Year: 2020

The JEDI contract award process might never be done. Following legal challenges from Amazon after the Pentagon’s massive, $10 billion cloud contract was awarded to Microsoft in October, the Pentagon indicated in court documents last night that it wishes to reconsider the award.

It’s just the latest plot twist in an epic government procurement saga.

Here’s what we know. The Pentagon filing is based on Amazon’s complaints about the technical part of the deal only. Amazon has said that it believes political interference influenced the awarding of the contract. However, the cloud computing giant also believes it beat Microsoft on the technical merits in a majority of instances required in the request for proposals issued by the Pentagon.

In fact, sources told TechCrunch, “AWS’s protest identified evaluation errors, clear deficiencies and unmistakable bias in six of the eight evaluation factors.”

Obviously Amazon was happy to hear this news. “We are pleased that the DoD has acknowledged ‘substantial and legitimate’ issues that affected the JEDI award decision, and that corrective action is necessary,” a spokesperson stated.

“We look forward to complete, fair, and effective corrective action that fully insulates the re-evaluation from political influence and corrects the many issues affecting the initial flawed award.”

The court granted the Pentagon 120 days to review the results again, but indicated it could take longer. In the mean time, the project is at a standstill.

On Friday, the court issued a ruling that Amazon was likely to succeed on its complaint on merit, and that could have been the impetus of this latest action by the Pentagon.

While the political influence piece might not be overtly part of this filing, it does lurk in the background. The president has made it clear that he doesn’t like Amazon founder and CEO Jeff Bezos, who also owns the Washington Post. As we wrote last year:

Amazon, for instance, could point to Jim Mattis’ book where he wrote that the president told the then Defense Secretary to “screw Bezos out of that $10 billion contract.” Mattis says he refused, saying he would go by the book, but it certainly leaves the door open to a conflict question.

As we previously reported, AWS CEO Andy Jassy, stated at a press event at AWS re:Invent in December that the company believed there was political bias at play in the decision-making process.

“What I would say is that it’s fairly obvious that we feel pretty strongly that it was not adjudicated fairly,” he said. He added, “I think that we ended up with a situation where there was political interference. When you have a sitting president, who has shared openly his disdain for a company, and the leader of that company, it makes it really difficult for government agencies, including the DoD, to make objective decisions without fear of reprisal.”

We have requested comment from Microsoft and DoD and will update the story should they respond.

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

As COVID-19 continues to change how many workers and students approach their daily labors, demand for some remote work friendly products is booming. As TechCrunch recently explored, some startups are seeing interest accelerate for their products, services and wares.

The trend has become sufficiently acute that it’s common now to see jokes on Twitter from people fervently hoping that Zoom doesn’t crash as many American universities quickly move to leverage the popular video chat service.

Zoom reported earnings earlier this month, beating investor expectations for the past quarter, and forecasting revenues ahead of investor guesses for the current quarter and its full fiscal year. The 2019 IPO also noted that it could see gross margin erosion as usage of its product free tier accelerated ahead of monetization. The remote work boom is changing Zoom’s short-term economics, and, investors hope, its long-term growth curve.

Slack, another recent public offering and remote work friendly tool, reported earnings yesterday. Instead of it going well, shares in the American chat app quickly fell. TechCrunch noted at the time that this was likely due, in part, to its further forecast appearing light. After the report dropped, Slack posted a temporary recovery, opening down a more modest 6% today after posting a 20% drop after its figures first dropped. However, since then its shares have slid and are down 19% as I write to you.

This morning we’ll examine the company’s notes from its earnings call, mixing in fresh usage notes from Monday.com — another popular remote friendly software service, albeit one that is still private —  and take a peek at new data that could help us illuminate growth trends in Slack’s battle with Microsoft’s competing Teams product.

The picture that emerges is somewhat complex, with Slack’s usage rising, but the firm hesitant to forecast present demand as future revenue as the world changes. But we can explain why the company’s shares fell and staged a recovery, albeit a temporary one. Let’s go.

The U.S. Food and Drug and Administration has granted emergency approval for use of a new test that can increase the range of testing patients by up to 10 times compared to methods in use currently, Bloomberg reports. That speed improvement refers specifically to the technical capabilities of the testing process, meaning access to testing is still a separate issue, but it is the first commercially available test that has received emergency approval and for which equipment exists in fairly high volume across the U.S.

Testing is a core component of the effort to combat and control the spread of COVID-19, since those affected by the virus display a wide range of symptoms, and many could be carriers with only very mild external signs of the disease. Having effective and broadly available testing methods, that can test a high volume of patients per day, is a key part of any defense strategy since it means more effectively identifying the scope of affected populations and reinforcing the need for mitigation strategies like social isolation and distancing.

These new tests granted emergency approval can test up to 1,440 patients per day on an earlier generation of Roche’s testing hardware, or as many as 4,128 on a later iteration. Bloomberg notes that there are roughly 110 of these machines across both generations available in the U.S., and that more are being installed in “significant” volume in recent weeks as response efforts ramp up. These tests use analysis of patient saliva and mucus to determine if a patient has contracted a known coronavirus strain.

Access to coronavirus testing in the U.S. has been heavily criticized by healthcare professionals and experts to date, including at a congressional hearing this week. Observers have noted that countries that seem to have been able to bend the exponential curve of infection, including South Korea, China and Japan, have all done so in part supported by excellent and widespread testing available in high volume. This newly approved test should help private labs increase the availability of testing in the U.S., but it’s not yet clear exactly how that will play out in terms of the actual rate of U.S. patient testing in practice.

As America’s fractured Congress inches closer to an agreement on a comprehensive bailout for the economic hardships businesses and workers are facing due to the COVID-19 pandemic, stocks are poised for a big rally on Wall Street.

The move is more than welcome after stock markets recorded their worst day in over thirty years yesterday.

All the major indices (and bitcoin) were up in pre-market trading the morning after Treasury Secretary Steve Mnuchin and Speaker of the House Nancy Pelosi said that Republican and Democratic leadership had a deal in place to move forward with a financial stimulus package to support businesses hit by the coronavirus outbreak.

At the open markets went up:

• The Dow Jones was up 1,301.20, or 6.14% , to 22,501.82
• The Nasdaq was up 391.93 points, or 5.44%, to 7,593.73  
• The S&P 500 was up 139.54 points, or 5.63%, to 2,620.18

In addition to the federal government’s agreement with congressional leadership to make it rain, the agencies tasked with overseeing the nation’s health are moving forward quickly to bring new testing capabilities online in an effort to get a clearer picture of the spread of the novel coronavirus in the U.S.

It’s a clutch of good news for people who don’t like bad news, and there’s been a lot of bad news lately. The seeds of a potentially more coordinated government response have borne fruit in a brighter outlook for tech darlings like Apple, which was up 7.45% or $18.49 per-share in pre-market trading. Tesla shares were up 7.75% at the market open to $604.01 per share. Microsoft is up over 7% as well.

Damage

Not all damage is set to be undone, however. At its current open, the Nasdaq is still off about 22%, leaving it not only far from recovered, but still firmly encamped in bear-market territory.

Similarly, bitcoin’s modest rally in the past half day is not a full recovery. This morning’s trading leaves the price of the most famous cryptocurrency down a little less than 50% down from recent highs (bitcoin traded for more than $10,000 in mid-February.) Other cryptos remain hard-hit, with XRP down more than 50% from its February highs, and Ethereum down a similar percent over the same timeframe.

But still, the day’s positive news is welcome. Hard-hit companies like Uber and Lyft are up sharply, providing some balm to investors who had wagered on recent technology IPOs. More when the markets close, of course, but keep an extra close eye on Slack, which fell after-hours yesterday when its earnings report failed to excite investors. This morning, however, it appears to have pared those declines.

In Asia, where I work as a partner at an early-stage VC, startups are regularly rolling out a minimum viable product (MVP) and then transacting on messaging apps.

Companies like shoe brand Portblue, AI e-commerce company Sorabel and Sama, an online recruitment platform for migrant workers, all started life using WhatsApp and Facebook Messenger to communicate with customers, onboard users and raise brand awareness.

For many years, WeChat has been the default app for daily life and business in China. It’s estimated that more than 30% of all internet traffic in China is through WeChat, and in 2017 they introduced “mini-programs,” where businesses could build apps inside WeChat. Now, you never have to download any apps or go to a browser to access millions of services and businesses in WeChat.

We now see a similar trend in Southeast Asia. Here, WhatsApp is the dominant social platform and, while it has not built the same infrastructure for building apps, startups have found a way around that and now run many services on top of WhatsApp, validating with customers fast and cheaply. These companies are not only mobile-first, but they are also WhatsApp-first.

Sampingan, an Antler portfolio company founded here in Singapore, provides an on-demand workforce to businesses in Indonesia. The first version of the product was on WhatsApp. The team sourced and managed more than 2,000 blue-collar workers in Indonesia who completed 25,000 jobs in the company’s first three months.

Lisa Enckell is a partner at Antler, an early-stage venture capital firm and startup generator.

Princess Cruises, the cruise liner forced to halt its global operations after two of its ships confirmed outbreaks of coronavirus on board, has now confirmed a data breach.

The notice posted on its website, believed to have been posted in early March, said the company detected unauthorized access to a number of its email accounts over a four month period between April and July 2019, some of which contained personal information on its employees, crew, and guests.

Princess said names, addresses, Social Security numbers, and government IDs — such as passport numbers and driver’s license numbers — may have been accessed, along with financial and health information.

But, the cruise liner said, that the potentially impacted data is “not specific” to each guest.

Princess said it discovered the suspicious activity on its network in May 2019. It’s not known why it took almost a year for the cruise liner to disclose the breach.

A company spokesperson did not immediately respond to a request for comment.

Carnival, which owns the Princess brand, saw its shares tank by more than 30% this week after the cruise liner said it would suspend its fleet of 18 ships following the declaration of the COVID-19 pandemic. The company was at the center of two separate incidents involving its ships carrying dozens of patients infected with the coronavirus strain in Japan and more recently California.

The cruise liner did not say under which jurisdictions it reported the breach. Companies can be fined up to 4% of their annual turnover for violations of European data protection rules.

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

Today was something a bit special. We’d originally hoped to have this episode in person, as a group, but the world isn’t flying as much right now so we had to make do. Regardless, please say hello and welcome Natasha Mascarenhas to the Equity crew.

Natasha has worked for the Boston Globe, the SF Chronicle, and, most recently, covering venture capital for Crunchbase News. TechCrunch is lucky to have her, and the Equity team is stoked that she’s coming aboard our hosting team. When she’s not podcasting, she will be reporting on early stage startups and venture capital trends for TechCrunch and ExtraCrunch.

Don’t worry, Danny and Alex aren’t going anywhere. Equity is now, happily, back to its original three-part hosting crew. This means we can do a better job week in, and week out.

Alright! Enough of all that, let’s talk news. Here’s what we went over today:

• The 11 year bull market is over, and Uber and Lyft suffered from the fallout.
• What might be ahead for startups as the public markets fall apart.
• New funds from NEA and Felicis.
• How to raise money in the current remote-work climate.
• The Sequoia-Finix dustup.

Equity has been busy lately. We put together a huge interview with Jason Lemkin, and held a live chat this week. We’re tinkering with new things as we try to do more, and better for you all. Chat you all Monday morning!

Equity drops every Monday at 7:00 AM PT and Friday at 6:00 am PT, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.

May is traditionally a month of big developer conferences, with Facebook F8, Google I/O and Microsoft Build often happening within the same two-week period. But not this year. After F8 and I/O were already canceled in favor of online events, Microsoft is now unsurprisingly following suit, too, and canceling the in-person element of Build, which was scheduled to run from May 19 to 21, citing concerns over the current coronavirus outbreak.

“The safety of our community is a top priority. In light of the health safety recommendations for Washington State, we will deliver our annual Microsoft Build event for developers as a digital event, in lieu of an in-person event,” the company said in a statement to The Verge. “We look forward to bringing together our ecosystem of developers in this new virtual format to learn, connect and code together. Stay tuned for more details to come.”

The announcement doesn’t exactly come as a surprise. Indeed, it was really only a question of when Microsoft would make the call and the real surprise was how long it took Microsoft to make this call, especially given how hard Washington state has been hit by the coronavirus outbreak. Currently, a number of Washington state counties have banned events with more than 250 people. That ban was set to expire before Build.

It’s worth noting that Microsoft hasn’t actually updated the Build homepage yet and you can still buy a ticket. If I were you, I wouldn’t do that, though. You’ll get a refund, but it’s not worth the hassle.

Pressure from the global pandemic has broadband companies loosening the arbitrary restrictions on the connections users pay for — and this may be the beginning of the end for the data caps we’ve lived in fear of for decades. Here’s why.

The coronavirus threat and official policies of “social distancing” are leading millions to stay home, doing meetings via video chat and probably watching Netflix and YouTube the rest of the time. That means a big uptick in bytes going through the tubes, both simultaneously and cumulatively.

ISPs, leery of repeating Verizon’s memorable gaffe of cutting off service during an emergency, are proposing a variety of user-friendly changes to their policies. Comcast is boosting the bandwidth of its low-income Internet Essentials customers to levels that actually qualify as broadband under FCC rules. AT&T is suspending data caps for all its customers until further notice. Verizon has added $500 million to its 5G rollout plans. Wait, how does that help? Unclear, but the company “stands ready” for increases in traffic. (Disclosure: Verizon Media owns TechCrunch but this does not affect our editorial coverage.)

Elsewhere in the world ISPs are taking similar actions, either voluntarily or at the request of the state. In India, for instance, ACT Fibernet has bumped everyone up to 300 Mbps for no cost.

There are two simple truths at play here.

The first is that any company that sends its subscriber a $150 overage fee because they had to work from home for a month and ran over their data cap is going to be radioactive. The optics on that are so bad that my guess is most companies are quietly setting forgiveness policies in place to prevent it from happening — though of course it probably will anyway.

The second is that these caps are completely unnecessary, existing only as a way to squeeze more money from subscribers. Data caps just don’t matter any more. As I pointed out during the whole zero-rating debacle, the very fact that the limits can be lifted at will or certain high-traffic categories (such as a broadband company’s own streaming TV channels) can be exempted fundamentally beggars the concept of these caps.

Think about it: If the internet provider can even temporarily lift the data caps, then there is definitively enough capacity for the network to be used without those caps. If there’s enough capacity, then why did the caps exist in the first place?

Answer: Because they make money.

As with other nonsensical and aggravating fees and practices, ISPs get away with this because they amount to regional monopolies or duopolies and are all running the same basic set of grifts for extra cash on top of your subscription fee.

That may be changing with the coronavirus, because after this very public exception to them it will be obvious to everyone that there is no reason for the caps to exist — including the FCC.

For years ISPs have made excuses that certain “bad actors” and superusers would abuse the system and suck up all the internet, causing congestion and slowdowns for everyone else. Unsurprisingly, this never actually happened, or if it did, it happened many, many years ago when broadband was in its infancy and it was possible to hog the line in your neighborhood.

Now, with 100-megabit and gigabit connections becoming more common by the month (to those on the right side of the digital divide, anyway), you’d be hard pressed to max out your own connection, let alone everyone else’s. In fact, the only person who would notice you’d eaten up 50 times more data than your neighbor would be your ISP.

Yet, strangely, if you were to use this high-speed connection steadily, you’d be punished on extraordinarily short notice. Comcast’s gigabit data plans, for instance, come with a 1-terabye cap. At top speed, you’d hit it in less than three hours. Doesn’t make a lot of sense, does it?

These facts will be material if, in a couple months, the ISPs attempt to re-establish data caps. If the entire country was using the hell out of their connection for months with no ill effects — and no ISP will admit that their superior network couldn’t handle it — why should there be limits at all?

Of course, this is only speculation for now. But once someone like Commissioner Rosenworcel starts talking publicly about this sort of thing, it tends to only go forward, absent serious opposition by the opposing party or industry groups. When it comes to data caps, it’s hard for anyone to justify their continued existence, and the coronavirus situation will only make this more clear.

Crucially, once it becomes clear that data caps are on the outs, it will suddenly become the cool new idea that simultaneously occurs to every ISP that a few months ago was happy to collect overages. I can picture the ad copy now: “What data caps? Binge care-free with the new Freedom Plus plan from AT&T.” “Unlimited data — yes, we mean it.”

Well, they can call it whatever they want, as long as it’s free and the limits are lifted — the way it should have been all this time.

Epic Games announced today that it’s buying Cubic Motion, a computer vision startup that’s been building out a platform for capturing more realistic facial animations with a complex camera rig and software platform.

The game studio behind Fortnite and the Unreal Engine has already done plenty of work with the UK-based startup, creating a number of tech demos over the past several years that have centered on translating an actor’s facial movements to a digital character in real-time. The startup’s Persona product which launched last year bundles both its software and motion capture hardware rig.

Cubic Motion’s technology has been used in recent blockbuster gaming titles like Sony Interactive Entertainment’s God of War and Insomniac Games’ Marvel’s Spider-Man.

The startup raised just over $22 million in funding from NorthEdge Capital. Terms of the deal weren’t disclosed. The startup will continue serving existing customers while also accelerating integrations between the company’s tech and Unreal Engine, the companies said in a press release.

While Epic Games and competitor Unity continue to court large game developers, acquisitions like this signify hopes that the real-time game engines will infiltrate industries outside gaming more deeply. This acquisition will undoubtedly be helpful for helping higher budget game studios craft intricate cut scenes but the integration will likely also serve to court more attention from movie studios interested in bringing real-time rendering into their workflows.

Last year, Epic acquired game studio 3Lateral which built more realistic human avatars. That, partnered with this latest acquisition certainly suggests that Epic sees more realism in human characters and avatars as a category worth investing with.