Author: azeeadmin

Africa’s startup scene is growing by leaps and bounds and three tech leaders are set to share insights on this vibrant space at Disrupt San Francisco.   

Paga CEO Taya Oviosu, Helios Investment Partners’ Vice President Fope Adelowo, and Cellulant CEO Ken Njoroge will take the stage September 7 to discuss topics such as fintech, Africa’s founder experience, data privacy, VC investment, and the continent’s future unicorn and IPO prospects.

Nearly two decades of improved stability, economic growth and reform have created some bright spots on the continent, rapid modernization and a growing technology scene among them.

Africa minted its first unicorn — e-commerce venture Jumia— in 2016 and over the last five years, just about every big-name U.S. tech company, including Facebook, Google and Netflix, has expanded there.

The continent now has 442 active tech hubs, accelerators and innovation spaces across IT hotspots in Ghana, Kenya, South Africa, Nigeria and Rwanda. Thousands of African startups are moving into every imaginable sector: from blockchain, logistics and education to healthcare and agriculture.

And hundreds of millions of dollars in venture capital is flowing to these startups, with the expectation that some of their solutions for Africa’s 1.2 billion people will produce significant ROI.

Two of those ventures are Oviosu’s Paga and Njoroge’s Cellulant. Paga has become one of Nigeria’s leading digital payments providers in a market where many people are just signing on to financial services. Since 2012 the company has processed 57 million transactions worth $3.6 billion, reached 9 million users, and achieved profitability, according to Oviosu.

Cellulant—a Nairobi headquartered Pan-African payment startup—has also posted some impressive fintech stats. The company offers B2B and P2B services to clients that include some of the continent’s largest banks. In 2017 Cellulant’s payment platforms processed $2.7 billion across 33 countries, according to Njoroge. And in 2018 Cellulant raised one of the continent’s largest VC rounds— $47.5 million —led by TPG Growth’s Rise Fund.  

Paga and Cellulant have the potential to become early public African tech companies and both Oviosu and Njoroge mentor younger startups as angel investors in their respective markets.

On IPO prospects, Helios Investment Partners’ Fope Adelowo has been on the forefront of VC into Africa’s breakout startups. She serves as board observer to two of the firm’s high-profile Africa investments, e-commerce site MallforAfrica and payments company Interswitch. MallforAfrica recently launched a global e-commerce site with DHL and Interswitch said it plans to become one of the continent’s first tech IPOs on a major exchange by 2019.

A top four tech company recently approached the CEO of one of our B2B portfolio companies with a tremendous offer. This company, with buy-in from its world-famous CEO, believes the startup’s core technology could help them catch up to a rival in an incredibly important space and wanted to discuss a $20M investment on extremely favorable terms. This partnership would allow the startup to grow 10X in a year and would provide invaluable validation.

The founder was elated. I was terrified. This kind of deal is a classic “whale hunt,” and most of the startups who engage in them are doomed to end up like Captain Ahab.

While it’s immensely gratifying to receive this kind of validation from a market leader, the startup is at an early and important developmental stage. I’ve seen many promising startups blown up by ill-advised business development deals that swelled teams in a bout of euphoria only to see them wither if interest and focus from their partner wanes.

In my experience, arrangements that pair a behemoth megacorp with a Seed/Series A stage startup have a success rate well below 50%. I didn’t tell the founder to decline the offer outright, but I did suggest that the management team consider a few questions before pursuing it.

How much MRR will it add to your business? The project with the large company is in line with the startup’s long-term vision, but it’s a departure from their current focus. A $20M investment is very nice indeed, but once that money is spent, what will the ongoing revenue be? And what is the opportunity cost of not supporting the current business plan? What discount rate will you apply to compensate for the small probability of this deal working out? My advice was that if he couldn’t satisfactorily answer those questions, it was probably the right move to turn the deal down. Even if the deal was structured as $20M in revenue rather than equity I’d hesitate.

How, in detail, will this project help your core business? There’s an argument for entering into an agreement like this even if the immediate revenue contribution is low. If the project will allow the startup to speed up the development of a core technology that is generally applicable to other customers, it would seem far more worthy of consideration but beware our human ability to rationalize (first and foremost to ourselves).

These projects more often end up as bespoke development engagements where despite the initial intention, the startup is producing a custom application for the big co. Founders will rationalize the deviations from their product roadmap, but ultimately sell out their future for a long-shot opportunity to integrate with a worldwide leader.

My advice is to not think magically about product/market fit, and instead, to try pre-selling it to other customers as a form of market development. If you can sell the product, great! If not, you’re probably using venture capital to subsidize the R&D budget of a company worth hundreds of billions of dollars.

What happens if this doesn’t work out? It’s easy to visualize success, but what happens if the deal doesn’t lead anywhere? In this scenario, imagine the big tech company decides to change its priorities and abandons the initiative. SaaS startups face a similar failure mode when they go to great lengths to impress big companies during pilot programs only to see their project die due to lack of interest. When considering a high-risk, high-reward partnership, founders need to spend time envisioning a gruesome demise.

● What will your pitch be for a bridge round of financing when you have no revenue, you just came up short during a prolonged engagement with the best possible customer in your industry?

● How will you reassure your most talented team members that you know what you’re doing when the deal fails, and capital is running short?

● How quickly can you reorient the company to focus on other customers and how quickly will you start generating revenue from them?

How well do you understand the Big Company? Founders with little exposure to big companies are susceptible to misreading cues. My partner Eric Paley wrote about how entrepreneurs regularly misread their likelihood of getting funding from VCs, and the pattern is similar with this kind of business development deal.

When I started an ISP in South Africa in the 1990s, I had the chance to pitch the executive team at the country’s equivalent to Walmart . We were talking about the upcoming Olympic Games, which they were sponsoring. I asked if they were bringing their biggest customers to the events. One of the VPs looked at me, bewildered, and said: “Your mother may well be our biggest customer.”

I instantly realized they didn’t have big customers; they were a big customer. Their suppliers took them to the Games and fancy dinners. I felt silly at the moment but learned a valuable lesson about B2B power dynamics. Here are some other dynamics to be cautious of:

Are You Aware of the Work Pace Differential?

Startups measure their survival quarter to quarter while big companies plan in five-year increments. It’s often shocking how slowly big company partners move on everything from email to product roll-outs. Decisions made by gut feel at startups have to navigate a maze of meetings and committees at a big company. Startups often drown in the number of process leviathans require to make the smallest of improvements.

Who are the Internal Champions?

Promising projects can die on the vine because the internal champion gets reassigned or leaves the company. Successful partnerships will involve multiple high-level people from the larger organization. They also typically involve the startup being paid a fair market rate or are paired with a strategic investment to help defray the burden of non-recurring expenses. If not, beware.

Most sponsors will say their project is critical to the company, but it’s the startups CEO’s job to check that out. Founders should reference the opportunity in the same way they would reference an investor. This kind of deal is often an all or nothing bet on your company, don’t make it too blithely.

Is the Project a Priority for the CXO/VP?

Partnerships between startups and big companies work best when it solves the problem of a VP or CXO level executive. Below that level, we’ve seen startups spend large sums and risk their future on what amounts to a proof of concept project for a mid-level director with no real juice.

This is especially common with startups who sell to retailers. Theoretically, the brick and mortar shops need a bulwark against Amazon, but in reality, we’ve seen many of them default to more focused on protecting their physical retail turf rather than truly investing in online sales. They’ll run pilots to assure investors that they have their eye on the future when in reality the efforts are more PR than a business plan.

Do you Understand Big Company Logic?

A $20M investment to a small startup is a massive deal. For a big company, it’s essentially the size of an acquihire and can be shut down with no repercussions. In the context of a half-billion dollar company, $20M bets actually fail far more than a startup may appreciate.

Are you competing with another startup?

Is this project a “bake-off” where multiple companies are competing? The most dangerous kind of whale hunting is when a startup is competing with one or more competitors to win a large book of business. Founders considering this kind of arrangement should give serious thought to skipping the process and building out a less concentrated revenue base with fewer impediments while your competitors fight to the death.

Do you have a deep bench of vetted candidates ready to be hired? Founders often underestimate the challenge of growing 3-5X in short order. Every successful startup has to do this, but it usually happens more organically over time. The kind of business development deal our portfolio CEO is considering will change the company overnight.

Entrepreneurs need to ask if they have a long list of former co-workers, peers, vetted candidates eager to join their company? If not, massively scaling the company to meet the demands of a major partner will likely lead to sub-par hires to fill an urgent need while slowly poisoning the company’s culture. Money is rarely the most challenging part of hiring. Hiring fast when you control your destiny is hard enough, doing so in an uncertain arrangement can be very detrimental.

Beyond hiring, it’s important to view a partnership through the lens of Activity Based Costing.

How much time will this take up? 50%? 80%? More? Will you have to drop existing customers or products to make the project work? Are you still able to grow the business outside of this partnership or is it genuinely all-consuming?

Are You Ready for the Hunt?

If you can answer these questions confidently, then you may be ready to go whale hunting. When these projects work, they can be the first domino in a cascade that leads to growth and good places. More often, it results in a startup spending a year and a large chunk of its capital on a high-risk business development deal that more often fails to pan out. Chart your course accordingly.

Facebook is making it easier for kids to add their friends on its under-13 chat app, Messenger Kids. Starting today, the company is rolling out a new feature that will allow kids to request parents’ approval of new contacts. To use the feature, parents will turn on a setting that creates a four-word passphrase that’s used generate these contact requests, the company says.

Parents can opt to use this feature, which is not on by default.

Once enabled, Facebook will randomly generate a four-word phrase that’s uniquely assigned to each child. When the child wants to add a friend to their app’s contacts list in the future, they will show this phrase to the friend to enter in their own app.

Both parents will then receive a contact request from their child – and both have to approve the request before the kids can start chatting. In other words, this doesn’t represent a loosening of the rules around parental approvals – all contact requests still require parents’ explicit attention and confirmation, as before.

However, it does make it easier for kids to friend one another when their parents aren’t Facebook friends themselves. That’s been an issue with the app for some time, and one Facebook first started to address in May when it made a change that finally no longer required parents to be friends, too.

While most parents will at least want to know who their child is texting with, there are plenty of times when parents are friendly with someone on a more casual basis – like through the child’s school or their extracurricular activities. But just because two people are neighbors or fellow soccer moms and dads, that doesn’t necessarily mean they’re also Facebook friends.

The change introduced in May allowed parents to do a search for the child’s friend’s parents, then invite them to the app so the kids could connect. But this still required parents to take the initial steps (at the urging of the child, of course). It was also confusing at times, we found when we tried it for ourselves – some parents we connected with couldn’t figure out how the approval process worked, for example.

That being said, it may have helped to give the app’s install base a big boost, along with its expansion outside the U.S. According to data from Sensor Tower, Messenger Kids saw a sizable increase in installs in the beginning of early June and it has just now passed 1.4 million downloads across both iOS and Android. In addition, its daily downloads are around 3x what they were at the end of May.

The passphrase solution will make things a bit easier on parents, because contact requests will be initiated by the kids. Parents will only have to tap a big “Approve” button to confirm the request (or deny it, if the request is inappropriate for some reason.)

The four-word passphrase will only be visible to the child in the Messenger Kids app, and to the parent in their Parent’s Portal.

It’s worth noting that Facebook opted for a passphrase instead of a scannable QR code, as is common in other messaging apps including Facebook Messenger, Snapchat and Twitter, for instance. Facebook says this is so kids can exchange the passphrase without the device being present.

Messenger Kids is a controversial app, but its adoption is growing, the data indicates. Parents have been starved for an app like this – one allowing for conversation monitoring (you just install your own copy) and contact approvals. Whether this will actually indoctrinate a new generation of Facebook or Messenger users is more questionable. It’s likely that when kids outgrow Messenger Kids, they’ll still be switching over to Facebook’s Instagram and Snapchat instead.

The passphrase feature is rolling out starting today on the Messenger Kids mobile app.

Being stuck on the phone with call centers is painful. We all know this. Observe.AI is one company that wants to make the experience more bearable, and it’s raised $8 million to develop an artificial intelligence system that it believes will do just that.

The funding round was led by Nexus Venture Partners, with participation from MGV, Liquid 2 Ventures and Hack VC. Existing investors Emergent Ventures and Y Combinator also took part — Observe.AI was part of the YC’s winter 2018 batch.

The India-U.S. startup was founded last year with the goal of solving a very personal problem for founders Swapnil Jain (CEO), Akash Singh (CTO) and Sharath Keshava (CRO): making call centers better. But, unlike most AI products that offer the potential to fully replace human workforces, Observe.AI is setting out to help the humble customer service agent.

The company’s first product is an AI that assists call center workers by automating a range of tasks, from auto-completing forms for customers to guiding them on next steps in-call and helping find information quickly. Jain told TechCrunch in an interview that the product was developed following months of consultation with call center companies and their staff, both senior and junior. That included a stint in Manila, one of the world’s capitals for offshoring customer services and a city well known to Keshava, who helped healthcare startup Practo launch its business in the Philippines’ capital.

That effort to know call center operates directly has also shaped how Observe.AI is pitching its services. Rather than going to companies, it is tapping the root of the tree by offering its services to the call centers who manage customer support for well-known businesses behind the curtain. Uber, for example, is one of many to use Philippines-based support centers, but the Observe.AI thesis is that going directly to the source is easier than navigating large companies for business.

One such partner is Concentrix, one of the world’s largest customer support providers with over 100,000 staff and offices dotted around the globe, while the startup said it has tapped Philippines telco PLDT for infrastructure.

In addition to helping understand the problems and generating business, working directly with these companies also gives Observe.AI access to and use of data, which is essential for developing any AI and natural language processing-based systems.

Beyond improving its customer service assistant — which Jain likens to an ‘Alexa for call centers’ — Observe.AI is working to develop a virtual assistant of its own that can handle the more basic and repetitive calls from customers to help free up agents for callers who need a human on the other end of the line.

“We aim to eventually automate a large part of the call center experience,” Jain explained in an interview. “A good set [of customer calls] are complex but a large set can be fairly automated as they are simple in nature.”

The startup is aiming to introduce ‘voicebots’ before March 2020, with a beta launch targeted at the end of 2019.

“The kind of company that will disrupt call centers will come from the east — we truly understand the call center life,” Jain told TechCrunch.

He explained that, while Silicon Valley is a hotbed for tech development, understanding the problems that need to be solved requires spending time in markets like India and the Philippines.

“That knowledge is super, super valuable… someone in the U.S. can’t even think about it,” he added.

That said, Observe.AI is headquartered in the U.S., in Santa Clara. That’s where Keshava, the company CRO, is based with a growing team that is dedicated pre- and post-sales and to building relationships with major software platforms used by call center companies. The idea with the latter is that they can provide an avenue into new business by working with Observe.AI to add AI smarts to their product.

In one such example, Talkdesk, a U.S. startup that offers cloud-based contact center services, has added Observe.AI’s services to what it offers to its customers. Talkdesk CEO Tiago Paiva called the addition “a huge opportunity for call center efficiency and improving the caller experience.”

The startup’s India-based team is Bangalore and it handles technology, which includes the machine learning component. Total headcount is 16 people right now but the founding team expects that will at least double before the end of this year.

YouTube, Facebook, Spotify, Apple, Pinterest and now Vimeo have removed Infowars content from their services. The video streaming platform is the latest in a growing wave of tech companies pull videos from embattled right-wing conspiracy theorist, Alex Jones.

Jones has been under fire for years over conspiracy driven output, surrounding events like the Sandy Hook shooting and 9/11. In spite of what are largely regarded as fringe views, however, he’s amassed a massive viewership, and even scored an interview with Donald Trump in the lead up to the 2016 election.

Vimeo suddenly found itself at the center of the on-going Infowars debate after the show was barred from a number of competing sites. Earlier in the week, it was host to a handful of Jones-produced videos, but that number jumped suddenly when north of 50 more were uploaded to the service on Thursday and Friday.

Vimeo pulled the content over the weekend, citing a Terms of Service violation. The move, which was reported by Business Insider, has since been confirmed by TechCrunch.

“We can confirm that Vimeo removed InfoWars’ account on Sunday, August 12 following the uploading of videos on Thursday and Friday that violated our Terms of Service prohibitions on discriminatory and hateful content. Vimeo has notified the account owner and issued a refund,” a spokesperson told TechCrunch.

Infowars is moving quickly from one platform to the next, as more sites remove content over TOS violations. Twitter remains steadfast in its decision not to remove Jones, however, instead holding journalists accountable for debunking his content. Jones has also apparently found some solace in the social ghost town that is Google+.

As the consumer appetite for digital entertainment in China continues its rapid growth, two companies are combining forces to step up their game in the space. Today, China Literature — the Tencent e-publishing venture that went public with a $1 billion IPO last November — announced that it would acquire Chinese digital production company New Classics Media for around $2.2-2.3 billion (RMB15.5 billion).

This is a consolidation of sorts not just in digital media, but in Tencent’s content interests: New Classics Media had been eyeing up an IPO of its own but instead picked up Tencent as an investor just in March of this year, when the Internet and messaging giant paid existing backer Chinese VC Enlight Media $524 million for a 27.64 percent stake in the company.

That deal valued NCM at about $1.9 billion. In other words, this represents a small but clear return for Tencent, which it most notably owns messaging giant WeChat but is also an investor in Snap, Uber and a number of other companies and is sometimes called the “Softbank of China”.

China Literature already was a strong content partner of Tencent’s using its Tencent Video, WeChat and other channels to distribute China Literature content; now it will ramp that up with more video based on China Literature’s material from a partner that has a string of successful blockbusters — titles include Some Like It Hot, Never Say Die and Goodbye Mr. Loser — as well as TV and web shows such as The First Half of My Life, White Deer Plain, The Kite, The Imperial Doctress and Yu Zui. 

Indeed, the deal is bringing together one of the bigger original content developers (China Literature) with one of the bigger video content producers (NCM) in the region. China Literature, according to its half-year results also out today, said that its monthly active users are up 11.3 percent to 213.5 million, with 7.3 million writers on its platform. The company’s revenues are up 18.6 percent to $345 million (RMB2.3 billion), with gross profit at a 52.4 percent margin at $180.8 million.

China Literature had already been working with third parties to produce video based on its written work, and NCM had been sourcing original content from third parties as the basis of its video, so this will essentially cut out the middle man for both sides.

“Users are increasingly demanding high quality video entertainment content which in turn drives the demand for literary works for various content adaptations. We are the pioneer and leader in online literature market and thus in providing source material for China’s most-watched TV series, web series and films,” said Mr Wenhui Wu, co-CEO of China Literature, in a statement.

“Further enhancing our content adaptation expertise is a natural next step for China Literature to unleash the commercial potential of our content library, drive integrated development of blockbuster titles, and enhance engagement of our writers and users.”

“Mr Huayi Cao and the NCM team have built up an outstanding track record of consistently producing popular, high quality TV series, web series and films,” said Xiaodong Liang, the other co-CEO of China Literature, in his statement.

“NCM represents a scarce opportunity for China Literature to extend its content capabilities downstream, enabling it to participate further along the IP value chain and enhance the services it can bring to its writers as well as its users. We believe that this combination will create significant long term strategic value for China Literature’s shareholders.”

You can think of this deal similar to what Amazon, as an example, has developed in house with its own original programming: the company will sometimes look to Amazon’s own in-house team and its literature catalogue when commissioning video; but it will  also cut deals with outside companies.

Similarly, China Literature notes that NCM will not be its exclusive partner. “The current management of NCM will continue to oversee the TV series, web series and film production business and will be empowered to make original content selection choices, including those from outside of China Literature’s platform,” it notes.

“The Company believes such arrangement will incentivize NCM’s management team and facilitate future business performance, while enabling NCM to access China Literature’s content library, writer’s platform and editorial expertise.”

“From the beginning, we have focused on ensuring that NCM is the benchmark for Chinese TV series and film production in terms of quality,” said Huayi Cao, founder of NCM, in a statement. “This process starts with the high quality source material, and China Literature is the original content powerhouse for many of our best productions. China Literature will provide us with access to the richest literature content library in China and enhance our credibility as a leading production house for TV series, web series and film. I can think of no better home for NCM as we work in partnership towards creating better content for our audience.”

China Literature said it will pay RMB5.1 billion in cash plus RMB10.4 billion in stock, “including an earn-out mechanism to align the long term performance and incentives of NCM’s management team.” The deal is expected to close in the second half of 2018.

Hackers at DefCon have exposed new security concerns around smart speakers. Tencent’s Wu HuiYu and Qian Wenxiang spoke at the security conference with a presentation called Breaking Smart Speakers: We are Listening to You, explaining how they hacked into an Amazon Echo speaker and turned it into a spy bug.

The hack involved a modified Amazon Echo, which had had parts swapped out, including some that had been soldered on. The modified Echo was then used to hack into other, non-modified Echos by connecting both the hackers’ Echo and a regular Echo to the same LAN.

This allowed the hackers to turn their own, modified Echo into a listening bug, relaying audio from the other Echo speakers without those speakers indicating that they were transmitting.

This method was very difficult to execute, but represents an early step in exploiting Amazon’s increasingly popular smart speaker.

The researchers notified Amazon of the exploit before the presentation, and Amazon has already pushed a patch, according to Wired.

Still, the presentation demonstrates how one Echo, with malicious firmware, could potentially alter a group of speakers when connected to the same network, posing concerns with the idea of Echos in hotels.

Wired explained how the networking feature of the Echo allowed for the hack:

If they can then get that doctored Echo onto the same Wi-Fi network as a target device, the hackers can take advantage of a software component of Amazon’s speakers, known as Whole Home Audio Daemon, that the devices use to communicate with other Echoes in the same network. That daemon contained a vulnerability that the hackers found they could exploit via their hacked Echo to gain full control over the target speaker, including the ability to make the Echo play any sound they chose, or more worryingly, silently record and transmit audio to a faraway spy.

An Amazon spokesperson told Wired that “customers do not need to take any action as their devices have been automatically updated with security fixes,” adding that “this issue would have required a malicious actor to have physical access to a device and the ability to modify the device hardware.”

To be clear, the actor would only need physical access to their own Echo to execute the hack.

While Amazon has dismissed concerns that its voice activated devices are monitoring you, hackers at this year’s DefCon proved that they can.

Uber announced a new program today called Profile Recommendations that takes advantage of machine intelligence to reduce user error when switching between personal and business accounts.

It’s not unusual for a person to have both types of accounts. When you’re out and about, it’s easy to forget to switch between them when appropriate. Uber wants to help by recommending the correct one.

“Using machine learning, Uber can predict which profile and corresponding payment method an employee should be using, and make the appropriate recommendation,” Ronnie Gurion, GM and Global Head of Uber for Business wrote in a blog post announcing the new feature.

Uber has been analyzing a dizzying amount of trip data for so long, it can now (mostly) understand the purpose of a given trip based on the details of your request. While it’s certainly not perfect because it’s not always obvious what the purpose is, Uber believes it can determine the correct intention 80 percent of the time. For that remaining 20 percent, when it doesn’t get it right, Uber is hoping to simplify corrections too.

Business users can now also assign trip reviewers — managers or other employees who understand the employee’s usage patterns, and can flag questionable rides. Instead of starting an email thread or complicated bureaucratic process to resolve an issue, the employee can now see these flagged rides and resolve them right in the app. “This new feature not only saves the employee’s and administrator’s time, but it also cuts down on delays associated with closing out reports,” Gurion wrote in the blog post announcement.

Uber also announced that it’s supporting a slew of new expense reporting software to simplify integration with these systems. They currently have integrations with Certify, Chrome River, Concur and Expensify. They will be adding support for Expensya, Happay, Rydoo, Zeno by Serko and Zoho Expense starting in September.

All of this should help business account holders deal with Uber expenses more efficiently, while integrating with many of the leading expense programs to move data smoothly from Uber to a company’s regular record-keeping systems.

Yesterday I speculated that Elon Musk’s hints that he wanted to take Tesla private might well be possible with Saudi Arabia’s sovereign wealth fund backing it might not be as far-fetched as people think. Today Musk has published a statement claiming that he has been talking to the Saudi Arabian sovereign wealth fund (known in the country as the Public Investment Fund) about taking Tesla private for almost two years.

Indeed, he says, they approached him “multiple times about taking Tesla private.”

He claims the Saudi PIF first met with him at the beginning of 2017 to express this interest “because of the important need to diversify away from oil.” He also says they had several more meetings “over the next year”. Musk points out that “the Saudi sovereign fund has more than enough capital needed to execute on such a transaction.” As I said yesterday, the fund is projected to reach $2 trillion dollars.

After the Saudi PIF bought almost 5% of Tesla stock through the public markets, Musk says they asked for another meeting with him which, he says, took place on July 31st, during which he claims they “regretted” that he had “not moved forward previously” with a private transaction with them, and that the head of the PIF “strongly expressed his support” for funding a private transaction for Tesla.

Musk says he left the meeting “with no question that a deal with the Saudi sovereign fund could be closed, and that it was just a matter of getting the process moving.” He says this is why he referred to “funding secured” in his tweet on the August 7th.

Musk goes on to say that the deal is more or less done, with only the details and logistics to be worked out.

This statement must also be taken with a pinch of salt. The Securities and Exchange Commission is understood to be inquiring about Musk’s tweets regarding the potential for the company to go private. Although an inquiry from the SEC does not necessarily mean an investigation will follow, if Musk were to be found guilty of misconduct for making such a public statement via Twitter, punishments could range from hundreds of millions of dollars in fines to criminal prosecution.

Critics might argue that this statement is a face-saving exercise. I doubt that. My personal knowledge of the traditions of the region leads me to surmise that these talks are almost certainly very real.

Here’s Musk’s statement in full:

Update on Taking Tesla Private

As I announced last Tuesday, I’m considering taking Tesla private because I believe it could be good for our shareholders, enable Tesla to operate at its best, and advance our mission of accelerating the transition to sustainable energy. As I continue to consider this, I want to answer some of the questions that have been asked since last Tuesday.

What has happened so far?
On August 2nd, I notified the Tesla board that, in my personal capacity, I wanted to take Tesla private at $420 per share. This was a 20% premium over the ~$350 then current share price (which already reflected a ~16% increase in the price since just prior to announcing Q2 earnings on August 1st). My proposal was based on using a structure where any existing shareholder who wished to remain as a shareholder in a private Tesla could do so, with the $420 per share buyout used only for shareholders that preferred that option.

After an initial meeting of the board’s outside directors to discuss my proposal (I did not participate, nor did Kimbal), a full board meeting was held. During that meeting, I told the board about the funding discussions that had taken place (more on that below) and I explained why this could be in Tesla’s long-term interest.

At the end of that meeting, it was agreed that as a next step, I would reach out to some of Tesla’s largest shareholders. Our largest investors have been extremely supportive of Tesla over the years, and understanding whether they had the ability and desire to remain as shareholders in a private Tesla is of critical importance to me. They are the ones who believed in Tesla when no one else did and they are the ones who most believe in our future. I told the board that I would report back after I had these discussions.

Why did I make a public announcement?
The only way I could have meaningful discussions with our largest shareholders was to be completely forthcoming with them about my desire to take the company private. However, it wouldn’t be right to share information about going private with just our largest investors without sharing the same information with all investors at the same time. As a result, it was clear to me that the right thing to do was announce my intentions publicly. To be clear, when I made the public announcement, just as with this blog post and all other discussions I have had on this topic, I am speaking for myself as a potential bidder for Tesla.

Why did I say “funding secured”?
Going back almost two years, the Saudi Arabian sovereign wealth fund has approached me multiple times about taking Tesla private. They first met with me at the beginning of 2017 to express this interest because of the important need to diversify away from oil. They then held several additional meetings with me over the next year to reiterate this interest and to try to move forward with a going private transaction. Obviously, the Saudi sovereign fund has more than enough capital needed to execute on such a transaction.

Recently, after the Saudi fund bought almost 5% of Tesla stock through the public markets, they reached out to ask for another meeting. That meeting took place on July 31st. During the meeting, the Managing Director of the fund expressed regret that I had not moved forward previously on a going private transaction with them, and he strongly expressed his support for funding a going private transaction for Tesla at this time. I understood from him that no other decision makers were needed and that they were eager to proceed.

I left the July 31st meeting with no question that a deal with the Saudi sovereign fund could be closed, and that it was just a matter of getting the process moving. This is why I referred to “funding secured” in the August 7th announcement.

Following the August 7th announcement, I have continued to communicate with the Managing Director of the Saudi fund. He has expressed support for proceeding subject to financial and other due diligence and their internal review process for obtaining approvals. He has also asked for additional details on how the company would be taken private, including any required percentages and any regulatory requirements.

Another critical point to emphasize is that before anyone is asked to decide on going private, full details of the plan will be provided, including the proposed nature and source of the funding to be used. However, it would be premature to do so now. I continue to have discussions with the Saudi fund, and I also am having discussions with a number of other investors, which is something that I always planned to do since I would like for Tesla to continue to have a broad investor base. It is appropriate to complete those discussions before presenting a detailed proposal to an independent board committee.

It is also worth clarifying that most of the capital required for going private would be funded by equity rather than debt, meaning that this would not be like a standard leveraged buyout structure commonly used when companies are taken private. I do not think it would be wise to burden Tesla with significantly increased debt.

Therefore, reports that more than $70B would be needed to take Tesla private dramatically overstate the actual capital raise needed. The $420 buyout price would only be used for Tesla shareholders who do not remain with our company if it is private. My best estimate right now is that approximately two-thirds of shares owned by all current investors would roll over into a private Tesla.

What are the next steps?
As mentioned earlier, I made the announcement last Tuesday because I felt it was the right and fair thing to do so that all investors had the same information at the same time. I will now continue to talk with investors, and I have engaged advisors to investigate a range of potential structures and options. Among other things, this will allow me to obtain a more precise understanding of how many of Tesla’s existing public shareholders would remain shareholders if we became private.

If and when a final proposal is presented, an appropriate evaluation process will be undertaken by a special committee of Tesla’s board, which I understand is already in the process of being set up, together with the legal counsel it has selected. If the board process results in an approved plan, any required regulatory approvals will need to be obtained and the plan will be presented to Tesla shareholders for a vote.

Taken from Update on Taking Tesla Private

Chrome OS has come a long way in the past few years. Even so, it’s still not the full-fledged operating system many of us required on our desktop machines. Google is reportedly looking to address that, in part, by adding the ability for users to dual-boot in Windows 10.

According to XDA-Developers, the company is actively courting Microsoft hardware certification for its flagship Chromebook, the Pixelbook. The “alt OS mode” codenamed “Campfire,” is said to be coming to the Pixelbook in the not-too-distant future, with more Chromebook support down the line.

Which devices would actually be able to support Microsoft’s once ubiquitous operating system is dependent on, among other things, system specs. Microsoft’s worked to make Windows compatible with low-end systems, but even by those standards, some super cheap Chromebooks don’t boast the built-in storage required to run both Chrome OS and Windows 10. For all of its faults, maybe Windows 10S would be a decent secondary platform. 

Windows 10 on the Pixelbook is a compelling proposition. The high-end Chromebook is a lovely piece of hardware, but even with the addition of Android apps, there are still some software gaps. I took the device on a recent trip to China and was disappointed by  some of the limitations I ran into on an otherwise fine device. 

It’s suggested that all of this could come as soon as Google’s upcoming Pixel 3 event. Given a number of recent leaks, it does appear that the company’s got something big planned for the near term.