Month: October 2019

London and Tel Aviv based VC firm 83North has closed out its fifth fund at $300 million, as we reported earlier. It last raised a $250 million fund in 2017 and expects to continue the same investment mix, while tracking developments in emerging areas like healthcare AI and autonomous vehicles.

In a conversation with general partner Laurel Bowden, the veteran investor shared a few further thoughts with Extra Crunch — talking about the tech scene in Europe vs Israel, what the firm looks for in a team and tips on scaling globally.

The interview has been lightly edited for clarity. 

TechCrunch: Is Europe starting to catch up to Israel when it comes to deep tech startups?

Laurel Bowden: We clearly think we have in our portfolio some deep tech. And in other VC portfolios too — there’s clearly some deep tech [coming out of Europe]. And then on the reverse side you’ve seen more consumer-related stuff coming out of Israel. But still if you take a blanket look, we see more data infrastructure, security, storage coming out of Israel than we see in Europe — that’s for sure.

Source: Tech Crunch

It’s a tough world out there for small countries. Technology is the future, everyone knows that; but how do you claim your share of that future when you’re competing with America, China, the EU, and India?

How do you build a thriving ecosystem of tech wealth and tech education — successful international businesses whose alumni found and invest in burgeoning startups — when you face the triple threats of a small population, limited capital, and a potential brain drain? Even nations as wealthy and successful as my homeland Canada often struggle with this.

So imagine what it’s like for, say, Armenia, from which I write, a former Soviet republic turned tiny nation of three million, sandwiched between unfriendly neighbors in the Caucasus Mountains. I’m here because the Armenian government is, at obvious expense¹, hosting one of the world’s seemingly countless / endless Major Tech Conferences, this time the World Congress of Information Technology, presumably in the hopes of garnering international attention for — and investment in — Armenia’s tech sector.

This may seem quixotic. Armenia styles itself as “the Silicon Valley of the former Soviet Union,” and its tech sector is successful enough to have played a prominent role in last year’s ‘velvet revolution.’ But it’s still a country of three million in a relatively obscure corner of the world. However, Armenia has a fascinating secret weapon — its diaspora.

Thanks to their homeland’s troubled 20th-century history, many more Armenians live scattered around the world than in Armenia proper, including, most famously, hundreds of thousands in Los Angeles. It is “one of the largest and most sophisticated diasporas in the world.” Obviously there’s cultural drift — but at the same time, I’m repeatedly assured it’s a rare Armenian who doesn’t have a distant friend or relative in L.A. and/or Moscow.

The effects of this unusually large and loose-knit diasporal web are significant. It leads, sometimes directly, often indirectly, to American clients, German universities, and Russian partners; to international connections to venture capitalists and startup incubators; to brain gain as well as drain. It means Armenia isn’t just a landlocked nation of three million, but the beating cultural heart of ten million, inadvertently strategically scattered across the globe. That’s a far, far stronger position.

I’ve argued before that as technology shortens and tightens the bonds between distributed communities, they’ll grow more significant, culturally, financially, and eventually politically. (And of course tech also makes entire sub-industries even possible; one of WCIT’s sponsors here is a slick and fast-growing crowdfunding marketing company, not exactly a traditional strength of the former Soviet bloc.) The Armenian diaspora is almost a natural experiment testing this theory.

This natural experiment will test whether this secret weapon will help Armenia continue to punch further and further above its weight in technology, tourism, and other diaspora-enhanced fields. If that happens, and I expect it to, it will be especially interesting to see which other distributed communities follow in its wake … and whether those will be affiliated with any nation-state at all.

---

¹Including paying the travel costs for your correspondent. Assume unconscious bias accordingly.

Source: Tech Crunch

In a wide-ranging conversation at TechCrunch Disrupt San Francisco last week, Postmates co-founder and chief executive officer Bastian Lehmann made light of the company’s lack of IPO documents.

The San Francisco-based on-demand delivery business was expected to publicly file its IPO prospectus in September in preparation for a fall exit, sources familiar with the matter told TechCrunch this summer. September, however, has come and gone and we’re still waiting on Postmates to release the critical document.

“The reality is that we will IPO when we believe we find the right time for the business and the right time for the markets,” Lehmann told TechCrunch. “And if you look at the markets right now, I believe they are a little choppy. They are a little choppy when it comes to growth companies specifically … We are hopeful that we find a good window to get out there.”

Lehmann made reference to Uber and other companies to recently float, citing market conditions as an IPO deterrent. Uber, Lyft, Slack and other fast-growing unicorns have struggled since entering the public markets earlier this year despite sky-high private market valuations. WeWork, a money-losing endeavor, recently decided to delay its IPO after demand from Wall Street devalued the business by the billions. Whether Postmates will complete its debut by the end of the year is unclear.

Postmates confidentially filed with the U.S. Securities and Exchange Commission for an IPO in February. Shortly after, Postmates held M&A talks with DoorDash, another food delivery unicorn, according to people familiar with the matter, but failed to come to mutually favorable terms. DoorDash has previously declined to comment on these reports. On stage last week, Lehmann declined to confirm the reports.

“I don’t think it does any good to speculate on M&A,” he said. “I think you have four well-funded players here in the U.S. in this space. I think everyone is well aware of the strengths and the weaknesses of each other and you know at some point down the line, if we take Europe for example, you will see consolidation in the market. People have conversations all the time but I wouldn’t read too much into it.”

Postmates operates its on-demand delivery platform, powered by a network of local gig economy workers, in more than 3,500 cities across all 50 states. The company does not yet operate in any international markets aside from Mexico City, however, Lehmann’s comments suggest the business could be plotting a foray into Europe, where Deliveroo, Just Eat and others dominate the market.

Postmates has raised about $900 million to date, including a $225 million round announced last month that valued the company at $2.4 billion. DoorDash, on the other hand, reached a $12.6 billion valuation in May with a $600 million Series G and has raised more than double that of Postmates. When asked why DoorDash, a similar and competing business, needed that much more capital, Lehmann joked “Maybe [DoorDash CEO Tony Xu] needs a jet, I don’t know.”

Postmates, founded in 2011 by Lehmann, is backed by Spark Capital, Founders Fund, Uncork Capital, Slow Ventures, Tiger Global, Blackrock and others. In our interview with Lehmann, the long-time CEO discussed the ‘choppy’ public markets, competitors, the company’s autonomous robotics delivery efforts and more.

Source: Tech Crunch

Dr. Stuart Russell, a distinguished AI researcher and computer scientist at UC Berkeley, believes there is a fundamental and potentially civilization-ending shortcoming in the “standard model” of AI, which is taught (and Dr. Russell wrote the main textbook) and applied virtually everywhere. Dr. Russell’s new book, Human Compatible: Artificial Intelligence and the Problem of Control, argues that unless we re-think the building blocks of AI, the arrival of superhuman AI may become the “last event in human history.”

That may sound a bit wild-eyed, but Human Compatible is a carefully written explanation of the concepts underlying AI as well as the history of their development. If you want to understand how fast AI is developing and why the technology is so dangerous, Human Compatible is your guide, literally starting with Aristotle and closing with OpenAI Five’s Dota 2 triumph.

Stuart’s aim is help non-technologists grasp why AI systems must be designed not simply to fulfill “objectives” assigned to them, the so-called “Standard Model” in AI development today, but to operate so “that machines will necessarily defer to humans: they will ask permission, they will accept correction, and they will allow themselves to be switched off.”

Source: Tech Crunch

The U.S. government may not be able to prevent another global cyberattack like WannaCry, a senior cybersecurity official has said.

Jeanette Manfra, the assistant director for cybersecurity for Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA), said on stage at TechCrunch Disrupt SF that the 2017 WannaCry cyberattack, which saw hundreds of thousands of computers around the world infected with ransomware, was uniquely challenging because it spread so quickly.

“I don’t know that we could ever prevent something like that,” said Manfra, referring to another WannaCry-style attack. “We just have something that completely manifests itself as a worm. I think the original perpetrators didn’t expect probably that sort of impact,” she added.

The WannaCry cyberattack was the first major global security incident in years. Hackers believed to be associated with North Korea used a set of highly classified hacking tools that only weeks earlier had been stolen from the National Security Agency and published online. The tools allowed anyone who used them to infect thousands of vulnerable computers with a backdoor. That backdoor was used to deliver the WannaCry payload, which locked out users from their own files unless they paid a ransom.

Making matters worse, WannaCry had wormable properties, allowing it to spread across a network and making it difficult to contain.

Although the National Security Agency never publicly acknowledged the theft of its hacking tools, Homeland Security said at the time that users were “the first line of defense” against the threat of WannaCry. Microsoft released security fixes weeks earlier, but many had not installed the patches.

“Updating your patches would have prevented a fair amount of people from from being a victim,” said Manfra. Yet data shows that two years after the attacks, more than a million computers remained vulnerable to the ransomware.

Manfra said “bad things are going to happen,” but that efforts to mobilize government and the private sector can help combat cyberattacks as they emerge.

“Luckily, there was a an enterprising individual who was able to find a way to kill it and it didn’t impact the U.S. as much,” she said.

Marcus Hutchins, a malware reverse engineer and security researcher, registered a domain name found the ransomware’s code which when registered acted as a “kill switch,” stopping the ransomware from spreading. Hutchins was hailed as an “accidental hero” for his efforts. Hutchins and his colleague Jamie Hankins spent a week ensuring the kill switch stayed up, helping to prevent millions of further infections.

Manfra’s remarks came just weeks after her department warned of a new, emerging threat posed by BlueKeep, a vulnerability found in Windows 7 and earlier, which experts say has the capacity to trigger another global incident similar to the WannaCry attack. BlueKeep can be exploited to run malicious code — such as malware or ransomware — on an affected system.

Like WannaCry, BlueKeep also has wormable properties, allowing it to spread to other vulnerable computers on the same network.

It’s estimated that a million internet-connected devices are vulnerable to BlueKeep. Security researchers say it is only a matter of time before bad actors develop and use a BlueKeep exploit to carry out a similar WannaCry-style cyberattack.

Source: Tech Crunch

Editor’s Note

This week, we hosted 23 panels on all aspects of building startups on the Extra Crunch stage at TechCrunch Disrupt SF. Thanks to the thousands of attendees who attended those talks, as well as the workshops we held on the Breakout Stage — your enthusiasm was palpable.

We also had hundreds of new EC members join during the conference — to all of you: welcome!

This newsletter covers all of last week, and is a bit abbreviated thanks to Disrupt. Back to normal next week.

Where top VCs are investing in edtech

Extra Crunch media columnist Eric Peckham interviewed almost a dozen leading venture capitalists about the state of edtech, including Jennifer Carolan of Reach Capital, Aydin Senkut of Felicis Ventures, and Charles Birnbaum of Bessemer. There is still a lot of enthusiasm for the space, but the theses for these investors have diverged quite significantly.

Marlon Nichols , Managing Partner at MaC Venture Capital (a new LA-based seed fund with investments in Catalyte, Codeverse, and Wonderschool):

“Many education technology companies target individual teachers, which presents a long path to sizable revenue (requires too many customers) while others usually attempt to navigate the lengthy and bureaucratic sales cycle of selling to school districts. VCs prefer companies that have short sales cycles that can scale revenue quickly so in general, edtech companies are difficult investments for venture capital.

That said, education is a giant opportunity in the US because high quality education is not evenly distributed across communities or social classes. It’s a crisis. Companies that address this at scale are attractive if the revenue model makes sense. That’s why I led the first round into Wonderschool, which delivers high quality education and child care at costs relative to one’s zip code. The schools double as the educator’s home so there isn’t a need for real estate investment.”

Why is Dropbox reinventing itself? A chat with Dropbox VP of Product Adam Nash and CTO Quentin Clark

Dropbox may be known for its singular file storage product, but the company is adapting and changing as it seeks new customers and also learns more about what “file storage” really means to users.

Source: Tech Crunch

Adam Neumann may be out of the daily flow of WeWork, but he seemingly remains top of mind to some of the company’s bankers.

According to a new Business Insider piece, Neumann is working with JPMorgan, UBS, and Credit Suisse to consider new terms for a $500 million loan that he took out before WeWork filed to go public, and from which Neumann has already drawn down $380 million. Since he can no longer pay the loan with proceeds from selling WeWork shares publicly (it yanked its S-1 filing earlier this week), he may have to put up some of his properties or other assets as collateral for the loan, according to one of BI’s sources.

“No terms have been set,” a spokeswoman for Neumann tells the outlet.

Per earlier reports, Neumann has plenty to offload if it comes to it, having acquired numerous residential and commercial properties over the years.

Among his reported investments is a $10.5 million Greenwich Village townhouse; a farm in Westchester, New York; a home in the Hamptons where he reportedly weathered the storm with his family ahead of resigning as CEO last week; and a $21 million, 13,000-square-foot house in the Bay Area with a guitar-shaped room.

According to an earlier WSJ report, Neumann has also bought several commercial properties through investor groups that he had leased back, in some cases, to WeWork.

WeWork, and Neumann, have both enjoyed a close relationship with JPMorgan in recent years. As recently reported in the NYTimes,  JPMorgan “lent Mr. Neumann money personally (with his inflated shares as collateral), provided equity and debt for the company, served as a corporate adviser for the I.P.O. and secured nearly $6 billion in financing as part of the now scotched offering.”

Source: Tech Crunch

At the very beginning, there were 20 startups. After two days of incredibly fierce competition, we now have a winner.

Startups participating in the Startup Battlefield have all been hand-picked to participate in our highly competitive startup competition. They all presented in front of multiple groups of VCs and tech leaders serving as judges for a chance to win $100,000 and the coveted Disrupt Cup.

After hours of deliberations, TechCrunch editors pored over the judges’ notes and narrowed the list down to five finalists: OmniVis, Orbit Fab, Render, StrattyX and Traptic.

These startups made their way to the finale to demo in front of our final panel of judges, which included: Mamoon Hamid (Kleiner Perkins), Ashton Kutcher (Sound Ventures), Alfred Lin (Sequoia), Marissa Mayer (Lumi Labs), Ann Miura-Ko (Floodgate Ventures) and Matthew Panzarino (TechCrunch).

Winner: Render

Render has created a managed cloud platform. The company wants to provide an alternative to traditional cloud providers, such as AWS, Azure and GCP. And it starts with an infrastructure that is easier to manage thanks to automated deployments and a abstracted way to manage your application that is reminiscent of Heroku.

Read more about Render in our separate post.

Runner-Up: OmniVis

OmniVis aims to make detection of cholera and other pathogens as quick, simple and cheap as a pregnancy test. Its smartphone-powered detection platform could save thousands of lives.

Read more about OmniVis in our separate post.

Source: Tech Crunch

NASA issues a new formal request for info from industry specifically around spacesuits. The agency is hoping to gather information in order to help it figure out a future path for acquisition of spacesuit production and services from external industry sources.

That doesn’t mean it’s outsourcing its spacesuit design and production immediately – NASA will build and certify its own spacesuits for use in the first Artemis missions, including Artemis III which is the one that’ll see the next American man and the first American woman take their trip to the lunar surface. But for Artemis missions after that, of which there are currently five more proposed (Artemis 4 through 8), four of which will have crew on board.

NASA has of course already worked with private industry, as well as academic institutions and researchers, on the technologies that will go into its own space suits. And the agency fully expects that the current exploration suit will form the basis of any future designs. It is however looking to fully transition their prouduction and testing to industry partners, and will additionally expect those partners to “facilitate the evolution of the suits” and also suggest improvements on the existing suit design.

On top of the suits, NASA is looking for input on tools and support hardware to be used with the suits, during extra-vehicular activities, or in making sure the suits work well with the vehicles that’ll be transporting them, as well as the lunar gateway that will act as the staging ground between Earth and the Moon’s surface.

Finally, NASA also would like to hear from companies about how to better commercialize spacesuits and spacewalks – making them available to customers outside of the agency itself, as well.

This isn’t surprising given how many signals NASA has been giving lately that it’s interesting in partnering with industry more deeply across both Artemis, future Mars exploration, and the ISS (and its potential commercial successor). The full RFI issued by NASA is available here, in case you’re interested in spinning up a spacesuit startup.

Source: Tech Crunch