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A look at how surveillance is becoming more prevalent with almost nothing restricting how it is used, as automatic license plate reader software becomes cheaper — Cheap surveillance software is changing how landlords manage their tenants and what laws police can enforce.
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Germany-based Staffbase, a mobile-first employee communication and experience platform, raises $23M Series C, bringing its total raised to $35M — Staffbase, a mobile-first platform that enables employees to communicate, access work-related services and stay updated with company information, has raised $23 million in Series C funding.
Pipefy, which is developing a process pipeline management platform for enterprise clients like IBM, raises $45M Series B, bringing its total raised to $65M — Pipefy, a San Francisco firm developing a process pipeline management platform for enterprises, today revealed that it this month closed …
A look at Estonia's four and half year old e-residency program, which now has 55,000 e-residents and is unlikely to attain its original goal of 10M by 2025 — Instead of the goal of gaining 10 million e-residents by 2025, Estonia is now focusing on security and usability.
Profile of Meiya Pico, which claims a 40% share of the digital forensics market in China and which is believed to be linked to a spy app used by Chinese police — Meiya claims a 40 per cent share of the digital forensics market in mainland China Net profit was US$44 million last year …
Following in the wake of our deep profiles of Patreon and Niantic, we have our next EC-1 package, this time on children’s gaming platform Roblox. Extra Crunch writer Sherwood Morrison has covered gaming and startups for years, and he got an in-depth, behind-the-scenes look at the incredibly popular startup with interviews with many of the company’s principals. This is your weekend read.
In part one of this EC-1, Morrison looks at the origin story of Roblox, which has to be one of the most interesting I have read in some time. Founders Dave Baszucki and Erik Cassel first worked together on a physics simulation engine called Knowledge Revolution before founding Roblox in 2004 (then known as Dynablox).
Since those humble origins 15 years ago, Baszucki and his team have grown the company dramatically through a sequence of smart strategic moves that Morrison illuminates, eventually culminating in the company’s massive $150 million Series F venture capital round last year from Greylock and Tiger Global, valuing the company at a reported $2.5 billion. Roblox now has 90 million active users, tripling in just a few short years.
Meanwhile, in part two of this EC-1, Morrison illuminates the challenges and opportunities facing Roblox in the years ahead as it looks to conquer a greater swath of the gaming market, or what Baszucki calls “human co-experience.”
First and foremost, Roblox has to expand internationally and capture a greater share of children’s entertainment. Then, the company wants to start to expand beyond its children’s gaming roots to reach other, older demographics. It has to do all this while also maintaining safety for its users and increasing the quality of its game engine against competitors like Unity and Unreal.
As Morrison writes:
If Roblox can continue to grow, it will serve as a guiding example for a whole new generation of companies. And if it continues to evolve, it may yet prove that human co-experience is more than a fever dream. A whole generation of companies failed to create immersive social environments — but in the space between games and chat, Roblox may yet prove that there’s a whole new social category waiting to be discovered.
Be sure to check out both parts, and if you haven’t already, be sure to read the Patreon EC-1 and the Niantic EC-1 as well for similar deep profiles of leading Silicon Valley startups.
Immigrants make up a huge portion of Silicon Valley’s workers and investors. That’s why news that the Trump Administration is changing the eligibility for investor green cards is a huge story, particularly for immigrants from India.
Profile of businesswoman Hanzade Dogan-Boyner, founder of Turkey's largest e-commerce site Hepsiburada, with $786M in 2018 revenue, as it tries to expand abroad — On a mild winter morning, Hanzade Dogan-Boyner rushes into her office on the fourth floor of the Trump Towers in Istanbul, overlooking the historic city's skyline.
Silicon Valley has many dreams. One dream — the Hollywood version anyway — is for a down-and-out founder to begin tinkering and coding in their proverbial garage, eventually building a product that is loved by humans the world over and becoming a startup billionaire in the process.
The more prosaic and common version of that Valley dream though is to join an early-stage company right before its growth kicks into high gear. Sure, those early employees might only have a smidgen of equity, but that equity could be worth a whole heck of a lot if they join the right startup.
Every startup has a window of opportunity, a timeframe in which early employees can join while the stock option strike prices are low and the equity grants are high. Join before the big uptick in valuation, and suddenly what might have been an otherwise nice couple of hundred K dollars in the coming years becomes actually, well, in the Bay Area, a reasonably-sized domicile.
Yet, that opportune window seems to be shrinking in size, making it harder for potential startup employees to nail the timing necessary to garner their own best financial return.
For every Roblox, which as we profiled in-depth this week, took almost two decades to reach its current apotheosis, there is a Brex, which seems to reach unicorn status in no time at all. And such stories — while certainly anecdotal — seem to be more commonplace than ever.
Part of the reason for that fast early valuation growth is that Silicon Valley has simply learned how to grow even faster, even earlier. As venture capitalist Reid Hoffman and Chris Yeh discuss in their book Blitzscaling, there are now frameworks and tried-and-true techniques to not just grow a startup, but to grow it at a dizzying rate. Through better marketing channels, growth strategies, and product development, we have indeed made progress at cutting at least some of the time to better valuations.
That rapid transformation from nothing to everything though gives very little time for early employees to discover a startup through the grapevine when the financial conditions are still interesting.
Half a decade ago, I wrote about the plight of early employees in an article I entitled “The Problem with Founders.” I wrote then that:
The secret of Silicon Valley is that the benefits of working at a startup accrues almost entirely to the founders, and that’s why people repeat the advice to just go start a business. There is a reason it is hard to hire in Silicon Valley today, and it isn’t just that there are a lot of startups. It’s because engineers and other creators are realizing that the cards are stacked against them unless they are the ones in charge.
My reasoning then was simple: early employees take on pretty much just as much risk as their founders do, but for a fraction of the equity. Now, with startups jumping to unicorn status in sometimes as short as a handful of months, that risk-reward ratio seems to be even more off-kilter for those early employees.
And it doesn’t just have to be a Brex-scale transformation either. The rapid increase in the size and valuation of series A rounds of financing the past three years means that engineers and salespeople who might have an employee number in the low double digits are suddenly seeing their options struck at a couple of hundred million in valuation. Exits, meanwhile, aren’t suddenly getting richer to compensate.
I started to notice this pattern over the past few weeks in the course of several conversations with software engineering friends of mine who had gotten excited about very early-stage companies — say, just a handful of employees — but who walked away from their offer letters due to already sky-high company valuations.
Now, there is an argument to be made that joining these sorts of companies is precisely where the best opportunities lie. Sure, the valuations are already high, but these are startups with the financial resources and the backing that might allow them to compete effectively. So maybe the equity is smaller and more expensive, but ultimately, if the startup is more likely to be successful, the expected value function might actually be favorable.
Maybe. Yet it is also hard to see how these startups, which despite their rich valuations have barely laid any foundation for success, are a safer bet than a similarly-valued startup with years of experience under its belt and a growth strategy based upon dependable results. Even worse, early employees are perhaps taking even more financial risk, since the preference stack of the venture capital could mean that smaller exits are particularly unfavorable to them.
Plus, the shrinking opportunity window for leading startups means that the difference in financial outcome between two early employees — what could be millions of dollars upon an exit — could have been decided based on who joined the week before the other. That doesn’t seem fair or right, but is increasingly widespread in our industry.
As with most macroeconomic structural changes, there’s not much for anyone to do. Founders aren’t going to take lower valuations or less money just to make the lives of their early employees a bit more rosy, and certainly venture capitalists aren’t going to lowball their offers in a hyper-competitive investment environment. Indeed, the very excitement of a sudden unicorn may be the best attraction for candidates to hear a startup’s pitch and ultimately join.
But when it comes to that Silicon Valley dream of a nice house from a decent return on exit, it’s getting narrower and less widely-distributed. Blitzscaling is making a lot of people a lot of wealth, but early employees? Not so much.
Shopify's ecosystem, with its own fulfillment network, may become the first true Amazon competitor by enabling merchants to succeed or fail on their own terms — While I am (rightfully) teased about how often I discuss Aggregation Theory, there is a method to my madness, particularly over the last year …
Another week, another trade war. And unlike most trade wars these days, this one didn’t originate from the confines of the Rose Garden with the Marine One whirlybird in the background. No, like any Ice Bucket Challenge-worthy meme, others are getting in on the trade war bandwagon and making it their own.
Cue Japan and South Korea. The two countries have slipped into their own trade war over the past few weeks, a conflict that now threatens the foundations of Japan’s supplier industry, Samsung Electronics, and global smartphone and computer shipments.
But why a trade conflict? If the U.S./China trade war emanates from the dark recesses of President Trump’s brain, then this new trade war emanates from the dark chapters of Japan and South Korea’s collective and sad history.
One of the saddest of those chapters is the plight of Korean comfort women — women who were forced into sexual slavery by wartime Japan in the 1930s and 1940s to service soldiers throughout the Japanese empire. Given the dates of those atrocities, many of those women are now reaching the late stages of their lives, as are men who were impressed into wartime labor in Japanese factories to fight the Allies.
Late last year, Korea’s highest court ordered Mitsubishi to pay essentially reparations for the company’s use of slave labor throughout the Japanese occupation and World War II, a decision that mirrored the court’s earlier judgment against Nippon Steel & Sumitomo Metal a few weeks before.
As the Korean court system has attempted to claw back those reparations from Japanese companies, Japan has not sat still. The country’s prime minister Shinzo Abe and his government have responded by placing a broad trade embargo on South Korea of high-technology goods under “national security” grounds, arguing that Seoul has failed to find a path forward to mend the fences between the two countries.
This past week, the two countries met to try to resolve the tensions, but failed to agree on a solution. That leaves the export bans in place, jeopardizing the supply chains for many electronics products.
Take Samsung Electronics for instance. The Korean company is the number one manufacturer of memory DRAM chips, accounting for more than 40% of the nearly $100 billion market, and also the number one manufacturer of NAND flash chips, with 35% share. SK Hynix — another Korean company — was the second largest manufacturer of DRAM chips with a roughly 31% share. Samsung and other Korean manufacturers are also market leading in industries like semiconductors and LCD displays.
Korea’s electronics companies have deep supply chains in Japan, which produce everything from photoresist chemicals and materials for semiconductors to the actual manufacturing equipment and parts required to operate factories. Thus, Japan’s trade embargo was expected to compromise two of Korea’s leading manufacturers, a punch to Korea’s fragile economy and a wake-up call for President Moon to reach a compromise with Prime Minister Abe.
Except, as often happens in the wacky world of trade, the export ban had unexpectedly positive consequences.
An anticipated glut of DRAM memory chips this year had pushed prices to new lows, slashing profits at Samsung Electronics in the company’s worst drop in four years. The company’s stock has been battered: from August last year until January, the company lost a third of its value.
And then Japan interceded. Supplies of DRAM chips are suddenly dropping — and prices are rising in turn. As the Wall Street Journal noted Thursday, Japan’s curbs are actually shoring up the memory chip market and leading to better than expected results for Samsung and other Korean manufacturers. While it has had a topsy-turvy few weeks, the stock price for Samsung Electronics is now almost back to where it was this time last year.
In other words, Japan’s punch was more like a stimulus. Whoops.
Such short-term gains may be amusing for trade policy watchers, but any returns are likely to be short-lived of course. And the news is much worse for semiconductors. As the Nikkei Asian Review noted this week, “Any disruption in the supply of EUV photoresist — a coating product used in the extreme ultraviolet lithography vital to the most complex semiconductors — could set back Samsung’s plans to launch its 7-nanometer chips around the turn of the year.” The company has stockpiled some materials, but if the trade war extends from weeks to months, it will eventually have to succumb from the damage to its supply chain.
All of which is to say that what started as a trade spat might boil over into shrinking quantities of memory chips, displays, and next-generation semiconductors — in other words, pretty much everything you need to build a computer or smartphone today.
There are a couple of lessons for the tech industry here. First, while Silicon Valley and other tech regions enjoy a mostly ahistorical outlook, the antecedents of the world are always brimming just beneath the surface. The comfort women situation may seem tangential to the day-to-day challenges of building a hardware product, but politics — particularly visceral, human politics — has a way of interceding far from its remit.
Second, even in a globalized world where national politicians lust for economic growth (and certainly Prime Minister Abe and President Moon are heavily invested in growing their respective economies), networked and cross-border supply chains are increasingly fragile. Just as Huawei discovered the dangers of relying on American technology over the past year, now Korean companies are learning about the dangers of depending on Japan’s high technology industry for critical components.
Third, the development of 5G wireless technology standards and associated hardware devices just increasingly gets battered. The U.S. has specifically targeted Huawei over 5G, but Samsung also has 5G modems and network equipment underway, which are now threatened in Japan and South Korea’s trade war. As wireless technology has become essential to global commerce and entertainment the past few decades, the political importance of controlling this technology has increased dramatically.
Ultimately, what’s the resolution to this new trade war? Well, that’s part of the challenge. President Moon doesn’t want to agree to a quick truce, worrying that such a rapid negotiation would appear to be giving in to Japan’s demands — a symbolism that he is unlikely to accept. Meanwhile, Prime Minister Abe faces the opposite forces, with the Japanese government holding the line that all claims to reparations over the comfort women and wartime slavery were settled by the two countries’ bilateral trade agreement from the 1960s and other diplomatic agreements.
Yet, both politicians need economic growth to succeed, and compromising their leading companies from selling their leading exports is not a route to that outcome. Both are principled leaders, but both are ultimately pragmatic. And so as it happens, it may not be the State Department that gets a deal over the line. No, maybe it’s time Tim Cook gets on his iPhone and talks about, well, iPhones.
Hello and welcome back to Startups Weekly, a weekend newsletter that dives into the week’s noteworthy startups and venture capital news. Before I jump into today’s topic, let’s catch up a bit. Last week, I noted the big uptick in VC spending in 2019. Before that, I struggled to understand WeWork’s growth trajectory.
Remember, you can send me tips, suggestions and feedback to kate.clark@techcrunch.com or on Twitter @KateClarkTweets. If you don’t subscribe to Startups Weekly yet, do that here, now, please, thanks.
Anyways, onto today’s topic. Venture capitalist’s favorite company, Zoom, endured its first high-profile scandal this week.
After security researcher Jonathan Leitschuh published a Medium post detailing a major security vulnerability within Zoom’s technology platform, the company patched its Mac video conferencing client to remove a rogue web server that allowed any website to join a video call without permission. Users can now update their client or download the new version from Zoom’s website. Apple has also pushed a silent update for Mac users removing the vulnerable component, a move meant to protect users both past and present from the undocumented web server vulnerability without affecting or hindering the functionality of the Zoom app itself.
Zoom only made the call to remove the insecure web server after intense pushback. I’m not here to share my own opinions on Zoom’s security or lack thereof, what I’d like to point out is the company’s poor reaction to the PR nightmare. Yes, Zoom ultimately provided a fix, but initially, it failed to solve the underlying issue.
Zoom’s major hiccup comes shortly after users and onlookers attacked the exclusive email service Superhuman. Superhuman tracks email you send and receive and gives you tools to help manage it. They do this on your behalf, but without the permission of the recipient of your emails.
Superhuman was much faster than Zoom to offer an official response amid complaints. Just a couple of days after a blog post outlining security flaws within the service went viral, Superman announced it was going to remove location logging altogether, get rid of all existing location data, turn off read receipts by default and make them an opt-in feature for users. This is all nice and good and definitely shifted attention away from the key issue: Pixel-tracking (embedding the commonly used advertising tool of a “pixel” in emails to report back to senders info like whether an email’s been opened or not). Superhuman still has the exact same pixel-tracking capabilities, what’s changed is that users just need to turn on the feature.
Startups and public companies alike will do what they can to maintain features that benefit their businesses and will go to great lengths to shift consumer attention away from key issues, even when that means putting their own users at risk.
Anyways…
We hosted our first-ever mobility-focused conference this week in San Jose. In what was an incredibly successful, thought-provoking event, industry leaders gathered to discuss the issues plaguing startups, the future of micromobility, the scooter wars and more. A whole lot of mobility news corresponded with the event, including…
Who raised money this week?
Which VCs closed new funds this week?
After generally being the butt of the public market’s jokes since its IPO, Snap is having a killer 2019, with its stock price nearly tripling in value. The successes are perhaps giving the company a moment to pause and think more about generating future value. Part of that equation is certainly the company’s Yellow accelerator that aims to invest in pre-seed startups that bring mobile users to shared experiences. We covered Yellow’s inaugural batch back in September; now TechCrunch’s Lucas Matney has the full rundown on Snap’s second class of bets.
Following an extensive report in Forbes about Bumble’s parent company and its billionaire founder Andrey Andreev, the female-first dating app’s founder Whitney Wolfe Herd issued a statement on Tuesday. While Wolfe Herd says she was “mortified by the allegations” and “saddened and sickened to hear that anyone, of any gender, would ever be made to feel marginalized or mistreated in any capacity at their workplace,” the exec also detailed that “Badoo is currently conducting an investigation into the allegations, as well as compiling documentation to expose the factual inaccuracies that exist within the article.” We’ve got Wolfe Herd and Forbes’ statement in full here, as well as more on Forbes’ explosive investigation.
First of all, if you still haven’t signed up for Extra Crunch, I’m not sure what you’re doing. For a low price, you can learn more about the startups and venture capital ecosystem with exclusive deep dives, newsletters, resources and recommendations and fundamental startup how-to guides. Here are some of this week’s top-performing posts.
If you enjoy this newsletter, be sure to check out TechCrunch’s venture-focused podcast, Equity. In this week’s episode, available here, Equity co-host Alex Wilhelm dives deep into this year’s IPOs.
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A look at Life360, a location-sharing app aimed at families, and conversations with teens who installed the app and their concerns about privacy and autonomy — SPEND ENOUGH TIME on the social media app TikTok, and you're bound to see a Life360 meme. That's because Life360 …
