Category: UNCATEGORIZED

Google today announced Equiano, a new private subsea cable that will connect Portugal and South Africa. The cable will be built by Alcatel Submarine Networks and the first phase of the project is scheduled for completion in 2021. In April, the WSJ first reported the company’s plans for this cable.

This is the company’s third private cable after Dunant between Europe and the U.S., and Curie, which spans between the U.S. and Chile. In addition, Google is also a partner in a number of cable consortiums that operate cables that span the globe.

The company notes that Equiano, which was named after Nigerian writer and abolitionist Olaudah Equiano, will be the first subsea cable that uses optical switching at the fiber pair level. This makes it easier to allocate capacity as needed.

Google also stresses that this new cable is able to carry about 20 times the capacity of the last cable that was built to serve this region. The cable will feature numerous branching units that it can then use to connect lines to other countries along the way. The first branch will connect the cable to Lagos, Nigeria. Other branches will follow in the future.

Unlike some of its competitors, Google does not currently operate any data centers on the African continent and has yet to share any plans to do so. This makes fast connections to Europe even more of a necessity, though it’s also possible that Google is putting this new cable in place to prepare for a data center launch in South Africa, for example.

Fintech has been one of the bigger stories of the UK startup world — due in no small part to the fact that its capital, London, is also one of the world’s major financial centers. Today, one of those startups made a big splash by buying an incumbent business, and taking on an equity investment alongside that, to scale up its position in the market.

Jaja, a mobile-first business that provides digital and physical credit cards and other financing services, today announced that it will be acquiring the UK credit card accounts for an initial cash consideration of £530 million (or $671 million at current rates). It will also become the consumer credit card issuer for the Bank’s UK business and the AA. At the same time it’s also getting an equity investment of £20 million in its own business.

“This announcement with Bank of Ireland UK is an exciting and important development in Jaja’s journey and is part of our strategy to create partnerships that will help more people embrace a simpler way of managing credit,” said Neil Radley, CEO of Jaja Finance, in a statement. “Our vision is to enable a new generation of mobile-first credit card products with unrivalled functionality, service and security. We’re excited to be welcoming Bank of Ireland UK customers as cardholders.”

The Bank of Ireland’s UK credit business includes a number of key accounts covering the AA (UK’s Automobile Association), the Post Office, as well as a card branded Bank of Ireland itself. (It excludes the bank’s commercial card business in the Republic of Ireland.)

The Bank had put the business up for sale some time ago as part of a bigger strategy to divest of its capital-intensive, competitive operations in a push to grow profitability by improving its loans and mortgages business: amid that, the Bank’s wider UK business has been a challenge for it, with investors going so far as to value the UK business at zero earlier this month.

“Jaja is an innovative company which shares our commitment to delivering outstanding customer service. We are proud to partner with them and bring their next generation credit card to customers across the UK,” said Bank of Ireland UK CEO Des Crowley in a statement. “Today’s announcement demonstrates the Bank’s continued progress in delivering against its strategic targets for growth and transformation to 2021, as set out at its Investor Day in June 2018.”

Jaja’s deal is being done in partnership with KKR, Centerbridge Partners and other unnamed investors, who are helping finance the acquisition and are also putting £20 million ($25 million) of equity investment into Jaja (pronounced “yah-yah”) alongside it. Prior to this, Jaja had raised about about $16 million, including about £3 million by way of the Seedrs crowdfunding platform.

The company is not disclosing its valuation amid this $671 million purchase.

A spokesperson for Jaja said the startup is not releasing any numbers today that point to how much the company’s current services are being used. The company, which is today active only in the UK, has taken the route of keeping a waitlist to onboard new users, and it was reported to have some 6,000 people on it back in February just ahead of the Jaja launching its cards.

The company also has a deal with Asda, the UK business of Walmart, to provide financing at the point of sale for its online storefront George.com (an Amazon-type everything store akin to Walmart.com). Given that Jaja has up to now not operated on a massive scale — even if it took on its whole waitlist, that would only number 6,000 customers, for example — it’s likely that this latest acquisition will be adding a sizeable number of users, and key brands, into its stable in one fell swoop.

Jaja was founded by Jostein Svendsen, Kyrre Riksen and Per Elvebakk — London-based Norwegian entrepreneurs who have previously found and sold other financial and tech startups (Svenden, for example, sold a previous company to American Express) — and is currently led by CEO Neil Radley, who had previously been the MD for Barclaycard in Western Europe.

Its key mission has been to bring a more modern approach to the world of credit and credit cards. That in itself is not hugely unique — it is essentially the purpose of all consumer-facing credit startups today — but given that the vast majority of credit services, and transactions, are still handled through traditional channels, it’s disruptive nonetheless.

The company describes itself as digital, mobile-first business, which in its case means that you apply for and initiate services through the company’s app — using your phone’s camera to snap your ID and an AI-based algorithm that takes in other data about you to provide what Jaja describes as “near instant” credit decisions within minutes. Jaja provides physical cards (Visa is its credit card partner), but it also allows people to use the cards through their digital wallets immediately. The company does not change for foreign currency exchanges and offers free cash withdrawal fees, with an annual percentage rate (APR) of 18.9%. And in keeping with what is now par for the course for challenger fintech services, you can use the app to get real-time updates on your account, modify repayments and more.

On that note, in addition to the challenge of onboarding a number of established brands and a large number of users on to a new platform that up to now has been adding users intentionally slowly, it will be interesting to see how and if Jaja can inject more modern infrastructure into those established operations, and a customer base that’s used to the traditional way of doing things. For now, it says that customers of those services will continue to use them as they have done.

Spotify seems to have learned little from the Facebook developer platform’s scandals despite getting a huge boost from the social network in its early days. Spotify has been caught allowing record labels to grab tons of unnecessary user data and permissions to even control their accounts just so people can “pre-save” upcoming song releases.

An investigation by Billboard’s Micah Singleton found major label Sony’s app for pre-saving demanded access to users’ email address, what you’ve listened to and saved to your library, playlists you’ve made or subscribed to, artists you follow, and what you’re playing right now. It also asks to be able to take actions on your behalf including change who you follow, add or remove songs from your library, create/edit/follow playlists, and even control Spotify on your devices.

An example of Universal Music Group’s pre-save app that asks for unnecessary user data and access permissions

This means that by agreeing to use a pre-save feature, a record label could index you music tastes and determine your current mood for marketing purposes, subscribe you to all of their artists and playlists, force you to create playlists that include their artists or add them to your existing playlists, and delete or unfollow any music or artists represented by their competitors.

Since users often speed through platform app permission screens assuming they’re just asking for what’s required, many likely gave up valuable data about themselves and the ability to manipulate their accounts without fully understanding what was happening. Other major labels like Warner and Universal’s pre-save apps like this one similarly ask for 10 types of permission — most extraneous.

In reality, the only permission a pre-save app should need is to be able to add the song you wanted to pre-save to your library. Anything else is theoretically prohibited by Spotify’s developer policy section 5.2: “You will only request the data you need to operate your Spotify Developer Application.”

In a post-Cambridge Analytica world, platforms like Spotify should know better than to let developers run amok without proper oversight. That’s why I was so disappointed when Spotify refused to provide a statement, explanation, or even talk with me about the issue.

Offering a flexible developer platform has plenty of advantages for users. Apps for DJing with streaming music, discovering new bands, or synchronizing playback with friends could be built with rightful and transparent use of Spotify’s APIs. But for something as simple and common as volunteering to have a new song from your favorite band show up in your library on the day it’s released shouldn’t become a lure for an exploitative data grab.

That’s why Spotify should build its own in-house pre-save app that labels could all use to pre-promote their releases. Approved labels and their artists should be able to punch in their upcoming single’s Spotify URL and get a shareable link back that they can distribute through social media or wherever that only grants permission to pre-save that specific song, and that expires once that action is completed.

Spotify is widening its subscriber lead over Apple Music

Otherwise, Spotify risks losing all the goodwill its built up with listeners by being a music-first company compared to competitors like Apple and Google where music is a rounding error. Apple Music provides app developers with less data about users.

Just today Apple Music announced it has 60 million subscribers, lagging increasingly further behind Spotify which now has 100 million subscribers and 217 million total monthly users. Spotify already dominates cultural mind share for streaming, having used the playlists it controls to become a hit-maker and gain leverage over the labels for royalty negotiations. But turning a blind eye to shady developers just because they own the music it streams could make listeners question their loyalty and stray to Apple, which is notoriously serious about privacy.

If Spotify is unwilling to push back on data abuse by its record label partners, then it’s undeserving of users’ ears and subscription dollars.

When you live in Silicon Valley, it feels like nearly everyone works in tech and that entry into the industry is wide open. Of course, the reality is very different. Even as software eats the world, not everyone has the training or connections to land a high-paying job in either the traditional tech industry or with a company that’s actively embracing its digital future.

In fact, it would be challenging to interest an executive recruiter in someone who doesn’t have a tech background and didn’t go to college, yet a company called SV Academy is doing just that. In fact, according to cofounder and CEO Rahim Fazel, the nearly two-and-a-half-year-old, Bay Area company is currently helping 100 people every 30 days — or 1,200 per year — land jobs at companies like SurveyMonkey, Palo Alto Networks, and PayPal.

Did we mention that it costs these job candidates nothing, that instead employers pay SV Academy between $12,000 to $15,00 per hire?  All the prospects really need to do is convince SV Academy that they have the grit required to take a 12-week, tuition-free training program that teaches human-centered skills that place these individuals in sales roles, as well as that they will embrace a year of ongoing training and mentorship for a year after graduating.

It sounds like a great deal, and it is, which is why SV Academy says it has more interest than it can handle. In fact, Fazel tells us that the company, which received 1,000  applications over eight months in its first year of operations, is now receiving 1,000 applications a week from people who’ve largely heard of the company through word of mouth.

Because it’s focused on finding candidates who it can stand behind and who won’t quit after their first year on the job, SV Academy is loath to scale up to accommodate that kind of demand. Still, a new round of funding should help widen the funnel a bit. Until recently, the company was backed by $2 million that it raised a couple of years ago from Bloomberg Beta, Rethink Education, Precursor Ventures, Uprising Ventures, 500 Startups and WTI.

The money was enough for SV Academy to achieve profitability and get to the point of putting employers on a waiting list. But with demand beginning to more seriously exceed its supply of candidates, SV Academy recently hit the market again, sharing exclusively that it has just closed on $9.5 million in Series A funding led by Owl Ventures with participation from Kapor Capital, Strada Education Network, and several earlier backer participating, namely Bloomberg, Rethink, and Uprising.

It isn’t the first time that Fazal has started a company that has taken off. In fact, he cofounded a company a decade ago that sold to Oracle, where he spent the next two and a half years. But SV Academy is even closer to his heart, given that he is exactly the kind of person who he wants to help with SV Academy — someone smart but lacking resources. Fazel himself grew up in government housing. He didn’t go to college. He knows firsthand that with determination and right amount of guidance and support, obstacles like not financial stability or a fancy degree can fall away.

Fazel also recognizes the importance of having the right cofounder, which he seems to have landed on with Joel Scott, who is also the company’s COO. A Stanford-trained lawyer, Scott was previously VP of operations at Hewlett Packard, and according to Fazel has trained upwards of 500 SaaS salespeople since college.

Indeed, Scott has played a major role in creating SV Academy’s curriculum, which is very focused on training people for SaaS jobs (for now) and that is entirely virtual, from the 12-week-training period, to the coaching that comes afterward. The unsurprising reason: it enables it to reach students in the U.S. wherever they may be, and whatever their experience might be. (Though some of the applicants who it accepts are college graduates, many are also “working full-time jobs, or they’re caretakers, and it’s impossible for them to drive into the city several times a week for classes,” he explains.)

It seems to be working, too. Fazel says that 100% of the individuals who complete the program are not only receiving median job offers of $79,000 plus benefits and, in many cases, equity, but 70% of them are also receiving promotions within their first year. Yes, the law of small numbers is a factor, but it’s also easy to understand investors’ enthusiasm for what they are seeing — including the cautious approach SV Academy is taking to expanding.

“Real transformation is difficult,” says Fazel. “You can’t create outcomes like this by throwing software at the problem.”

Above, left to right: Joel Scott and Rahim Fazel of SV Academy

There’s seemingly no end in sight for DoorDash’s compensation model where it subsidizes driver wages with customer tips. The mildly bright side, however, is that DoorDash is now providing more transparency after each completed delivery, DoorDash CEO Tony Xu wrote in a blog post today.

“With our current pay model, Dashers see a guaranteed minimum — including tips — prior to accepting a delivery,” Xu wrote. “The guaranteed minimum is based on the estimated time and effort required to complete the delivery. Providing this guarantee upfront means that Dashers are more likely to accept all kinds of deliveries because they know what their earnings will be even if the customer provides little or no tip.”

That means DoorDash’s base pay is sometimes just $1.

“Talking about transparency is good,” labor rights group Working Washington said in a statement to TechCrunch. “And admitting you pay $1/job is better than denying it. But $1 is still $1.”

In light of pay controversies at Instacart, DoorDash and Postmates, Working Washington formed the Pay Up Campaign, which unites thousands of workers across all those gig economy platforms.

“They continue to subtract tips from worker pay,” the organization said in its statement. “And they continue to mislead customers about where their tips are going. When a customer tips more, DoorDash pays less — in other words, the customer is tipping the company.”

Despite what DoorDash said in its blog post about what workers want, the Pay Up campaign says it wants a minimum pay floor of $15 per hour plus expenses for time with an active job, tips, and a detailed breakdown of pay.

Slack’s recent direct listing marks a momentous 15-month stretch for freemium SaaS businesses. With Slack joining the public company ranks, six companies will have tapped the public markets since Dropbox’s IPO last March. This group of companies now has a collective market value of more than $50 billion.

When Zoom filed its public S-1, the tech industry fawned over the company’s financial profile. Here was a company growing revenue over 100% that had somehow managed to be cash flow positive. Conventional wisdom among many Silicon Valley investors has recently been that profits and rapid growth are mutually exclusive.

Uber and other high-growth tech companies aspire to be the next Amazon, foregoing profits into the foreseeable future to establish a dominant market position. This land grab mentality has held sway with most of the SaaS businesses that go to market with a traditional enterprise sales force. In contrast, the recent crop of public freemium businesses show they can actually make money while sustaining attractive growth rates.

Recent IPOs

How can this flavor of enterprise software business run so much more efficiently than their traditional enterprise brethren? The answer heavily lies in their approach to sales and marketing. Despite similar growth rates, traditional enterprise SaaS businesses spend an average of 10% more of their revenue on sales and marketing than their freemium comparables.

Freemium vs. enterprise: Different paths to sales success

A common criticism of freemium businesses is that their retention rates dramatically lag those of traditional enterprise software businesses. Customer relationships for freemium businesses usually begin online. An individual employee wants to use a product for her/his own productivity and simply charges a credit card to pay for a subscription. In contrast to larger-ticket enterprise relationships with multiple stakeholders that tend to renew at 90%+ annually, the retention profile of these individual users often resembles consumer subscription businesses — usually in the 60-80% range. When it comes time to renew the subscription a year later, the person may have changed jobs, changed credit cards or only used the product episodically.

It’s less well understood that many of these business models are evolving in real time as they leverage widespread individual adoption to establish broader enterprise customer relationships. When sales reps for freemium products call on enterprise buyers, they usually have hundreds, or even thousands, of their employees already using the product individually or in small teams.

Their products and brands are already widely known and loved, with power-users clamoring for broader internal support and acting as advocates in the sales process. This internal validation makes it much easier to convince an enterprise buyer that the product will deliver compelling value to end users. While some hands-on sales support is usually required to land a contract over $5,000, this job can be done by less-experienced and lower-cost sales reps. If you visit the offices of freemium businesses and ask to walk their sales floor, you’ll see a sea of millennials closing sizeable contracts over the phone.

Legacy enterprise players have historically successfully fended off competition from freemium businesses by accusing them of not being “enterprise-grade” technology. It can take years to build out robust security infrastructure, deep integration into other systems and administration and reporting capabilities, all of which are needed in the enterprise procurement process. This was a muscle that freemium businesses, whose product orientation was around end-user design rather than back-end infrastructure capabilities, needed to build. They also had to build sales motions to navigate the longer, complex sales cycles that come with six and seven-figure annual recurring revenue (ARR) deals.

However, the financial results of these public freemium companies show just how well this is now working, and there are many more private companies following their lead.

Freemium’s enterprise traction

Most public companies don’t report granular renewal rates for their larger enterprise relationships, but the unit economics of these businesses are incredibly compelling.

Lucid Software now has more than 3,000 enterprise customers, which generates more than 60% of the company’s revenue, up from just 350 and 15% when we invested in the company three years ago. The logo renewal rate for their 3,000+ enterprise customers is more than 95% and net revenue retention is more than 130% annually, because end user seat growth more than outstrips any customer losses.

At Spectrum Equity, we’re watching with interest as these early freemium leaders emerge as successful public companies and the broader industry better understands how these business models work. Since leading SurveyMonkey’s first financing more than 10 years ago, Spectrum has invested in Lucid Software, Bitly, Litmus and Prezi, which are all charting a similar course from freemium online through to the enterprise. A number of Spectrum’s content businesses, such as Lynda.com, Teachers Pay Teachers, Headspace, DataCamp, Offensive Security and Digital Marketing Institute, have also successfully built hybrid individual and enterprise distribution strategies.

We believe companies that create the most compelling end-user experiences will win over the long term, and this trend of the consumerization of enterprise technology has only just begun.

(Note from Spectrum Equity: The specific companies identified above may not represent all of Spectrum’s investments, and no assumptions should be made that any investments identified were or will be profitable. View the complete list of our portfolio companies.)

Today’s major Apple news may be the departure of its design guru Jony Ive, but the even as the company stomachs the executive loss, their software plows ahead. Today, in an interview with French news site Numerama, Apple honcho Eddy Cue revealed that the number of Apple Music subscribers has now climbed to 60 million.

The company seems to give updates every time it surpasses another additional 10 million subscribers, we last heard that they had crossed the 50 million mark back in April.

Now, the company’s music service is well past the halfway market in its mission to surpass Spotify which currently has 100 million subscribers.

Hans Zimmer, the film score composer behind dozens of Hollywood movies including The Lion King and Inception, is shaping what the next generation of BMW electric vehicles sound like.

Zimmer and Renzo Vitale, an acoustic engineer and sound designer at the BMW Group, recently composed the sound for the BMW Vision M NEXT, the concept that had its world debut June 25.

BMW’s project with Zimmer ties into its new “BMW IconicSounds Electric” sound brand.

“We want to get BMW IconicSounds Electric in position for customers who value emotional sound. With BMW IconicSounds Electric they will be able to experience the joy of driving with all their senses”, Jens Thiemer, senior vice president of the BMW brand, said in a statement.

The pair composed the drive sounds and sound signs for the BMW Vision M NEXT together in Zimmer’s studios in London and Los Angeles. Watch the video below and listen for the wooshing sound that is produced as the vehicle accelerates. Sadly, it’s not the soundtrack of Inception playing on repeat.

The M NEXT will not be in your local BMW dealership any time soon. It’s a concept that should show where the automaker is headed in terms of tech and design.

But customers can expect the next generation of electric vehicles to come with special acoustics meant to mimic the feeling a driver might get when they’re behind an M5 or other BMW with an internal combustion engine.

The idea isn’t to make an electric car sound like an ICE vehicle. Instead, the sound is meant to match the power and speed of the electric vehicle.

It turns out that BMW has been working on artificially generated sound since at least 2009. Engineers wanted to increase awareness of the traditional quiet electric vehicles, which at the time include the MINI E test fleet.

Since the launch of the BMW i3, customers have been able to choose acoustic pedestrian protection as optional equipment. Legislation has required automakers to adopt acoustic pedestrian protection, a feature being rolled out as standard in all plug-in hybrids and all-electric vehicles from BMW. The aim in the development was to fulfill the warning function without disturbing pedestrians.

PepsiCo is planning to replace its plastic bottles of Aquafina with aluminum cans at locations around the U.S.

The move is part of a broader initiative from the company to reduce its plastic use as a consumer backlash against plastic use grows across the country. Microplastics, found in both air and water, block up the guts of animals and insects and can potentially have incredibly harmful consequences on ocean ecosystems.

The move could be calamitous for startups like Liquid Death, the direct to consumer retail startup pitching canned “tallboys” of water with a metal message and a veneer of environmental responsibility.

Aluminum is nearly 100% recyclable and has a better overall environmental footprint as a packaging material than plastic, according to some advocates.

For now, Pepsi’s canned water will only be available at food vendors who stock its products, but the company is considering a broader transition to aluminum cans across its supply chain.

The company also announced that its LIFEWTR brand would only be sold in 100% recycled polyethylene terephthalate and its bubly product will no longer be packaged in plastic.

The changes, which the company said will go into effect next year, will eliminate 8,000 metric tons of virgin plastic and roughly 11,000 metric tons of greenhouse gas emissions.

Pepsi has set a goal of using nothing but recyclable, compostable or biodegradable packaging by 2025, the company said.

“As one of the world’s leading food and beverage companies, we recognize the significant role PepsiCo can play in helping to change the way society makes, uses, and disposes of plastics,” said PepsiCo Chairman and CEO Ramon Laguarta, in a statement. “We are doing our part to address the issue head on by reducing, recycling and reinventing our packaging to make it more sustainable, and we won’t stop until we live in a world where plastics are renewed and reused.”

Facial recognition is a controversial enough topic without bringing in everyday policing and the body cameras many (but not enough) officers wear these days. But Axon, which makes many of those cameras, solicited advice on the topic from and independent research board, and in accordance with its findings has opted not to use facial recognition for the time being.

The company, formerly known as Taser, established its “AI and Policing Technology Ethics Board” last year, and the group of 11 experts from a variety of fields just issued their first report, largely focused (by their own initiative) on the threat of facial recognition.

The advice they give is unequivocal: don’t use it — now or perhaps ever.

More specifically, their findings are as follows:

• Facial recognition simply isn’t good enough right now for it to be used ethically.
• Don’t talk about “accuracy,” talk about specific false negatives and positives, since those are more revealing and relevant.
• Any facial recognition model that is used shouldn’t be overly customizable, or it will open up the possibility of abuse.
• Any application of facial recognition should only be initiated with the consent and input of those it will affect.
• Until there is strong evidence that these programs provide real benefits, there should be no discussion of use.
• Facial recognition technologies do not exist, nor will they be used, in a political or ethical vacuum, so consider the real world when developing or deploying them.

The full report may be read here; there’s quite a bit of housekeeping and internal business, but the relevant part starts on page 24. Each of the above bullet points gets a couple pages of explanation and examples.

Axon, for its part, writes that it is quite in agreement: “The first board report provides us with thoughtful and actionable recommendations regarding face recognition technology that we, as a company, agree with… Consistent with the board’s recommendation, Axon will not be commercializing face matching products on our body cameras at this time.”

Not that they won’t be looking into it. The idea, I suppose, is that the technology will never be good enough to provide the desired benefits if no one is advancing the science that underpins it. The report doesn’t object except to advise the company that it adhere to the evolving best practices of the AI research community to make sure its work is free from biases and systematic flaws.

One interesting point that isn’t always brought up is the difference between face recognition and face matching. Although the former is the colloquial catch-all term for what we think of as being potentially invasive, biased, and so on, in the terminology here it is different from the latter.

Face recognition is just finding a face in the picture — this can be used by a smartphone to focus its camera or apply an effect, for instance. Face matching is taking the features of the detected face and comparing it to a database in order to match it to one on file — that could be to unlock your phone using Face ID, but it could also be the FBI comparing everyone entering an airport to the most wanted list.

Axon uses face recognition and to a lesser extent face matching to process the many, many hours of video that police departments full of body cams produce. When that video is needed as evidence, faces other than the people directly involved may need to be blurred out, and you can’t do that unless you know where the faces are and which is which.

That particular form of the technology seems benign in its current form, and no doubt there are plenty of other applications that it would be hard to disagree with. But as facial recognition techniques grow more mainstream it will be good to have advisory boards like this one keeping the companies that use them honest.