Why are revenue-based VCs investing in so many women and underrepresented founders? – TechCrunch

This guest post was written by David Teten, Venture Partner, HOF Capital. You can follow him at teten.com and @dteten. This is part of an ongoing series on revenue-based investing VC that will hit on:

A new wave of revenue-based investors are emerging who are using creative investing structures with some of the upside of traditional VC, but some of the downside protection of debt.

I’ve been a traditional equity VC for 8 years, and I’m researching new business models in venture capital. As I’ve learned about this model, I’ve been impressed by how these venture capitalists are accomplishing a major social impact goal… without even trying to.

Many are reporting that they’re seeing a more diverse pool of applicants than traditional equity VCs — even though virtually none have a particular focus on women or underrepresented founders. In addition, their portfolios look far more diverse than VC industry norms.

For context, revenue-based investing (“RBI”) is a new form of VC financing, distinct from the preferred equity structure most VCs use. RBI normally requires founders to pay back their investors with a fixed percentage of revenue until they have finished providing the investor with a fixed return on capital, which they agree upon in advance. For more background, see “Revenue-based investing: A new option for founders who care about control“.

I contacted every RBI venture capital investor I could identify, and learned:

  • John Borchers, Co-founder and Managing Partner of Decathlon Capital, reports that “37% of our portfolio companies would be considered ‘impact’ qualified companies. This includes companies that would meet most institutional definitions for impact investing (women, minority, and veteran owned/run businesses, including LMI (“Low to Moderate Income”) and CRA (“Community Reinvestment Act”) qualified companies. While we do lots of work in these areas due to the attractive opportunity set, we are not an impact investor, and impact qualification is not a criterion that we use in evaluating or funding companies. On an organic basis, 13% of our portfolio companies are women-owned or run businesses, while 19% of the companies we work with are minority-owned or run. When you look at the composition of the entire founding or executive teams, the number of companies with either a woman or minority in management jumps even higher and is north of 50%.”
  • Indie.VC reports, “…50% of the teams we’ve funded are led by female founders and nearly 20% are led by black founders.”
  • Lighter Capital reports that they’ve funded companies in 30 states, including well established startup hubs and less mature ecosystems.
  • According to Derek Manuge, CEO of Corl, in the past 12 months, 500+ companies have applied to Corl for funding. Of the ones who received capital, “30% were led by women, and 40% were led by executives of non-Caucasian or of mixed ethnic origin.”
  • Feenix Partners reports that “35% of our portfolio companies have either a female or minority (non-Caucasian) CEO or Owner.”
  • Michelle Romanow, co-founder and CEO of Clearbanc, says that “We have funded eight times more women than the venture capital industry average – probably because we’re not doing meetings, which is an amazing accomplishment, and that’s not because we do different sourcing or anything else. It was just because we looked at data.” (Note that Clearbanc has a somewhat different business model than the RBI VCs I list here.)
  • Founders First Capital is the only RBI VC I’ve identified with a specific focus on underrepresented founders. Kim Folsom, Co-Founder, reports that as of August 2019, Founders First’s portfolio was 80% women and 55% women of color; 70% people of color; 20% military veterans; and 71% located in low/moderate income areas. 85% of their companies have under $1m in annual revenues. I can also announce exclusively that according to Kim Folsom, “Founders First Capital Partner (F1stcp) has just secured a $100M credit facility commitment from a major institutional impact investor. This positions F1stcp to be the largest revenue-based investor platform addressing the funding gap for service-based, small businesses led by underserved and underrepresented founders.”

By contrast, according to PitchBook Data, since the beginning of 2016, companies with women founders have received only 4.4% of venture capital deals. Those companies have garnered only about 2% of all capital invested. This is despite the fact that the data says that in fact you’re better off investing in women.

Paul Graham href=”http://www.paulgraham.com/bias.html”> observes, “many suspect that venture capital firms are biased against female founders. This would be easy to detect: among their portfolio companies, do startups with female founders outperform those without?

A couple months ago, one VC firm (almost certainly unintentionally) published a study showing bias of this type. First Round Capital found that among its portfolio companies, startups with female founders outperformed those without by 63%.”

Image via Getty Images / runeer

Why are RBI investors investing disproportionately in women & underrepresented founders, and vice versa: why do these founders approach RBI investors? 

I’d argue it’s not that RBI is so unbiased and attractive; it’s that traditional equity VC is biased structurally against some women and underrepresented founders.

The Boston Consulting Group and MassChallenge, a US-based global network of accelerators, partnered to study why “women-owned startups are a better bet”. Through their analysis and interviews, BCG identified three primary reasons why female founders are less likely to receive VC funds.

The study used multivariate regression analysis to control for education levels and pitch quality to conclude that gender was a statistically significant factor. I argue that these 3 reasons are much less applicable for RBI investors than for conventional VCs.

  1. Less need for a belief in breakthrough technology. From the study: “More than men, women founders and their presentations are subject to challenges and pushback. For example, more women report being asked during their presentations to establish that they understand basic technical knowledge. And often, investors simply presume that the women founders don’t have that knowledge.” However, companies with a focus on early profitability are less likely to require an investor to believe in complex, hard-to-predict new technology which is hard to diligence. Instead, the company can pitch itself based on a credible financial projection.
  2. Realistic projections. “Male founders are more likely to make bold projections and assumptions in their pitches,” BCG observes, while, “Women, by contrast, are generally more conservative in their projections and may simply be asking for less than men.” However, to raise RBI a woman founder does not need to promise a valuation of $1 billion within 5 years. Rent the Runway co-founder and CEO Jennifer Hyman said in a recent interview with CNBC’s Julia Boorstin, “I haven’t been given the permission or privilege to lose a billion every quarter… I’ve had to bring my company towards profitability…”
  3. Concentration in consumer/branded products startups. BCG reports that, “Many male investors have little familiarity with the products and services that women-founded businesses market to other women”—especially in categories such as childcare or beauty. However, RBI investors report that they see a lot of proposals for ecommerce and consumer packaged goods geared to mothers. Meghan Cross Breeden, Cofounder of Amplifyher Ventures, observes, “Personal customer attachment shouldn’t be a factor in investing; the early investors in Snapchat and Facebook weren’t the Gen Z target demo. Rather, I would imagine that one explanation of women garnering rev-share modes of financing is the prevalence of women-led companies in the consumer/branded goods field, which systemically is more tangible and revenue driven. Therefore, there’s more revenue to share – as opposed to the typical venture business, which requires capital upfront before a J curve of growth.”

Traditional equity VCs are looking for high-risk, high-reward, “swing for the fences” models. The founders of such companies inherently are taking financial risk, reputational risk, and career risk.

Paul Graham, co-founder of Y Combinator, said, “few successful founders grew up desperately poor.” Ricky Yean, a serial founder, agrees: “building and sustaining a company that is “designed to grow fast” is especially hard if you grew up desperately poor”.

Most of the founders of the paradigmatic VC home runs were privileged: male, cisgender, well-educated, from affluent families, etc. Think Bill Gates and Mark Zuckerberg .

That privilege makes it easier for them to take very high risk. The average person, worried about students loans and long term employability, quite rationally is less likely to take the huge risk of founding a company. It’s far safer to just get a job.

Investors who back diverse teams can win much higher returns than the industry norm. Both RBI investors and the founders they back will hopefully benefit from this pattern.

For further reading

Note that none of the lawyers quoted or I are rendering legal advice in this article, and you should not rely on our counsel herein for your own decisions. I am not a lawyer. Thanks to the experts quoted for their thoughtful feedback.



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Facebook is losing its last Oculus co-founder – TechCrunch

Facebook spent billions on Oculus in 2014, and in the years since the organization has been absorbed deeper into Facebook while the startup’s co-founders have stepped back in prominence. Today, the final Oculus co-founder remaining at Facebook, Nate Mitchell, announced in an internal memo sent to employees that he was leaving the company.

The news was first reported by Alex Heath at The Information. Mitchell confirmed the news soon after on Twitter.

We’ve reached out to Facebook for comment.

In a note on Reddit, Mitchell said he was leaving the company and would be “taking time to travel, be with family, and recharge.”

Mitchell was Oculus’s head of product management for virtual reality.

Mitchell’s role has shifted several times in the past few years at the company as the VR organization underwent a number of leadership shakeups. Late last year, the company’s former CEO Brendan Iribe left the company following disagreements with the team on the future of Oculus’s high-end products. The company’s central co-founder, Palmer Luckey, had a much more high-profile departure from the company in 2017, following an odd, convoluted scandal that involved him paying for a billboard for an anti-Clinton political group aligned with Reddit’s r/The_Donald community.



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Twitter says accounts linked to China tried to ‘sow political discord’ in Hong Kong – TechCrunch

Twitter says a significant information operation involving hundreds of accounts linked to China were part of an effort to deliberately “sow political discord” in Hong Kong after weeks of protests in the region.

In a blog post, the social networking site said the 936 accounts it found tried to undermine “the legitimacy and political positions of the protest movement on the ground.”

More than a million protesters took to the streets this weekend to demonstrate peacefully against the Chinese government, which took over rule from the British government in 1997. Protests erupted months ago following a bid by Hong Kong leader Carrie Lam to push through a highly controversial bill that would allow criminal suspects to be extradited to mainland China for trial. The bill was suspended, effectively killing it from reaching the law books, but protests have continued, pushing back at claims that China is trying to meddle in Hong Kong’s affairs.

Although Twitter is banned in China, the social media giant says the latest onslaught of fake accounts is likely “a coordinated state-backed operation.”

“Specifically, we identified large clusters of accounts behaving in a coordinated manner to amplify messages related to the Hong Kong protests,” the statement said.

china tweets

Two of the tweets supplied by Twitter

Twitter said many of the accounts are using virtual private networks — or VPNs — which can be used to tunnel through China’s vast domestic censorship system, known as the Great Firewall. The company added that the accounts it is sharing represent the “most active” portions of a wider spam campaign of about 200,000 accounts.

“Covert, manipulative behaviors have no place on our service — they violate the fundamental principles on which our company is built,” said Twitter.

News of the fake accounts comes days after Twitter user @Pinboard warned that China was using Twitter to send and promote tweets aimed at discrediting the protest movement.

Facebook said in its own post it also took down five Facebook accounts, seven pages and three groups on its site “based on a tip shared by Twitter.” The accounts frequently posted about local political news and issues, including topics like the ongoing protests in Hong Kong, said Nathaniel Gleicher, Facebook’s head of cybersecurity policy.

“Although the people behind this activity attempted to conceal their identities, our investigation found links to individuals associated with the Chinese government,” said Gleicher.

Some of the posts, Facebook said, referred to Hong Kong residents as “cockroaches.”

Twitter said it’s adding the complete set of the accounts’ tweets to its archive of information operations.



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Facebook’s human-AI blend for audio transcription is now facing privacy scrutiny in Europe – TechCrunch

Facebook’s lead privacy regulator in Europe is now asking the company for detailed information about the operation of a voice-to-text feature in Facebook’s Messenger app and how it complies with EU law.

Yesterday Bloomberg reported that Facebook uses human contractors to transcribe app users’ audio messages — yet its privacy policy makes no clear mention of the fact that actual people might listen to your recordings.

A page on Facebook’s help center also includes a “note” saying “Voice to Text uses machine learning” — but does not say the feature is also powered by people working for Facebook listening in.

A spokesperson for Irish Data Protection Commission told us: “Further to our ongoing engagement with Google, Apple and Microsoft in relation to the processing of personal data in the context of the manual transcription of audio recordings, we are now seeking detailed information from Facebook on the processing in question and how Facebook believes that such processing of data is compliant with their GDPR obligations.”

Bloomberg’s report follows similar revelations about AI assistant technologies offered by other tech giants, including Apple, Amazon, Google and Microsoft — which have also attracted attention from European privacy regulators in recent weeks.

What this tells us is that the hype around AI voice assistants is still glossing over a far less high tech backend. Even as lashings of machine learning marketing guff have been used to cloak the ‘mechanical turk’ components (i.e. humans) required for the tech to live up to the claims.

This is a very old story indeed. To wit: A full decade ago, a UK startup called Spinvox, which had claimed to have advanced voice recognition technology for converting voicemails to text messages, was reported to be leaning very heavily on call centers in South Africa and the Philippines… staffed by, yep, actual humans.

Returning to present day ‘cutting-edge’ tech, following Bloomberg’s report Facebook said it suspended human transcriptions earlier this month — joining Apple and Google in halting manual reviews of audio snippets for their respective voice AIs. (Amazon has since added an opt out to the Alexa app’s settings.)

We asked Facebook where in the Messenger app it had been informing users that human contractors might be used to transcribe their voice chats/audio messages; and how it collected Messenger users’ consent to this form of data processing — prior to suspending human reviews.

The company did not respond to our questions. Instead a spokesperson provided us with the following statement: “Much like Apple and Google, we paused human review of audio more than a week ago.”

Facebook also described the audio snippets that it sent to contractors as masked and de-identified; said they were only collected when users had opted in to transcription on Messenger; and were only used for improving the transcription performance of the AI.

It also reiterated a long-standing rebuttal by the company to user concerns about general eavesdropping by Facebook, saying it never listens to people’s microphones without device permission nor without explicit activation by users.

How Facebook gathers permission to process data is a key question, though.

The company has recently, for example, used a manipulative consent flow in order to nudge users in Europe to switch on facial recognition technology — rolling back its previous stance, adopted in response to earlier regulatory intervention, of switching the tech off across the bloc.

So a lot rests on how exactly Facebook has described the data processing at any point it is asking users to consent to their voice messages being reviewed by humans (assuming it’s relying on consent as its legal basis for processing this data).

Bundling consent into general T&Cs for using the product is also unlikely to be compliant under EU privacy law, given that the bloc’s General Data Protection Regulation requires consent to be purpose limited, as well as fully informed and freely given.

If Facebook is relying on legitimate interests to process Messenger users’ audio snippets in order to enhance its AI’s performance it would need to balance its own interests against any risk to people’s privacy.

Voice AIs are especially problematic in this respect because audio recordings may capture the personal data of non-users too — given that people in the vicinity of a device (or indeed a person on the other end of the phone line who’s leaving you a message) could have their personal data captured without ever having had the chance to consent to Facebook contractors getting to hear it.

Leaks of Google Assistant snippets to the Belgian press recently highlighted both the sensitive nature of recordings and the risk of reidentification posed by such recordings — with journalists able to identify some of the people in the recordings.

Multiple press reports have also suggested contractors employed by tech giants are routinely overhearing intimate details captured via a range of products that include the ability to record audio and stream this personal data to the cloud for processing.

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Twitter blocks state-controlled media outlets from advertising on its social network – TechCrunch

Twitter is now blocking state-run media outlets from advertising on its platform.

The new policy was announced just hours after the company identified an information operation involving hundreds of accounts linked to China as part of an effort to “sow political discord” around events in Hong Kong after weeks of protests in the region. Over the weekend more than 1 million Hong Kong residents took to the streets to protest what they see as an encroachment by the mainland Chinese government over their rights.

State-funded media enterprises that do not rely on taxpayer dollars for their financing and don’t operate independently of the governments that finance them will no longer be allowed to advertise on the platform, Twitter said in a statement. That leaves a big exception for outlets like the Associated Press, the British Broadcasting Corp., Public Broadcasting Service and National Public Radio, according to reporting from BBC reporter, Dave Lee.

The affected accounts will be able to use Twitter, but can’t access the company’s advertising products, Twitter said in a statement.

“We believe that there is a difference between engaging in conversation with accounts you choose to follow and the content you see from advertisers in your Twitter experience which may be from accounts you’re not currently following. We have policies for both but we have higher standards for our advertisers,” Twitter said in its statement.

The policy applies to news media outlets that are financially or editorially controlled by the state, Twitter said. The company said it will make its policy determinations on the basis of media freedom and independence, including editorial control over articles and video, the financial ownership of the publication, the influence or interference governments may exert over editors, broadcasters and journalists, and political pressure or control over the production and distribution process.

Twitter said the advertising rules wouldn’t apply to entities that are focused on entertainment, sports or travel, but if there’s news in the mix, the company will block advertising access.

Affected outlets have 30 days before they’re removed from Twitter and the company is halting all existing campaigns.

State media has long been a source of disinformation and was cited as part of the Russian campaign to influence the 2016 election. Indeed, Twitter has booted state-financed news organizations before. In October 2017, the company banned Russia Today and Sputnik from advertising on its platform (although a representative from RT claimed that Twitter encouraged it to advertise ahead of the election).

 



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YC’s Earth AI closes funding for its platform to make mining less wasteful – TechCrunch

Discovering and drilling for the important minerals used for industry and the technology sector remains incredibly important as existing mines are becoming depleted. If the mining industry can’t become more efficient at finding these important deposits, then more unnecessary, harmful drilling and exploration takes place. Applying AI to this problem would seem like a no-brainer for the environment.

Andreessen Horowitz knows this, as they invested in KoBold Metals. GoldSpot Discoveries is a competitor.

Joining this field is now Earth AI, a mineral targeting startup which is using AI to predict the location of new ore bodies far more cheaply, faster, and with more precision (it claims) than previous methods.

It’s now closed a funding round of ‘up to’ $2.5 million from Gagarin Capital, A VC firm specializing in AI, and Y Combinator, in the latter’s latest cohort announced this week. Previously, Earth AI had raised $1.7 million in two seed rounds from Australian VCs, AirTree Ventures and Blackbird Ventures and angel investors.

The startup uses machine learning techniques on global data, including remote sensing, radiometry, geophysical and geochemical datasets, to learn the data signatures related to industrial metal deposits (from gold, copper, and lead to rare earth elements), train a neural network, and predict where high-value mineral prospects will be.

In particular, it was used to discover a deposit of Vanadium, which is used to build Vanadium Redox Batteries that are used in large industrial applications. Finding these deposits faster using AI means the planet will thus benefit faster from battery technology.

In 2018, Earth AI field-tested remote unexplored areas and claims to have generated a 50X better success rate than traditional exploration methods, while spending on average $11,000 per prospect discovery. In Australia, for instance, companies often spend several million dollars to arrive at the same result.

Jared Friedman, YCombinator partner comented in a statement: “The possibility of discovering new mineral deposits with AI is a fascinating and thought-provoking idea. Earth AI has the potential not just to become an incredibly profitable company, but to reduce the cost of the metals we need to build our civilization, and that has huge implications for the world.”

“Earth AI is taking a novel approach to a large and important industry — and that approach is already showing tremendous promise”, Mikhail Taver, partner at Gagarin Capital said.

Earth AI was founded by Roman Tesyluk, a geoscientist with eight years of mineral exploration and academic experience. Prior to starting Earth AI, he was a PhD Candidate at The University of Sydney, Australia and obtained a Master’s degree in Geology from Ivan Franko University, Ukraine. “EARTH AI has huge ambitions, and this funding round will supercharge us towards reaching our milestones,” he said.

This latest investment from Gagarin Capital joins a line of other AI-based products and services and investments it’s made into YC companies, such as Wallarm, Gosu.AI and CureSkin. Gagarin’s exits include MSQRD (acquired by Facebook), and AIMatter (acquired by Google).

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Twitter is blocked in China, but its state news agency is buying promoted tweets to portray Hong Kong protestors as violent – TechCrunch

Twitter is being criticized for running promoted tweets by China’s largest state news agency that paint pro-democracy demonstrations in Hong Kong as violent, even though the rallies, including one that drew an estimated 1.7 million people this weekend, have been described as mostly peaceful by international media.

Promoted tweets from China Xinhua News, the official mouthpiece of the Chinese Communist Party, were spotted and shared by the Twitter account of Pinboard, the bookmarking service founded by Maciej Ceglowski, and other users.

The demonstrations began in March to protest a now-suspended extradition bill, but have grown to encompass other demands including the release of imprisoned protestors, inquiries into police conduct, the resignation of current Chief Executive of Hong Kong Carrie Lam and a more democratic process for electing Legislative Council members and the Chief Executive.

While China Xinhua News has repeatedly described demonstrators as violent, international observers have criticized the Hong Kong police’s use of excessive force against peaceful protestors, including incidents documented in footage verified by Amnesty International.

The irony of China Xinhua News’ tweets is that they let the Chinese Communist Party disseminate its version of events to a worldwide audience even though Twitter is officially banned in China (along with other U.S. social media platforms like Facebook, Instagram, Google, YouTube, Tumblr and Snapchat).

The Chinese government has also recently begun to keep a closer eye on citizens who use VPNs to access blocked services. For example, the Washington Post reported in January that even though there are only an estimated 10 million Chinese citizens on Twitter, its role as a platform for critics of the Chinese government means users are under increased scrutiny.

In June, Twitter was accused of censoring critics of the Chinese government after numerous Chinese-language user accounts were removed days before the thirtieth anniversary of the Tiananmen Square massacre. The company said that the accounts had been removed by error and, despite speculation, “were not mass reported by the Chinese authorities.”

It is unknown how much China Xinhua News has spent on promoted tweets or where they are being targeted. Twitter has been contacted for comment.



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‘Private’ and ‘hidden’ mean different things to Facebook – TechCrunch

Facebook’s leadership made a pretty heavy-handed indication this year that it believes Facebook Groups are the future of the app. They announced all of this alongside their odd declaration that “The future is private.” Now, Facebook is changing the language describing the visibility of privacy of groups.

As the Groups feature has come front-and-center in recent redesigns, Facebook has decided that the language they have been using to describe the visibility of “Public,” “Closed” and “Secret” Groups isn’t as clear as it should be, so the company is switching it up. Groups will now be labeled either “Public” or “Private.”

That means that groups that were previously “Closed” or “Secret” will now share the designation of “Private,” meaning that only members of the group can see who’s in the group or what has been posted. The distinction is that there’s now a second metric — whether or not the group is “Visible,” which denoted if the group can be found via search. For groups that were previously “Closed,” the migration to the classification will leave them “Visible” while “Secret” groups will remain “Hidden.”

Screen Shot 2019 08 14 at 8.48.45 AM

In a way, this is kind of just Facebook throwing more privacy-related labels in their app to change perceptions while the feature sets stay the same, but denoting the visibility of a “closed” group in search was probably the biggest point of confusion here that Facebook was aiming to rectify. There’s a clear editorial message with Facebook conveying that there are shades and nuances to what “Private” means on Facebook compared to “Public,” which is unwavering and defaulted.

The point of the previous labels was to make privacy settings easier to grasp with a single word. Facebook didn’t hit a home run with those labels, but it kind of feels like you really need to see this graphic to fully get the differentiations to Groups now, which probably isn’t the best sign.

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Snapchat beats a dead horse – TechCrunch

Hey. This is Week-in-Review, where I give a heavy amount of analysis and/or rambling thoughts on one story while scouring the rest of the hundreds of stories that emerged on TechCrunch this week to surface my favorites for your reading pleasure.

Last week, I talked about how Netflix might have some rough times ahead as Disney barrels towards it.


3d video spectacles 3

The big story

There is plenty to be said about the potential of smart glasses. I write about them at length for TechCrunch and I’ve talked to a lot of founders doing cool stuff. That being said, I don’t have any idea what Snap is doing with the introduction of a third-generation of its Spectacles video sunglasses.

The first-gen were a marketing smash hit, their sales proved to be a major failure for the company which bet big and seemingly walked away with a landfill’s worth of the glasses.

Snap’s latest version of Spectacles were announced in Vogue this week, they are much more expensive at $380 and their main feature is that they have two cameras which capture images in light depth which can lead to these cute little 3D boomerangs. One one hand, it’s nice to see the company showing perseverance with a tough market, on the other it’s kind of funny to see them push the same rock up the hill again.

Snap is having an awesome 2019 after a laughably bad 2018, the stock has recovered from record lows and is trading in its IPO price wheelhouse. It seems like they’re ripe for something new and exciting, not beautiful yet iterative.

The $150 Spectacles 2 are still for sale, though they seem quite a bit dated-looking at this point. Spectacles 3 seem to be geared entirely towards women, and I’m sure they made that call after seeing the active users of previous generations, but given the write-down they took on the first-generation, something tells me that Snap’s continued experimentation here is borne out of some stubbornness form Spiegel and the higher-ups who want the Snap brand to live in a high fashion world and want to be at the forefront of an AR industry that seems to have already moved onto different things.

Send me feedback
on Twitter @lucasmtny or email
lucas@techcrunch.com

On to the rest of the week’s news.

tumblr phone sold

Trends of the week

Here are a few big news items from big companies, with green links to all the sweet, sweet added context:

  • WordPress buys Tumblr for chump change
    Tumblr, a game-changing blogging network that shifted online habits and exited for $1.1 billion just changed hands after Verizon (which owns TechCrunch) unloaded the property for a reported $3 million. Read more about this nightmarish deal here.
  • Trump gives American hardware a holiday season pass on tariffs 
    The ongoing trade war with China generally seems to be rough news for American companies deeply intertwined with the manufacturing centers there, but Trump is giving U.S. companies a Christmas reprieve from the tariffs, allowing certain types of hardware to be exempt from the recent rate increases through December. Read more here.
  • Facebook loses one last acquisition co-founder
    This week, the final remnant of Facebook’s major acquisitions left the company. Oculus co-founder Nate Mitchell announced he was leaving. Now, Instagram, WhatsApp and Oculus are all helmed by Facebook leadership and not a single co-founder from the three companies remains onboard. Read more here.

GAFA Gaffes

How did the top tech companies screw up this week? This clearly needs its own section, in order of badness:

  1. Facebook’s turn in audio transcription debacle:
    [Facebook transcribed users’ audio messages without permission]
  2. Google’s hate speech detection algorithms get critiqued:
    [Racial bias observed in hate speech detection algorithm from Google]
  3. Amazon has a little email mishap:
    [Amazon customers say they received emails for other people’s orders]

Adam Neumann (WeWork) at TechCrunch Disrupt NY 2017

Extra Crunch

Our premium subscription service had another week of interesting deep dives. My colleague Danny Crichton wrote about the “tech” conundrum that is WeWork and the questions that are still unanswered after the company filed documents this week to go public.

…How is margin changing at its older locations? How is margin changing as it opens up in places like India, with very different costs and revenues? How do those margins change over time as a property matures? WeWork spills serious amounts of ink saying that these numbers do get better … without seemingly being willing to actually offer up the numbers themselves…

Here are some of our other top reads this week for premium subscribers. This week, we published a major deep dive into the world’s next music unicorn and we dug deep into marketplace startups.

Sign up for more newsletters in your inbox (including this one) here.



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Final Oculus co-founder departs Facebook – TechCrunch

The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 9am Pacific, you can subscribe here.

1. Facebook is losing its last Oculus co-founder

Nate Mitchell, the final Oculus co-founder remaining at Facebook, announced in an internal memo that he’s leaving the company and “taking time to travel, be with family, and recharge.” His role within the company has shifted several times since Oculus was acquired, but his current title is head of product management for virtual reality.

This follows the departures of former Oculus CEO Brendan Iribe and co-founder Palmer Luckey.

2. Twitter tests ways for users to follow and snooze specific topics

The company isn’t getting rid of the ability to follow other users, but it announced yesterday that it will start pushing users to start following topics as well, which will feature highly engaged tweets from a variety of accounts.

3. WeWork’s S-1 misses these three key points

WeWork just released its S-1 ahead of going public, but Danny Crichton argues we still don’t know the health of the core of the company’s business model or fully understand the risks it is undertaking. (Extra Crunch membership required.)

4. CBS and Viacom are merging into a combined company called ViacomCBS

The move is, in some ways, a concession to a turbulent media environment driving large-scale M&A, with AT&T buying Time Warner and Disney acquiring most of Fox — both deals are seen as consolidation in preparation for a streaming-centric future.

5. Nvidia breaks records in training and inference for real-time conversational AI

Nvidia’s GPU-powered platform for developing and running conversational AI that understands and responds to natural language requests has achieved some key milestones and broken some records, with big implications for anyone building on their tech.

6. Corporate carpooling startup Scoop raises $60 million

Scoop, which launched back in 2015, is a corporate carpooling service that works with the likes of LinkedIn, Workday, T-Mobile and more than 50 other companies to help their employees get to and from work.

7. Domino’s launches e-bike delivery to compete with UberEats, DoorDash

Domino’s will start using custom electric bikes for pizza delivery through a partnership with Rad Power Bikes.

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