Month: September 2018

As Facebook execs took to the stage during the opening keynote for the company’s VR-focused Oculus Connect 5 conference, one thing was clearly missing, the founding team that had built the virtual reality startup Facebook bought for $2 billion in 2014.

None of the five original OculusVR co-founders took to the stage at the company’s big keynote, while Facebook executives including CEO Mark Zuckerberg, long-time VP of Ads Andrew Bosworth — now VP of VR/AR — and Hugo Barra, Facebook’s VP of VR, delivered the bulk of major announcements.

The absence of OculusVR co-founders onstage at Facebook’s biggest VR event of the year comes as a flurry of news circulates surrounding the former leaders of high-profile Facebook acquisitions. Earlier this week, Instagram’s co-founders Kevin Systrom and Mike Krieger announced they were unexpectedly leaving the company. Today, we heard more WhatsApp founder Brian Acton who left Facebook earlier this year and walked away from $850 million after growing dissatisfied with the direction of the company he originally built.

Oculus has had a more turbulent time at Facebook than other acquisitions, the company was at the center of a $3 billion lawsuit last year with ZeniMax Media over the founding of the company and the theft of intellectual property. Ultimately, Facebook was made to pay up $250 million.

Founder Palmer Luckey also proved to be quite the headache for Facebook’s public communications after his donation to an anti-Clinton group during the 2016 election led a firestorm of negative press. Luckey left Facebook last year. While the company’s other co-founders held onto leadership roles following the acquisition, a big shakeup at the end of 2016 downgraded the roles of then-CEO Brendan Iribe and then-VP of Product Nate Mitchell, with Xiaomi’s Barra coming onboard later to lead Oculus as Facebook’s VP of VR reporting directly to Zuckerberg.

The OculusVR co-founders have been taking more of a backseat role in the past couple of years at events as well. While Iribe and Luckey held a major presence during the keynotes at early conferences, last year, only Mitchell took to the stage. This year there were plenty of callbacks to Connect keynotes of the past with early employees like Chief Scientist Michael Antonov speaking about the future of the VR platform, but ultimately none of the startup’s original leadership were present onstage during the nearly 2-hour presentation.

As Facebook continues to shift its high-profile acquisitions away from autonomy and further under its core leadership umbrella, the future of founding leaders driving the public vision of the companies they originally built seems even more uncertain.

Source: Tech Crunch

Few properties seem better suited to tap VR than Star Wars, if only because… you know, lightsabers.

And Lucasfilm knows it. They’ve just announced Star Wars: Vader Immortal — a three part, at-home experience that’ll launch on Oculus’ just announced standalone Quest headset.

Alas, there’s not much to go on besides the name, a quick teaser trailer, and that it’s launching sometime in 2019. Lucasfilm does note that it’ll be a “yet untold story” that’ll take place across three episodes, with the story writing lead by Dark Knight writer David S. Goyer.

This isn’t the first time the Lucasfilm/ILM teams have dabbled with VR. They released a short one-off experience called Trials of Tatooine for the HTC Vive two years ago, and they worked with The Void to build massive, full-building VR game called Secrets of the Empire that launched at Disneyland last year. But Trials was short and experimental, and Secrets requires you to be in a very specific place in the real world. This one sounds like it’ll be a bit more substantial, and intended for a wider audience.

(* tangent: for what it’s worth, Secrets of the Empire is one of the more mind-blowing VR experiences I’ve ever had. I left feeling that it was a bit pricey for the amount of time it lasted, but I’m still thinking about how damned cool it was nearly a year later.)

More on this as we hear about it.

Source: Tech Crunch

On Wednesday, Texas Rep. Will Hurd and Illinois Rep. Robin Kelly introduced a bipartisan bill that would reorganize how IT is managed throughout the federal government. The bill, the Federal CIO Authorization Act of 2018, would make a handful of changes with the intention of making the government run more smoothly and securely.

Among those changes, the bill would rename the Office of E-Government, the department overseen by the federal CIO, to the “Office of the Federal Chief Information Officer.” Second, it would “elevate” the federal CIO position so that the position reports to the director of the Office of Management and Budget (OMB) instead of the deputy director, as it stands now. Beyond those changes, the bill would make the federal chief information security officer (CISO) position report directly to the federal CIO.

While CIOs within individual government agencies report directly to agency directors, the federal CIO role has not been elevated in the same way. The decision to further empower agency CIOs, enacted through an executive order in May, aimed to “better position agencies to modernize their IT systems” and to reduce cybersecurity risk by streamlining the way agency CIO roles functioned. The federal CIO bill has the same goals in mind.

“No entity can operate securely and efficiently without a CIO in the year 2018, including the federal government,” Rep. Hurd said of the proposal. “This bill does more than just rename an office. It makes a clear statement that the Federal CIO is in charge of coordinating IT policy across the government in order to ensure that our agencies are able to provide better, faster and more cost-efficient services for the American people.”

Rep. Kelly added that the bill seeks to “streamline government IT processes,” part of a broader effort to bring government technology — and the positions that manage it — up to date.

Source: Tech Crunch

They all started with the best of intentions. Formation 8 talked about bringing “smart enterprise” to the corporate world. Social Capital talked about how to “fix capitalism,” and Binary Capital wanted to “affect global behaviour change.” Rothenberg Ventures set out to “work on the biggest problems that change the world.”

Young founding partners debuting change-the-world funds were irresistible for chroniclers of the venture world, who too often had been forced to chat to balding and aging managing directors while hitting the links at resplendent country clubs. Everything was going to change in the venture world, and here was a new guard of progressive-thinking talent that would transform Silicon Valley forever.

Then it all came crashing down.

Social Capital fired nearly its entire remaining staff last week after seeing a mass staff exodus over the past few months. Formation 8 suffered deep acrimony between its founding partners, and its successive funds continue to deal with new challenges, such as a new, unreported lawsuit in California. Binary faced the Caldbeck sexual harassment situation, while Rothenberg imploded with allegations of financial fraud and mismanagement.

Some of the tales are sordid, while others are clearly the result of inexperience and hubris. But together, they weave a narrative for us that shouldn’t surprise anyone: giving hundreds of millions of dollars to neophytes wasn’t perhaps the best plan to build long-lasting funds.

The lessons though are myriad and broad. For founders, receiving investments from same-age peers may have made board meetings more relaxing, but at the cost of experience and oversight. Journalists who sat by while VCs built founding fables about themselves should have done more to pierce these reality distortion fields.

But perhaps most of all, the lessons need to be learned by limited partners. As LPs continue to lower their guard and drop due diligence in the race to get into the next hot fund, perhaps the combination of these stories can serve as a warning against rushing to write a check and being thoughtful about who to partner with in business.

The Valley finds its glamour

It’s almost impossible to imagine today, but venture and the broader startup ecosystem used to be decidedly uncool. In the early 2000s, before the rise of blogs like TechCrunch and the breathless coverage of thousands of tech startups, Silicon Valley startups worked in the relative obscurity of the South Bay — the actual Silicon Valley of lore. A boring suburban hell of sorts, startups attracted the misfits and the communalists, and most definitely the engineers who saw in the internet the future of human society.

Things changed as the global financial crisis struck in 2008. The startup world began to migrate north, to San Francisco. Technology went from a backwater industry to the forefront of global power and commerce. Once the bastion of nerds, the MBAs and other pretty people started pouring in, ready to seek out fortune — the tech that might drive it be damned.

Perhaps most importantly, glamor hit the tech world hard. Conferences like Disrupt and AllThingsD propelled formerly unknown entrepreneurs to the heights of fame. Exec comms became de rigueur for founders, and venture firms equipped themselves with some of the best communications talent they could find.

Yet, while the entrepreneurs were increasingly speaking about “saving the world,” the venture firms were not. Stodgy, venerable, and just plain old (and white and male), the stalwarts of Sand Hill Road (the epitome of a suburban hell street complete with a full-service gas station) struggled to adapt their boring Excel number crunching thinking to this new world.

Their firms – and LPs – noticed, and responded by trying to hire a new crop of partners, operators with the cachet to win over founders and snare the next great deal. Operators had very different mentalities from traditional venture folks, but that was okay in the competition for the next hot startup.

But as any Silicon Valley enthusiast knows, the path to disruption doesn’t lie through evolving incumbents. Instead, it’s about founding startups, or in this case, new venture firms with fresh perspectives that connect with founders looking for a friend on their board rather than competent but mature directors who were older than their grandparents.

The best-laid plans of mice and VCs…

And so we get Joe Lonsdale, a co-founder of Palantir, who left and eventually started Formation 8 at age 30 with Brian Koo age 33, scion of the Koo family of South Korea which owns the LG conglomerate, along with long-time VC investor Jim Kim. They raise $448 million for their first fund in 2013, the largest debut in the history of venture. Lonsdale described the firm’s investing style simply: “First and foremost, we invest in driven entrepreneurs who we believe will change the world.”

We get Jonathan Teo aged 34 and Justin Caldbeck aged 37 (and the oldest of the pack!), two young but reasonably experienced venture capitalists peeling off of their venerable funds (General Catalyst for Teo and Lightspeed and Bain for Caldbeck) to start Binary Capital, which began with a debut fund of $125 million in 2014 and raised another $175 million just two years later. Teo, speaking to a Singaporean magazine, explained that “We are at the centre of the tech ecosystem, and consumer technology is the highest leverage a company has to affect global behaviour change.”

(That same article noted in its intro that “It is not every day that someone buys a Boeing 747 as a gift. But that was exactly what Jonathan Teo did last year, when he gathered a group of Silicon Valley tech titans to purchase a used plane and donated it to Burning Man, an annual experimental art festival held in Black Rock Desert, Nevada.” Burning Man may well be one of the most inter-connected events for all of these folks).

Chamath Palihapitiya, who spent four years at Facebook early in that company’s history and eventually headed growth, would start Social+Capital Partnership in 2011 and synced up with experienced hands Ted Maidenberg and Mamoon Hamid. Palihapitiya, aged 34 and self-described “Merchant of Progress,” said that he wanted to “fix capitalism.” In an interview with Fast Company’s Ainsley Harris, he said, “But you can fix capitalism. And the reason you can fix capitalism: It is inherently numerical, and as a result, it is inherently objective. It can be done objectively.”

Rothenberg may not have raised the same kind of moolah, debuting with a $5 million seed fund in 2013, but Rothenberg spread his wings far and wide in San Francisco, opening up his apartment and co-working facilities to create a community of entrepreneurs. He loved the press and media attention and outlandish behavior, eventually hosting a now infamous field day at the SF Giants baseball park in SoMa. As he explained during an interview at Stanford, “…we can build and create awesome experiences, people care about that and then we can actually work on the biggest problems that change the world and that’s awesome…”

These four firms flouted venture conventions, and sought out the path-breaking investments that would drive returns. Formation 8 struck a bit of gold with its exit of Oculus to Facebook and RelateIQ to SalesForce. The rebranded Social Capital bought into high-flying startup Slack, and also led the series A into Intercom. Binary invested in young consumer startups like Bellhops and Shoptiques and Havenly according to Pitchbook. Rothenberg invested heavily in VR and also in popular companies like Boosted, Apartment List, and Chubbies, albeit with mostly tiny checks.

These firms were designed to cultivate the next-generation of founders, and on that front, they succeeded. If only that was the sole benchmark for success.

… often go awry

Tolstoy begins Anna Karenina with the line that “Happy families are all alike; every unhappy family is unhappy in its own way.”

The same is true of venture firms. Portfolio returns can easily make everyone happy, but when firms blow up, they all blow up in their own, idiosyncratic ways.

Formation 8 was the first of the set to disintegrate. Part of the equation was accusations and a lawsuit against Joe Lonsdale around a sexual assault – allegations that were in the end dismissed. But the challenges internally at the firm far pre-dated those challenges. As William Alden at Buzzfeed chronicled at extreme length, Lonsdale and Brian Koo were at loggerheads over investment strategy, and even the geography of where the Formation 8 offices should be located in the Bay Area. Plus, they had a fight over a Korean restaurant Koo tried to open in Palo Alto. There were also the lurid details of the Hyperloop One imbroglio, where Lonsdale was a board member.

The two ended up separating, with Lonsdale creating 8VC and debuting with a $425 million fund and Koo starting Formation Group with a $357 million fund.

Yet, the troubles continue. A lawsuit – so far unreported – was filed in the United States District Court for Northern California this past June, alleging that Koo and Formation Group and its affiliates committed “fraud, breach of contract, breach of the implied covenant of good faith and fair dealing…“ by failing to pay a partner named Martin Robinson and a principal named Selvam Moorthy. That litigation remains on-going according to district court records, where the parties are due to discuss a motion to move the matter to arbitration.

Lonsdale, for his part, has certainly shied away from the media, and has been in a rebuilding phase, eventually nailing a second fund for 8VC of $640 million earlier this year.

Partner fallout is one version of an unhappy venture firm, but Binary Capital disintegrated due to alleged sexual harassment by Justin Caldbeck from multiple women in Silicon Valley. He would eventually come to be the Silicon Valley poster boy for the MeToo movement, and was sued by a former employee of Binary. The firm’s assets were sold to LHV earlier this year, and it is now essentially a non-entity.

Meanwhile, Rothenberg has been facing tougher challenges. He faced a litany of investigations over his fiduciary responsibilities to his fund, eventually being charged by the SEC last month for fraud. That criminal trial is on-going.

And then we get to Social Capital, whose troubles appear to be more managerial. Palihapitiya’s two early partners, Maidenberg and Hamid, both decamped to other firms. There has now been a complete exodus of partners and staff at the firm, with even more layoffs taking place just in the last few days. The fund is no longer raising outside capital.

Outside of Palihapitiya, the math on who is left remains decidedly unclear. The Information quotes Palihapitiya as saying that “I would rather spend time with the people that are 100% aligned with what I want to do and the person that’s most aligned with what I want to do is me.”

That shouldn’t be a problem when there is no one else in the room.

Lessons for founders, VCs, and LPs

Silicon Valley loves a great story. We love the entrepreneurs who fight like hell to build their companies, who beat the odds against incumbents and competitors. We love the drama of business, of Uber against Lyft and Airbnb against city governments. We want the underdogs to win.

At some point though, we need to evaluate our own narrative fetishes. We need to see through the loud pronouncements, the ambitious quotes, the glossy marketing. Especially in venture capital, where excuses for poor performance are a common trade, we need to resurrect the age-old skill of simply looking at the numbers and evaluating quality. As my VC mentors over the years have consistently said: VC is not an investment business, it is a returns business.

We also need to reevaluate our patience. Startups take twelve years or more to build and exit, but VC firms have a much longer cycle. They are meant to last, because they owe broad obligations to so many other firms through the board seats they hold.

Partner turnover is up at many firms, despite the damage that does to startup governance. Even worse is when a firm disintegrates entirely. We should celebrate the slow and steady on the finance side, and leave the quick growth to the startups.

In a region that reveres the young, we also need to remember that many jobs are ultimately dependent on experience, and venture capital is certainly one of them. VC is its own trade, with learnings and techniques that build up over a lifetime of investing. That doesn’t mean that young people have nothing to offer – far from it. But it does mean that our indexing should not just assume that a 30-something automatically has the capacity to manage a complex front and back office team and invest hundreds of millions of dollars in a few short months.

LPs face the greatest challenges in this area. They are the guardians of their funds, since after all, it’s their money that will be lost. But the timing to get into a hot investor’s hand can be extraordinarily limited, and even asking a question or two could lead them to be cut out of a fund’s subscriptions. LPs need to band together and refuse to concede to these demands. Due diligence doesn’t have to be exhaustive on a debut fund, but it should also not be de minimis. Some coordination here is just absolutely needed to ensure a basic level of integrity.

It’s said that new VCs need to down an F-16 in order to learn the trade. Together, Formation 8 raised $1.39 billion, Social Capital $1.3 billion, Binary $300 million, and Rothenberg $70 million, according to Pitchbook.

That’s a $3 billion education for these partners, and for all of us.

Source: Tech Crunch

The new presidential limousine — and an identical one called a “spare” that travels in President Donald Trump’s motorcade for added security— was spotted this week on the streets of New York. This new “Beast,” like so many before it, is a Cadillac .

But this time, the heavily armored vehicle produced by GM, is designed after the Cadillac CT6. (Although if you look closely there are some Escalade influences in there.) The last version of the presidential limo used during the Obama Administration was modeled after a Cadillac DTS.

The Secret Service dictates much of the design of the presidential limousine such as a heavy-duty chassis and armored material. There are other accoutrements inside the vehicle, which is based on a GM truck platform. GM didn’t provide many details however, citing security reasons.

“It’s GM’s honor to develop and build the presidential limousine, a great American tradition,” a GM spokesperson said in an emailed statement to TechCrunch. “Continuing a rich history of Cadillac limousines that have served many U.S. presidents, the new car embodies Cadillac’s style and craftsmanship. The limousine, which was designed and built in Detroit, proudly resembles the Cadillac CT6 sedan. This being a secure project, we cannot discuss further details.”

GM won federal contracts worth $15.8 million to develop two phases of what the government describes as a “next-generation parade limousine program.” GM has other multi-million dollar contracts with the Secret Service to supply the agency with services and vehicles.

Here’s what we do know: the custom tank-like Cadillac CT6 appeared for the first time in public on Sunday. The Secret Service even tweeted out an image promoting the vehicle ahead of this week’s United Nations General Assembly meetings.

If this presidential Cadillac CT6 is anything like its predecessors, then the vehicle is outfitted with everything you’d need to stay alive in the midst of an attack, including a bullet-proof glass, a supply of the president’s blood type and an independent air supply to thwart a chemical attack.

The last Beast, a 2009 custom Cadillac DTS, was unveiled on former President Barack Obama’s Inauguration Day. The vehicle, which featured 19.5-inch wheels and seating for five, was in production for two years. The interior included a fold-out desk for the president.

Source: Tech Crunch

A federal appeals court has handed a defeat to Uber drivers who were suing the company in three separate lawsuits over claims that they were misclassified as independent contractors instead of full-time employees.

The litigants must go through arbitration to pursue their claims against the company rather than have the claims heard in open court.

The decision also means that the drivers in one of the suits can’t file a class-action against Uber. Had the case been able to go to trial, drivers could have pursued larger damage claims against the company.

In a 3-0 decision, judges on the 9th U.S. Circuit Court of Appeals in San Francisco flipped the ruling of a lower court judge that would have allowed Uber drivers to sue in open court.

As full-time employees, the drivers argued they would be entitled to reimbursement for gas and expenses around maintenance and general upkeep.

According to Reuters, the drivers also claimed that Uber was not allowing them to keep all of their tips from passengers.

While Uber drivers aren’t able to avoid forced arbitration for complaints against their non-employer the platform, Uber did do the right thing recently in ending forced arbitration in cases of sexual harassment or assault.

Were the Uber drivers to proceed with their lawsuit and become full-time employees of the ride-hailing company, they’d be likely to face the same forced arbitration claims. Full-time Uber employees are also forced into arbitration to settle disputes rather than have their claims heard in open court.

At the heart of the dispute for Uber drivers is the demand for the safety net that comes with full-time employment and for companies a potentially significant hit to their bottom line.

Ride-hailing platforms like Uber and Lyft have long argued that the drivers on the platform aren’t actually employees of the company, despite being the providers of the service that the technology platforms facilitate. For drivers, the inability to set pricing or negotiate the percentage that Lyft or Uber will take of the fees that are charged means they operate more like employees than bidders in a marketplace.

And earlier this year, the California Supreme Court seemed to agree with the drivers’ argument.

In April, the California Supreme Court issued a ruling in a case involving the nationwide delivery company Dynamex Operations West Inc. and its contract drivers. The decision established a new test for enforcement of California wage laws, and made it much harder for companies in California to claim that independent contractors are not actually full-time employees.

Source: Tech Crunch

If you happen to crack open that fancy little iPhone XS casing on your new phone, you’ll notice there’s a dwindling amount of Qualcomm chips in there and that they’re increasingly being replaced by Intel hardware.

The swap is representative of the cooling state of affairs between the two as the companies’ legal teams battle over Apple’s refusal to pay royalties that Qualcomm claims it is owed. Today, Qualcomm doubled down on its claims that Apple was stealing chip secrets from Qualcomm tech and feeding it to Intel engineers.

CNBC reports:

Qualcomm has unveiled explosive charges against Apple for stealing “vast swaths” of its confidential information and trade secrets for the purpose of improving the performance of chip sets provided by Qualcomm competitor Intel, according to a filing with the Superior Court of California.

The allegations are contained in a complaint that Qualcomm hopes the court will amend to its existing lawsuit against Apple for breaching the so called master software agreement that Apple signed when it became a customer of Qualcomm’s earlier this decade.

The newly filed documents amend an earlier suit by the company, claiming that Intel engineers working with Apple have been using Qualcomm source code.

Source: Tech Crunch