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News: Daily Crunch: Tiger Global leads $33M Series B for construction tech platform Agora

• August 12, 2021
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Hello friends and welcome to Daily Crunch, bringing you the most important startup, tech and venture capital news in a single package.

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Hello and welcome to Daily Crunch for August 12, 2021. A few things to kick us off: First, the worlds of politics and technology are increasingly butting heads. We’re not talking about China or India (more here on the latter), though both countries have picked fights in recent months with tech firms foreign and domestic. This time it’s Zambia, which is restricting WhatsApp and other services within its borders. A trend to watch.

Also, Seth Rogen is coming to Disrupt! — Alex

The TechCrunch Top 3

• Governments challenge app stores: The United States Senate, the upper chamber of our bicameral Congress, is chewing on a new bill that would “require companies that control operating systems to allow third-party apps and app stores,” per TechCrunch. The chances that this bill passes as-is are low, but the fact that it exists details the regulatory climate that tech finds itself in today.
• Box v. Investors: The saga of former startup-darling Box taking on an activist shareholder group took a new turn today with the enterprise productivity company releasing its earnings early. Why? Box had some reasonably good news to report, and there’s a vote underway. It wanted its results out to help control the narrative. We have the numbers for you.
• Reddit is raising $700M: Social giant Reddit has put together $410 million of a larger round to help fuel its long-term ambitions. The company did around $100 million in Q2 revenue and will be worth $6 billion after it closes its latest round. It’s a lot of capital for an internet property that was once sold to Conde Nast for a sum that we are 99.99% sure was but a fraction of its current worth.

Startups/VC

Kicking off our startup news, a note for students out there. You can get an inexpensive ticket to our upcoming SaaS event in case you are hoping to brush up ahead of founding your first company. I actually went to my first TechCrunch event on a student pass 1,000 years ago.

• Aalto wants you to sell your house directly: Sure, Opendoor just reported blowout earnings, but startups are still hammering away at what the future of home buying and selling may be. Aalto just landed $13 million from Sequoia to help folks sell their properties directly to buyers. That’s one way to cut costs.
• Crypto tax startup raises $130M: How to intelligently tax cryptocurrency transactions is a matter of national policy in the U.S. But TaxBit is forging ahead with its software solution to the problem, not waiting for the government to get its House (and Senate) in order. The company is now worth $1.33 billion after its latest round, implying a pre-money valuation of $1.2 billion. Crypto is big business, don’t forget.
• AI for chip designs? My first read of this news item? Hell yeah. Motivo, a startup that wants to improve microchip designs using AI, just raised a $12 million Series A. Why is this cool? Because what I want are better chips, faster. My work Macbook Pro can barely run Chrome. There has to be a better way. Perhaps Motivo will accelerate the development of better chips.
• Contact raises $1.9M for better creative business management: If you work in anything related to the entertainment business, be it acting, modeling, or the work that goes into making acting and modeling folks look show-ready, Contact wants to be your software hub. The Maisie Williams-involved startup now has more cash to pursue its vision. Founders Fund led the modest round.
• Agora raises $33M on the back of rapid ARR growth: Closing out our funding round coverage today, contractor-focused “materials management platform” Agora has closed a large Series B from Tiger. The company has now raised $45 million in total. In metrics terms, Agora saw its customers scale by 6x in the last year while its annual recurring revenue, or ARR, expand 766% over the same timeframe.
• To wrap up our startup coverage today, we have a robot roundup! Yep, Brian Heater’s latest is here for your enjoyment!

Disaster recovery can be an effective way to ease into the cloud

Given the rapid pace of digital transformation, nearly every business will eventually migrate some — or most — aspects of their operations to the cloud.

Before making the wholesale shift to digital, companies can start getting comfortable by using disaster recovery as a service (DRaaS). Even a partially managed DRaaS can make an organization more resilient and lighten the load for its IT team.

Plus, it’s a savvy way for tech leaders to get shot-callers inside their companies to get on board the cloud bandwagon.

(Extra Crunch is our membership program, which helps founders and startup teams get ahead. You can sign up here.)

Big Tech Inc.

• Foxconn is going to build U.S. plants: Maybe for real this time? That’s our first read of the news, but the latest is that well-known manufacturing giant Foxconn may build EV plants in the U.S. and Thailand next year. Rubber, roads and meeting, but this is still encouraging.
• Arrival to begin EV production next year: London-based commercial EV company Arrival told investors that it is on track to meet production targets. Though, as with all EV companies, there are some moving parts to consider. Notably, Arrival also has aspirations to build some hardware in the United States. Call it a trend?
• TikTok to tinker with its app to protect teenagers: Per TechCrunch, social giant TikTok will roll out app changes for users in their teenage years to make its service “more private, safer and less addictive.” Which sounds like “less used,” frankly. Given that TikTok is owned by ByteDance, which is taking body blows from its domestic government, the changes aren’t entirely a surprise.

TechCrunch Experts: Growth Marketing

Image Credits: SEAN GLADWELL (opens in a new window) / Getty Images

TechCrunch wants to help startups find the right expert for their needs. To do this, we’re building a shortlist of the top growth marketers. We’ve received great recommendations for growth marketers in the startup industry since we launched our survey.

We’re excited to read more responses as they come in! Fill out the survey here.

News: Airbnb, DoorDash report earnings as COVID threatens to slow the IRL economy (again)

• August 12, 2021
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Both companies were heavily impacted by the onset of COVID-19: Airbnb saw its revenues collapse in 2020, while DoorDash managed a simply incredible 2020 as folks stayed home and ordered in.

Home-stay giant Airbnb and on-demand delivery concern DoorDash reported their quarterly results today after the bell.

Both companies were heavily impacted by the onset of COVID-19. Airbnb saw its revenues collapse in 2020 during early lockdowns, leading the company to raise expensive capital and batten its hatches. The company recovered as the year continued, leading to its eventual IPO.

DoorDash, in contrast, managed a simply incredible 2020 as folks stayed home and ordered in. Given that we got both reports on the same day, let’s digest ’em and see how COVID has — and may — impact their results.

Airbnb’s Q2

In the second quarter, Airbnb reported revenues of $1.3 billion, which compares favorably with its Q2 2020 result of $335 million and its 2019 Q2 revenue total of $1.21 billion. In percentage terms, Airbnb’s revenue grew 299% from its Q2 2020 level and 10% from what the company managed during the same period of 2019.

Analysts had expected $1.23 billion in revenue for the period.

Airbnb lost $68 million in the quarter when counting all costs. The company’s adjusted EBITDA, a heavily modified profit metric, came to $217 million in the quarter. Cash from operations in Q2 2021 was $791 million. Looking ahead, here’s what Airbnb had to say regarding its revenue outlook:

[We] expect Q3 2021 revenue to be our strongest quarterly revenue on record and to deliver the highest Adjusted EBITDA dollars and margin ever.

How did the market digest Airbnb’s better-than-expected growth, rising adjusted profit, falling net losses, massive cash generation and expectations of record Q3 revenue? By bidding its shares lower. Airbnb is off around 4.5% in after-hours trading.

Confused? Investors may be worried about the following note from the company, also from the guidance section of its earnings letter:

In the near term, we anticipate that the impact of COVID-19 and the introduction and spread of new variants of the virus, including the Delta variant, will continue to affect overall travel behavior, including how often and when guests book and cancel. As a result, year-over-year comparisons for Nights and Experiences Booked and GBV will continue to be more volatile and non-linear.

While Q3 2021 is looking great for Airbnb, it appears that its future growth could be lumpy or delayed thanks to the ongoing pandemic. There are public indicators pointing to travel rates declining, which could impact Airbnb.

The company’s Q2 results and Q3 anticipations are impressive when compared to where Airbnb was a year ago. But that doesn’t mean that it is entirely out of the COVID woods.

DoorDash’s Q2

Despite generally lower COVID friction in its market during Q2 2021, DoorDash managed to set records for orders and the value of those orders. In the three-month period concluding June 30, 2021, the on-demand food delivery company turned $10.46 billion in order value (marketplace GOV) into $1.24 billion in total revenue. The marketplace GOV number was 70% greater than the Q2 2020 result, while DoorDash’s revenues expanded by 83%.

Investors had expected the company to post $1.08 billion in total revenues, so DoorDash handily bested expectations.

How profitable was DoorDash during the quarter? DoorDash was unprofitable overall, with a net loss of $102 million. In adjusted EBITDA terms, DoorDash saw $113 million in profit during Q2 2021. That’s not too bad, given that Uber cannot manage the same feat with its own food delivery business. DoorDash’s net income was worse than what it managed in Q2 2020, while its adjusted EBITDA improved.

Shares of DoorDash are off around 3.5% in after-hours trading.

Why? It’s not entirely clear. DoorDash said that it expects “Q3 Marketplace GOV to be in a range of $9.3 billion to $9.8 billion, with Q3 Adjusted EBITDA in a range of $0 million to $100 million.” Sure, that’s down a smidgen from its Q2 GOV number, but investors were anticipating DoorDash to post less revenue in Q3 than Q2, so you would think that GOV expectations were also more modest.

Is COVID the answer? Mentions of COVID-19 in the company’s earnings document tend to deal with trailing results and historical efforts to provide relief to restaurants that use DoorDash for orders or delivery. So, there’s not a lot of juice to squeeze there. However, the company did say the following toward the end of its report:

We believe the broad secular shift toward omni-channel local commerce remains nascent. However, the scale and fragmentation of local commerce suggests the problems to be solved will get more difficult, coordination between internal and external stakeholders will become more complex, and vectors for competitive threats will increase. At the same time, we expect the pace of consumer behavioral shifts to slow compared to the extraordinary pace of change in recent quarters.

Simplifying that for us: DoorDash expects slower growth in the future, a more complex business climate and rising competition as it enters new markets. That’s not a mix that would make any investor more excited, we don’t think.

News: Samsung Galaxy Buds 2 review: Getting out of their own way

• August 12, 2021
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Earlier this year, Nothing launched the Ear (1) with a grand idea: earbuds as fashion accessories. Sure, the company talked a lot about the non-invasiveness of transparent design, but at the end of the day, the product’s launch on StockX betrayed a focus on the fashion forward. In that respect, Samsung’s new Galaxy Buds 2

Earlier this year, Nothing launched the Ear (1) with a grand idea: earbuds as fashion accessories. Sure, the company talked a lot about the non-invasiveness of transparent design, but at the end of the day, the product’s launch on StockX betrayed a focus on the fashion forward.

In that respect, Samsung’s new Galaxy Buds 2 are the anti-Nothing. They’re almost aggressively unassuming in their approach. It’s in keeping with previous generations of Buds, but still in stark — and refreshing — contrast for a company that prides itself on creating some of the world’s most ostentatious smartphones. Look no further than the two (!) new foldables launched along with the headphones at the Unpacked event.

Samsung’s almost casual approach to its headphones is something of a mixed blessing. The company could certainly be clearer with the branding of what seems to be an ever-shifting lineup of models. I asked for clarification of how things break down ahead of this week’s launch, and the company responded thusly:

As our premium offering, the Galaxy Buds Pro leverage cutting-edge technology to deliver immersive audio, intelligent Active noise cancelling, and effortless connectivity. For those looking to show off their unique style, the Galaxy Buds Live combine high quality sound with an eye-catching design.

Image Credits: Brian Heater

So, the short answer is there are three versions of Galaxy Buds on the market: Buds 2, Buds Pro and Buds Live. The above quote should confirm any suspicion you may have had that the new $149 version of the entry-level Buds make the $170 Buds Live Buds more or less redundant. Barring some major upgrade, they’re probably not long for this world, leaving a clearer two-level offering of the Buds 2 and the higher-end Buds Pro.

I’ve mentioned this before — the world of wireless earbuds were quick to reach a consensus of “pretty good.” Frankly, you’d have to go out of your way to find a bad pair for over $100. And for many or most intents and purposes, I’m inclined to recommend people go with a pair made by the company that made their phone. There’s a definite market advantage in having direct access to a device’s hardware and software.

That, of course, is a decided advantage for a company with as massive a global market share as Samsung. And the Galaxy Buds 2 are the epitome of “pretty good” in the pretty good way. They’re not flashy, and with a design that’s 15% smaller and 20% lighter than the already compact original Galaxy Buds, they’re designed to practically disappear, with minimal surface area exposed.

Image Credits: Brian Heater

The size and shape makes for an extremely comfortable pair of buds. I’m not sure why I’m blessed with the gift of ear pain with roughly half of the earbuds I try out, but these are ergonomic and designed for the long haul. There’s enough surface area to access the touch control on the exposed side. The biggest downside to the small size is there’s really no way to adjust them in your ear without accidentally triggering that touch. That became a nuisance when I constantly found myself adjusting them to deal with sweaty ears during a run — a bad time to have to worry about dealing with music controls.

The sound is solid, courtesy of Samsung subsidiary AKG. Not exceptional, but pretty much exactly what you need/want out of a pair of $149 buds. I was impressed with the active noise canceling, as well. A perfectly good, totally unexceptional experience — utilitarian, really. Again: in a good way. If better sound is a must, the Pros are an easy upgrade — or else, there’s Nura’s new buds or Sony’s, depending on how lavish you want get. The Buds Pro also bring features like 360 Audio — which is likely only a make-or-break for an exceedingly small number of potential buyers.

Image Credits: Brian Heater

Wireless charging for the case is a welcome touch, which along with ANC, catapults them above a number of other entry-level pairs. The battery is rated five hours with ANC and 7.5 with it off. The glassy little case bumps that up to a respectable 20 hours. The IPX2 water resistance, meanwhile, is good for sweat, but otherwise can be added to the list of things the company can improve next around.

All in all, it’s a pretty short list, however. The Galaxy Buds 2 are solid, unassuming and an easy addition for those in the Samsung Galaxy ecosystem.

News: Disaster recovery can be an effective way to ease into the cloud

• August 12, 2021
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Operating in the cloud is soon going to be a reality for many businesses whether they like it or not. Points of contention with this shift often arise from unfamiliarity with cloud operations.

Operating in the cloud is soon going to be a reality for many businesses whether they like it or not. Points of contention with this shift often arise from unfamiliarity and discomfort with cloud operations. However, cloud migrations don’t have to be a full lift and shift.

Instead, leaders unfamiliar with the cloud should start by moving over their disaster recovery program to the cloud, which helps to gain familiarity and understanding before a full migration of production workloads.

What is DRaaS?

Disaster recovery as a service (DRaaS) is cloud-based disaster recovery delivered as a service to organizations in a self-service, partially managed or fully managed service model. The agility of DR in the cloud affords businesses a geographically diverse location to failover operations and run as close to normal as possible following a disruptive event. DRaaS emphasizes speed of recovery so that this failover is as seamless as possible. Plus, technology teams can offload some of the more burdensome aspects of maintaining and testing their disaster recovery.

DRaaS is a perfect candidate for a first step into the cloud for five main reasons:

• Using DRaaS helps leaders get accustomed to the ins and outs of cloud before conducting a full production shift.
• Testing cycles of the DRaaS solution allows IT teams to see firsthand how their applications will operate in a cloud environment, enabling them to identify the applications that will need a full or partial refactor before migrating to the cloud.
• With DRaaS, technology leaders can demonstrate an early win in the cloud without risking full production.
• DRaaS success helps gain full buy-in from stakeholders, board members and executives.
• The replication tools that DRaaS uses are sometimes the same tools used to migrate workloads for production environments — this helps the technology team practice their cloud migration strategy.

Steps to start your DRaaS journey to the cloud

Define your strategy

Do your research to determine if DRaaS is right for you given your long-term organizational goals. You don’t want to start down a path to one cloud environment if that cloud isn’t aligned with your company’s objectives, both for the short and long term. Having cross-functional conversations among business units and with company executives will assist in defining and iterating your strategy.

News: Medal.tv, a video clipping service for gamers, enters the livestreaming market with Rawa.tv acquisition

• August 12, 2021
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Medal.tv, a short-form video clipping service and social network for gamers, is entering the live streaming market with the acquisition of Rawa.tv, a Twitch rival based in Dubai, which had raised around $1 million to date. The seven-figure, all cash deal will see two of Rawa’s founders, Raya Dadah and Phil Jammal, now joining Medal

Medal.tv, a short-form video clipping service and social network for gamers, is entering the live streaming market with the acquisition of Rawa.tv, a Twitch rival based in Dubai, which had raised around $1 million to date. The seven-figure, all cash deal will see two of Rawa’s founders, Raya Dadah and Phil Jammal, now joining Medal and further integrations between the two platforms going forward.

The Middle East and North African region (MENA) is one of the fastest-growing markets in gaming and still one that’s mostly un-catered to, explained Medal.tv CEO Pim de Witte, as to his company’s interest in Rawa.

“Most companies that target that market don’t really understand the nuances and try to replicate existing Western or Far-Eastern models that are doomed to fail,” he said. “Absorbing a local team will increase Medal’s chances of success here. Overall, we believe that MENA is an underserved market without a clear leader in the livestreaming space, and Rawa brings to Medal the local market expertise that we need to capitalize on this opportunity,” de Witte added.

Medal.tv’s community had been asking for the ability to do livestreaming for some time, the exec also noted, but the technology would have been too expensive for the startup to build using off-the-shelf services at its scale, de Witte said.

“People increasingly connect around live and real-time experiences, and this is something our platform has lacked to date,” he noted.

But Rawa, as the first livestreaming platform dedicated to Arab gaming, had built out its own proprietary live and network streaming technology that’s now used in all its products. That technology is now coming to Medal.tv.

Image Credits: Medal.tv

The two companies were already connected before today, as Rawa users have been able to upload their gaming clips to Medal.tv, and some Rawa partners had joined Medal’s skilled player program. Going forward, Rawa will continue to operate as a separate platform, but it will become more tightly integrated with Medal, the company says. Currently, Rawa sees around 100,000 active users on its service.

The remaining Rawa team will continue to operate the livestreaming platform under co-founder Jammal’s leadership following the deal’s close, and the Rawa HQ will remain based in Dubai. However, Rawa’s employees have been working remotely since the start of the pandemic, and it’s unclear if that will change in the future, given the uncertainty of Covid-19’s spread.

Medal.tv detailed its further plans for Rawa on its site, where the company explained it doesn’t aim to build a “general-purpose” livestreaming platform where the majority of viewers don’t pay — a call-out that clearly seems aimed at Twitch. Instead, it says it will focus on matching content with viewers who would be interested in subscribing to the creators. This addresses on of the challenges that has faced larger platforms like Twitch in the past, where it’s been difficult for smaller streamers to get off the ground.

The company also said it will remain narrowly focused on serving the gaming community as opposed to venturing into non-gaming content, as others have done. Again, this differentiates itself from Twitch which, over the years, expanded into vlogs and even streaming old TV shows. And it’s much different from YouTube or Facebook Watch, where gaming is only a subcategory of a broader video network.

The acquisition follows Medal.tv’s $9 million Series A led by Horizons Ventures in 2019, after the startup had grown to 5 million registered users and “hundreds of thousands” of daily active users. Today, the company says over 200,000 people create content every day on Medal, and 3 million users are actively viewing that content every month.

News: ‘The tortoise and the hare’ story is playing out right now in VC

• August 12, 2021
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The unprecedented liquidity entering the venture market in the past year has spurred trends that require VCs to adapt to an environment where startup founders have far more leverage than they used to.

The unprecedented liquidity that has entered the venture market in the past year has spurred several trends that require VCs to adapt to a more competitive environment where startup founders have far more leverage than they did in the past.

Structurally, there are only so many startups looking to raise capital, and even though some founders may be opportunistically pursuing deals they wouldn’t have previously, the supply of capital into venture funds has nonetheless outpaced the demand for those dollars.

This means VCs are in an unusual environment of increasing competition to get in on deals with startups, and as they jockey to win spots on cap tables they’re moving faster than ever to close deals.

What’s more, newcomers in the VC market like Tiger Global as well as a number of non-VC investment funds like PE firms with much larger pools of capital than the market has seen are aggressively pursuing enormous deals in an effort to drive faster exits and returns on their investments.

With so many investors vying for their attention, many founders are taking the opportunity to raise bigger rounds and coming back for additional funding faster than ever, which is apparent in the constant drumbeat of funding news as well as the 250 unicorns and the record $288 billion invested in startups in the first half of this year.

How can VCs adapt and be competitive?

For some, the answer may be moving faster to get in on deals. Strategies like doing more due diligence in advance of ever meeting startups and leveraging technologies like AI to supplement investors’ ability to evaluate companies can help with this. For others, it may be making larger investments and accepting smaller ownership stakes in startups than they’re accustomed to.

News: Chris Sacca’s Lowercarbon Capital has raised $800 million to “keep unf*cking the planet”

• August 12, 2021
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Lowercarbon Capital, a climate-tech focused fund founded by longtime investor Chris Sacca and his wife Crystal Sacca, has closed on $800 million in capital, Sacca announced today in a post on the firm’s site. According to Sacca, the commitments came exceedingly fast — in “just a few days.” Writes Sacca: “It turns out that raising

Lowercarbon Capital, a climate-tech focused fund founded by longtime investor Chris Sacca and his wife Crystal Sacca, has closed on $800 million in capital, Sacca announced today in a post on the firm’s site.

According to Sacca, the commitments came exceedingly fast — in “just a few days.” Writes Sacca: “It turns out that raising for a climate fund in the context of an unprecedented heatwave and from behind the thick clouds of fire smoke probably didn’t hurt. In fact, all that pollution may have lent a warm, beautifying haze to our Zoom calls. Like an Incendiary Doom Glow Insta filter.”

The interest is far from surprising given the mounting and rather stark evidence that life as humans know it is in peril, owing to rising temperatures. On the heels of a deadly floods in Western Germany and China, wildfires in Greece and California, and in advance of yet another heat wave for which people in the Pacific Northwest are currently bracing, a new report released Monday by the United Nations’ climate science research group was clear about the current state of affairs, declaring a “code red for humanity.”

Certainly, some of Lowercarbon’s backers are interested in tech that’s working to reverse some of these trends, but as Sacca notes, if they’re purely focused on the financial rewards that climate-focused tech can reap, that’s fine, too.

“We are thrilled to see how many investors understand the urgency of the climate crisis and are already dedicating their time, as well as their capital, to real solutions,” he says in his post. “However, to be frank, we were also heartened by those investors who actually don’t care that much about the planet and instead are just chasing financial returns.”

Lowercarbon’s very thesis is that “massive change will happen because these types of investments will pay off for sheer business reasons alone,” he adds.

In addition to the Saccas, Lowercarbon is being run by Clay Dumas, a Brooklyn, N.Y.-based partner who is described in his team bio as the firm’s most active investor. Though the Harvard grad hasn’t been in the venture world long — first joining up with Sacca in 2017 to join his earlier firm Lowercase Capital as a partner — he understands the world of politics in a way that few, more “traditional” VCs, might.

After opening a field office for the campaign to elect Barack Obama in 2008, he went on to serve as an aide in the White House to the-then Deputy Chief of Staff and later worked (again in the White House) for the  Office of Digital Strategy.

Lowercarbon’s many dozens of bets to date include Heart Aerospace, a three-year-old, Göteborg, Sweden-based startup at work on an electric regional airliner to which the firm wrote a seed check (and more recently wrote a follow-on check); Holy Grail, a two-year-old, Mountain View, Ca.-based startup that’s prototyping a direct air carbon capture device that is modular and small (it announced seed funding in June); and Cervest, a six-year-old, London-based climate risk platform that says it provides commercial and government entities access to current, historic, and predictive views about how combined weather risks can impact the assets they own. The last raised $30 million in May.

Sacca, who became well-known for his early and outsize bets on both Twitter and Uber, was somewhat famously a judge on the popular TV show “Shark Tank” for several seasons before quitting the show — and venture capital — in 2017, saying he had always intended to retire at age 40. (At the time, he was 42.)

Sacca’s growing concern regarding climate change — and his lack of faith that politicians can make a dent in reversing it — prompted him to rethink that decision. As he told Forbes in March: “We think that markets might actually hold the key to unf***ing the planet.”

According to an Axios report from June of last year, Lowercarbon was originally structured as a family office with tens of millions of dollars to deploy. As of the middle of last year, the only outside money it had accepted was for a “few special-purpose vehicles with institutional investors from Sacca’s prior funds,” the outlet reported.

Now, with a fresh $800 million to invest, Sacca & Co. appear to be fully back to work. In fact, we’ll be talking with Sacca next month at TechCrunch Disrupt; to hear what’s top of mind for him right now, you won’t want to miss that conversation.

News: A new Senate bill would totally upend Apple and Google’s app store dominance

• August 12, 2021
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With two giants calling the shots and collecting whatever tolls they see fit, mobile software makers have long complained that app stores take an unfair cut of the cash that should be flowing directly to developers. Hearing those concerns, a group of senators introduced a new bill this week that, if passed, would greatly diminish

With two giants calling the shots and collecting whatever tolls they see fit, mobile software makers have long complained that app stores take an unfair cut of the cash that should be flowing directly to developers. Hearing those concerns, a group of senators introduced a new bill this week that, if passed, would greatly diminish Apple and Google’s ability to control app purchases in their operating systems and completely shake up the way that mobile software gets distributed.

The new bill, called the Open App Markets Act, would enshrine quite a few rights that could benefit app developers tired of handing 30% of their earnings to Apple and Google. The bill, embedded in full below, would require companies that control operating systems to allow third-party apps and app stores.

It would also prevent those companies from blocking developers from telling users about lower prices for their software that they might find outside of official app stores. Apple and Google would also be barred from leveraging “non-public” information collecting through their platforms to create competing apps.

“This legislation will tear down coercive anticompetitive walls in the app economy, giving consumers more choices and smaller startup tech companies a fighting chance,” said Senator Richard Blumenthal (D-CT), who introduced the bipartisan bill with Sen. Marsha Blackburn (R-TN), and Sen. Amy Klobuchar (D-MN). Klobuchar chairs the Senate’s antitrust subcommittee and Blackburn and Blumenthal are both subcommittee members.

Senator Blackburn called Apple and Google’s app store practices a “direct affront to a free and fair marketplace” and Sen. Klobuchar noted that their behavior raises “serious competition concerns.”

The bill draws on information collected earlier this year from that subcommittee’s hearing on app stores and competition. In the hearing, lawmakers heard from Apple and Google as well as Spotify, Tile and Match Group, three companies that argued their businesses have been negatively impacted by anti-competitive app store policies.

“… We urge Congress to swiftly pass the Open App Markets Act,” Spotify Chief Legal Officer Horacio Gutierrez said of the new bill. “Absent action, we can expect Apple and others to continue changing the rules in favor of their own services, and causing further harm to consumers, developers and the digital economy.”

The Coalition for App Fairness, a developer advocacy group, praised the bill for its potential to spur innovation in digital markets. “The bipartisan Open App Markets Act is a step towards holding big tech companies accountable for practices that stifle competition for developers in the U.S. and around the world,” CAF executive director Meghan DiMuzio said.

Hoping to head off future regulatory headaches, Apple dropped its own fees for companies that generate less than $1 million in App Store revenue from 30% to 15% last year. Google followed suit with its own gesture, dropping fees to 15% for the first $1 million in revenue a developer earns through the Play Store in a year. Some developers critical of the companies’ practices saw those changes as little more than a publicity stunt.

Developers have long complained about the high tolls they pay to distribute their software through the world’s two major mobile operating systems. That fight escalated over the last year when Epic Games circumvented Apple’s payments rules by allowing Fortnite players to pay Epic directly, setting off a legal fight that has huge implications for the mobile software world. Following a May trial, the verdict is expected later this year.

Unlike Apple, Google does allow apps to be “sideloaded,” installed onto devices outside of the Google Play Store. But documents unsealed in Epic’s parallel case against Google revealed that the Play Store’s creator knows the sideloading process is a terrible experience for users — something the company brings up when pressuring developers to stick with its official app marketplace.

The counterargument here is that official app stores make apps safer and smoother for consumers. While Apple and Google extract heavy fees for selling mobile software through the App Store and the Google Play Store, the companies both argue that streamlining apps through those official channels protects people from malware and allows for prompt software updates to patch security concerns that could jeopardize user privacy.

Adam Kovacevich, a former Google policy executive who leads the new tech-backed industry group Chamber of Progress, called the new bill “a finger in the eye” for Android and iPhone owners.

“I don’t see any consumers marching in Washington demanding that Congress make their smartphones dumber,” Kovacevich said. “And Congress has better things to do than intervene in a multi-million-dollar dispute between businesses.”

At least in Google’s case, the counterargument has its own counterargument. Android has long been notorious for malware, but apparently most of that malicious software isn’t making its way onto devices through sideloading — it’s walking through the Google Play Store’s front door.

News: Box reports earnings early to give shareholders time to review financials ahead of board vote

• August 12, 2021
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Box has been in an ongoing dispute with activist investors Starboard Value over control of the board, an argument that is expected to come to a head on September 9th at the annual shareholder meeting. In an effort to show shareholders that the numbers are continuing to improve under the current leadership, Box took the

Box has been in an ongoing dispute with activist investors Starboard Value over control of the board, an argument that is expected to come to a head on September 9th at the annual shareholder meeting. In an effort to show shareholders that the numbers are continuing to improve under the current leadership, Box took the unusual move of releasing its earning report this morning, two weeks ahead of the expected August 25th report date.

Companies don’t normally report ahead of schedule, but perhaps Box sees the opportunity to do some lobbying, or conversely, to counter any negative lobbying that Starboard may be doing with its fellow investors ahead of the vote.

It’s also worth noting that in spite of the meeting being on September 9th, like a lot of voting these days, people will be sending in votes throughout this month, ahead of that day. Box wants to get its latest financial information out there sooner rather than later to catch those early voters before they cast their ballots.

Fortunately for Box and CEO Aaron Levie, the numbers look decent.

Earnings

It’s not hard to see why Box released its earnings early, as the numbers provide an argument for keeping the company’s current leadership in place.

In the three-month period ending July 31, 2021 — the second quarter of Box’s fiscal 2022 — the company generated $214 million in revenue, up 11% on a year-over-year basis. And, as Box is quick to point out, its second consecutive quarter of “accelerating revenue growth.” The company bested its own guidance of $211 to $212 million in revenue for the period.

It matters that Box is showing an ability to accelerate its revenue growth. First, because doing so puts wind in the sales of its stock; quickly growing companies are worth more per dollar of revenue than more slowly growing concerns, and accelerating revenue growth over time is investor catnip.

The accelerating pace of growth over the last half year also provides footing for Box’s leadership to argue that their product choices have been sound, directly supporting their positions that they should remain in charge of the company. If they made good product decisions quarters ago, and those choices are leading to accelerating revenue growth, why swap out the CEO?

Box had more quarterly good news apart from its revenue numbers to disclose. It also reported improved GAAP and non-GAAP operating margins — a key measure of profitability — better billings results than it had previously anticipated for the period. Box’s net retention rate also expanded to 106% from 103% in the sequentially preceding period.

And the company boosted its guidance for its fiscal year from “$845 million to $853 million” to “$856 million to $860 million.”

The counter arguments are somewhat easy to generate, however. Yes, Box’s revenue growth is accelerating, but from an admittedly reduced base; it’s not as hard to accelerate revenue expansion from low numbers as it is from higher base levels. And the company’s net retention is lower than what any business-focused SaaS company would want to report.

Will the good news be enough? Shares of Box are up around 1.5% in today’s regular trading, despite a somewhat mixed overall market. Investors now have to vote with more than just their dollars.

Boardroom context

Starboard bought approximately 7.5% of the company in 2019, and actually stayed fairly quiet for the first year, but at the end of 2020 it started making itself heard with rumors of pressure to sell the company. In what appeared to be a defensive move, Box took a $500 million investment from private equity firm KKR and gave the investor a board seat in April.

The activist investor did not take kindly to that move, writing in a letter to investors in early May, “The only viable explanation for this financing is a shameless and utterly transparent attempt to “buy the vote” and shows complete disregard for proper corporate governance and fiscal discipline.” In that same letter, Starboard made it official that it wanted to take over several board seats, outlining a litany of complaints it had about the way the company was being run. It also made clear that it wanted co-founder and CEO Aaron Levie gone or the company sold.

Box pushed back that the letter and another on May 10th did not accurately reflect the progress that the company had made. In July, Box took the battle public in an SEC filing detailing the back and forth dance that had been going between Box and Starboard since it bought its stake in the company

So far, the cloud content management company has staved off all attempts to force its hand and sell the company or fire Levie, but this is all going to culminate with the shareholder’s vote. It’s truly a battle for the soul of the company.

If Starboard convinces shareholders to give it several seats on the Box board, it would probably be able to push out Levie, take control of the company and likely sell it to the highest bidder. The early financial report released today, while not exactly stellar, shows a pattern of increasingly good quarters, and that’s what Box is hoping voters will focus on when they fill out their ballots.

News: 3 lies VCs tell ourselves about startup valuations

• August 12, 2021
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VCs need to stop engaging in self-delusion about why a valuation that is too high might be OK. Here are three common lies investors tell themselves to rationalize an undisciplined valuation decision.

I’m frequently asked by journalists whether I think venture capital valuations are too high in the current environment.

Because the average venture capital fund returns only 1.3x committed capital over the course of a decade, according to the last reported data from Cambridge Associates, and 1.5x, according to PitchBook, I believe the answer is a resounding “yes.”

So when entrepreneurs use unicorn aspirations to pump private company valuations, how can investors plan for a decent return?

At the growth stage, we can easily apply traditional financial metrics to venture capital valuations. By definition, everything is fairly predictable, so price-to-revenue and industry multiples make for easy math.

But at the seed and early stages, when forecasting is nearly impossible, what tools can investors apply to make pricing objective, disciplined and fair for both sides?

For starters, venture capitalists need to stop engaging in self-delusion about why a valuation that is too high might be OK. Here are three common lies we tell ourselves as investors to rationalize a potentially undisciplined valuation decision.

Lie 1 : The devil made me do it

If a big-name VC thinks the price is OK, it must be a good deal, right?

Wrong.

While the lead investor who set the price may be experienced, there are many reasons why the price she set may not be justified. The lead may be an “inside” investor already, committing small amounts or  —  believe it or not  —  simply not care.

Insiders are investors who have previously placed capital in the startup. They face a conflict of interest because they are rooting for the success of the startup and generally want the company’s stock price to keep growing to show momentum.

This is one of the reasons why many venture capitalists prefer not to lead subsequent rounds: Pricing decisions can no longer be objective because investors are effectively on both sides of the table at the same time.

Inside-led rounds happen all the time for good reasons  —  including making a funding process fast so that management can focus on building the business  —  but because these decisions are not at arm’s length, they cannot be trusted as an objective indicator of market value. Only a test of the open market or an independent third-party valuation can accomplish this goal.

It’s also the case that a relatively small investment can relax pricing discipline in some firms. If a funding amount represents 1% of the fund size or less, it’s possible that the VC team may view the investment as “putting a marker down” and not worry about whether the price offers an attractive multiple. For this reason, it’s a good idea to check the lead investor’s check size against the overall size of the firm’s latest fund.

There are other reasons why investors may not care about the valuation. Some VCs are “logo hunters” who just want to be able to say they were investors in a particular company. If you outsource valuation discipline to a lead investor who doesn’t value financial results, your own returns may suffer.

Lie 2:  We are getting a deal because the price is flat from the last round

If the last round valuation was $50 million and the current round valuation is about the same, we tell ourselves it’s gotta be a good deal.

Again, this is faulty thinking, because the last round’s price might have been too high.