Category: UNCATEGORIZED

Evan Spiegel has finally found a way to fight back against Mark Zuckerberg’s army of clones. For 2.5 years, Snapchat foolishly tried to take the high road versus Facebook, with Spiegel claiming “Our values are hard to copy”. That inaction allowed Zuckerberg to accrue over 1 billion daily Stories users across Instagram, WhatsApp, and Facebook compared to Snapchat’s 186 million total daily users. Meanwhile, the whole tech industry scrambled to build knock-offs of Snap’s vision of an ephemeral, visual future.

But Snapchat’s new strategy is a rallying call for the rest of the social web that’s scared of being squashed beneath Facebook’s boot. It rearranges the adage of “if you can’t beat them, join them” into “to beat them, join us”. As a unified front, Snap’s partners get the infrastructure they need to focus on what differentiates them, while Snapchat gains the reach and entrenchment necessary to weather the war.

Tinder lets you use Snapchat Stories as profile photos

Snapchat’s plan is to let other apps embed the best parts of it rather than building their own half-rate copies.

Why reinvent the wheel of Stories, Bitmoji, and ads when you can reuse the original? A high-ranking Snap executive told me on background that this is indeed the strategy. If it’s going to invent these products, and others want something similar, it’s smarter to enable and partly control the Snapchatification than to try to ignore it. Otherwise, Facebook might be the one to platform-tize what Snap inspired everyone to want.

The “Camera company” corrected course and took back control of its destiny this week at its first ever Snap Partner Summit in its hometown of Los Angeles. Now it’s a camera platform thanks to Snap Kit. Its new Story Kit will implant Snapchat Stories into other apps later this year. They can display a more traditional carousel of your friends’ Stories, or lace them into their app in a custom format. Houseparty’s Stories carousel shares what your buddies are up to outside of the group video chat app. Tinder will let you show off your Snapchat Story alongside your photos to seduce potential matches. But the camera stays inside Snapchat, with new options to share out to these App Stories.

Snap CEO Evan Spiegel presents at the Snap Partner Summit

This is how Snapchat colonizes the native app ecosystem similarly to how Facebook invaded the web with the Like button. Snap’s strong privacy record makes these partners willing to host it where now they might fear that Facebook and its history with Cambridge Analytica could tarnish their brand.

Instead of watching these other apps spin up mini competitors that further fragment the Stories world, Snap saves developers the slow and costly hassle while instantly giving them best-in-class tools to boost their own engagement. Each outpost makes your Snapchat account a little more indispensable, grants its camera new utility, and reminds you to visit again. It’s another reason to stick with Snap rather than straying to other versions of Stories.

If Spiegel knows what’s up, he’ll douse the Story Kit partnerships team with resources so they can sign up as many apps as possible before Facebook can copy this idea too. For now, Snap isn’t injecting ads into App Stories, but it could easily do so and split the cash with its host. This would attract partners, generate revenue, and give Snap’s advertisers more reach.

Houseparty embeds Snapchat Stories

Either way, Snap will score those benefits with its new Ad Kit. Later this year the Snapchat Audience Network will launch allowing partners to host Snap’s full-screen vertical video ads and earn an as-yet-undisclosed revenue share. They won’t have to build up an ad sales force or build an auction and delivery system, but just drop in an SDK to start displaying ads to both Snapchat users and non-users. The company’s message again is that it’s becoming easier to cooperate with Snapchat than copy it.

Snap’s new ad network

Giving its advertisers more reach and reusability for Snap’s somewhat proprietary ad unit format helps Snap address its core challenge: scale. Snap’s 186 million total users can look small in comparison to Instagram, Facebook, or YouTube, especially since that count sank in Q2 and Q3 before stabilzing in Q4 of last year. That makes it tougher for advertisers to justify the chore of spending on Snapchat. Ad Kit and potentially Story Kit give Snap more reach even without user growth.

Added size could tip the cards in Snap’s favor given it’s already popular with an extremely important demographic. Snapchat now reaches 75 percent of 13 to 34-year olds in the US, and 90 percent of 13 to 24-year olds there. It claims to now reach more of that younger age group than Facebook in the most lucrative countries: the US, Canada, UK, France, and Australia.

Facebook has massively neglected this segment. Case in point: Facebook Messenger’s Stickers feature that’s popular with kids has hardly improved since its launch in 2013, which I hear was a fight to get approved internally. Meanwhile, Snapchat keeps growing its lead on virtual identity with Bitmoji. Now Snap will let you put your personalized Bitmoji avatar on your FitBit smart watch face, use them to joke about Venmo purchases, and even represent yourself with one in Snap’s new multiplayer games platform.

Again, Snap wants partners to integrate the real thing rather than try to build some half-assed facsimile of Bitmoji. Surprisingly, Facebook’s Avatars have been mired in development for over a year and Apple’s Memoji can’t escape iMessage and FaceTime yet. That’s why Snapchat would be wise to double-down on trying to make Bitmoji the ubiquitous way to represent yourself without a photograph. Facebook’s lack of design cool and Bitmoji’s massive headstart with this differentiated product is a powerful way for Snap to wedge itself into partnerships.

Snap needs all the help it can get if the underdog is going to carve out a substantial and sustainable piece of social networking. Teaming up was the theme of the rest of the Snap Partner Summit. It’s built ways for Netflix, GoFundMe, VSCO, and Anchor to share stickers and for publishers like the Washington Post to share articles back to Snapchat. It’s got Zynga and ZeptoLab building real-time multiplayer Snap Games that live inside chat and are a clever way of slipping ads into messaging.

Snapchat’s new Scan augmented reality utility platform has signed up Giphy and Photomath as well as former partners Shazam and Amazon to let you squeeze extra interactivity out of your surroundings. And since the physical world is too vast for any one developer to fill with AR experiences, Snap beefed up its Lens Studio platform with new templates and creator profiles so developers add to its warchest of 400,000 special effects. Facebook may be able to clone Snap’s features, but not its developer army.

“If we can show the right Lens in the right moment, we can inspire a whole new world of creativity” says Snap co-founder Bobby Murphy . From partnerships to utilities to toys, all the new announcements drive attention back to Snapchat’s camera. That makes it ripe to become the augmented reality brower of the world.

It all feels like a coming of age moment for Snapchat, punctuated by the glitzy press event where media bigwigs gnoshed on Chinese steak buns and played with AR art installations in West Hollywood.

Spiegel has discovered a method of capitalizing on his penchant for inspiring mobile product design. With this strategy in place and Snap’s reengineered Android app and new languages rolling out now, I believe Snapchat will grow again, at least in terms of deeper engagement if not also total user count. Perhaps it will need a little bit more funding to get it over the hurdle, but I expect it will reach profitability before the end of 2020. 

During a pre-event press briefing with a dozen Snap executives including Spiegel and Murphy (that was on ‘background’ so we can’t quote or specify who said what), one Snap higher-up joked that Facebook has been copying it for seven years so it’s started to feel normal. Zuckerberg recently declared he wanted to reorient Facebook around privacy, ephemerality, and messaging — the core tenets of Snapchat. But a Snap leader used some colorful language to describe how they don’t care what Facebook says its philosophy is until it fixes the 2 billion-user product that keeps doing harm.

Subtly throwing shade from the stage, Spiegel concluded that “Our camera lets the natural light from our world penetrate the darkness of the Internet . . . as we use the Internet more and more in our daily lives, we need a way to make it a bit more human.” That apparently means making other apps a bit more Snapchat.

Welcome back to this week’s transcribed edition of Equity, TechCrunch’s venture capital-focused podcast that unpacks the numbers behind the headlines. Here we put the words of our wildly popular venture capital podcast, Equity, into Extra Crunch members’ eyes instead of their ears. This week, TechCrunch’s Kate Clark and Crunchbase News’s Alex Wilhelm get rapid-fire on funding news from around the way. And because they both talk so fast, they got a lot in.

In case you hadn’t heard, Andreessen Horowitz relinquished its status as a venture capital firm and registered all 150 of its employees as financial advisors. Kate and Alex dug in a bit more about that story. And who is sick of hearing about Lyft’s IPO? Nobody? Great. Because they talked about that and the implications of Uber’s imminent journey into the land of the public.

And finally, the Midas List. Does it matter? Why are we talking about it? Why do lists exist? Who’s on top? Who’s not? Who’s sad? Who cares? And more questions left unanswered.

For access to the full transcription, become a member of Extra Crunch. Learn more and try it for free. 

Kate Clark: Hello, welcome back to Equity. I’m TechCrunch’s Kate Clark and I’m joined again this week with Crunch Base News’ Alex Wilhelm.

Alex Wilhelm: Hello Kate. Good to be back in the studio.

Kate Clark: Welcome back. It’s just Alex and I this week and we have a lot of news to get through. So we’re just gonna start off by doing a rapid-fire overview of some of the stuff we’re not going to go as deep on. Alex, start us off with Affirm.

When I first came out to California, one of my favorite places to go for sushi was in downtown Mountain View. They had these little boats that would float around the bar, each carrying some sushi on a small plate. You just sat down and started picking out the ones you liked, and began eating — very efficient and also a little bit of fun.

I feel like my news consumption these days is like those sushi boats. I sit down and the news just streams by and I pick out the articles I like and read them. Very efficient and also a little bit of fun. But I’ve been stuck at the sushi boat bar of news for far too long, watching the same imitation crab rolls go by. I need a better way to consume better information.

As you probably guessed, that “sushi boat bar of news” is Facebook, Twitter and the like. The algorithmic nature of news feeds tends to target the lowest common denominator, and it can often pander to people’s baser instincts. That being said, it does have its place, and provides a glimpse into what is capturing the general public’s attention — but it can’t be the whole meal, and that is what it has become. It’s like people who eat McDonald’s for breakfast, lunch and dinner. It’s tasty, addictive, but very unhealthy in the long term.

So what can you do about it, how can you make a change?

Email newsletters have been making a resurgence in popularity, but they are hard to manage and sort through. Christopher Mims of The Wall Street Journal tweeted about this problem:

if everyone has an email newsletter and someone gets the brilliant idea to consolidate them in one place where they can easily be followed or unfollowed wouldn’t that realize the dream of an open standards-based, surveillance-free alternative to Facebook?

And then Steven Sinofsky had a witty response:

And let us name it is RSS.

Indeed, another “old” technology like email that people have been gravitating toward as an alternative to get their daily news. Wired has proclaimed that “It’s time for an RSS revival” and it has resonated with well-respected thought leaders like Brad Feld. But RSS has had a tumultuous past, mainly used by professionals who need to keep up with their respective industries, not by the average consumer.

If email newsletters or RSS were to become the replacement, it would need a new approach or framework, not just a rehashing of past products. But that is only half the problem. In this day and age, we have become accustomed to having our friends and other people around when we read the news. Even if you don’t make any comments yourself, news exists in a public conversation and people’s reactions, whether they be from your friends or celebrities, are often part of the news itself.

Now these public conversations can be very toxic and are the very reason people are fleeing and looking for alternatives, but I don’t think people want to turn the dial to zero and go back to the days of reading the newspaper by yourself over breakfast. I think people still want others around — they just want it to be safe and free from trolls.

When the web first started taking off, information propagated via the web and hyperlinks, and that world was dominated by Google web search. As Facebook and Twitter grew into prominence, information started to propagate via social networks. And now people are starting to get more and more of their information via messaging, which is looking to be the next step in the progression. You can already see this transition happening in places like India with WhatsApp, where it is becoming a major source of misinformation. And there are interesting experiments out there like Naveen Selvadurai’s README on Telegram, where he posts articles into a Telegram group.

But for the most part there hasn’t been much evolution or progress on the messaging side of the equation to adapt it to become more of an information propagation medium. It’s still mainly about casual conversation and has little overlap with the “news feed” use case. But given how things are changing, now may be a good time to push the boundaries of what messaging could become. I think people are seeking relief from the barrage of social media, not knowing who to trust any more and wanting a better channel to the truth.

I’m pretty confident that closing the circle to a closer, trusted group would be welcome by most people. It doesn’t necessarily mean just friends, but it could include trusted experts or voices in the community that can help shepherd people through the noise and distractions.

Mike Isaac recently started a newsletter called “Brain Dump” wherein he wrote about his thoughts on the privacy post by Mark Zuckerberg, but what caught my attention was a paragraph near the end:

this is at least in part why i started this newsletter. the form is a kind of weird semi-private hybrid — a public newsletter, sent directly to inboxes, which occasionally elicits one-to-one conversations with some of you (that i greatly enjoy). it makes me feel much better than scrolling through twitter and watching performative nastiness.

A public forum with a positive audience interaction model. Even Fred Wilson noted that his readers often email him directly with comments that lead to one-to-one conversations. I wonder if Fred enjoys it as much as Mike does.

I’m sure this doesn’t scale very well, but it provides an interesting starting point that aligns with where we are heading. The modern equivalent of one-to-one email conversations is private messaging, which is squarely where Facebook has declared that it is headed, and it is also where people spend most of their time communicating these days, especially with the advent of mobile. The email newsletter also needs a modern equivalent, and maybe it can learn something from podcasts, which is seeing a major rebirth these days.

As it so happens, podcasts have adopted RSS as a de facto standard for providing feeds to podcast aggregators. It has its shortcomings, but it’s doing the job well enough that it continues to be used and has become a requirement for any new podcast that wants distribution. Even though it may seem like an esoteric protocol from the internet days of old, RSS is woven more deeply into the fabric of the web than you might think.

So if we think about who could shepherd us through the noise and distractions, could people like Mike Isaac or Fred Wilson be the right voices that help guide us toward understanding the truth of what is happening in the world? They are two very different types of people with two very different motives, and sometimes they are at odds with each other.

Mike Isaac is a journalist for The New York Times, a publication that recently did a campaign with the slogan, “The truth is more important now than ever.” We live in a time where world-class journalism is dying and yet it is desperately needed. The free press has always been a watchdog for democracy and, as The Washington Post says, “Democracy dies in darkness.” Journalists are probably the most obvious group of people that can guide us, since it is at the core of who they are and it is their job to expose the truth.

Fred Wilson is a venture capitalist for Union Square Ventures. He has a financial interest behind much of what he writes about, but that doesn’t necessarily disqualify him from being an important voice in the community. There are many people who are often the subject of the articles written in The New York Times that should have a voice of their own. “The Players’ Tribune” is a media company built entirely around that concept, giving athletes a platform to connect with the world on their own terms. The critics are skeptical that this just sugar-coats their stories, but you can’t ignore testimonials like the father trying to get his son to enjoy reading and how Steph Curry’s story connected with his son like no other sports publication could.

So I believe it will have to be a diverse group of voices that will guide us, just like reading only one publication these days may not always give you the whole story. It will likely start with one-to-one conversations between those voices and their readers, but that will only be the beginning.

Just like teenagers will resort to using Google Docs as their chat application of choice at school, the olds are using whatever tools they can get their hands on to find a safe way to understand the truth of what is going on in the world today. There is a product waiting to be built that is optimized for this purpose, and I’m sure companies large and small are trying to figure it out. For some like Facebook, it is an existential question. For publications like The New York Times and The Washington Post, it’s an opportunity to re-establish themselves after the wake of the internet revolution. And for the entrepreneurs, it could be the chance to use the thin edge of the wedge to work their way to a larger success.

The reason this is happening now is that people are starting to wake up to the reality of the digital world we live in and realize they are not safe. If you use Eugene Wei’s framework, social capital has grown to be enormous, but that by itself is not the concern — it is because social capital has become a fungible asset that can be bought, sold and used in whatever manner you choose.

It was all fine when it was just YouTube and Instagram influencers peddling products and making money, but when you can use that same social capital to influence elections, it started to make people feel very creepy and unsafe. The game is changing from one of status that Eugene Wei so articulately describes in his post to one of trust. We’ve fallen down a couple of levels in Maslow’s hierarchy of needs and safety has to be taken care of first before we can get back to esteem.

But we want to get back to trust and safety in a sustainable way, and for that we have to have the right business model. The tricky part is that trust tends to be inversely related to money. The more money you have, the less people trust you. I don’t think the general public trusts the billionaires to look out for their best interests, and the growing income disparity has only made it worse, spawning protests like “Occupy Wall Street” and political slogans like “We are the 99%.”

Ironically in the case of trust, a bank is a good analogy. People need to trust the bank to keep their money safe. If people trust a bank, more people will put more money into it. If they don’t trust the bank, then it will create panic and there will be a run on the bank.

In the context of social media, the currency is people’s attention and the bank is what is keeping people’s attention. People are losing trust in the current “attention banks,” so they are moving it out and trying to find a new more trustworthy place to store it. Again, to use Eugene Wei’s framework, the difficulty in migrating off of a social media platform will depend on how much social capital they have accumulated in the “attention bank” and if they can’t transfer that social capital easily, it will be much harder to leave. But for the average consumer, I don’t think they have much social capital, so it will be easy for them to leave. And when enough of the average consumers leave, there will be a mass deflation of the social capital value on the platform, so it will be easier for those “rich” people to leave also.

Now coming back to the business model. Just like banks make a profit by keeping other people’s money and lending it out to others, social media makes money by keeping other people’s attention and lending it out to others. The medium by which people’s attention is captured has moved from the printed page to an online web page, then an online web page to a social media post. And if the progression toward messaging is fully realized, then attention will migrate into a conversation, which would require a transformation of how people’s attention is lent out to others.

This transformation is an opportunity to reinvent the business model. It still may fundamentally be about lending out people’s attention, but it may become much more tangible. If you go back to print media, when you purchased an ad in a magazine, you had to use the size of the readership as a proxy to gauge how much attention that was lent to you. If what you get instead is a conversation with a potential customer, it is much more valuable. A good indicator that this could be a good business model are companies like Intercom, which are creating tools to immediately engage in conversations with customers instead of just taking them to a landing page.

Now if you bring this back to people needing a better way to understand the truth of what is happening in the world, can we have frank and honest discussions about a product that may put the company that makes it in bad light, yet still have that company willing to advertise on the platform?

The answer to this question lies in private messaging. On a platform like Facebook and Twitter, where it is a public conversation, a “town square” as Zuckerberg calls it, then it is more likely to be a problem. But if the conversation is private or in a small closed group, then it is less likely to be a problem. If done correctly, it could be an opportunity to change people’s minds or clarify misunderstandings.

As we said before, it will require a diverse group of voices to guide us to the truth, and companies should have a voice in the conversation where people are talking about their products or services. It’s not too dissimilar to Yelp giving businesses a way to respond to reviews and defend themselves. I think it’s the fair thing to do, and what’s important is not who is right or wrong, but the conversation itself. Keeping a dialog going between all parties, whether you like them or not, will only help us get closer to the truth. Shutting them down will not. They just need to be safe and with people we trust.

If you walk down Harrison Street in San Francisco’s Mission District, you’ll come across a store front with blacked-out windows, right across from the award-winning restaurant Flour + Water, (where Steve Jobs famously got denied a table). The only writing you’ll find is on the front door, which says “By Reservation Only sasakisf.com.”

You would never know by looking at it, but it is also an award-winning restaurant owned by Masaki Sasaki, who earned a Michelin star when he was the chef at Maruya and also consulted for many other omakase restaurants in San Francisco. The restaurant seats 12 people and they offer only one prix-fixe menu nightly. When I want the best sushi both in quality and overall dining experience, this is where I go. Each bite sends you to another world and you can’t help but close your eyes to fully enjoy the experience. It is fitting that omakase is all the rage these days; an intimate experience with only the highest-quality fish, hand-crafted by a master chef.

I think this is where we are heading with our daily news consumption — private groups, only the highest quality, curated by experts that we trust. You can see this change already happening in people’s behavior, partly in reaction to recent events, but also because people are starting to educate themselves on how all of this technology works and what it means to them personally.

With that understanding will come action and people will begin to make different choices depending on how they feel about what they have learned. And that action will lead to opportunity for new and existing companies to provide a service that people want given what they now know.

Insurance policies are confusing as hell, but the basic business proposition is pretty simple. For policyholders, it’s a way to get paid if something bad happens. And for insurers, it’s a way to make money charging people who avert disasters.

Given that many major insurance companies have stayed in business a century or more, it has clearly been a successful formula for those who write the policies. While other industries fall prey to the forces of creative disruption, giant insurers have largely managed to remain giant and profitable.

In the past few years, however, a surge of well-funded startups are scaling up insurance-focused offerings. Venture funding for insurance and insuretech companies hit all-time highs in 2018, according to Crunchbase data, with both global and U.S. totals reaching record levels. A space that once attracted a few hundred million in venture investment is now in the multiple billions.

Insuretech is seeing some massive rounds, too. And while traditional venture firms are active in the space, a surprisingly large portion of funding is coming from the corporate venture arms of the very same giant insurance companies startups are trying to disrupt.

“I think what it comes down to is insurance is viewed as a grand slam opportunity,” said Caribou Honig, chairman of the InsureTech Connect conference series and a former founding partner at venture firm QED Partners. “The venture community says prices are not cheap, but if we can find opportunities, this is a massive space.”

Below, we get up to speed on recent funding data, muse at the valuations, look at the active players and speculate about why we haven’t seen more exits.

A few more deals, but a lot more money

First, let’s talk about the rising cost of insurance deals.

People complain when their insurance payments go up a few bucks. That’s nothing compared to what insurance startup investors have to confront.

Valuations for sought-after startups are on a tear, and round sizes are ballooning as well. In all, U.S. insurance and insuretech startups raised just over $2.5 billion in 2018, more than double 2017 levels. Global investment, meanwhile, was just shy of $4 billion.

We lay out the funding spike in chart-form below, looking at round counts and investment totals in the U.S.

And here are the five-year totals for the global market (including the U.S.).

A huge wave of seed-stage insurance startups launched three or four years ago, Honig said, and that’s one of the reasons average round sizes are rising so much. Hot companies in that cohort are rapidly maturing, and they’re seeking ever-larger later-stage rounds.

In the U.S., nearly 50 insurance or insuretech companies raised rounds of more than $10 million, including some supergiant financings. We look at some of the largest global funding recipients below:

It’s tax season, which has me thinking about one of decentralized technology’s holy grails: self-sovereign identities. It’s a stirring vision, of a world in which control over our driver’s licenses, passports, birth certificates, social security numbers — the table stakes to participate in the modern economy — rests in our hands, rather than that of the governments who issue them and the companies who demand them. A world in which the tools of identity are as accessible to a stateless refugee as they are to an investment banker.

The concept is most eloquently explained by Christopher Allen in his essay “The Path To Self-Sovereign Identity” a few years ago. This piece recapitulates online identities: the hierarchically dictated identities of the Domain Name System and certificate authorities, still in use today; the idealistic, impractical “Web of Trust” of PGP; OpenID and OAuth; argues that the next phase of identity is self-sovereign identity; and itemizes its ten core principles. (Independent existence, user control, user access, transparent systems, long lives, transportable services, wide usability, user consent, minimized disclosure, protected rights.)

“Sounds great,” I hear you saying, “but what exactly does that all mean?” When you boil that stirring set of concepts and principles down to “what actually happens at the DMV after it switches to self-sovereign identities,” it probably — though there are conflicting visions — looks like this. Warning: blockchain ahead.

1. Your unique, global, personally controlled “identity” is an account on a global shared datastore not beholden to any government or organization. (I told you a blockchain was coming.) You access this account via the knowledge of a secret series of words, which can be transformed into a cryptographic private key.
2. You bring your phone — on which you’ve already unlocked your identity — to the DMV, and have it convey to their systems the identification they need. Today, I would need my physical green card, with my photo, and two physical proofs of address — say, one each from PG&E and Chase Bank. In a self-sovereign world, I wouldn’t need any documents at all. I wouldn’t even need my own phone; any trusted piece of hardware with access to that decentralized system would do. That “identity account” would already include attestations from the US government, PG&E, and Chase, stating e.g. “Chase Bank confirms that Jon is known to receive physical mail at this address,” signed with Chase’s own unforgeable private key.
3. I would approve the sharing of those attestations — and only those relevant for this particular mission; the DMV needs my address, but doesn’t need my bank account balance or my credit rating. My green-card attestation would include the photo of me taken during that process. The DMV would then take their own photo of me, and…
4. send to me their own attestation, “Jon is licensed to drive cars and motorcycles for noncommercial purposes in California until 1 April 2024, and this is a picture of him as of 1 April 2019,” signed by their own private key. My phone would then verify this attestation (presumably transferred to me as something like a QR code) and attach it to my own global identity account.
5. When carded at a bar, I would then provide that photo and the attestation of my age. If pulled over by the police, I’d provide all the legally required information regarding my identity and registration … and no more.

You’ll notice that this “decentralized” solution requires buy-in from the State of California, PG&E, and JP Morgan Chase … i.e. the current centralized providers of identity information. Let’s suppose, for the sake of argument, that they’re willing to participate in this system, sign and use digital attestations, etc. Certainly enterprises are at least interested in the notion.

The advantages are significant. Identity theft would become vastly more difficult; knowing my social security number and address would do no good if the thief couldn’t sign them as me. The estimated billion people on Earth with no formal documents could begin chains of attestations, starting with local establishments who know them personally, or the UN High Commission on Refugees, which could in time accumulate into something solid enough to build credit and formally own property. Best of all, as long as you remembered your mnemonic phrase, you would literally carry all of your ID in your head, and would only ever need a cheap burner phone to use them. It would be a world devoid of any fear of losing your passport / green card / driver’s license / credit cards.

(You’ll note that Apple Card is a half-step towards such a world…)

Online, persistent passwords could be replaced by one-time-use ones — something as simple as signing a salted timestamp with a private key (well, in practice probably a revocable intermediate key) and having the site in question check that signature against your identity account’s public key. Phishing would become a thing of the past, because no password would or even could ever be used twice.

The complexities and disadvantages are also, to understate, nontrivial. In the case of losing or being forced to surrender your identity key, you could have a “social recovery” procedure in which, say, a majority of 5 out of 7 people, chosen by you, presumably very close and trusted, would have the power to recover or rotate your identity key, rendering your old one useless… but this is obviously much more difficult and fault-prone than going to a centralized power who can fix you up with the stroke of a single key.

What’s more, the sheer accumulation of all those attestations in one place could turn that into a single point of failure, and make them more vulnerable to misuse. Right now, immigration officers don’t usually ask for your credit rating, because it isn’t realistic to expect everyone to carry or have access to that information. But in a world where the same technology which tells them “this person is a citizen of Nation X” has the power to inform them, at the same time, of their credit rating … that expectation may change.

It’s possible that unifying identities and attestations in a single place is actually quite undesirable; individuals may theoretically have control over what they share, but in practice, can be put under duress where they have little choice to surrender it all. It’s not hard to envision a world in which states put you through the equivalent of an IRS audit, and airlines demand all your banking and credit information which then use to relentlessly upsell, every time you travel between countries … purely because they can, because doing so has become technically easy, and all your attestations are known to the attesters too, so you must constantly “volunteer” all your data to get anything done.

(You’ll note that people from poor countries applying for visas to rich countries must already go through this kind of invasive in-depth investigation of their personal and financial history. In this future technology would be a great equalizer! …by treating everyone in the same dystopian way.)

In short: decentralized self-sovereign identities are not a panacea, and if not carefully structured, they could even be an accidental boon to authoritarian governments. But their potential is great enough that I’m glad to see more and more companies working on them (particularly Sovrin and uPort, and Keybase is doing good work in this area too.) Watch this space: I expect a lot of interesting developments in this field over the next few years.

Tesla is preparing to roll out a more capable and robust version of its automated parking feature known as Enhanced Summon next week, CEO Elon Musk tweeted Saturday.

The tweet comes just days after the company released a new version of Navigate on Autopilot, an advanced driving feature that is viewed as a step towards full automated driving on highways.

In the tweet, Musk writes “Tesla Enhanced Summon coming out in U.S. next week for anyone with Enhanced Autopilot or Full Self-Driving option.”

Enhanced Summon is a parking assist feature designed to vehicles to navigate a parking lot autonomously and find its driver — under specific conditions. For instance, the driver, who uses the Tesla app to remotely call the car, must be within a certain distance of the vehicle.

Using the feature, the vehicle will pull out of a parking space, navigate around objects and come to the owner. Musk has been teasing this feature for some time now and owners in the early access program have used it. It’s started to be available more widely a few weeks ago to some owners. (There are already numerous video demonstrations of Enhance Summon in action) Now it appears it will have a wider release, based on Musk’s tweet.

Tesla’s vehicles are not self-driving. Autopilot is an advanced driver assistance system that can be described as a Level 2 system, a designation by the SAE that means partial automation. Level 2 can control two ADAS features simultaneously like adaptive cruise (accelerating and deceleration along with the vehicle ahead) and lane steering in certain conditions. However, the human driver is expected to maintain control at all times.

(Others have referred to it as semi-autonomous system, but that terminology has been recently shunned by industry insiders)

Navigate on Autopilot, which is supposed to guide a car from a highway on-ramp to off-ramp, including navigating interchanges and making lane changes, is Tesla’s most advanced driver assistance feature to date. The feature was initially held back when the automaker released the latest version of its in-car software, 9.0. When Navigate on Autopilot was eventually released in late October, Tesla placed some limitations on it, including that it mad a lane change suggestion that required the driver to confirm by tapping the turn signal before it would proceed.

In this newest iteration, drivers will now have the option to use Navigate on Autopilot without having to confirm lane changes via the turn stalk. The new version offers “a more seamless active guidance experience,” the company wrote in a blog post April 3.

For a bit of history, Tesla announced in October 2016 that it would started producing electric vehicles with a more robust suite of sensors, radar, and cameras—called Hardware 2—that would allow higher levels of automated driving. Owners of these Hardware 2 vehicles would be able to opt for one of two advanced driving packages, Enhanced Autopilot or Full Self-Driving, the latter of which is supposed to push the automated driving feature to new levels of capability and eventually drive autonomously without human intervention.

Owners with Enhanced Autopilot have vehicles capable of adaptive cruise control, Autosteer (essentially lane keeping), Summon and Navigate on Autopilot. But then in October 2018, the same month it started rolling out Navigate on Autopilot, Tesla removed that “full self-driving” option (FSD).

Then suddenly this year, Tesla changed the terminology and pricing again — and it brought back FSD.

Enhanced Autopilot is no longer available to new owners. Instead, owners can opt for Autopilot or FSD. Autopilot includes the Autosteer and adaptive cruise control features.

Owners who want the more advanced features like Navigate on Autopilot have to buy FSD. Navigate on Autopilot is considered a step towards that still on-met full self-driving promise.

Autopilot costs $3,000 and Full Self-Driving, costs an additional $5,000. So to get FSD owners have to plunk down $8,000.

The Global Positioning System time epoch is ending and another one is beginning, an event that could affect your devices or any equipment or legacy system that relies on GPS for time and location.

Most clocks obtain their time from Coordinated Universal Time (UTC). But the atomic clocks on satellites are set to GPS time. The timing signals you can get from GPS satellites are very accurate and globally available. And so they’re often used by systems as the primary source of time and frequency accuracy.

When Global Positioning System was first implemented, time and date function was defined by a 10-bit number. So unlike the Gregorian calendar, which uses year, month and date format, the GPS date is a “week number,” or WN. The WN is transmitted as a 10-bit field in navigation messages and rolls over or resets to zero every 1,204 weeks.

Since that time, the count has been incremented by one each week, and broadcast as part of the GPS message.

The GPS week started January 6, 1980 and it became zero for the first time midnight August 21, 1999.  At midnight April 6, the GPS WN is scheduled to reset, which could be problematic for legacy systems and impact time and the time tags in location data. Utilities and cellular networks also use GPs receivers for timing and controlling certain functions. For instance, the U.S. power grid uses timestamps embedded in GPS. The U.S. Department of Energy says that “GPS supports a wide variety of critical grid functions that allow separate components on the electric system to work in unison.”

It should be noted that the WN restart date could be different in some devices, depending on when the firmware was created.

The bug, which some has described as the Y2K of GPS, will cause problems in some GPS receivers such as resetting the time and corrupting location data. The GPS WN rollover event may hurt the reliability of the reported UTC, according to U.S. Department of Homeland Security. HDS said an GPS device that conforms to the latest IS-GPS-200 and provides UTC should not be adversely affected. The agency also provided a word of caution:

However, tests of some GPS devices revealed that not all manufacturer implementations correctly handle the April 6, 2019 WN rollover. Additionally, some manufacturer implementations interpret the WN parameter relative to a date other than January 5, 1980. These devices should not be affected by the WN rollover on April 6, 2019 but may experience a similar rollover event at a future date.

If you own a newer commercial device with updated software, it’s most likely fine. But double check and make sure the software is up-to-date.

The U.S. Naval Observatory suggests contact the manufacturer of your GPS receiver if you have been effected by the GPS week number rollover. Some GPS receiver manufacturers can be found at the GPS World website.

Work has been done to avoid this kind of rollover issue — or at least punt it down the line. The modernized GPS navigation message uses a 13-bit field that repeats every 8,192 weeks.

Editor’s Note: refocused newsletters

It was another dizzying week here at Extra Crunch as you will shortly see in this newsletter.

One change that we are making: we are simplifying our newsletters to keep you better informed on what is happening on Extra Crunch. We are merging the daily, weekly, and article editions of this newsletter into a “roundup” format that will come out twice per week. The goal is to keep the signal high, and the noise in your inbox low.

To control which newsletters you receive from Extra Crunch (and TechCrunch more broadly), feel free to go to our newsletters page while logged in. And as always, if you have feedback, do let me know at danny@techcrunch.com.

Scooters may kill the sharing economy?

TechCrunch’s scooter aficionado Megan Rose Dickey dived into the current state of the scooter market, and came back decidedly non-plussed. Scooters seem like a viable solution to the last-mile problem of urban transportation, but the reality is that the sharing economics behind them are weak, and huge regulatory barriers are being erected that will almost certainly slow their advance. Even worse, sharing may disappear entirely:

Venture investment in space technology is hitting stratospheric heights in recent quarters. But investors in the sector are betting it will rocket higher still.

The latest example of high-velocity funding is satellite internet startup OneWeb, which recently announced a galactic-sized $1.25 billion venture funding round in the wake of a successful launch. The financing, which included a long investor list featuring the ever spendy SoftBank, brought total funding for the Arlington, Va. company to a whopping $3.4 billion.

But OneWeb is far from the only space tech company to secure a big round recently. A Crunchbase News roundup of large investments in the sector unearthed a sizable list of companies attracting attention and big checks from venture capitalists, with at least a half dozen securing rounds of $50 million or more since 2018.

What’s the draw? Largely, it’s the oft-repeated tale of a startup sector seeing valuations rise as early-stage companies mature, said Chad Anderson, CEO of investor group Space Angels.

“The barriers to entry came down in 2009, when SpaceX provided increased access to space through low-cost launch and transparent pricing,” Anderson said. “We saw the first pioneering companies, like Planet [former Planet Labs]*, take advantage of that new access starting in 2013.”

Now, the crop of space tech companies that launched five or six years ago is middle-aged by startup standards and ripe for larger, later-stage rounds.

Economics of satellite design and launch have also become a lot more compelling for investors in recent years. Whereas satellites previously cost hundreds of millions (or even billions) to design, manufacture, and launch, today a small satellite can be built for tens of thousands of dollars and launched for a few hundred thousand dollars, Anderson said.

Venture capitalists seem to like that math. Over the past 10 calendar years, Space Angels estimates that venture capital funds have invested nearly $4.2 billion into space companies. Of that total, 70 percent was deployed in the last three calendar years.

More firms are getting into the space, as well. Currently, Anderson calculates that just over 40 percent of the Top 100 venture capital firms now have at least one space investment. Their investments are concentrated in two areas: satellites and launch technology, particularly for the small satellite space.

To get an idea of where the money is going, we put together a chart below showing the space tech companies that have secured some of the largest funding rounds since last year:

While space tech is generating a lot of venture investment, however, not a lot of startups have yet made it to exit. That’s not entirely surprising, if we presume that typical venture startup-to-exit timelines apply. If the current crop of funded startups launched in the 2013 time frame, we’d expect to see exits pick up in a few years.

It is worth noting, however, that the one most famous and pioneering of the current crop of venture-backed space companies, Elon Musk’s SpaceX, has also stayed private. Certainly SpaceX has the name recognition and track record to support a blockbuster IPO.

Yet Anderson contends that’s unlikely to happen — at least not for a very long time. For one, Musk has laid out the company’s ultimate goal as colonizing Mars. That doesn’t jibe well with the typical public company duties, like meeting quarterly numbers. It doesn’t help that Musk has already gotten into hot water with regulators for his approach at Tesla.

Yet as SpaceX pursues its grand ambitions, the company has also served as a launchpad for a number of other space tech entrepreneurs — we put together a list of nine startups with a SpaceX alum as founder or core team member.

So while colonizing Mars remains a risky bet, the odds in favor of blockbuster space tech exits on Earth are getting a lot higher.

*Planet and SpaceX are Space Angels portfolio companies.

Extra Crunch offers members the opportunity to tune into conference calls led and moderated by the TechCrunch writers you read every day. This week, TechCrunch’s Kirsten Korosec and Kate Clark led a deep-dive discussion into Lyft’s IPO and the outlook for the business going forward.

After skyrocketing nearly 10% on its first day hitting the public markets, Lyft stock has faded back down towards its IPO price as some investors grow more concerned over the company’s path to profitability (or lack thereof) and the long-term fundamentals of the business. But Lyft’s public listing is bigger than just the latest in increasingly common unicorn IPOs. As the first public “transportation-as-a-service” company, Lyft offers the first inside glimpse into the business model and its economics, and its development may ultimately act as the canary in the coal mine for the future of transportation.

“Lyft, hasn’t just survived, they’ve grown. 18.6 million people took at least one ride in the last quarter of 2018. That’s up from 16.6 million in late-2016. That illustrates the growth that the company has had. They’ve also said that they have 39% share of the ride-sharing market in the US. That’s up from 22% in 2016.

To me, the big question is let’s say they had Uber’s share, which is 66%, would they be able to make a profit? Is that the determination? And I’m not convinced that it is, which is why all these other aspects of the transportation-as-a-service business model [micromobility, AVs, etc.] are going to be really important.”

Image via Getty Images / Mario Tama

Kirsten and Kate dive deeper into what the market response to Lyft means for Uber and the timeline for its impending IPO. The two also elaborate on their skepticism of ride-hailing economics and debate which innovative transportation model will ultimately drive the path to profitability for Lyft, Uber and others.

For access to the full transcription and the call audio, and for the opportunity to participate in future conference calls, become a member of Extra Crunch. Learn more and try it for free. 

Danny Crichton: Good afternoon and good morning everyone this is Danny Crichton, executive editor of Extra Crunch. Thanks so much for joining us today with TechCrunch reporters Kate and Kirsten.

I’ll start with a quick introduction for our two writers today. We have Kate Clark, our venture capital reporter. Kate has been with us for a while now covering everything in the startup and venture world. She’s also one of the hosts of TechCrunch’s podcast Equity and also writes our Startups Weekly newsletter.

Our other writer today is Kirsten, our intrepid automotive writer covering all things Elon Musk, Tesla, and everything else in the autonomous vehicle space. Kirsten has also been with us for quite some time and also writes a newsletter that she just introduced in the last couple of weeks, around transportation. So with that, I’m going to hand off the conversation to the two of them now.

Kirsten Korosec: Thanks so much Danny. This is Kirsten Korosec here. The newsletter is in a bit of a soft launch but it is being published Fridays and we hope to have an email subscription coming sometime in the future, so just keep an eye out for that.

I should also mention I too have a podcast centered around autonomous vehicles and future transportation called The Autonocast that comes out weekly. Thanks so much for joining the call and just a reminder, we want participation. So at about the halfway point, we’ll turn and open up the line and answer questions. Let’s get started.

Before we dig into all the hot takes out there, I think it’s worth providing a primer of sorts — a general timeline of events. We all probably know Lyft of course and most of us think of 2012 as the launch date when it came to San Francisco, but really Lyft was build out of the service of Zimride. Which is the ride-sharing company that John Zimmer and Logan Green founded in 2007.

A lot of attention has been placed on Lyft in 2018 with what happened in the past year, in the run-up to the IPO. But I think it is worth noting the intense activity and growth that happened between 2014 and 2016. These are critically important years for Lyft, just a frenzy of activity in a period where the company gained ground, investors, and partners.

To showcase the amount of activity that was happening; Lyft had two separate funding rounds, one for $530 million another for $150 million, just two months apart in 2015. You might also recall in early-2016 its partnership with GM and the automakers’ $500 million dollar investment as part of the Series F $1 billion dollar fundraising effort.

That was really interesting because GM’s president at the time Dan Ammann took a seat on the board, which he has since vacated. As Lyft and GM started realizing that they were competitors. Now, Dan is the CEO of GM Cruise which is the self-driving unit of GM.

2017 and 2018 were also big years, as Lyft launched their first international market in Toronto. They made big moves on the autonomous vehicle front, which we’ll talk about today, and in micromobility. Their scooter business launched in Denver in 2018. They bought Motivate, which is the oldest and largest electric bike share company in North America. Then, we finally get to the end of 2018, and this is when Lyft confidentially files a statement with the FDC and we’re off with the races to the IPO.

The last two months or three months is when Lyft unveiled its prospectus, met with investors, priced its IPO and made its public debut. So Kate what are the nuts and bolts of the IPO and what’s happening right now?

Kate Clark: Hi everybody this is Kate. So I’m just going to mention really quickly the timeline these last couple of months in the run-up to Lyft’s highly historical IPO. So going back to December, that’s when Lyft initially filed confidentially to go public. We later find out that they are going public on the NASDAQ when they eventually unveiled their S1 in early March.

This is after Lyft had raised $5 billion in debt and equity funding at a $15 billion dollar valuation, so there are a lot of people paying attention to what was the first ever rideshare IPO. So then in early-March, we’re able to get a closer look at Lyft’s S1, which tells us that the company has $911 million in losses in 2018 and revenues of $2.2 billion. So after calculating and pulling together some data, a lot of people were quick to find out that that means Lyft has some of the largest losses ever for any IPO. But also has some of the largest revenues ever for any pre-IPO company, just following Google and Facebook in that category.

So this is a really interesting IPO for a lot of people given these sky-high losses but also these huge, huge revenues. The next we see Lyft price their IPO between $62 and $68 dollars a share. Some people were quick to say that that was maybe a little underpriced, given that this was a highly anticipated IPO with a ton of demand. So on the second day of Lyft’s roadshow, the process, they say that their IPO is oversubscribed. So demand is apparently huge, their oversubscribed, so they decide we’re going to increase the price of our shares.

Image via GettyImages / maybefalse

So Lyft then says they gonna charge a max of $72 per share and then on the day of their IPO they charge $72 per share, the next day opening at $87 per share. So we see a huge IPO pop that I don’t think was particularly surprising given that they already spoke of this demand, and we had already known that there was a lot of demand on Wall Street. Not just for Lyft but just for unicorn IPO’s of this stature, given that there are so few of these. So Lyft began trading hitting $87 per share though, if you’ve been following the news that’s not were Lyft is today.

Kirsten: Yeah so I was just about to ask — Kate give me the latest numbers, you know a lot of focus is on that opening day but things haven’t exactly sustained. So what’s happened in the past few days?

Kate: Yeah it’s really tough to manage expectations after an IPO. I mean, I think there has been a lot of criticism towards Lyft now and I think it’s trading below its initial share price. So as I mentioned Lyft opened at $87 per share, it priced at $72, but almost immediately they began trading below that $72 price per share. So they closed Tuesday trading at $68.96 per share. Still boasting a market cap larger than $19 billion. So they’re still significantly valued at more than they were as a private company at $15 billion but it doesn’t look good to be trading below a price per share so quickly.

However, it actually did hit its IPO price for just a minute today, so maybe let’s give it a few more hours and see where it closes. It’s possible that it will sort of jump towards that $72, but it’s still trading quite significantly below that $87.

Kirsten: With IPOs like this, and especially such a high profile one, there’s going to be a ton of attention on share price and on volatility. And so I’m wondering, in your view, what did this first week, or first few days of volatility say to you? What does it say about Lyft’s future and, well certainly, its present?

Kate: Yeah. I mean, it’s hard to say. I think a lot of people were questioning if Wall Street was going to be interested in a company like Lyft that’s extremely unprofitable at this time and has years left before it will reach profitability, if indeed it ever reaches profitability.

So at this point you got to wonder, do some of these investors that did buy Lyft right off the bat, were they really long on Lyft? Because it does look like a lot of those investors have already sold their stock and perhaps weren’t as invested in Lyft’s long-term profitability plan, which involves a lot of very iffy things, like the future of autonomous vehicles, which we’ll talk about later in this call. And there’s a lot of uncertainty there.

But with that said, it’s not uncommon for a stock to experience volatility right off the bat, and you can’t assume the future of that stock price just because of some early volatility.

And we gathered some examples of IPOs where there was some early volatility that did not determine the long term future. So Carvana, for example, which is an online used car dealer in the automotive space, and it did experience volatility at first, with the stock sliding in the first few months but ultimately trended upward.

Kate: So Carvana opened at $13.50 a share, falling below its IPO price, so it didn’t even have the IPO pop. And then in 2018, it hit an all-time high of $65 per share. Today, it’s trading around $58 per share, so that’s ultimately a positive story to be told there.

And then another example on the other side of things is Snap, which actually took four months to dip beneath its 2017 IPO price, and we all know Snap has definitely not been a success story and it’s trading well below its offer price. But then finally, Facebook, for example, dropped below its IPO price on its second day of trading and then actually had a rough first year on the stock market before the stock ultimately took off and became a very obvious success.

Kirsten: So, Kate, I’m wondering why you think that there was that initial run up on that first day. Was it excitement? Was there something material that was pushing the price up? What was the cause?

Kate: I think there was a lot of excitement and demand around this IPO because it was very much one-of-a-kind, and there were a lot of investors that it seemed were really long on the possibility of Lyft becoming this hugely profitable company. And I think a lot of that was because in the S1, although you did see these really, really big losses — quite major, just ridiculously huge losses — you did see that they were shrinking over time and that there was definitely a path in which Lyft could take where it would reach profitability, say, in the next five years.

And I think Wall Street was really paying attention to that, and they were not paying attention to some of the other metrics. Now, they’ve taken off their rose-colored glasses and they’re looking at Lyft as a public company, and it’s just a little bit different now that it’s actually completed its debut.

Kirsten: Well, so, I mean, I like to view IPOs often times, and especially in Lyft’s case, as a measure of an investors’ faith in the company’s growth prospects, because this is a company that while it does have quite a bit of revenue, it has significant losses and it’s really planning not just for the present day but for the future. It’s been called a disruptive business for a reason, and it is certainly very forward-looking. So I’m wondering if you think it was a good strategy for Lyft. They wanted to open it up to “the everyman” when they actually went to market. They did a different approach, and do you think this might have had an effect? I mean, it’s very on-brand for them to do this, but I’m wondering if you thought that means that some of the investors aren’t as disciplined.

Kate: Do you mean with the fact they were providing bonuses to their employees and drivers to actually participate in the IPO as well?

Kirsten: Absolutely. That’s actually a really good point that maybe you can elaborate on. Lyft did a little bit of a more open approach for its IPO. Typically IPOs can be closed off to only large, institutional investors. So did this set them up perhaps to have more volatility?

Kate: Yeah, Lyft provided some of their drivers up to, I think, $10,000 to, in theory, actually buy stock in the IPO. Do I think that had a high impact? I don’t know. I think there’s not enough comparison, not enough data to really make a decision or to make a hot take on whether that really was part of the volatility. I think just given the uncertain nature of Lyft’s future and their big losses, I think their volatility was pretty inevitable, and I think people paying attention to this are probably not particularly surprised by how the stock has fared in these first couple days.

And I do want to add there’s this six-month lock-up period for the venture capital funds that own Lyft and as well as their employees, so I think we’re not sure what’s going to happen when that lock-up period ends and those holders can just sell their stock right then or how that will impact the stock price, as well.

Image via TechCrunch/MRD

Kirsten: So something to keep an eye on. It reminds me a lot of a company I write a lot about, which is Tesla, and I’ve been covering them for years. And it’s one of the most volatile stocks, and their investors, they certainly have large, institutional investors, but the number of fanboys that they have with smaller investors, either prop up the share price sometimes or add to that volatility, and I’m kind of really curious to see if that happens with Lyft. If you go to a shareholder meeting at Tesla, for example, it’s filled with people who are passionate about the brand and its CEO, Elon Musk.

And Lyft and possibly Uber, if they end up finally going through with their IPO, you can see that potentially happening because people feel very strongly about the brand and also the service it provides. So I’m curious to see how this all sort of shakes out. And I tend to take the view that I invest personally in mutual funds and things like that. I don’t invest in any of these companies, but the long, patient view tends to be the better one, and trying to catch a falling knife, as investors have told me, is never really a good idea.

So I’m curious to see if investors sort of grow up and learn with Lyft, if they’ll become disciplined and just sort of wait it out and see them play out the growth prospects for the company in the long term. So, we’ve been talking about Lyft and I can’t not talk about Uber as a result. I’m wondering what you think this might mean for Uber. The big story initially was let’s beat Uber to IPO and I’m wondering what this means then. Is this indicative of what Uber is going to experience?

Kate: I think that question is really at the top of everyone’s mind right now, including my own. I will say that I still do think it was highly beneficial for Lyft to get out first. Because imagine if and when Uber does too experience volatility, which it probably will, if it were to have gone first, I think that would have frightened Lyft a lot more than Lyft’s volatility may or may not be frightening Uber. So, with that said, I think I’m of two minds right now with my thoughts on how this impacts Uber’s IPO. I think that if Lyft stock continues to be volatile and perhaps even falls lower than it already has. I do think that there is a chance Uber may ultimately decide to push its IPO back.

I think that for a few reasons, namely being that Uber is not in a huge rush to go public. They do have the ability to wait. They have filed to go public. So it’s likely to happen quite soon, but it may not happen in April as they are reportedly planning to do.

On the other hand, Lyft went public at like a $24 or $25 billion dollar market cap. Whereas Uber is going to debut at maybe a $120 billion dollar initial market cap. So these IPOs, although they are both ride hail IPOs and they are very similar companies in a lot of ways, they’re also very different and Uber is operating on an entirely different scale though it still is unprofitable. And has some of the same issues that, investors are probably noting about Lyft.

I think it’s either going to be that it’s maybe that they do decide to push it back or maybe that Uber is like, well we’re five times larger, six times larger. We have much larger statistics to show to investors. There’s just a chance it could go either way. I wish I had a better, more concrete answer, but I just don’t think we know yet.

Kirsten: Well I’m okay with not taking hot takes just a few days into this IPO. I think this is a good time to open it up to questions. While we wait for a question, I will do one quick follow up with you Kate. What do you think this means for Uber? Will it delay its IPO?

Kate: Right now, no, I don’t think they’re going to. But it’s like I said, it’s tough to say given that it’s only been a few days of Lyfts IPO. But no, I think you’ve got to imagine that they are ready to discuss the possibilities of Lyfts IPO and already planned ahead if there was volatility. They maybe already assumed that would happen, given that that’s not uncommon. So right now I’m going to say no, I don’t think they’re going to delay, but it’s certainly still a possibility.

Kirsten: Okay, great. I think another really interesting piece for Uber was their acquisition of Careem. This is a deal that was made right before their IPO, so it was shifting attention away from Lyft, just for a moment.

Why did Uber do this? Is this not a signal that they’re delaying their IPO? Is this just prepping for it? What are you hearing on it? I’m wondering if this might have just been a strategy to show the world investors, specifically potential shareholders, what the road ahead is going to look like. Or is it some other reason — Is it to justify their really big losses?

Image via Careem / Facebook

Kate: I think it’s the latter two things you said.  Just to give some background Uber is paying about $3.1 billion to acquire Careem, which is a Middle Eastern ride-hailing company. So basically just the Uber of the Middle East. Uber does have a history of acquiring, smaller competitors like this in different markets where it’s not active, just as a way for Uber to quickly grow essentially.

So I do think it’s a big deal to make just before going public. So I guess we don’t know if they necessarily will go public in April, but I think it was a move to present to public market investors as a prep for an IPO, to show “we just acquired this company, here’s more evidence of future growth”. Like you mentioned, it’s definitely a justification of those huge losses that we know Uber has.

Kirsten: Thanks for that. Questions?

Caller Question: Hi there, so when we talk about looking ahead and moving towards profitability — what role, if any, do you think the acquisition of a scooter or other mobility companies will have for companies like Lyft and Uber?

Kirsten: That’s a great question. I think it’s going to be a huge piece of both of their businesses. A lot of people describe this as the first ride-hailing IPO. We need to stop calling this a ride-hailing company. These are transportation-as-a-service companies and they’re making money. But generating revenue as opposed to making profit is a totally different thing. When you start talking about ridesharing, it’s a tough business. With those it’s an asset-light business, right? They don’t own the cars and then they technically don’t employ these drivers.

But at the same time, as of 2016 only something like 1% of people in the US were using rideshare. So you see this opportunity, but they’re not pushing forward. There is a ton of car ownership still that’s happening. Yes, sharing has absolutely increased, but 17 million new cars were sold in the US last year. So scooters, bike share and other businesses are going to be key to their paths to profitability because ride-sharing alone is just difficult to make a profit. It’s not difficult to generate revenue. It’s difficult to make a profit on.

And I’m wondering, talking about that road to profitability, I do think it’s worth noting how much they have grown. Lyft, hasn’t just survived, they’ve grown. 18.6 million people took at least one ride in the last quarter of 2018. That’s up from 16.6 million in late 2016, that illustrates the growth that the company has had.

They’ve also said that they have 39% share of the ride-sharing market in the US. That’s up from 22% in 2016. To me, the big question is let’s say they had Uber’s share, which is 66%, would they be able to make a profit? Is that the determination? And I’m not convinced that it is, which is why all these other aspects of the transportation-as-a-service business model are going to be really important.

Kate: I think what you pointed out is important, about Lyft and Uber both becoming transportation businesses, not ride-hailing companies and I think their long-term visions involve scooters, bikes, autonomous vehicles, all sorts of different models of transportation beyond just car sharing.

Kirsten: I hate to be wishy-washy here and say, I don’t know, but I do really think that it’s going to come down to a variety of items all coming together. It’s just not going to be enough for Lyft to scale up its ride-hailing business. And I should point out that Uber should be treated in some ways the same way, but there are some distinct differences. But it’s important for us to think of Lyft as a transportation-as-a-service business. I mean they say in their prospectus that transportation is a massive market opportunity. The hard part of course is turning that into a profit. There might be opportunity there.

So there’s this asset-light business that they have right now, which is the ride-hailing, but then they are making acquisitions in the micromobility space and that is going to become more capital intensive. And that’s going to force them to change their business. And then there’s the autonomous vehicle piece. And then finally, I actually think that one of the pieces of their S1 that has really not received much attention at all is what they’re pursuing in terms of public transportation. And they have said that they, and Uber, intend on being a piece of the public transit ecosystem.

Now that doesn’t mean that they’re going to necessarily be operating buses, but there are people that I’ve talked to in the industry who actually feel like, in Uber’s case, they want to control every mode of transportation. For Lyft, I see them seeing more of the opportunity financially with the data piece and becoming more of a platform and becoming that one-stop shop where you use an app to figure out if you want to use the scooter or a bike, or ride-hailing or buy that ticket for the L in Chicago or the Bart System.

So I really think that the public transit piece often gets ignored and cities are having so much more control now and weighing in. We see this in New York City with congestion pricing. It’s going to force Lyft and Uber to take advantage of these opportunities and use their platform in a way that perhaps accelerates faster than they had intended.

Kate: I’m very interested in the public transportation element, but I’m also very skeptical of the scooters and bikes in the future for Lyft, I think, given the unit economics, I certainly wouldn’t rely on them to be Lyft’s path to profitability. I think autonomous vehicles are a much more interesting path towards profitability. So a lot of companies, Uber, Lyft, Waymo and more are focusing on autonomous vehicles and their development, whether that be with hardware or software. How does Lyft’s strategy with autonomous vehicles differentiate from some of their competitors or does it does differentiate?

Kirsten: It does differentiate, and the funny thing is, is that so you don’t see micromobility necessarily as the oath to profitability and are interested in AVs and I write about AVs, but I see that AVs as a harder path to profitability in a way because of the nuts and bolts that it takes to develop them.

So just to weigh in really quickly on the micromobility piece and then I’ll move on to AVs; To show the opportunity but also the volatility in a real-world example for micromobility, I was in Austin for South by Southwest, I think you were there too, and you probably saw scooters everywhere, right? 18 months ago there were no scooters or bike share in the city. Then bike share came first.

Image via Flickr / Austin Transportation / https://www.flickr.com/photos/austinmobility/41536051644/in/album-72157669223418248/

And I was talking to that mayor of Austin and one of the folks from Spin, which is a Ford owned business, and they told me something that was really remarkable that I hadn’t thought about, which was that scooters were disrupting the bike share business. So bikes share came in and then scooters came in and all of a sudden they’re pulling bikes off the streets because no one was using them or were not using them at the same level as scooters.

Lyft is going to go through these same exact growing pains and people are figuring out what works. And as you mentioned, the unit economics are an issue, the wear and tear on the scooters alone is driving up costs and driving down revenues certainly, but pretty much making it very difficult to make a profit on it.

But that’s a near term business, right? So it’s at least generating revenue right now. On the other hand, you have this other piece, which is the AV piece. Lyft is doing some really interesting things on the AV piece — they kind of have a two-prong approach.

So they basically created a ton of partnerships to use their platform. So this started a couple of years ago and companies like Aptiv, drive.ai, even Waymo and nuTtonomy, which Aptiv just recently bought about a year ago and GM, and Lyft basically allows developers to use their platform and connect to their autonomous vehicle and offer these rides.

And the best example of this, if you’ve been to CES or if you have been to Las Vegas I should say more specifically, is this partnership that Lyft has with Aptiv — and Aptiv as a tier one supplier, they used to be called Delphi, they spun out, they bought nuTonomy, and they’re Aptiv now. And this is taking Aptiv automated BMW, which are on the Lyft network. If you hail a ride, you might be asked if you want a self-driving car, or “are you okay with a self-driving car?” And they have a safety driver, no humans have been pulled away from it yet. But they provided about 35,000 rides since I want to say January 2018.

Then they’re also doing Level 5, a dedicated self-driving vehicle division that launched in 2017. And here they’re basically creating an open self-driving system or open SDS. On top of that, they have partnered with Magna, an auto parts producer, to develop these self-driving systems that can be manufactured at scale.

And so you just see a rush of partnerships and sort of dual approaches and all of that costs a lot of money. And I can’t emphasize the amount of money that it costs or will cost to develop these systems and deploy them commercially. And I hear from other companies figures like $5 billion to get self-driving vehicles. So developing the full stack, doing fleet management, maintenance, all of that — that’s a lot of money. And, I’m not sure where Lyft, will get that capital, will they get it from the open market or will they have to go and ask for more capital.

Kate: So when do you think then that Lyft will be able to commercialize autonomous vehicles?

Kirsten: The timeline? So depending on who you talk to, you can hear from any of these developers between five years and 30 years. I think it’s important to talk about language and how we talk about autonomous vehicles. So to be clear, there is currently not a single commercial autonomous vehicle deployment where a human being or safety driver has been pulled away from the wheel. It just doesn’t exist.

There are plenty of pilots and Waymo is probably considered the leader in that list, though it is a bit of a confusing one for me because they have so many partnerships and they’ve become competitors to some of those partnerships. The analogy I use is “Survivor,” the reality show. Everyone wants to make these alliances so they don’t get voted off the island.

And now we’re at that point where autonomous vehicle development has entered what we call the trough of disillusionment, which is heads down, “let’s get away from the hype, let’s do the hard work.” And I think we’re going to see a lot of those partnerships and headwinds really come up in the next year, 18 months. So to put a target date on Lyft, it’s really going to depend on which one of those partnerships really play out and are real. I think the one with Aptiv seems the most real to me based on what I know the company is doing and I can see them doing a lot more pilots in the next 18 months.

Does that mean commercial deployment without a human safety driver behind the wheel? I’m not sure I can see a lot more these pilots with a human safety driver expanding beyond Las Vegas. I see pilots happening absolutely in the next year to 18 months. The issue is going to be when is that human safety driver going to be pulled out and with which partner.

Kate: So should we open it up to questions again?

Caller Question: Hi, I was just wondering how we should think about the regulatory risks that might exist as these companies expand to new cities, new markets, or even the public transport use case you mentioned. Thanks.

Kirsten: The regulatory piece is an interesting one. Let’s talk about ride-hailing first. We’ve already seen the regulatory environment, in cities, push back against companies like Uber and Lyft. I think the congestion pricing model that just launched in New York City is going to be one to watch and could be something that will put pressure on, on businesses like Lyft.

Kate: I agree and just to speak, quickly on the scooters; I think the narrative around scooters has been pretty dominated by how cities have forced them out or cities push these strict regulatory barriers on them. And I think that’s still playing out very much. There are even some scooter providers that have had to pull out of cities that they worked very hard to get into in the first place. So I think that has slowed down some of the growth there. And given that Lyft has micromobility as such a key part of their road to profitability, I think that’s partially why I am a little bit skeptical of how that’s gonna play out.

Kirsten: One thing we’ve found, and something to consider for Uber as well, in the future, if any of these AV developers end up, filing for IPOs on their own — there’s been chit chat about Waymo someday doing that or GM cruise someday— the implications for all of these companies and their relationship with cities should not be ignored or undervalued.

And I think you see a bit of that playing out with the present day track we have, which is the ride-hailing scooters and bike share cities and transit agencies or the DOT of different counties finding that they are in a more powerful position than they’ve ever been before. And they are exerting that power.

And so you will see instances like Los Angeles where they have put forth a mandatory data sharing component if you want to operate in their city. This raises some privacy concerns by the way, but it also adds another cost to a company or certainly forces them to look at their business a little bit differently.

Then you start talking about AVs and where are they will operate, how they will operate, where are they will park, what type of vehicle will be allowed in the urban center. In places like Europe, there are strict emissions rules, so that’s going to go to an AV or hybrid profile. And it’s important to think about what that regulatory framework might be and acknowledge the fact that it’s really a mishmash.

There are voluntary guidelines on the federal level right now, but there were no mandates. And so it’s really left up to the cities, counties and states to decide how an AV might be deployed. It’s going to mean probably more lobbyists in DC working with federal folks to ensure that their business doesn’t get hamstrung as a result as well as more of a presence in those cities and states and counties.

But Kate, I’m wondering what is your view from a startup perspective? Do you think of Lyft as a startup anymore are they acting like a startup or are they acting like a company that could handle all of these different complicated, various challenges? I mean, we’ve got pricing pressure, regulatory pressure or you’ve got AV development, opportunities with scooters and all this other stuff. So are they acting like a company that is able to handle this?

Image via Getty Images / Jeff Swensen

Kate: That’s an interesting question. I mean, they’re definitely not a startup anymore by, by anybody’s definition. You maybe could have still used that word, if they were still private, but even then, I know many people would yell at you for using that term for a company worth $15 billion. But now it’s a public company. It’s not a startup. I don’t think they’re acting like a startup, no. I think that they are mature in the way that they’re handling all of these different, so-called paths to profitability.

But we need to wait and see. Let’s see how this year goes, let’s see how they handle all the criticism that they’re going to undoubtedly take from Wall Street or from everyone who’s either interested in buying or just taking a seat and watching how the stock favors and then we’ll know what kind of lessons they took from all those years as a private company. Then we can decide if their behavior is really that of a mature public company.

Kirsten: I do want to make one point that I think is an interesting one on Lyft’s strategy versus Uber is in terms of AVs. Let’s all put a big asterisk that says no, AVs are still a ways out. It is important to note the Lyft and Uber’s strategies for AVs are wildly different and Uber does not take this dual approach. Uber is throwing a ton of capital towards developing their own, self-driving stack and also they’ve done, some acquisitions as well.

They’ve also had quite a bit of trouble. Last year Uber had the first self-driving vehicle fatality that happened in Tempe, Arizona, which looked like it was going to derail their self-driving unit, but it did not. They’re back, testing in a very limited way, but Lyft’s is all about what they call the democratization of autonomous vehicles.

And we can look at that as marketing speech, but I do think that it’s important to look at those words because it shows what their business model is. Their business model is partnerships, alliances, opening up the platform and casting the widest net possible. What I’m very interested to find out is which approach will end up being the winner. It’s going to be a very long game. It’s not going to be anything that’s going to be determined in the next year. I think what Lyft’s proven is that when they look like they’re down and out, they come back.

We’ll see what the better approach is. Do you do everything in-house and launch your own robo-taxi service? Or take capital partners on or do the Lyft approach, with multiple partners? Are partnerships actually too complicated? As someone who covers the startup world, do you have a thought on which one might work or not?

Kate: I have no idea which will work better and I’m sort of excited to see where this all goes, especially as Uber and Lyft are now going to be public.

That’s a good spot to end the call on.

Kirsten: Thanks so much for joining. Thanks again for being Extra Crunch subscribers, we really appreciate it. Bye everyone.