked to dig through the S-1 trenches with you.

24 Jun 2020

Demand for fertility services persists despite COVID-19 shutdowns

In 2019, the global fertility services industry was estimated to be worth $14.8 billion with demand driven by the significant growth in the median age of first-time mothers, according to a Research & Markets report.

Gina Bartasi, founder and CEO of NYC-based fertility center Kindbody, has pointed to macroeconomic trends responsible for the industry’s consistent growth, such as the increase in single mothers by choice and the fact that “heterosexual couples are waiting to have children and waiting to get married, and more and more same-sex couples are having children, which is relatively new.”

Regardless of the increasing demand, disasters can disrupt fertility services: On March 17, the American Society for Reproductive Medicine directed U.S.-based fertility clinics to avoid initiating new treatments, push back nonemergency surgeries and shift care to telemedicine.

Now reopened, it’s undeniable that COVID-19’s national impact could alter the space as different types of crises have in the past. In looking back, we can find a better understanding of what the future holds.

After the terror attacks on September 11, 2001, a University of Louisville study found that there was “a prompt and significant increase in births and birthrates in the post-9/11 period” in New York City. Relatedly, when Hurricane Katrina hit New Orleans in August 2005 and created the nation’s costliest natural disaster, it was also one of five times since 1987 that frozen embryos were evacuated and protected during a natural disaster.

According to a study done by University of Wisconsin, “following Katrina, displacement contributed to a 30% decline in birth cohort size. Black fertility fell, and remained 4% below expected values through 2010. By contrast, white fertility increased by 5%.” The communities were so ravaged that the area’s Black population has remained substantially smaller.

24 Jun 2020

PACT Act takes on internet platform content rules with ‘a scalpel rather than a jackhammer’

The PACT Act is a new bipartisan effort to reform Section 230, the crucial liability shield that enables internet platforms to exist, approaching the law’s shortcomings “with a scalpel rather than a jackhammer,” as Senator Brian Schatz (D-HI) describes it. It would be a welcome alternative to the dangerous EARN IT Act and risible Executive Order also in the running.

Section 230 protects companies online from being liable for content posted by their users, as long as those companies remove illegal content when it is pointed out to them. Politicians have recently characterized it as an excuse for companies like Facebook and Twitter to control speech on their platform and avoid responsibility for shoddy or arbitrary moderation policies.

But the two most high profile attempts to change this law, which arguably made the modern internet possible, are riddled with problems. The EARN IT Act is widely understood to be an end run against encryption by an impotent and furious Justice Department; Trump’s recent Executive Order, in addition to plainly being retaliation against Twitter for fact-checking his tweets, doesn’t actually appear to do much of anything.

Yet there is growing consensus that Section 230, while it has filled its purpose admirably for two decades, needs to be adjusted to accommodate for a changed digital environment. To that end, Sen. Schatz and his colleague Sen. John Thune (R-SD), leaders of the Communications, Technology, Innovation and Internet Subcommittee, are proposing a reasonable alternative.

“The best thing we can do for the internet, and for the law that enabled the internet to happen, is to modify this law so that it works for another 20 years instead of pretending that it’s perfect just the way it is,” Sen. Schatz said in a call with press.

Their Platform Accountability and Consumer Transparency Act focuses more on exposing the process rather than changing it. Under the proposed law, companies using Section 230 would have to:

  • Publicly document their moderation practices and issue a standardized quarterly report on actions they’ve taken and the complaints that prompted them
  • Make and report moderation decisions within 14 days of user reports, and allow appeals
  • Remove “court-determined illegal content and activity” within 24 hours, with some flexibility allowed for smaller platforms

The Act would also limit the scope of Section 230 in protecting companies when they are facing action from federal regulators and state attorneys general, or when they are provably aware of the illegal nature of the content.

It would not affect or involve changes to encryption, which is another tool companies have to distance themselves from illegal content: If they can’t read the data, they can’t tell if it’s illegal. But attempts to weaken encryption or reduce its use have been met by polite but firm rejection by the tech industry — it’s clear that we have been traveling down a one way street in that regard.

“This is not designed to attract people who want to bully tech companies into political submission,” said Sen. Schatz. “It’s designed to improve federal law.”

“Here’s why we think this bill is significant,” he continued. “First, because we believe it is the most serious effort to retain what works in 230, and try to fix what is broken about 230. Second, you have the chair and ranking member of the subcommittee introducing the bill, which is not a trivial matter. And third, because we do think there is an appetite to legislate here. Though the volume gets turned up when someone wants to beat up on the platforms via cable TV or twitter, the serious work of the Commerce Committee has always been bipartisan.”

You can read the full text of the bill here; We’ll soon hear whether the Senators’ effort bears any fruit.

24 Jun 2020

AWS launches Amazon Honeycode, a no-code mobile and web app builder

AWS today announced the beta launch of Amazon Honeycode, a new fully managed low-code/no-code development tool that aims to make it easy for anybody in a company to build their own applications. All of this, of course, is backed by a database in AWS and a web-based drag-and-drop interface builder.

Developers can build applications for up to 20 users for free. After that, the pay per user and for the storage their applications take up.

Image Credits: Amazon/AWS

Like similar tools, Honeycode provides users with a set of templates for commonly use cases like to-do list applications, customer trackers, surveys, schedules and inventory management. Traditionally, AWS argues, a lot of businesses have relied on shared spreadsheets to do these things.

“Customers try to solve for the static nature of spreadsheets by emailing them back and forth, but all of the emailing just compounds the inefficiency because email is slow, doesn’t scale, and introduces versioning and data syncing errors,” the company notes in today’s announcement. “As a result, people often prefer having custom applications built, but the demand for custom programming often outstrips developer capacity, creating a situation where teams either need to wait for developers to free up or have to hire expensive consultants to build applications.”

It’s no surprise then that Honeycode uses a spreadsheet view as its core data interface, which makes sense, given how familiar virtually every potential user is with this concept. To manipulate data, users can work with standard spreadsheet-style formulas, which seems to be about the closest the service gets to actual programming.

AWS says these databases can easily scale up to 100,000 rows per workbook. With this, AWS argues, users can then focus on building their applications without having to worry about the underlying infrastructure.

Honeycode currently only runs in the AWS US West region in Oregon but is coming to other regions soon.

Among its first customers are SmugMug and Slack.

Updating…

24 Jun 2020

Sony will now pay researchers up to $50,000 to hack the PS4

Think you’ve found a way to consistently brick someone’s PS4, or make it run code that it shouldn’t? Sony wants to know — and now they’re willing to pay.

This morning Sony announced that it’s opening its bug bounty program to the public, and will pay for newly discovered bugs and exploits that impact either the PlayStation 4 or their online PlayStation Network.

Sony is pretty explicit about what kind of bugs they’re looking for: anything that hits “the PlayStation 4 system, operating system, accessories” in its current and/or beta form, or that impacts any of a handful of PlayStation Network domains/APIs. Tactics like socially engineering Sony employees or DDoSing their servers, meanwhile, aren’t allowed.

Bugs found in the PlayStation Network will have base bounties of $100-$3,000 or more (depending on severity), while critical bugs found related to the PS4 itself will pay upwards of $50,000. You can see Sony’s breakdown, including what’s in/out of the program’s scope, right here.

(Note the focus on PlayStation 4. Finding a new way to break the ol’ PS2 is cool and all, but Sony won’t be dishing out any money for it.)

In a blog post announcing the bug bounty program, Sony notes that they’ve actually been running this program quietly with a handful of researchers for a while now — today, though, they’re opening it up to anyone with the skill and interest. The program’s HackerOne page says Sony has already paid out over $170,000 to researchers, with an average bounty of around $400.

Microsoft launched a similar bug bounty program for Xbox Live earlier this year.

24 Jun 2020

Hoxton Ventures’ partners assess Europe’s early-stage landscape

Hoxton Ventures, a London-based early-stage VC firm best known for backing British unicorns Babylon Health, Darktrace and Deliveroo, announced its second fund last week, coming in at just under $100 million.

The firm’s self-proclaimed strategy is to seek out startups that can scale globally into “large, category-defining leaders” in nascent industries — A strategy that appears to be bearing fruit.

However, although fund two is twice the size of the firm’s $40 million debut fund back in 2013 (when new VC firms in Europe were still seen as a novelty), Hoxton struggled somewhat to close a new fund. Despite having the highest ratio of unicorns to investments in Europe, according to Dealroom, it took more than four years to get fund two over the line, leaving many VC watchers scratching their heads.

To find out exactly what happened and to learn more about Hoxton’s strategy going forward, I put questions to founding partners Rob Kniaz and Hussein Kanji — Fidelity and Accel alums, respectively — and new partner and chief operating officer Rob Ludwig. The conversation that followed was refreshingly candid, providing valuable insights into the state of early-stage venture capital in Europe and what it takes to get funded by an outlier VC like Hoxton.

It’s seven years since you announced your debut fund, which I remember at the time was considerably harder to raise than you had perhaps envisaged. However, despite having three unicorns in fund one, this second fund also appears to have taken a long time to get over the line. Why was that?

Hussein Kanji: I see you’re not taking it easy on us. Good question. Fundraising is our Achilles’ heel.

We did our final closing in November 2014 (not widely reported) and did the majority of this fund’s closing in January/February 2019. That’s a little more than a four-year gap, meaning we’re a year (maybe two) past due. That goes to a combination of two things: we are terrible fundraisers and we had a really awkward experience with the European Investment Fund, which set us back by at least a year.

Rob Kniaz: Yes, sadly EIF denied this publicly but they discontinued new fund relationships in the U.K. after Article 50 triggered, so that cost us a significant amount of time due to the length of their process. By that time we had other commitments that had timed out so we probably had and then lost then reraised nearly half of what we eventually raised.

24 Jun 2020

Crypto Startup School: The legal and fundraising implications of crypto tokens

Editor’s note: Andreessen Horowitz’s Crypto Startup School brought together 45 participants from around the U.S. and overseas in a six-week course to learn how to build crypto companies. Andreessen Horowitz partnered with TechCrunch to release the online version of the course. 

The final week of a16z’s Crypto Startup School kicks off with former Coinbase Chief Legal Officer Brian Brooks discussing “Token Securities Frameworks and Launching a Network.” Brooks starts off calling crypto the “most perfect intersection of tech and finance,” but he cautions that crypto builders must navigate traditional financial-services regulatory structures.

This takes on special importance because tokens, the native assets of crypto networks, can be deemed securities by regulators, making them illegal to list on exchanges and subject to disclosures and other legal requirements.

Brooks explains the four-part Howey test, the Supreme Court ruling that has come to define when a given transaction is a securities transaction. Because crypto is still relatively new, however, the path to legality is still developing.

In the meantime, the crypto industry has created the Crypto Rating Council, a new tool to objectively rate tokens and gauge their risk of being deemed securities. Broadly, the tokens that carry the most risk of being labeled securities are those issued before a crypto network is fully decentralized, and while the actions of the management team remain critical to a network’s success. (Bitcoin, for example, is not a security, because it is completely decentralized and there is no core management team.)

Brooks introduces some promising new regulatory paths for crypto including membership models — similar to cooperatives or mutuals — in which token holders agree to only sell the token to other members of the network, avoiding a secondary sales market and thus steering clear of securities issues. While this model hasn’t been tested with the SEC, it has a long track record in other industries and bears further study.

In the final video of the program, former a16z partner and Mediachain co-founder Jesse Walden discusses “Fundraising and Deal Structure” for crypto startups. During early product development, crypto startups can raise traditional venture capital through equity, which allows for the most alignment between founders and investors.

Then, unlike a traditional startup, a crypto startup can invite its user base to participate in ownership and operation via the disbursement of tokens, once the core founding team has found product-market fit and established a viable network. This aligns incentives among the network, its users, the core team, and venture investors. Issuing tokens dilutes the stakes of the core team and early investors, but this is a desirable outcome because incentivizing more participants increases the chances that a network will grow. This leads to a larger pie overall for investors to share.

Walden also discusses Network Monetary Policy, citing Bitcoin, with its guaranteed limit of 21 million tokens, as having a fixed, deflationary supply policy. Other networks may be inflationary, with no ceiling on token amount, thereby perpetually diluting founders and early investors.

A perpetually dilutive system can nonetheless be productive for token holders due to staking, or the process of holders contributing to the operation of the network, which pays off in newly minted tokens for stakers and the retention of their ownership stakes.

See the videos from all six weeks of Crypto Startup School.

24 Jun 2020

Dell’s debt hangover from $67B EMC deal could put VMware stock in play

When Dell bought EMC in 2016 for $67 billion it was one of the biggest acquisitions in tech history, and it brought with it a boatload of debt. Since then Dell has been working on ways to mitigate that debt by selling off various pieces of the corporate empire and going public again, but one of its most valuable assets remains VMware, a company that came over as part of the huge EMC deal.

The Wall Street Journal reported yesterday that Dell is considering selling part of its stake in VMware. The news sent the stock of both companies soaring.

It’s important to understand that even though VMware is part of the Dell family, it runs as a separate company, with its own stock and operations, just as it did when it was part of EMC. Still, Dell owns 81% of that stock, so it could sell a substantial stake and still own a majority the company, or it could sell it all, or incorporate into the Dell family, or of course it could do nothing at all.

Patrick Moorhead, founder and principal analyst at Moor Insights & Strategy thinks this might just be about floating a trial balloon. “Companies do things like this all the time to gauge value, together and apart, and my hunch is this is one of those pieces of research,” Moorhead told TechCrunch.

But as Holger Mueller, an analyst with Constellation Research, points out, it’s an idea that could make sense. “It’s plausible. VMware is more valuable than Dell, and their innovation track record is better than Dell’s over the last few years,” he said.

Mueller added that Dell has been juggling its debts since the EMC acquisition, and it will struggle to innovate its way out of that situation. What’s more, Dell has to wait on any decision until September 2021 when it can move some or all of VMware tax-free, five years after the EMC acquisition closed.

“While Dell can juggle finances, it cannot master innovation. The company’s cloud strategy is only working on a shrinking market and that ain’t easy to execute and grow on. So yeah, next year makes sense after the five year tax free thing kicks in,” he said.

In between the spreadsheets

VMware is worth $63.9 billion today, while Dell is valued at a far more modest $38.9 billion, according to Yahoo Finance data. But beyond the fact that the companies’ market caps differ, they are also quite different in terms of their ability to generate profit.

Looking at their most recent quarters each ending May 1, 2020, Dell turned $21.9 billion in revenue into just $143 million in net income after all expenses were counted. In contrast, VMware generated just $2.73 billion in revenue, but managed to turn that top line into $386 million worth of net income.

So, VMware is far more profitable than Dell from a far smaller revenue base. Even more, VMware grew more last year (from $2.45 billion to $2.73 billion in revenue in its most recent quarter) than Dell, which shrank from $21.91 billion in Q1 F2020 revenue to $21.90 billion in its own most recent three-month period.

VMware also has growing subscription software (SaaS) revenues. Investors love that top line varietal in 2020, having pushed the valuation of SaaS companies to new heights. VMware grew its SaaS revenues from $411 million in the year-ago period to $572 million in its most recent quarter. That’s not rocketship growth mind you, but the business category was VMware’s fastest growing segment in percentage and gross dollar terms.

So VMware is worth more than Dell, and there are some understandable reasons for the situation. Why wouldn’t Dell sell some VMware to lower its debts if the market is willing to price the virtualization company so strongly? Heck, with less debt perhaps Dell’s own market value would rise.

It’s all about that debt

Almost four years after the deal closed, Dell is still struggling to figure out how to handle all the debt, and in a weak economy, that’s an even bigger challenge now. At some point, it would make sense for Dell to cash in some of its valuable chips, and its most valuable one is clearly VMware.

Nothing is imminent because of the five year tax break business, but could something happen? September 2021 is a long time away, and a lot could change between now and then, but on its face, VMware offers a good avenue to erase a bunch of that outstanding debt very quickly and get Dell on much firmer financial ground. Time will tell if that’s what happens.

24 Jun 2020

Instagram expands its TikTok clone ‘Reels’ to new markets

Instagram is expanding its TikTok competitor known as “Reels” to new markets, following its launch last year in Brazil. Starting today, Instagram is rolling out further access to Reels in France and Germany, allowing users to record short, 15-second video clips set to music or other audio, then share them on the platform where they have the potential to go viral.

The Reels feature is similar to TikTok in that it presents a set of editing tools that make it easier to film creative videos. At launch, for example, Reels offered a countdown timer, the ability to adjust the video’s speed, and other effects.

The company learned from its early tests in Brazil and has since rethought key aspects to the Reels experience.

Before, Reels were meant to be shared only within Instagram Stories. But the Instagram community said they wanted the ability to share Reels with followers and friends in a more permanent way, and also have the opportunity to expand that distribution more broadly if desired.

In addition, the community said they wanted a dedicated space where they could easily compile Reels and watch other people’s Reels.

With the expansion in Germany and France, Instagram has moved Reels to a dedicated space on the user Profile and in Explore — the latter for public accounts — so people can share with a new audience and share on their Instagram Feed, a company spokesperson tells TechCrunch.

These changes offer the chance for more exposure for both Reels and their creators, as Reels becomes more of a destination in the app — like the Stories row is today, for instance.

Reels are not Facebook’s first attempt at challenging TikTok’s growing popularity.

The Instagram parent company had previously launched short-form video app Lasso, but it has so far failed to gain significant traction. With Reels, however, Instagram is able to tap into its existing base of creators and leverage users’ familiarity with its video editing tools.

The challenge for Reels is in getting Instagram users to create a different type of content than they do today in Feed posts and in Stories. Those video tend to be more personal in nature — like clips from someone’s day or a vlog, for example. Meanwhile, more professional creator content has been relocated to IGTV.

TikTok videos, on the other hand, tend to be rehearsed and choreographed. Users learn a dance, perform a trick, make jokes, lip-sync to songs or audio, or replicate a popular meme in their own way. These videos are not typically off-the-cuff, as on Instagram. Encouraging this content requires a different editing tool set and workflow, which is what Reels offers.

Instagram didn’t say when it plans to roll out Reels globally or when it expects to bring the product to the U.S., but says the further expansion will allow the company to continue to build on the existing experience and evolve the product.