Category: UNCATEGORIZED

We’ve seen our fair share of shocking headlines recently: tenuous IPOs, the “retailpocalypse” and a fickle market have reset the way we size up subscription businesses. Recurring revenue models have their pitfalls, and 2019 has certainly taught the industry a few lessons.

Next year, retention is set to be a top priority for companies looking to keep customers engaged and drive growth. From niche products to personalization, how companies deliver on and measure the success of their customer experience will separate successful subscription businesses from the next unflattering news story.

These seven trends will emerge to shape the way companies delight and retain customers in 2020.

1. To meet consumer demand, more mainstream brands will experiment with subscriptions

We’ve all seen articles detailing the financial fall of many brick-and-mortar stores. The retail crunch predicted years ago is coming to fruition as we’ve watched household names like Sears, Toys R Us and Barney’s consider bankruptcy or go up for sale.

Consumers aren’t letting up in their preference for convenience; they want easier ways to buy, and that means stores must develop better online experiences and offer subscription options or risk losing revenue. We’ll see big brands like Nike and Ikea continue to experiment and expand innovative subscription offerings.

For struggling brick-and-mortar businesses, subscription services could very well be a lifeline to retain a dwindling customer base. The shifting retail industry presents an opportunity for traditional companies to fully embrace recurring revenue models next year — smart organizations will do so.

2. The golden age of niche subscriptions is gone, so fatigue will settle in

We’ve experienced a rapid period of subscription adoption, with more options launching everyday. And that’s led us to a point of max fragmentation where companies and consumers alike are subscribed to so many niche products and services, they can no longer manage or afford new offerings.

Because the proliferation of subscriptions are so vast, specialized products and services will need to do prove their worth or risk being replaced. B2B (project management, martech, ecommerce) and B2C (clothing, streaming, meal delivery) companies alike must offer far better experiences in 2020 than in years past. For B2B organizations, products must be integrated with larger systems to justify their existence. One-off point solutions that silo information and create broken customer experiences will no longer be accepted. And for B2C companies, pricing will have to be spot on as more competition vies for the budgets of consumers who haven’t budgeted for increased spending.

Ultimately, not every company will be able to compete in the age of subscription fatigue, so we’ll see more consolidation, partnerships and mergers occur in the coming year.

3. Customer retention will become the new frontier for marketers

It’s impossible to ignore the IPO press around WeWork, Blue Apron, Uber, Peloton and others. If 2020’s tech and consumer unicorns have poor unit economics and aren’t turning a profit, they need to prepare to be the next ugly headline. Marketers can be a force for change by focusing on the long-term retention of the customers they acquire. And I believe they’ll do so happily. Why?

Security researchers have found several popular Android phones can be tricked into snooping on their owners by exploiting a weakness that gives accessories access to the phone’s underlying baseband software.

Attackers can use that access to trick vulnerable phones into giving up their unique identifiers, such as their IMEI and IMSI numbers, downgrade a target’s connection in order to intercept phone calls, forward calls to another phone or block all phone calls and internet access altogether.

The research, shared exclusively with TechCrunch, affects at least 10 popular Android devices, including Google’s Pixel 2, Huawei’s Nexus 6P and Samsung’s Galaxy S8+.

The vulnerabilities are found in the baseband firmware, the software that allows the phone’s modem to communicate with the cell network, such as making phone calls or connecting to the internet. Given its importance, the baseband is typically off-limits from the rest of the device, including its apps, and often come with command blacklisting to prevent non-critical commands from running. But the researchers found that many Android phones inadvertently allow Bluetooth and USB accessories — like headphones and headsets — access to the baseband. By exploiting a vulnerable accessory, an attacker can run commands on a connected Android phone.

“The impact of these attacks ranges from sensitive user information exposure to complete service disruption,” said Syed Rafiul Hussain, one of the co-authors of the paper, in an email to TechCrunch.

Hussain and his colleagues Imtiaz Karim, Fabrizio Cicala and Elisa Bertino at Purdue University and Omar Chowdhury at the University of Iowa are set to present their findings next month.

Baseband firmware use a special language, known as AT commands, which control the device’s cellular functions. These commands can be used to tell the modem which phone number to call. But the researchers found that these commands can be manipulated. The researchers developed a tool, dubbed ATFuzzer, which tries to find potentially problematic AT commands.

In their testing, the researchers discovered 14 commands that could be used to trick the vulnerable Android phones into leaking sensitive device data, and manipulating phone calls.

But not all devices are vulnerable to the same commands or can be manipulated in the same way. The researchers found, for example, that certain commands could trick a Galaxy S8+ phone into leaking its IMEI number, redirect phone calls to another phone and downgrade their cellular connection — all of which can be used to snoop and listen in on phone calls, such as with specialist cellular snooping hardware known as “stingrays.” Other devices were not vulnerable to call manipulation but were susceptible to commands that could be used to block internet connectivity and phone calls.

The vulnerabilities are not difficult to exploit, but require all of the right conditions to be met.

“The attacks can be easily carried out by an adversary with cheap Bluetooth connectors or by setting up a malicious USB charging station,” said Hussain. In other words, it’s possible to manipulate a phone if an accessory is accessible over the internet — such as a computer. Or, if a phone is connected to a Bluetooth device, an attacker has to be in close proximity. (Bluetooth attacks are not difficult, given vulnerabilities in how some devices implement Bluetooth has left some devices more vulnerable to attacks than others.)

“If your smartphone is connected with a headphone or any other Bluetooth device, the attacker can first exploit the inherent vulnerabilities of the Bluetooth connection and then inject those malformed AT commands,” said Hussain.

Samsung recognized the vulnerabilities in some of its devices and is rolling out patches. Neither Huawei nor Google provided comment at the time of writing.

Hussain said that iPhones were not affected by the vulnerabilities.

This research becomes the latest to examine vulnerabilities in baseband firmware. Over the years there have been several papers examining various phones and devices with baseband vulnerabilities. Although these reports are rare, security researchers have long warned that intelligence agencies and hackers alike could be using these flaws to launch silent attacks.

African on-demand trucking logistics company Lori Systems has raised a Series A round led by Chinese investors Hillhouse Capital and Crystal Stream Capital.

Other participating investors included Nigeria and U.S. based EchoVC, Flexport CEO Ryan Peterson, and Nigerian founder Iyinoluwa Aboyeji.

Lori Systems is not disclosing the amount of the Series A. DealStreet Asia reported the round amount at $30 million earlier Friday, but Lori Systems’ CEO Josh Sandler would not confirm that. That figure was “something lost in translation” and “a mischaracterization of the raise,” he told TecCrunch on a call.

The company issued a clarification to initial reporting in a Medium post. On the reason for the non-disclosure, “Lori has never released fundraising details as we feel it is a vanity metric that distracts from what matters most: our mission of lowering the goods in frontier markets,” Lori Systems co-founder Jean-Claude Homawoo told TechCrunch.

A recent Financial Times piece pegged Lori’s total funding raise at $20 million.

Founded in Kenya in 2016, the company provides mobile based on-demand trucking logistics services through an Uber -like network of drivers and merchant partners. Lori Systems has operations in East Africa in Kenya and Uganda.

The company expanded to Nigeria in September 2019, where it faces a competitor in trucking logistics company Kobo360.

“We are using the round to ramp up operations, build up our technology, and hire a best in class team…that can drive a global revolutions in logistics,” Lori Systems CEO Josh Sandler said.

The company recently hired Nigerian Uche Ogboi from EchoVC to become its CFO and former Quona Capital associate Efayomi Carr.

Lori Systems won Startup Battlefield Africa in 2017.

Bumble, the popular and profitable dating and networking app built around the ethos of women calling the shots on how connections get made and developed, has made a deal for some independence of its own.

Andrey Andreev, the founder of Badoo, the controversial London-based company that owns a series of dating apps and was the main backer and builder of Bumble, is selling his entire stake in the company to Blackstone and will step away from the business. Whitney Wolfe Herd, Bumble’s co-founder and the co-owner of MagicLab — the name of the holding company that owned Bumble, itself owned by Badoo — become the CEO of the company, retaining much of her stake in the business in the process. We understand that stake is at about 19%.

The deal values Bumble — which is profitable — at $3 billion.

Blackstone will also be making an investment in the company as part of the deal.

“This transaction is an incredibly important and exciting moment for Bumble and the MagicLab group of brands and team members. Blackstone is world-class at maximizing the success of entrepreneur-led companies, which presents a tremendous opportunity. We are very excited to build the next chapter with them,” said Wolfe Herd in a statement. “I am honored to take on the role of CEO of the group. I will strive to lead the group with a continued values-based and mission-first focus, the same one that has been core to Bumble since I founded the company five years ago. We will keep working towards our goal of recalibrating gender norms and empowering people to connect globally, and now at a much faster pace with our new partner.”

Bumble is consistently in the top 10 of lifestyle apps in the US, according to App Annie data. The WSJ reports that Bumble now has some 75 million users, although Apptopia’s figures are a little more conservative: it notes that aggregated, lifetime downloads of Bumble are about 52 million, while lifetime in-app purchase revenue is about $335 million. March 2019 was its best month ever for IAP revenue with $14.1 million, and over the past six months, Bumble has averaged 1.5 million downloads per month, Apptopia’s Adam Blacker told TechCrunch.

But while Bumble has been growing at a healthy clip — in addition to being profitable, MagicLab had revenue growth of 40% annually — the transaction caps off a tumultuous time at the corporate level for the company.

Almost exactly a year ago, Andrey Andreev had been talking about a future IPO for Badoo in the US, listing on Nasdaq. The bigger company at the time included the eponymous Badoo app, which itself now has 450 million users, as well as a number of others targeting more specific communities (for example, older people), and it was altogether expecting to make some $400 million in revenues in 2018. Within that bigger picture, Bumble was easily the high-profile jewel in the crown, especially in the high-visibility market of the US, where Badoo had hoped to list.

Badoo prior to that had reportedly turned down $450 million offer for Bumble from Match (Some have reported that Match might have offered as much as $1 billion or more for Bumble) — a strange twist in a long saga between the two. (In brief: Match is the company that owns Tinder and had been locked a series of different lawsuits with Bumble: Wolfe Herd had previously been a Tinder co-founder and left under acrimonious circumstances. Andreev had previously met Wolfe Herd and then approached her to come and start Bumble under his wing in the wake of that departure.)

While a bold IPO was an interesting prospect, things took a turn for the worse this summer, when an expose in Forbes painted a bleak picture of misogyny and sleaze at the parent company, headed by an eccentric and oblique leader — not the image that Bumble wanted to project, and definitely not the image that would have read well on Wall Street.

“We’re excited to invest in MagicLab, which is a pioneer in the fast-growing online dating industry. They have a highly talented team and strong set of platforms, including Bumble, which was built on a commitment to inclusion and female empowerment,” said Jon Korngold, Head of Blackstone Growth (BXG), in a statement. “This partnership is a perfect example of Blackstone’s ability to use its scale, long-term investment horizon, and deep bench of operational resources to help entrepreneurs take advantage of transformational growth opportunities in order to create global industry leaders over time.”

As with Wolfe Herd and Blackstone, Andreev does not address this aspect of the story in his statement on the sale, focusing instead on making a good return on his investment to fuel building more apps ahead.

“Blackstone presented MagicLab with a great opportunity to further develop the brands and platform, and I am confident Blackstone will take MagicLab to the next level in terms of growth and expansion. I am incredibly proud of the company, and of how we have connected millions of people around the world,” he said. “At MagicLab, I have had the pleasure of working with some of the best and most talented entrepreneurs. My aim now is to ensure a smooth and successful transition before I embark on a new business venture in search of innovative leaders with new and exciting ideas. I am grateful for all the support of my partners and employees over the years as we couldn’t have gotten to this point without them. I wish MagicLab and Blackstone every success.”

Wolfe Herd defended Badoo and Andreev through the bad press, but now with the divestment, it seems that there was more at play with a bid to extricate Bumble out of that relationship.

To learn more about the next wave of consumer startup investment outside Silicon Valley, I’m speaking to leading B2C-focused investors in various hubs about the trends they’re excited about right now. 

Recently, I shared the responses from several London-based investors; today, we spoke to eight of New York’s top consumer VCs:

• Rebecca Kaden, Partner at Union Square Ventures
• David Tisch, Founding Partner at BoxGroup
• Anu Duggal, Founding Partner at Female Founders Fund
• Craig Shapiro, Partner at Collaborative Fund
• Jeremy Levine, Partner at Bessemer
• Beth Ferreira, Partner at Firstmark Capital
• Graham Brown, Partner at Lerer Hippeau Ventures
• Eric Reiner, Partner at Sinai Ventures
• Chris Paik, Partner at Pace Capital

Consumer health and banking startups were recurring areas of interest, and there’s a sense that apps and product brands which provide a deeper sense of community are an untapped opportunity.

Rebecca Kaden, Partner at Union Square Ventures

At USV, we are focused on opportunities that broaden access by leveraging technology to increase value and decrease cost in big buckets of consumer spend. In doing so, we are looking for ways to make products and services previously available to a select segment available to many more. In particular, we have been investing in areas of consumer health where the delivery mechanism not only makes the care more convenient but also more affordable and higher quality; products and platforms in financial services that change the traditional underlying model to drive financial health for a mass customer; and opportunities that create new access to education both for kids and lifelong learners. 

Within each of these segments, I’ve been very interested in how new communities are forming inside products–users that come for a specific offering are forming allegiance and increasing engagement by interacting with other users. I think that is a trend we will only see accelerate.

David Tisch, Founding Partner at BoxGroup

People are bored on their phones, not of their phones. I am most excited to meet founders working on consumer apps that bring happiness and fun to a mass consumer audience, as I continue to believe we are in the early days of mobile and the app store is not dead.

These apps may look like a game, they may be a game, or they may be a new feed, but TikTok, Twitch, HQ, Yolo and other Snap app kit apps, Tinder and others have shown consumers want new apps, the barrier for adoption and retention is  just very high. All apps and games have a half-life, creating something with a very long one is really hard, but the demand is sitting on the phone scrolling thorough feeds, waiting for some new fun. We are excited about apps that allow people to interact with others in different ways, in new worlds, using new hardware, or new interfaces.

Anu Duggal, Founding Partner at Female Founders Fund

With the rise of the sober curious movement, we invested in Kin Euphorics, offering consumers a sexy option to an alcoholic drink, creating a social experience around a non-alcoholic beverage that doesn’t exist in the market today. With beer sales decreasing five years in a row, brands like Heineken are offering alcohol-free alternatives catering to this growing audience.

With the decline of religion, we have seen the rise of what we call the “rise of the alternate community.” Consumers are looking for ways to connect online and offline based on specific interests. Examples of this in our portfolio include The Wonder, a membership model for familyhood, Peanut, a social network for modern motherhood, and Co-Star, an astrology app.

Last month, Andreessen Horowitz (a16z) general partner Chris Dixon announced at TechCrunch Disrupt that the VC firm would run a free crypto startup school. And the company is officially launching its school today. Applications are now open and you have four weeks to apply.

With this initiative, a16z wants to democratize cryptocurrencies. Dixon and the a16z has been involved in the cryptocurrency/blockchain space for 7 years, and the firm now wants to share some of its learnings with entrepreneurs.

This way, it could give a boost to the crypto community, which could create investment opportunities for a16z down the road — a16z says clearly that participating in the crypto startup school doesn’t mean you’ll receive an investment from a16z. It also positions a16z as a thoughtful investor when it comes to crypto startup investments — not just for participants of the crypto startup school but for the crypto community at large.

The a16z Crypto Startup School will be a seven-week program that starts in February 21, 2020. The program is free and a16z doesn’t take any equity.

Lectures will take place in Menlo Park, so you have to be based in Silicon Valley or willing to spend a couple of months there. a16z knows that it can be challenging to move to another country just to attend this program, that’s why the firm will also be recording all lectures. Anyone will be able to watch videos and download curriculum materials later.

Here’s a sneak peek of the course outline:

• What are Crypto Networks, and Why Do They Matter?
• Blockchain Computing Primitives: Cryptography and Consensus
• Overview of Application Development Tools
• Applications: Today and 2025
• Crypto Business Models
• Cryptoeconomics
• UX, Product Development and Security
• Go-to-Market Strategy and Developer Relations
• Community Participation and Governance
• Regulatory Landscape and Considerations
• Guide to Fundraising

As you can, it’s a mix of lectures purely focused on cryptocurrencies as well as broader startup 101 lessons (fundraising, go-to-market strategy, etc.).

a16z is looking for 20 to 25 teams, which should represent approximately 40 participants. You should have prior experience when it comes to building software products, but you don’t need to be a crytpo expert. They can expect 12 to 15 hours of lectures, workshops, mentorship and networking opportunities per week.

At the end of the course, participants will showcase a project idea or a prototype during a demo day.

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

This week we did something just a little bit new. Kate was in studio at TechCrunch’s SF HQ. Alex was in his dork cave in Providence. And we had a guest in the studio as well. We’ve done similar setups before, but never with video all around. So, welcome to a slightly new chapter in Equity’s production history (all praise to Chris for making it work, video will be out today on TechCrunch’s YouTube page).

Our guest this week was the excellent Sarah Smith from Bain Capital Ventures. Before she turned to writing checks, Smith worked for both Quora and Facebook. Her fun fact? She’s an avid and competitive player of board games.

First up we dug into one of Kate’s latest, a piece looking at the influencer space, venture investments into it, and what’s next for the power of the Instagram-famous. She highlights startups like Influence, Cameo, Karat and more.

Next up, Deserve raised $50 million from Goldman Sachs, making the round something that was worth touching on. Later, Alex spoke with the company’s CEO and picked up more context, but what matters for today is that Deserve is doubling-down on its credit card fintech service, not doing what other companies that handle money are up to, namely trying to become neobanks at high speed.

Speaking of which, why is every fintech or finservices startup becoming a bank? Partially because they can, partially because it can be lucrative, and partially because, we found out, it’s a way to juice customers that they’ve already paid to acquire. Want to make your CAC expenses look more efficient? Stretch out that LTV!

And then we spent a minute on Uber’s results, which proved better than but wound up being poorly received.

Glad you guys came back for another episode, we’ll see you soon.

Lyft has another year of building out its autonomous driving program under its belt, and the ride-hailing company has been expanding its testing steadily throughout 2019. The company says that it’s now driving four times more miles on a quarterly basis than it was just six months ago, and has roughly 400 people worldwide dedicated to autonomous vehicle technology development.

Going into next year, it’s also expanding the program by adding a new type of self-driving test car to its fleet: Chrysler’s Pacifica hybrid minivan, which is also the platform of choice for Waymo’s current generation of self-driving car. The Pacifica makes a lot of sense as a ridesharing vehicle, since it’s a perfect passenger car with easy access via the big sliding door and plenty of creature comforts inside. Indeed, Lyft says that it was chosen specifically because of its “size and functionality” and what those offer to the Lyft AV team when it comes to “experiment[ing] with the self-driving rideshare experience. Lyft says it’s currently working on building these test vehicles out in order to get them on the road.

Lyft’s choice of vehicle is likely informed by its existing experience with the Pacificas, which it encountered when it partnered with Waymo starting back in May, with that company’s autonomous vehicle pilot program in Phoenix, Arizona. That ongoing partnership, in which Waymo rides are offered on Lyft’s ride-hailing network, is providing Lyft with plenty of information about how riders experience self-driving ride-hailing, Lyft says. In addition to Waymo, Lyft is also currently partnering with Aptiv on providing self-driving services commercially to the public through that company’s Vegas AV deployment.

In addition to adding Pacificas to its fleet alongside the current Ford Fusion test vehicles it has in operation, Lyft is opening a second facility in addition to its Level 5 Engineering Center, the current central hub of its global AV development program. Like the Level 5 Engineering Center, its new dedicated testing facility will be located in Palo Alto, and having the two close together will help “increase the number of tests we run,” according to Lyft. The new test site is designed to host intersections, traffic lights, roadway merges, pedestrian pathways and other features of public roads, all reconfigurable to simulate a wide range of real-world driving scenarios. Already, Lyft uses the GoMentum Station third-party testing facility located in Concord, California for AV testing, and this new dedicated site will complement, rather than replace, its work at GoMentum.

Meanwhile, Lyft is also continually expanding availability of its employee self-driving service access. In 2019, it increased the availability of self-driving routes for its employees three-fold, the company says, and it plans to continue to grow the areas covered “rapidly.”

Alibaba is doubling down on its logistics affiliate Cainiao, two years after acquiring a majority stake in the firm. The Chinese giant said today it would invest an additional 23.3 billion yuan (about $3.33 billion) to raise its equity in Cainiao to 63% from 51%.

Cainiao was co-founded by Alibaba in 2013 to bring organization in Chinese logistics, particularly around e-commerce deliveries. And it has delivered: Today Cainiao powers a significant volume of Alibaba’s logistics needs in the nation and elsewhere. Department store owner Intime Group, conglomerate Fosun Group, and a number of other logistics firms also own stakes in Cainiao.

In 2017, Alibaba said it was bumping its stake in Cainiao to 51% from 47%, and at the time committed to spend more than 100 billion yuan to expand the logistics business over five years.

More to follow…

We get it. You’re deep in the weeds starting your startup, building your business, expanding your empire. Startuppers are frequently overworked, prone to procrastination and last-minute decision making.

We’re here to tell you today’s the last day you can score early bird savings to Disrupt Berlin 2019. The early bird deadline ends tonight at 11:59 p.m. (CEST). Don’t pay more than necessary. Beat the deadline, and buy your early bird pass to Disrupt Berlin right now.

As usual, we have a great lineup of speakers, and you’ll learn from the best at Disrupt. Here are just a few examples of what’s on tap. For more detail, go study the Disrupt Berlin 2019 agenda.

Growing from a humble garage project into a global competitor may be possible, but easy? Not so much. Learn the fine art of scaling your startup from a panel of experts who’ve been to the mountaintop. You’ll hear from Holger Seim, founder and CEO of Blinkist, Karoli Hindriks, founder and CEO of Jobbatical and Sophie Alcorn, founding partner of Alcorn Immigration Law.

Brexit — the mere word strikes uncertainty in the hearts of U.K. and European startups. Talk about jangled nerves. We’ll hear three experts discuss decision making in the face of Brexit’s chaotic landscape. Investor Bindi Karia, founder Glenn Shoosmith and VC Volker Hirsch offer their unique perspectives on how to make the right decisions in the face of these obstacles.

If you’re into rapidly changing landscapes, don’t miss eToro’s Yoni Assia and Charlie Delingpole of ComplyAdvantage as they talk fintech. You’ll hear lessons they learned along the way and how today’s startups can change the future of finance.

Hiroki Takeuchi, GoCardless co-founder, CEO and fintech expert, has led the eight-year-old company to the point where it has a shot at becoming a global leader in direct debit payments. He’ll join us to talk about resilience and why he sees a big opportunity for B2B use cases.

There’s so much more to take in at Disrupt Berlin. What happens when you mix creativity and raw talent and then subject it to intense pressure? Head on over to the Extra Crunch Stage to watch the Hackathon finalists pitch products they designed, coded and created in 24 hours. Who will win the individual sponsored challenges and who will win $5,000 from TechCrunch editors for best overall hack?

Disrupt Berlin 2019 takes place on 11-12 December, and you have just a few hours left to take advantage of early bird pricing. Buy your early bird pass before 11:59 p.m. (CEST) tonight and save up to €500.

Is your company interested in sponsoring or exhibiting at Disrupt Berlin 2019? Contact our sponsorship sales team by filling out this form.