Year: 2020

The last two decades have ushered in significant change and transformation. I believe the 2020s will be dispositive in redefining the pillars of our economy, and COVID-19 magnifies this greatly. As of this writing there are 3,611,394 confirmed cases, and the U.S. accounts for 33% of those. We are now dealing with a 4.8% Q1 GDP contraction and expectations for Q2’s shrinking runs into the 25% range, more than 30 million unemployed and a $7 trillion federal intervention — in a span of six weeks.

Eric Schmidt recently predicted that the coronavirus pandemic is strengthening big tech. It is hard to disagree with him; it almost feels obvious. Big tech and other digital companies are net beneficiaries of new habits and behaviors. Some of this shift will be permanent, and well-capitalized tech companies are likely to expand their power by grabbing talent and buying companies for their IP — then dissolving them.

With power comes political backlash and public wariness. One flavor of that counter pressure is already in full effect. Sen. Elizabeth Warren and Rep. Alexandria Ocasio-Cortez have proposed new legislation that seeks to curtail acquisition activity via the Pandemic Anti-Monopoly Act. I’ll reserve judgment on their effort, but the theme is familiar: the strong get stronger and the weak get weaker, which further widens gaps and calcifies disparity.

The COVID-19 shock is highlighting a chasm that has evolved over decades. The digital divide, lack of capital access, sporadic paths to education and microscopic levels of wealth accumulation in communities of color and the implicit/explicit bias against non-coastal “elites” are some contributing factors.

During the 2008 crisis, the combined value of the five biggest companies — ExxonMobil, General Electric, Microsoft, AT&T and Procter & Gamble — was $1.6 trillion. Microsoft is worth almost that today — all by itself. No need to talk about FAANG, because since the pandemic’s economic halt, Peloton downloads went up five-fold in a month, Zoom grew to 200 million users from 10 million in December and Instacart users grew six times in that period.

Roelof Botha of Sequoia Capital was recently quoted as saying, “Like the killing off of the dinosaurs, this reorders who gets to survive in the new era. It is the shock that accelerates the future that Silicon Valley has been building.” It is hard to argue with his views.

To be clear, I am a beneficiary of and a big believer in technology. Throughout my career I have managed it, invested in it and made policy on it. For example, one of the multi-billion-dollar programs I oversaw, the Small Business Innovation Research (SBIR) program, has invested more than $50 billion in tens of thousands of startups, which have collectively issued 70,000 patents and raised hundreds of billions of capital — and 700 of them have gone public, including tech titans such as Qualcomm, Biogen and Symantec.

My point: I think about technology a lot, and, lately, about its repercussions. There is a massive shift afoot where more power and influence will be consolidated by these remarkable companies and their technology. Besides the economic consequences of the strong crushing the weak, there are serious ethical issues to consider as a society. Chamath Palihapitiya has been pretty vocal about the moral hazard of what is essentially a massive transfer of wealth and income. On one side you have mismanaged and/or myopic corporations and on the other, the counterparty is the American people and the money we need to print to bankroll the lifeline. I am not talking about Main Street here, by the way.

It is not hard to imagine a world in which tech alone reigns supreme. The ethical dilemmas of this are vast. A recent documentary, “Do You Trust this Computer,” put a spotlight on a frantic Elon Musk ringing the alarm bell on machines’ potential to destroy humanity. Stephen Hawking argued that while artificial intelligence could provide society with outsized benefits, it also has the potential to spiral out of control and end the human race. Bill Gates has been less fatalistic, but is also in the camp of those concerned with synthetic intelligence. In an interesting parallel, Bill has for years been very vocal on the risks pandemics pose and our lack of preparedness for them — indeed.

These three men have had a big impact on the world with and because of technology. Their deep concern is rooted in the fact that once the genie is out of the bottle, it will make and grant wishes to itself without regard to humanity. But, is this doomsday thinking? I don’t know. What I do know is that I am not alone thinking about this. With COVID-19 as a backdrop, many people are.

Algorithmic sophistication and computer horsepower continue to evolve by leaps and bounds, and serious capital continues to be invested on these fronts. The number of transistors per chip has increased from thousands in the 1950s to over four billion today. A one-atom transistor is the physical boundary of Moore’s Law. Increasing the amount of information conveyed per unit, say with quantum computing, is the most realistic possibility of extending Moore’s Law, and with it the march toward intelligent machines and a tech first world. The march has been accelerated, even if peripherally, by the pandemic.

While the promise of technology-driven progress is massive, there are some serious societal costs to exponential discovery and unleashed capability acceleration. Dartmouth’s Dr. James Moor, a notable thinker at the intersection of ethics and technology, believes that the use and development of technologies are most important when technologies have transformative effects on societies. He stipulates that as the impact of technology grows, the volume and complexity of ethical issues surrounding it increases. This is not only because more people are touched by these innovations, they are. It is because transformative technology increases pathways of action that outstrip governance systems and ethical constructs to tame it.

So what? The twists and turns of technology application lead to consequences, sometimes unknowable — and for that reason we should be increasingly vigilant. Did Zuckerberg ever imagine that his invention would have been so central to the outcome of the 2016 election? Unknowable consequences, exhibit one. Interconnected systems touch every aspect of society, from digital terrorism to bioengineering to brain hacking and neural cryonics to swarm warfare, digital assets, intelligent weapons, trillions of IoT connected devices — the list goes on.

As a society, we should be open to innovation and the benefits it ushers in. At the same time, we must also remain committed to sustainable tech development and a deployment mechanism that does not fail to shine a light on human dignity, economic inequality and broad inclusiveness. These seem like esoteric issues, but they are not, and they are being put to the test by COVID-19.

A fresh example of this thematic happened recently: Tim Bray, a VP and engineer at Amazon’s AWS, resigned because of the company’s treatment of employees, and was quoted as saying, in part, “…Amazon treats the humans in the warehouses as fungible units of pick-and-pack potential. Only that’s not just Amazon, it’s how 21st-century capitalism is done… If we don’t like certain things Amazon is doing, we need to put legal guardrails in place to stop those things.”

Eliminating human agency has been at the core of innovation during the last four decades. Less human intervention in a call center, a hedge fund trading desk, a factory, a checkout line or a motor vehicle seems fine — but in cases of greater importance, humans should remain more active or we will, at best, make ourselves irrelevant. In the past, labor displacement has been temporary, but it seems to me that the next wave is likely to be different in terms of the permanence of labor allocation, and big tech getting bigger will likely hasten this.

Innovative capability has been at the center of progress and living standard improvements since we harnessed fire. The world’s technology portfolio is an exciting one, but potentially terrifying to those who could be more hampered by it, such as the front-line workers on Main Street shouldering the health and economic brunt of the coronavirus.

Years ago, Peter Drucker pointed out that technology has transformed from servant to master throughout our history. Regarding the assembly line, he noted that “it does not use the strengths of the human being but, instead, subordinated human strengths to the requirements of the machine.”

In my opinion, Drucker’s quote is at the very core of our point in time, happening on a scale and speed that is hard to fathom and changing the digital divide amongst us into a digital canyon between us and technology.

Xiaomi today launched a new e-commerce service in India that allows people in the nation to easily browse and order its handsets and other products from nearby physical retail stores as the Chinese giant rushes to kickstart its sales in its biggest overseas market.

Dubbed Mi Commerce, the service allows people to locate nearby stores that are either run by Xiaomi or those that have tie-ups with the company and browse smartphones, TVs, electric lamps, and a range of other products.

Users can express their “interest” to purchase the selected item through the app that would prompt the retail store to place a confirmation call. The retail store would deliver the item and then process the payment, Xiaomi said. A spokesperson told TechCrunch that Mi Commerce is available only in India currently.

Xiaomi has also launched a WhatsApp Business account that operates on a similar flow. Users can send a message to +91 8861826286 to initiate the conversation with retail stores through Facebook-owned service.

The shift to what is often described in the industry as an online to offline model comes as Xiaomi, like other smartphone vendors, looks to make up its lost sales in recent weeks. India ordered a nationwide lockdown in late March that shut retail shops, and restricted e-commerce firms to only service grocery orders.

According to Hong Kong-headquartered research firm Counterpoint, no smartphone units were sold in India, the world’s second largest smartphone market, in April.

In a call with reporters, Xiaomi executives said they were hopeful that the Indian market would attain at least 80% of its momentum by the end of the year. Counterpoint slashed its smartphone projections for India last month, saying it now expects the market to shrink by 10% this year. Indian smartphone market has consistently grown year-by-year in the last decade.

Mi Commerce would additionally also help potential customers maintain social distance and avoid errands to stores that would otherwise expose them to novel coronavirus.

Xiaomi said it was working with the government for an update on the resumption of smartphone manufacturing plants that are also shut since the lockdown was ordered in March. The company executives said they currently have inventory to meet demand for three to four months.

The Chinese giant is also providing working capital to its retail store partners, it said.

Samsung, which lost the tentpole position in India’s smartphone market to Xiaomi in 2018 and recently the second spot to Vivo, did not respond to TechCrunch’s request for comment on any similar efforts it has made — or not made — in India.

On Monday, e-commerce firms including Amazon and Walmart in India resumed their service for people in more than 80% zip codes in the country. A lockdown would remain in place for another two weeks in India, but New Delhi has eased some restrictions.

Here’s another edition of “Dear Sophie,” the advice column that answers immigration-related questions about working at technology companies.

“Your questions are vital to the spread of knowledge that allows people all over the world to rise above borders and pursue their dreams,” says Sophie Alcorn, a Silicon Valley immigration attorney. “Whether you’re in people ops, a founder or seeking a job in Silicon Valley, I would love to answer your questions in my next column.”

“Dear Sophie” columns are accessible for Extra Crunch subscribers; use promo code ALCORN to purchase a one or two-year subscription for 50% off.

Dear Sophie:

I was recently laid off but found another position at a growing biotech company. My new employer just submitted the H-1B petition before the end of my grace period. I would like to stay permanently in the United States. How long do I have to apply for a green card?

If my employer isn’t willing to sponsor me, I heard I can self-petition for an EB-1A or EB-2 NIW green card?

—Hopeful in Hayward

Dear Hopeful:

Congrats on your new job offer and H-1B transfer. Many companies are hiring talented individuals right now. Every company has the right to their own immigration sponsorship policy, so it can be worthwhile to discuss this going into your new role to make sure that everybody’s on the same page as to how things can unfold with respect to your green card.

Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.

In December of 2019, this column wrote an entry detailing Uber’s micro-mobility efforts. Just six months ago — a mere two quarters — Uber’s Jump team was on the record saying that its parent company wanted to “double down on micro-mobility.” At the time, before COVID-19 and the decline in human travel, it made some sense.

Things have changed for both Uber and micro-mobility sector. Uber’s financial performance was looking up before the pandemic, with the company promising a more aggressive adjusted profitability timeline. Lime, a dockless scooter company, was also making noise about profits—or something close to them.

Both goals now seem out of reach. Bird and Lime, the best-known American scooter companies, have both cut staff this year. And The Information recently reported that Uber may invest in Lime at a dramatically lowered valuation with an option to buy the company at a later date.

As Uber already has its own micro-mobility bet (recall that it bought JUMP and thus has its own scooters in-market), why would it go through the bother of repricing Lime to maybe buy it later? The Information notes that Uber’s own micro-mobility bet is expensive. But given Lime’s own persistent losses and cash burn I couldn’t make the idea square in my head. So, this morning let’s peek at Uber’s numbers ahead of earnings and see what we can learn about its 2019 in the micro-mobility world, and if that helps us understand why it might drop up to nine figures on Lime during the smaller company’s struggles.

M&A activity has generally slowed down in the weeks since the novel coronavirus took a grip on the world, but there have been some pockets of activity in the tech industry when the price is right or when the divestment/acquisition just makes sense.

The world of messaging brings us the latest development in that theme: SAP, the CRM and enterprise software giant, is selling its Digital Interconnect messaging business to Sinch, a Swedish cloud voice, video and messaging company that originally spun out from low-cost IP calling company Rebtel and is now public.

Sinch is paying €225 million (around $250 million) on a cash and debt-free basis for the business, which has 1,500 enterprise customers that use it for various messaging services, such as “omnichannel” conversations with customers over SMS, push, email, WhatsApp, WeChat and Viber; and messaging technology for carriers.

The deal will give Sinch, based in Sweden, a foothold in the US market — the Digital Interconnect business is headquartered in Silicon Valley — and access to a trove of customers using the kind of messaging technology that Sinch develops and sells.

Messaging continues to be a very high-volume, low-margin (or even no-margin in some cases) business, and so a bigger strategy for more economy of scale that will continue to play out. As a case in point: Sinch has been on an acquisition spree in the last month. Other deals have included Latin American messaging provider Wavy ($119 million, announced March 26), and ChatLayer ($6 million, announced April 20).

“With SAP Digital Interconnect now becoming a part of Sinch, we build on our scale, focus and capabilities to truly redefine how businesses engage with their customers, throughout the world,” comments Oscar Werner, Sinch CEO, in a statement. “The transaction strengthens our direct connectivity globally. Plus, it enables us to expand and accelerate a range of business-critical services to mobile operators, including products for person-to-person messaging, reporting and analytics.”

The news caps off nearly a month of speculation that SAP was gearing up for a sale of the legacy unit as part of a bigger strategy to focus more squarely on its CRM and newer enterprise IT services — SAP acquired Qualtrics in November 2018 for $8 billion, spearheading a stronger move into employee and customer experience, surveys and research — in a particularly challenging economic environment.

And between then and now SAP has seen a very notable personnel change: its co-CEO Jennifer Morgan stepped away from the company by mutual agreement with the board, leaving Christian Klein as sole CEO (the two had been in the co-CEO roles for only six months). At the time, the company said that the abrupt change — a mere 10 days between announcement and departure — was in response to “the current environment [which] requires companies to take swift, determined action which is best supported by a very clear leadership structure.”

It would appear that this sale is an example of the kind of swift and determined action that the board was hoping to see.

SAP’s messaging unit has been around in one form or another for years. It became a part of SAP in 2010 as part of its acquisition of Sybase, but even before that Sybase acquired Mobile 365, which had developed the messaging technology, back in 2006.

At the time, the messaging business was the primary part of Mobile 365, and Sybase paid $417 million for the company. In that regard, it might look like SAP is selling it for a loss, although you could also argue that 15+ year-old technology in the fast-moving world of messaging would have depreciated at this point.

The business itself is very typical of messaging: huge volumes but not huge revenues.

In 2019, SAP said that the enterprise messaging business processed 18 billion messages, while its carrier services processed 292 billion carrier messages. The Bloomberg report that broke the news about the intent to sell the division said that it made $50 million in EBITDA and $250 million in revenue last year, but actually this is small relatively speaking: SAP altogether had revenues of nearly $30 billion in the same period. In other words, it’s an okay business but not really core to SAP and where it’s going. 

On the other hand, it’s a better fit for Sinch, which is a much smaller company — market cap of about $3.1 billion (30.82 billion Swedish krona), versus SAP’s market cap of $139 billion — but is squarely focused on messaging services similar to those that the former SAP division offers.

“SAP Digital Interconnect is a leader in its area showing profitable growth and reaching 99 percent of the world’s mobile subscribers. Looking at Sinch’s innovation and investment strategy in the area of cloud communication platforms, we welcome them as the new owner of SDI. Sinch is perfectly positioned to unleash further growth potential we see in SDI,” said Thomas Saueressig, member of the Executive Board of SAP SE, responsible for SAP Product Engineering, in a statement.

M&A continues on in the wider European region even while so much else has slowed down or stopped in the current market. This deal follows on the heels of Intel acquiring Israel’s Moovit for $900 million, and Avira in Germany getting acquired by Investcorp at a $180 million valuation.

Netflix has released the first trailer for its series Space Force, which is a parodic take on the newest branch of the U.S. armed forces. The project was announced pretty shortly after the space-focused military branch was made official, so it’s actually pretty impressive to see a trailer for what looks like a pretty polished production in such a short time – even as the actual U.S. Space Force has only just begun graduating its first cadets.

The show arrives on May 29 (coincidentally just two days after NASA and SpaceX are set to mark a return to U.S. crewed spaceflight with their first Commercial Crew astronaut demonstration mission), and stars Steve Carell alongside John Malkovich, Diana Silvers, Tawny Newsome, Lisa Kudrow and Ben Schwartz. If you get a distinctly ‘Office’ vibe from this trailer, then there’s a good reason for that – a lot of the creative team worked on that Carell show, too, including Office U.S. creator Greg Daniels.

It’s tempting to characterize this as ‘The Office but with space army” based on this look, but that’s probably just the powerful association of Carell with the Micheal Scott character talking.

The world has changed dramatically since May 2019 when we last surveyed venture capitalists about the trends they were seeing in media, entertainment and gaming.

Since then, COVID-19 and the resulting physical distancing measures have created plenty of demand for companies helping to inform and entertain us as we’re stuck at home. At the same time, there’s a dramatic reduction in ad spending, making it harder to monetize that consumer attention.

So we checked in a variety of top VCs about the new landscape, where they’re investing and what kind of advice they’re giving their portfolio companies.

Not all of them invest directly in what (paraphrasing Betaworks’ Matt Hartman) we might call media media — the companies whose business models revolve around content creation and advertising — but each of these investors are backing startups looking to change the way we stay connected and entertained.

Here’s who we surveyed:

• Kevin Zhang (Partner, Upfront Ventures)
• Pär-Jörgen (PJ) Pärson (General Partner, Northzone)
• Vasu Kulkarn (Partner, Courtside Ventures)
• MG Siegler (General Partner, GV)
• Jana Messerschmidt (Partner, Lightspeed Venture Partners)
• Matthew Hartman (Partner, Betaworks Ventures)
• Gigi Levy-Weiss (Managing Partner, NFX)

The consensus? You can’t count on the ad business to recover in the next few months, but there are still opportunities for startups exploring new formats and new business models. And there’s still plenty of excitement about gaming and esports.

You can read their full responses, lightly edited, below.

Kevin Zhang, Upfront Ventures

What (if any) media trends are still exciting you from an investing perspective?

Live and interactive formats, especially shorter form, continue to be very exciting, made even more evident in this time of shelter-in-place. What has worked in China and broader Asia has not yet translated into explosive success in the West. As interesting as celebrity live broadcasts are from their homes, the lack of real interaction and participation features hampers long-term engagement and doesn’t make up for the lack of production quality.

Modern content production technology is needed to push both production and live ops cost down while enabling more interactive and engaging formats. Game engines are one example, there’s of course the Travis Scott concert that just happened in Fortnite built on the Unreal engine, but that 15-minute, pre-rendered show took months to create, we’re only just scratching the surface of what’s possible.

One of our investments in this space is Tellie for live-action formats, another is The Wave for rendered, live formats, and we continue to look for great combinations of tech and media talent innovating on new formats.

Speaking of gaming, multiplayer games continue to grow and grow exponentially, there is a lot to unpack in popular titles from new favorite Animal Crossing to classics like World of Warcraft to indie hits like For the King. They all have social cooperation as a core part of the game loop and design. I’d love to see more teams working on cooperative play and just overall a broader diversity in multiplayer experiences beyond purely competitive ones.

Cockroach Labs, the NYC enterprise database company, announced an $86.6 million Series D funding round today. The company was in no mood to talk valuations, but was happy to have a big chunk of money to help build on its recent success and ride out the current economic malaise.

Altimeter Capital and Bond co-led the round with participation from Benchmark, GV, Index Ventures, Redpoint Ventures, Sequoia Capital and Tiger Capital. Today’s funding comes on top of a $55 million Series C last August, and brings the total raised to $195 million, according to the company.

Cockroach has a tough job. It’s battling both traditional databases like Oracle and modern ones from the likes of Amazon, but investors see a company with a lot of potential market building an open source, on prem and cloud database product. In particular, the open source product provides a way to attract users and turn some percentage of those into potential customers, an approach investors tend to favor.

CEO and co-founder Spenser Kimball says that the company had been growing fast before the pandemic hit. “I think the biggest change between now and last year has just been our go to market which is seeing pretty explosive growth. By number of customers, we’ve grown by almost 300%,” Kimball told TechCrunch.

He says having that three-pronged approach of open source, cloud an on-prem products has really helped fuel that growth. The company launched the cloud service in 2018 and it has helped expand its market. Whereas the on-prem version was mostly aimed at larger customers, the managed service puts Cockroach in reach of individual developers and teams, who might not want to deal with all of the overhead of managing a complex database on their own.

Kimball says it’s really too soon to say what impact the pandemic will have on his business. He recognizes that certain verticals like travel, hospitality and some retail business are probably going to suffer, but other businesses that are accelerating in the crisis could make use of a highly scalable database like CockroachDB.

“Obviously it’s a new world right now. I think there are going to be some losers and some winners, but on balance I think [our] momentum will continue to grow for something that really does represent a best in class solution for businesses, whether they are startups or big enterprises, as they’re trying to figure out how to build for a cloud native future,” Kimball said.

The company intends to keep hiring through this, but is being careful and regularly evaluating what its needs are much more carefully than it might have done prior to this crisis with a much more open mind toward remote work.

Kimball certainly recognizes that it’s not an easy time to be raising this kind of cash and he is grateful to have the confidence of investors to keep growing his company, come what may.

China has launched a demonstration mission of its next-generation crew spacecraft, using the Long March 5B rocket. This is the first launch for that new rocket, an iteration of China’s Long March launcher that will also be used to take up the sections and components of the country’s forthcoming national orbital space station.

This launch flew the crew spacecraft without anyone on board, taking off from Wengchang in China, which is the country’s newest spacecraft launch site. The Long March 5B is a ten engine rocket, including four strapped on boosters that increase its lift capabilities, and represents the nation’s most powerful launch vehicle to date. It lacks a second stage, and is specifically designed for bringing big payloads to low Earth orbit – which is exactly what’s needed for assembling the space station China plans to establish there by 2022.

The crew capsule itself will spend a short time in low Earth orbit for its demonstration mission, which is a preparatory step on the way to certifying it for flight. Eventually, the spacecraft will replace the Shenzhou, which is the current vehicle that China uses to bring astronauts to space for rendezvous with orbital stations. It can carry up to six people at once, vs. three on the current model, and can eventually carry astronauts to the Moon.

This is a significant mission for China’s space program, and an interesting comparison point for the ongoing Commercial Crew missions by NASA, which is approaching a major milestone with the first demonstration launch of SpaceX’s Commercial Crew spacecraft with astronauts on board on May 27. SpaceX’s Crew Dragon can carry up to seven passengers, depending on configuration.

Orca Security, an Israeli cloud security firm that focuses on giving enterprises better visibility into their multi-cloud deployments on AWS, Azure and GCP, today announced that it has raised a $20 million Series A round led by GGV Capital. YL Ventures and Silicon Valley CISO Investments also participated in this round. Together with its seed investment led by YL Ventures, this brings Orca’s total funding to $27 million.

One feature that makes Orca stand out is its ability to quickly provide workload-level visibility with the need for an agent or network scanner. Instead, Orca uses low-level APIs that allow it to gain visibility into what exactly is running in your cloud.

The founders of Orca all have a background as architects and CTOs at other companies, including the likes of Check Point Technologies, as well as the Israeli army’s Unit 8200. As Orca CPO and co-founder Gil Geron told me in a meeting in Tel Aviv earlier this year, the founders were looking for a big enough problem to solve and it quickly became clear that at the core of most security breaches were misconfigurations or the lack of security tools in the right places. “What we deduced is that in too many cases, we have the security tools that can protect us, but we don’t have them in the right place at the right time,” Geron, who previously led a security team at Check Point, said. “And this is because there is this friction between the business’ need to grow and the need to have it secure.”

Orca delivers its solution as a SaaS platform and on top of providing work level visibility into these public clouds, it also offers security tools that can scan for vulnerabilities, malware, misconfigurations, password issues, secret keys in personally identifiable information.

“In a software-driven world that is moving faster than ever before, it’s extremely difficult for security teams to properly discover and protect every cloud asset,” said GGV managing partner Glenn Solomon . “Orca Security’s novel approach provides unparalleled visibility into these assets and brings this power back to the CISO without slowing down engineering.”

Orca Security is barely a year and a half old, but it also counts companies like Flexport, Fiverr, Sisene and Qubole among its customers.