Specializing in Computer Repair, Networking, Internet Solutions, Web Designing, Hybrid App Designing and Windows Operating systems.
Christopher Mims / Wall Street Journal:
For many services, moderating content has become an existential crisis; some services are even establishing rules that pre-empt the need for costly moderation — Content moderation rules used to be a question of taste. Now, they can determine a service's prospects for survival.
Dan Goodin / Ars Technica:
Researchers discover macOS malware dubbed “Silver Sparrow” on at least 30K Macs, which includes a native M1 version and leverages the Installer JavaScript API — With no payload, analysts are struggling to learn what this mature malware does. — A previously undetected piece …
Manish Singh / TechCrunch:
Whatsapp says users who haven't accepted its new privacy policy by May 15 can receive calls and notifications “for a short time”, but not read or send messages — WhatsApp said earlier this week that it will allow users to review its planned privacy update at “their own pace” …
Reuters:
Facebook deletes the main page of the Myanmar military for “repeated violations of Community Standards prohibiting incitement of violence and coordinating harm” — (Reuters) - Facebook on Sunday deleted the main page of the Myanmar military under it standards prohibiting …
It turns out the most important decision made was not the vote to choose (and remove) in the election but Twitter’s permanent banning of the former President from the social network. Suddenly the temperature cooled, the new administration engaged with the details of vaccine rollout, and the second impeachment trial ended with an expected outcome. Twitter’s move was bipartisan if the trial was not.
Twitter’s other big move was the acquisition of Revue, a Substack competitor we’re moving to in production of the Gillmor Gang newsletter. It features tools to drag and drop articles from Twitter, Feedly, and other newsletters, but crucially the ability to reorganize these chunks as the writing develops. It’s my bet that the newsletter container will absorb blogs, podcasts, and streaming into a reorganized media platform available to creators small and large.
This kind of organic process development meshes well with the newsletter model. It encourages more timely releases, and an editorial feel that prizes quality over quantity. As newsletters proliferate, an evaluation of time over volume becomes most significant. It’s less an eyeballs pattern than a prioritization of what is not chosen and then what is, consumed or annotated with social recommendations. As with the Gang’s Frank Radice Nuzzel newsletter, the focus becomes less flow and more authority or resonance.
Daily Commentary
I have made the decision to cover the media exclusively in “The Radice Files” There are plenty of general news aggregators out there, and I for one, am just tired of those stories. I hope you’ll stay with me.
Instead of non-stop Trump, the only political story in the revamped Radice File is about how Fox News cut away from House manager video testimony to a commentary on the futility of covering the violence given the lack of votes for conviction. This shadow dance happens not just on Fox but the other centrist or left networks like CNN and MSNBC. The slant is not what’s interesting; the networks’ business model and the subtle effect on media programming is.
No wonder that streaming’s impact is being felt in the latest unicorn from Silicon Valley, Clubhouse. The audio streaming podcast disruptor is marketed as a FOMO inside hallway conversation, with a Twitter social cloud viral onboard mechanism that digs deep into your contact list and never lets go. Big ticket items such as a keynote-like conversation with Elon Musk are overbooked from the first minute. I tried unsuccessfully to join this week’s follow up with Marc Andreessen and his VC partner Ben Horowitz but it was sold out at 5000 after 30 minutes.
But there is definitely something tugging at me as I get notifications of people joining and creating rooms on various glitzy Valley topics. The live feeling of serendipity and catch it as you can promises the possibility of lightning in a bottle, the sensation of history being made, not just observed. Probably just an illusion, but it’s reminiscent of the feeling we used to get when putting a record on the turntable and daring the artist(s) to succeed. I still get that every time Miles’ Kind of Blue resumes, the awe with which time is reorganized at the atomic level.
People say a Clubhouse can go easily from 1 to 5 hours. I think RSS was killed by the red unread marks indicator. Size matters? Probably, if my college research suggests. But more important than length is ROI, and that’s where the Clubhouse effect dovetails with the newsletter moment. The ingredients of both are intuition, choice, the organic breadcrumb trail, and the payload.
Does this notification fit in with what pattern I’m trying to discern this moment. I love movies like Citizen Kane and North By Northwest for the mirage that they project of a universe fated by a biologically innate DNA. Sometimes we call it fate, other times dumb luck, but always that dumbest of phrases: It is what it is. Only this time the conceit is: It is what it’s about to be is. And if something happens, yes, I knew it. Not specifically, but given the mood the planet is in, it figures this could happen.
In a newsletter: the game is not to read everything, but only what and when and in what order. The prize is the analytics, which reward the reader with more stuff, and the publisher with validation of the impact of the combination of choice (citations) and context (writing.) In Clubhouse, it’s being in the room and what — knowing when to bail? For me it’s escaping the inevitability of the point being made in a podcast, or the filter of the business model of what I’m going to do next. If it’s Sunday, it’s Meet the Press. Maybe…
There’s a bunch of choice: Choice of room, people, time invested, moment of throwing good money after bad. Choice of what I’m playing hookey on — work, cable news, family fun, sleep. Clubhouse lets you publicly eavesdrop, a broadcast @mention that doesn’t give you the option of lurking. But you can do the closest thing to multitasking: doing the dishes, playing with the dog, monitoring. cable news with the sound off, DJ-ing for a private room, driving, etc. It is the new radio, pandemic be damned. Wherever you go, there you still are.
Newsletters? People, time reading, research replacement, subscription development, form of payment (money, authority, trust), influence or eyeballs. The game is trading current media for future rebundling, where the new publishers, studios, and artists are grown.
These choices create the breadcrumb trail, plowing under the old and furrowing the new. Newsletters are the leading edge of this refactoring, tilling the memes, models, and markets for the trends that become viral. The analytics of opens, email vs. web clicks, and notification triage are implicit for the most part in their signal. Harvesting these breadcrumbs requires the impact of new content created in response to the earlier data. Once you’ve identified a valuable consumer, your real work has just begun.
First, you look for the signature of exultation, the embedded essence of the experience that a certain combination of intuition and action rewards the detective. For that is what this new media is: an information thriller that taps into deep reading, listening, and sharing. Every catch phrase — round up the usual suspects, or we are not the droids you are looking for — represent uber themes we crave to navigate a terrifying treacherous world. We are the droids we’re looking for, and these new medias represent possible parallel worlds where we can not just survive but honor values of our choosing.
In the movies, it’s called the plotline. Clubhouse presumes there’s a story worth waiting for, the moments where we gain power by sharing and decorating reactions with clues as to what part of the same elephant we are investigating. We know intuitively that we’re not going to learn business secrets, but there is gold to be retrieved from the participants as they share their sense of humor or lack of it, their rhythm of when they join, raise their hand, are successful at being invited on stage, when they leave, whether they boomerang, and only a little what they actually say. The price for this is your breadcrumbs.
As much as I’m intrigued by Clubhouse, I’ve only actually joined or started a room twice. Once was by accident, as I realized by clicking on a link to see who was there. Me, I found out. Another was a conversation about a Techmeme podcast by the podcaster and Chris Messina of hashtag fame. I never could get into the big A16Z attractions. Like Frank Radice’s newsletter pivot, I was primarily interested in the atmospherics surrounding Andreessen Horowitz’s media strategy. But that doesn’t obviate the steady feeling that something substantial is going on here.
Media generally is swallowing its pride in the wake of the political nightmare we’ve been living through. Notice I say media, not mainstream media or social media. Smarter people than me can debate the distinction, but I think the difference between the two is overstated, and more importantly, not that indicative of what the value of these new media surges will turn out to embody. More and more, the substantial writing that filters in on Twitter, RSS (through Feedly), and aggregators like Nuzzel and Medium is significant in its approach to the central issues we’re struggling with. That includes traditional players like the New York Times, Wall Street Journal, The Information, and the tech journals, as they combine newsletter techniques with their substantial resources.
We’re seeing a merger of the medias, with the consensus around value and weight being measured by new metrics. In television, it’s the NewFronts combining digital and linear TV; in music it’s at the song level, not the album. Streaming has shaken the old networks to their core, with a horse race between Netflix, Amazon Prime, and Hulu, and ABC, NBC, and the old CBS. M&A has swallowed Fox, Time Warner, FX, and even an old studio, Paramount. And radio? You could say the usual suspects Apple, Google, Amazon, and Spotify, but Clubhouse? Like Zoom, I think so. Twitter and Facebook have bigger fish to fry, but Apple Car and Glasses are the key platforms Clubhouse will play in as we move into the autonomous work from anywhere reality. The payload is value, time management, and notifications at the core of the move to digital.
from the Gillmor Gang Newsletter
__________________
The Gillmor Gang — Frank Radice, Michael Markman, Keith Teare, Denis Pombriant, Brent Leary and Steve Gillmor. Recorded live Friday, February 19, 2021.
Produced and directed by Tina Chase Gillmor @tinagillmor
@fradice, @mickeleh, @denispombriant, @kteare, @brentleary, @stevegillmor, @gillmorgang
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Welcome back to Human Capital. A lot happened this week pertaining to on-demand companies like Uber, Postmates, DoorDash and Instacart, and their respective gig workforces. Meanwhile, New York’s attorney general hit Amazon with a lawsuit over its warehouse labor practices and Twitter made some new commitments to increase diversity at the leadership level by 2025.
But that’s not all. Google fired another AI top ethicist, Margaret Mitchell. The company also internally published the results of its investigation into what happened with Dr. Timnit Gebru.
Apologies in advance for a slightly lengthier than usual newsletter but it’s all worth knowing, I promise.
Quick note: Human Capital is getting a new name because it seems to be causing some confusion, so don’t be alarmed when this hits your inbox next week with a different name. Name TBD.
New bill aims to regulate Amazon warehouses
California assemblyperson Lorena Gonzalez, who was behind gig worker bill AB 5, introduced new legislation that would regulate productivity quotas from companies like Amazon, Walmart and others. Called AB 701, the bill aims to better protect warehouse workers by implementing statewide standards.
“While corporations like Amazon are collecting record profits during the pandemic, employees in their warehouses are being expected to do more, go faster and work harder without clear safety standards,” Assemblywoman Gonzalez said in a statement. “It’s unacceptable for one the largest and wealthiest employers in the country to put workers’ bodies and lives at risk just so we can get next-day delivery.”
NY AG sues Amazon
New York Attorney General Leticia James filed a lawsuit against Amazon for allegedly failing to provide adequate health and safety measures for its workers. As part of the lawsuit, James alleges Amazon retaliated against workers Christian Smalls and Derrick Palmer after they complained to Amazon about the company’s lack of support during the COVID-19 pandemic. James’ suit came after Amazon’s preemptive lawsuit against her office, alleging that workplace safety is not something she has authority over.
While Amazon and its CEO made billions during this crisis, hardworking employees were forced to endure unsafe conditions and were retaliated against for rightfully voicing these concerns. Since the pandemic began, it is clear that Amazon has valued profit over people and has failed to ensure the health and safety of its workers. The workers who have powered this country and kept it going during the pandemic are the very workers who continue to be treated the worst. As we seek to hold Amazon accountable for its actions, my office remains dedicated to protecting New York workers from exploitation and unfair treatment in all forms.
Meanwhile, of course, Amazon warehouse workers in Bessemer are actively seeking to form a union. This week, reports showed Amazon was altering traffic signals as a way to prevent workers from being able to effectively talk with each other.
Ex-Postmates VP speaks out about the gig economy
Vikrum Aiyer, the now-former vice president of global public policy and strategic communications at Postmates, penned a memo to his former colleagues and other stakeholders in the gig economy outlining what he thinks needs to happen next in the industry.
In his letter, Aiyer says “it would be a mistake for us to think that mild tweaks to worker classification, or a single state ballot measure, create a durable path forward for meaningfully addressing what Americans truly worry about: the chance to work, take care of their families, and not fret about what comes next.”
Postmates drivers say they’ve become prey to scammers
A new report in The Markup showed scammers sometimes target Postmates workers. In one instance, a scammer stole $346.73 from a worker. You can read the full story here.
In related news, Uber, which owns Postmates, recently hired labor researcher and Uber critic Alex Rosenblat to lead the company’s marketplace policy, fairness and research efforts.
Uber drivers demand PPE and compensation for time spent sanitizing vehicles
Uber drivers shut down Market Street outside of Uber’s San Francisco headquarters to demand the company provide them with enough personal protective equipment during the COVID-19 pandemic. They also want to be compensated for time spent sanitizing vehicles in order to keep themselves and riders safe.
Uber lobbies in the EU for Prop 22-like legislation and loses key battle in the U.K.
Meanwhile, over in the EU, Uber is lobbying for Prop 22-like standards. In a white paper, Uber proposed a “new standard” for platform work, where it outlines the need to offer some benefits to workers while simultaneously steering away from the possibility of collective bargaining among workers. From TC’s Natasha Lomas:
A universal standard for platform benefits may sound progressive, but the notion of “relevant” benefits for gig workers risks fixing this labor force to a floor far below agreed standards for employment — closing off any chance of a better deal for a class of workers who are subject to persistent, algorithmic management.
In the UK, the Supreme Court ruled Uber drivers are employees and therefore entiteld to minimum wage and holiday pay. Also from Lomas:
The case, which dates back to 2016, has major ramifications for Uber’s business model (and other gig economy platforms) in the U.K. — and likely regionally, as similar employment rights challenges are ongoing in European courts.
DoorDash drivers are banding together to decline low-paying orders
The strategy, reported on Vice, is designed to beef up the base pay for drivers by working together to game the system.
From Vice:
The fundamental principles of the official #DECLINENOW movement rely upon all drivers in the movement to exercise their right to use the decline button to decline lowball offers for higher, more feasible ones,” reads a pinned post on the main Facebook group. “Declining lowball offers forces the algorithm to raise the base pay UP on the declined offer for the next driver as the need for DoorDash to service the order increases. In turn, Dashers will see an increase in higher paying offers, many times doing less deliveries for more money and a much higher paying ‘Per mile rate.’”
Turning jobs into gig work
Bloomberg had a really good feature about how the tech industry’s gig economy is impacting workers in other industries. It’s a must-read, but here’s a snippet:
Companies in a range of industries could use the Prop 22 model to undermine or eliminate employment protections. A week after the election, Shawn Carolan, a partner at early Uber investor Menlo Ventures, wrote an op-ed heralding the potential to spread Prop 22’s vision of work “from agriculture to zookeeping,” including to “nursing, executive assistance, tutoring, programming, restaurant work and design.”
President Biden nominates Jennifer Abruzzo to lead NLRB as general counsel
Abruzzo is currently the special counsel for strategic initiatives for the Communications Workers of America. For those unfamiliar, CWA has been making a name for itself in the tech industry by helping tech companies like Glitch and Alphabet unionize. Her appointment could prove to be quite beneficial for tech workers and gig workers alike.
In a statement, CWA President Chris Shelton said:
There is no one who has a more thorough grasp of the National Labor Relations Board and the purpose of the National Labor Relations Act than Jennifer Abruzzo. She is a brilliant attorney who understands how the actions of the NLRB impact the daily lives of people at their workplaces. President Biden’s selection of Jennifer as the NLRB General Counsel shows that under his watch, issues affecting working people will be handled by people like Jennifer who have dedicated their lives to helping workers — and not union busters like we saw during the Trump administration. We hope Jennifer’s confirmation process is speedy — working people need her at the helm of the NLRB now more than ever.
Instacart at odds with workers again
The company has reportedly suspended workers’ accounts for cancelling orders. According to Vice, these workers said they had good reason to cancel some of these orders, citing things like fears of safety and someone providing the wrong address.
Instacart, however, said it’s part of a fraud prevention policy that places accounts on pause if they suspect fraudulent or suspicious activity.
Twitter commits to increasing diversity at leadership level
Twitter has committed to the Silicon Valley Leadership’s Group 25×25 pledge, which challenges companies to do one of two things:
Currently, Twitter’s leadership team is just 6.5% Black, 3.9% Latinx, 2.8% multiracial and less than one percent Indigenous, according to its most recent diversity report.
Examining the “pipeline problem”
As I mentioned last week, I had the pleasure of chatting with Dr. Joy Lisi Rankin, a researcher at AI Now, about her research pertaining to the pipeline problem myth in tech. The story also features some insight from Uber Chief Diversity Officer Bo Young Lee, as well as Paradigm Director Courri Brady.
You can check that out here.
Tech engineer alleges sexism and bullying at Mailchimp
Kelly Ellis, a now-former principal engineer at Mailchimp, left her job earlier this week, alleging she was paid less than her male counterparts. In an email to employees, a higher-up at Mailchimp said the company “thoroughly and independently investigated the allegations and found them to be unsubstantiated.”
Glassdoor lets you filter ratings by demographics
Despite efforts from companies to create equitable environments, it’s clear that employees of certain demographics, like Black women, sometimes have very different experiences from their counterparts. Glassdoor aims to better surface those experiences through a new feature that allows folks to filter ratings by demographics.
Justice Through Code teaches returned citizens how to code
Justice Through Code, a semester-long coding and interpersonal skills intensive that takes place at Columbia University, aims to provide alternative paths for people once they reenter society.
The program has support from tech companies like Amazon Web Services, Coursera, Google and Slack.
Promise raises $20 million Series A round
Promise, a platform that makes it easy for people to navigate payments for child support, utilities, parking tickets and more, raised a $20 million Series A round. This round makes Promise founder Phaedra Ellis-Lamkins one of a handful of Black women who has raised more than $1 million.
Hey, Google…WTF?
Google fired Margaret Mitchell, the founder and former co-lead of the company’s ethical AI team. Mitchell announced the news via a tweet.
Google confirmed Mitchell’s firing in a statement to TechCrunch, Google said:
After conducting a review of this manager’s conduct, we confirmed that there were multiple violations of our code of conduct, as well as of our security policies, which included the exfiltration of confidential business-sensitive documents and private data of other employees.
News of Mitchell’s firing came shortly after Google internally announced the results of its investigation of Gebru’s exit, according to Axios. The company did not reveal what it found, but said it would implement some new policies to enhance diversity and inclusion at Google.
Google has a new ethical AI lead
Meanwhile, Google appointed Dr. Marian Croak to lead its responsible artificial intelligence division within Google Research, Bloomberg reported earlier today. Croak was previously the vice president of engineering at the company.
In her new role, Croak will oversee the teams working on accessibility, AI for social good, algorithmic fairness in health, brain fairness, ethical AI and others. She’ll report to Jeff Dean, SVP of Google AI Research and Health.
Also, we’re a little over a week away from TechCrunch Sessions: Justice, which takes place March 3. Be sure to snag your $5 ticket here to hear from folks like Backstage Capital’s Arlan Hamilton, former Amazon warehouse worker Christian Smalls, Congresswoman Barbara Lee and others.
Welcome back to The TechCrunch Exchange, a weekly startups-and-markets newsletter. It’s broadly based on the daily column that appears on Extra Crunch, but free, and made for your weekend reading. Want it in your inbox every Saturday morning? Sign up here.
Ready? Let’s talk money, startups and spicy IPO rumors.
Not alone, but you might be able to make a lot of progress with the right data in the right hands. And that’s precisely what the startup we’re talking about today is up to.
The Exchange caught up with Terry Myerson and Lisa Gurry this week, the CEO and CMO of Truveta, a young company that wants to collect oodles of data from healthcare providers, anonymize it, aggregate it and make it available to third parties for research.
It’s a big task, but the team behind Truveta has experience with big projects. Myerson is best known for his time one-rung below the top of the Microsoft org chart, where he ran things you might have heard of, like Windows. Gurry was a leader inside that org, most recently working on strategy for the Microsoft Store product.
But now they are at a healthtech data company. How did that come to be? After Myerson left Microsoft he worked with Madrona, the Seattle-area venture capital firm, and the Carlyle Group, a huge investing group with a taste for private equity. A few years later, several former Microsoft co-workers of Myerson had wound up at Providence, a healthcare giant. They reached out to Myerson around when COVID-19 was first locking down the United States. The former Microsoft exec agreed to take part in a few calls, but didn’t formally join them as he was stuck at home.
During that time he learned that Providence had put together a white paper concerning the idea that Truveta would become, that by collecting data from healthcare providers a dataset of sufficient size and diversity could be compiled to allow research of all sorts to leverage it. Myerson got stuck on the concept, later founding the company. Then he called up some former colleagues, including Gurry, to help him build it.
Truveta has around 50 people today and will scale to around 100 this year, Myerson said.
Questions abound in your head, I’m sure. Things are still early at Truveta, but the company announced last week that it has signed up 14 healthcare providers to help with its data goals. Those firms are also investors in the company (Myerson put in capital in as well).
I was curious about the company’s business plan. Per Myerson, Truveta will charge different rates depending on who wants to access its data. As you can imagine, commercial entities will pay a different price than an independent researcher.
Next for Truveta is getting more data, locking down its internal data schema, collecting feedback from researchers and, later, approaching commercial access.
Healthcare in America is inequitable — something that the pair of Truveta executives stressed during our call — thus giving the company a huge market to improve and make less racist and sexist.
It was a bit odd to talk to Myerson and Gurry about their startup. In the past I’d chatted with them about some of Microsoft’s largest platforms. Let’s see how fast they can transform Truveta from an idea I can’t help but dig, to a company that is a viable commercial concern. And then how big they can grow it.
A lot has happened in the past few days that we couldn’t get to. Adyen’s earnings, for example. The European payments platform reported H2 revenues of €379.4 million, up 28% compared to the year ago half-year. And from that it reported EBITDA of €236.8 million. Who said fintech can’t be profitable? (Note: Adyen’s results are required reading if you care about Stripe’s valuation and future public offering.)
And there were some rounds that also fell through our fingers. Investments like CloudTalk’s recent $7.3 million Series A. The Slovakia-based startup previously raised a $1.6 million seed round in 2019. The startup, as its name suggests, offers cloud telephony services to call centers.
We suspected that CloudTalk probably had a pretty good year in 2020 thanks to global growth in remote work. It did. In an email, CloudTalk said that it has not seen “Zoom-like [growth] figures” but that in 2020 demand for its services “exceeded [its] expectations.” That helps explain its latest round.
The Exchange was also curious if the company had a perspective on subscription pricing versus consumption pricing, a rising topic amongst software dorks such as myself (more to come on this next week with notes from Appian, Fastly and others). Per the company, CloudTalk charges “for both seats and for usage,” making it a hybrid company from a pricing perspective. CloudTalk called its pricing setup “a good balance for both parties because customers like to know what they are going to be paying ahead of time.”
It’s a startup to keep in mind. As is Zolve, a globally themed neobank with a focus on helping expats have a working financial world. I couldn’t get to it, but TechCrunch wrote it up. More here.
And in case you didn’t have time to watch television during work the last few days let’s talk about Robinhood. Which enjoyed a Congressional hearing this week that was mostly dull apart from some notes on the fintech giant’s business model.
Finally, it was a busy week for crowded startup niches. There was more money for OKR startups, leading to our question about VCs putting capital into related companies in the future. Public also raised several hundred million dollars. Because why not. And low-code player OutSystems raised $150 million to round out the group. It was one hell of a week.
I will leave you with a few data points. First, that Clubhouse’s metrics are finally starting to match the hype around the product. People are showing up in droves, pushing its total download figures over the 10 million mark.
And in news that I missed, Substack crossed the 500,000 subscriber mark. That’s impressive!
And to close, a Chicago-based, home-focused insurtech startup called Kin crossed the $10 billion “total insured property value” mark this week. The Exchange reached out, asking the company about its economics. After all it’s not hard to run up premium volume if you are selling dollars for 50-cent pieces.
Ruth Awad from the company responded that her company’s “ loss rate is 53% and our gross margins are 32%.” Not bad at all. Given how quickly insurtech has gone from experiment to public-success, Kin is a company to keep tabs on.
Wrapping, please make sure to support your local heavy metal band this weekend,
Sheldon Chanel / The Guardian:
Facebook's Australia ban is acute for people in places like Fiji, who rely on phone plans with cheap Facebook access as going to news websites costs more data — Media experts fear that communities reliant on the site for information will suffer significant impact
Financial Times:
US video streaming giants are finding it more challenging to cash in on India, amid outcries over edgy content and difficulties in convincing consumers to pay — Netflix, Amazon and Disney tackle greater scrutiny from censors as they engage in a fierce pricing war
Nilesh Christopher / Rest of World:
Interview with founder of Koo, a microblogging service for regional language speakers in India that recently passed 3M users, fueled in large part by Modi's BJP — Aprameya Radhakrishna made Koo for local-language speakers. Overnight, Hindu nationalists drove its success. — • BANGALORE, INDIA
Another week and the biggest story in a sea of big stories continues to center on SPACs, these blank-check companies that raise capital through IPOs expressly to acquire a privately held company and take it public. But some industry watchers as starting to wonder: Is this party just getting started, with more early guests still trickling in? Have we reached the party’s peak, with the music still thumping? Or did someone just quietly barf in the corner, a sure indicator that it’s time to grab one’s coat?
It certainly feels like things are in full swing. Just today, B Capital, the venture firm cofounded by Facebook cofounder Eduardo Saverin, registered plans to raise a $300 million SPAC. Mike Cagney, the fintech entrepreneur who founded SoFI and more recently founded Figure, a fintech company in both the home equity and blockchain space, raised $250 million for his SPAC. Even Michael Dell has made the leap, with his family office registering plans this afternoon to raise a $500 million blank-check company.
Altogether, according to Renaissance Capital, 16 blank-check companies raised $3.4 billion this week, and new filers continue to flood into the IPO pipeline, with 45 SPACs submitting initial filings this week (compared with 10 traditional IPO filings). Perhaps it’s no wonder that we’re starting to see headlines like one in Yahoo News just yesterday titled, “Why some SPAC investors may get burned.”
Interestingly, such headlines could help puncture the SPAC bubble. So argues INSEAD professor Ivana Naumovska in a new Harvard Business Review piece that’s ominously titled, “The SPAC Bubble is About to Burst.”
Naumovska points to research showing that when more people adopt a practice, it will become increasingly widespread due to growing awareness and legitimacy. (See Clubhouse.) But when it comes to something that’s more controversial — which it could be argued that SPACs are — outsider concern and skepticism also grows as the practice becomes more widely used. Thus are born headlines like that one in Yahoo Finance.
Naumovska has studied this phenomenon before, focusing on earlier reverse mergers that, as she notes, “surged in the mid-2000s, outnumbering IPOs in some years, and peaked in 2010, before falling off a cliff in 2011.” She says she and fellow researchers collected a plethora of data on the use of reverse mergers and market responses to them, including how the media evaluated such vehicles. Of the 267 articles published between 2001 and 2012, she says, 6 were positive, 148 were neutral, 113 were negative.
Notably and unsurprisingly, the negative articles grew as the number of reverse merger transactions involving firms with relatively low reputations increased. Then again, the same thing happens whenever the “IPO window” is open. Great companies go public, then good companies, then half-baked companies that think they might just blend in with the others. Except that the media picks up on these companies, as do regulators, and with investors, regulators, and the media feeding off one another’s signals, the party typically comes to a screeching halt.
Anecdotally, much more of the coverage around SPACs right now remains positive to neutral. If business reporters are privately skeptical of SPACs, they are reserving judgment, possibly because save for some highly concerning cases — like when the electric truck startup Nikola was accused of fraud — there isn’t much to criticize yet.
That’s partly because these things appeared so abruptly that public shareholders are still trying to understand them.
The argument that most investors have for creating a SPAC — which is that a lot of so-called unicorn companies are ready to be publicly traded — resonates, too, given how bloated the private market has become.
It’s also impossible to judge many of the SPACs raised over the last six months, as they have yet to announce their targets (they have two years from the time they raise funds from investors to zero in on a company or else have they have give back those IPO proceeds).
In the meantime, some of the merger deals that critics have long expected would begin to unravel have not, like Virgin Galactic, the space tourism company that kicked off SPAC mania when it went public in the fall of 2019.
Sir Richard Branson founded the company in 2004 in order to fly passengers on suborbital trips to space, but even after putting off plans yet again to attempt a rocket-powered flight to suborbital space last week, its shares — which have more than doubled since January– remain in the figurative stratosphere. (The company, which reported almost no revenue last year, is currently valued at $12 billion.)
Other offerings haven’t gone quite as smoothly. Clover Health, a health insurance company that, like Virgin Galactic, was taken public via a SPAC organized by famed investor Chamath Palihapitiya, is “facing a confluence of existential threats” to its business, as observed in a deep dive by Forbes.
Among others that are “digging into Clover’s business practices, including how the company incentivizes doctors and patients to buy its insurance and use its technology,” are the The Department of Justice, the Securities and Exchange Commission and influential short-sellers. (Clover has rebutted the allegations, but it is reportedly still facing at least three class-action lawsuits that have been filed over the company’s failure to disclose ahead of its IPO that the DOJ was investigating the company.)
“I don’t get it,” said skeptic Steve Jurvetson last month in conversation with this editor of the SPAC frenzy. The veteran venture capitalist, who sits on the board of SpaceX, said there are “some good companies [being taken public]. Don’t get me wrong; they aren’t all fraudulent.” But many are “early-stage venture companies,” he noted, “and they don’t need to meet the forecasting requirements that the SEC normally requires of an IPO, so [SPAC sponsors are] specifically looking for companies that don’t have any operating numbers to show [because they] can make any forecasts they want . . .That’s the whole racket.”
If many agree with Jurvetson, they hesitate to say so publicly. Many would be happy to see their portfolio companies taken public however possible; others who haven’t formed SPAC of their own are reserving the right to consider them down the road. In fact, Ed Sim of Boldstart Ventures in New York is one of few VCs in recent months to say outright, when asked, that his firm isn’t considering raising a SPAC at any point. “I have zero interest in that honestly,” says Sim. “You can come back to me if you see my name or Boldstart [affiliated] with a SPAC two years from now,” he adds, laughing.
Many more investors stress that it’s all about who is sponsoring what.
During a call yesterday with Kevin Mayer, the former Disney exec and, briefly, the CEO of the social network TikTok, he noted that there are “many fewer public companies now than there were 10 years ago, so there is a need for supplying another way to go public.”
Mayer has a vested interest in promoting the safety and efficacy of SPACs. Just yesterday, along with former Disney colleague Tom Staggs, he registered plans for a second a SPAC, after it was announced earlier this month that their first SPAC will be used to take public the digital fitness specialist Beachbody Company.
Still, Mayer argued that not every SPAC should be judged by the same yardstick. “Do I think it’s overdone? Sure, everyone and their brother is now getting to a SPAC, so yeah, that does seem a bit ridiculous. But I think . . . the wheat will be separated from the chaff very, very soon.”
It might have to happen if SPACs are to endure. Working against SPAC sponsors already are numbers that are starting to trickle in and that don’t look so great.
Late last week, Bloomberg Law reported that based on its analysis of the companies that went public as a result of a merger with a SPAC dating back to Jan. 1, 2019, and for which at least one month of post-merger performance data is available, 14 out of 24 (or 60%) reported a depreciation in value as of one month following the completion of the merger, and one-third of the companies reported a year-to-date depreciation in value.
The number of securities lawsuits filed by SPAC stockholders post-merger is also on the rise, noted the outlet.
Certainly, SPACs — more recently heralded as a lasting fix for a broken IPO market — could still prove durable rather than vehicles whose demise will come as the quality of offerings invariably sinks.
In the meantime, given the rate at which SPACs are being formed, as well as the some of the companies in their sights — some of them still in the prototype phase — the question of whether this phenomenon is sustainable is one that more are beginning to ask.
As for Professor Naumovska, she thinks she knows the answer already.
