Worried about a slowdown? It already happened in 2016, says one new venture study

In today’s market, it’s hard to make sense of what’s what. Deals have grown incestuous for the first time, with outfits like GV investing alongside Uber last week — just months after its parent company, Alphabet, was at Uber’s throat. A $10 million-plus round of seed funding is no longer a joke. Venture firms continue to raise record-breaking amounts of money, despite what feels like creeping uncertainty about how much longer this go-go market can continue.

Unsurprisingly, there’s been some talk lately about deal flow and the possibility that some of the most well-regarded early-stage investors in the industry have quietly applied the brakes. Yet new analysis out of Wing, the 7.5-year-old, Silicon Valley venture firm co-founded by veteran VCs Peter Wagner and Gaurav Garg, draws a conclusion that might surprise nervous industry watchers. After tracking the investment activity of what Wing considers to be the 21 leading venture firms, it discovered that a pullback already happened . . . in 2016. In fact, Wagner, who oversaw the analysis, tells us there’s been so sign of a slowdown since then.

We caught up with Wagner last week to learn more about Wing’s findings — and what might be causing some confusion in the industry right now.

TC: First, why do this kind of study right now?

PW: There’s been a lot of analysts and reporters and LPs and VCs asking us about our investment pace really, and I think it owes to talk of Benchmark and Union Square Ventures slowing down, so we thought we’d look at some parameters and see what’s going on.

TC: Why not just refer to industry-wide statistics? It seems like there are plenty of these.

PW: They’re kind of swamped with the data of less discriminating investors, though. You really want to focus on the signal, which is why we track what the 21 leading venture firms are doing, and in that analysis, we found no signs of a slowdown. We found instead that there was a peak of activity in 2013 and 2014, a pullback in 2016, and an uptick since.

And we cut it different ways. We removed international deals in China and India, because they have their own rhythm and can get frothy. We moved seed deals, given there’s been some major schizophrenia among venture firms who waded into seed deals, then pulled out. Even still, 2017 saw an increase in deals over 2016, which was the lowest year in terms of deal activity since 2010.

TC: These were first-time investments?

PW: Yes, and the reason is that follow-on rounds are dictated more by the operational needs of companies. Some could be running out of cash, for example, so it’s non-discretionary. If you want to look at sentiment, you have to look at first-time investments in isolation.

TC: Do you have 2018 data?

PW: We have partial data, of course, and we’ve annualized it to “predict” that 2018 numbers will be close to 2017. That is, if you buy the idea of projecting out, which I don’t really. Also, because you’re looking at a smaller batch of numbers, you’re on thin ice statistically. But for now, at least, we’re seeing a level of activity that was higher than 2016.

TC: You can see why things might be ticking along now: the tech IPO market, SoftBank’s massive Vision Fund, big tech companies getting bigger, which keeps the wheels turning. What happened in 2016? Uncertainly about the U.S. presidential election? Bill Gurley’s warnings that a reckoning was coming?

PW: I really don’t know that it was down so much versus that prior years were up. It was a more a reversion to the mean. The 2016 number still represents a pretty decent and sustainable pace for this industry.

TC: Based on your findings, would you guess a downturn is closer than further away? It seems inevitable, but I’ve thought this for the last three years.

PW: It’s a known unknown. We know there will be a change but we don’t know when or how deep it will be.

TC: Could things have possibly changed, given that everything is impacted by tech, that software is, in fact, eating the world? That’s obviously the bull case.

PW: It’s pretty darn mainstream, whether via digital transformation or just the massive disruption of massive industries buy digitally native competitors. I don’t know, is the answer. But it’s true. Tech isn’t a sideshow anymore.

Midwest rising

Emerging venture capital firms in smaller American cities from Indianapolis to Princeton, NJ are attracting increasingly larger funding as investors see opportunities for returns beyond the coastal confines of the nation’s largest cities and the innovation epicenter of Silicon Valley.

For the last four years, AOL co-founder Steve Case has been criss-crossing the country preaching a gospel of economic renewal for American cities driven by startup investment and technology-based entrepreneurialism. With Case those journeys culminated in the creation of a fund called Rise of the Rest — a $150 million vehicle raised by some of tech’s highest-profile names.

Investors like Amazon founder Jeff Bezos, Eric Schmidt, the chairman of Google’s parent company, Alphabet; Jim Bryer, the former head of the National Venture Capital Association and an early investor in Facebook; Kleiner Perkins Caufield & Byers partner John Doerr; and Facebook’s former President Sean Parker; came together with the family offices of some of America’s wealthiest people to back the fund.

As Schmidt told The Times, “There is a large selection of relatively undervalued businesses in the heartland between the coasts, some of which can scale quickly.”

Steve Case (Revolution LLC) at TechCrunch Disrupt NY 2017

Case and his partner JD Vance (the author of Hillbilly Elegy) are only two of the would-be pioneers that are bringing the venture investment model to the Midwest. In fact, it has been about four years since Mark Kvamme and Chris Olsen left the West Coast and Silicon Valley to launch Drive Capital — the venture capital firm they founded in Columbus, Ohio.

In that time the firm has managed to raise over half a billion dollars to invest in startups based primarily in the Midwest, and has spurred an investment revolution in areas of the country that are more synonymous with tractors than with technological innovation. 

But the Midwestern investment scene isn’t just defined by Valley transplants coming in. Some of the entrepreneurs behind the region’s home-grown success stories, like Indianapolis’ ExactTarget, have launched funds of their own to plant an entirely new crop of tech companies in the Midwest.

Homegrown Heroes

These are funds like High Alpha, which just closed its second $85 million fund, High Alpha Capital II, and raised another $16.5 million for a companion venture studio that ideates and incubates startups.

High Alpha doesn’t exclusively invest in the Midwest, but the bulk of its commitments are definitely falling outside of the typical geographies where most investors spend their time, according to High Alpha managing partner Scott Dorsey, the former chief executive of Indianapolis-based ExactTarget (which Salesforce acquired in 2013).*

For its venture studio, the firms was able to bring back Emergence Capital, the San Francisco-based software as a service investor, and woo new investor Foundry Capital, a Boulder, Colo.-based firm co-founded by the legendary investor Brad Feld. Both Feld and Gordon Ritter, the founder of Emergence Capital will take seats on the High Alpha Studios board.

High Alpha investments have been made in Atlanta, Chicago, Des Moines, Minneapolis, Seattle and Toronto, says Dorsey. “You have a big economic advantage where these companies don’t have to raise nearly as much money,” Dorsey says, echoing the sentiment from Schmidt. “The neat thing also is they see that there’s not just one technology company in town and if it doesn’t work out you’re packing up and moving and seeing an actual ecosystem.”

Dorsey and the High Alpha team focus their investments on marketing and automation software — an area that can run the gamut from drone use in agricultural applications to a software service that monitors company spending on business software so that the procurement process can be more efficient.

While the venture arm is one way that the firm is seeding a new generation of technology companies across the Midwest and around the country, the venture studio is focused on building businesses in Indianapolis itself, Dorsey says.

Through the studio, Dorsey and his partners have plans to start eight to 10 new software as a service businesses, and High Alpha is tapping local talent to do it. For instance, Dorsey’s former colleague Scott McCorkle, who ran the marketing cloud business for Salesforce, is now working on a company that High Alpha is incubating. 

“We are always building that stable of entrepreneurs,” Dorsey says. 

Initiatives in states like Indiana are also helping to encourage a more entrepreneurial and tech focused mindset, according to Dorsey. Like other states, Indiana is now mandating computer science classes for every grade from K-12 in public schools. The state also has created a $250 million fund-of-funds to invest in venture funds that will commit capital to companies that will bring jobs to the state. Finally, Indiana has passed a law to forego collecting sales tax on software as a service companies that are developing and selling products and services in the state.

Look Homeward (Investment) Angel

State incentives aside, there are structural reasons for the moves in the Midwest. The companies require less capital to scale compared to companies on the coasts, thanks to rising real estate prices and the intense competition for talent. Indigenous venture investors are springing up thanks to earlier bets on technology companies coming from the region.

U.S. land grant colleges, which may well be the most underappreciated heroes of American economic growth, are increasingly becoming startup hubs. With new companies emerging from Ann Arbor, Mich., Columbus, Ohio and Madison, Wis.

At the end of the day. The world is flat and entrepreneurs are everywhere and with technology it’s possible to start a company anywhere,” says Deven Parekh, the managing director of the multi-billion dollar growth equity investment firm Insight Venture Partners. “The West Coast is not necessarily the optimal place to start a company. The cost structure is prohibitive and there’s lots of turnover.”

For some firms, the revelation of abounding opportunities in states where the wind goes sweeping through the plains isn’t all that new. Growth capital firms like Edison Partners, the Princeton, N.J.-based investor which just closed on its tenth fund with $300 million has long been an investor in far-flung geographies. Only a minority of the firm’s investments fall inside the North Atlantic corridor of Boston and New York, according to partner Chris Sugden.

The rapid growth of VC deals in NY Metro, Midwest, and LA compared to stable growth in New England.

“Two-thirds of our investments are outside of New York or Boston [and] we haven’t participated in the Valley,” Sugden says. “My fear of being a tourist is overpriced deals like overpriced restaurants with not good quality food.”

For the 30 years it has been in business, Edison has backed companies outside of the traditional investment lanes for tech investors. “These ecosystems have been in place for a long time. The challenge for them has always been scale,” Sugden says.

“What’s happening right now is an interesting theme,” he added. “People leaving the Valley and leaving New York to go back to the South and go back to the Southeast. There’s a little bit more excitement and energy in these off of coast towns.”

And exits are beginning to follow this exodus. ExactTarget planted a flag in Indianapolis’s tech ecosystem (and the recent public offering for PluralSight was another big win for the city), while Groupon did the same in Chicago. Now a new generation of entrepreneurs is getting its first taste of Valley returns. These are people like Bill Smith, whose Birmingham, Ala.-based grocery delivery business Shipt was acquired by Target for $550 million late last year.

For Sugden, the four critical components an emerging tech ecosystem need to take flight are an educational hub to produce talent, an urban center to capture it, capital to sustain it, and government and traditional industry support to accelerate it.

“I’ve seen first-hand the incredible entrepreneurs trying to build great businesses outside of Silicon Valley,” said Vance, in a statement announcing the Rise of the Rest fund last year. “They often possess all the ingredients for success, but struggle to find enough investment capital to break through and have a positive impact on their region.”

*This sentence was updated to reflect the fact that Mr. Dorsey was the chief executive of ExactTarget, which Salesforce acquired in 2013.

‘Underwater Pokéball’ snatches up soft-bodied deep dwellers

Creatures that live in the depths of the oceans are often extremely fragile, making their collection a difficult affair. A new polyhedral sample-collection mechanism acts like an “underwater Pokéball,” allowing scientists to catch ’em all without destroying their soft, squishy bodies in the process.

The ball is technically a dodecahedron that closes softly around the creature in front of it. It’s not exactly revolutionary, except in that it is extremely simple mechanically — at depths of thousands of feet, the importance of this can’t be overstated — and non-destructive.

Sampling is often done via a tube with moving caps on both ends into which the creature must be guided and trapped, or a vacuum tube that sucks it in, which as you can imagine is at best unpleasant for the target and at worst, lethal.

The rotary actuated dodecahedron, or RAD, has five 3D-printed “petals” with a complex-looking but mechanically simple framework that allows them to close up simultaneously from force applied at a single point near the rear panel.

“I was building microrobots by hand in graduate school, which was very painstaking and tedious work,” explained creator Zhi Ern Teoh, of Harvard’s Wyss Institute, “and I wondered if there was a way to fold a flat surface into a three-dimensional shape using a motor instead.”

The answer is yes, obviously, since he made it; the details are published in Science Robotics. Inspired by origami and papercraft, Teoh and his colleagues applied their design knowledge to creating not just a fold-up polyhedron (you can cut one out of any sheet of paper) but a mechanism that would perform that folding process in one smooth movement. The result is the network of hinged arms around the polyhedron tuned to push lightly and evenly and seal it up.

In testing, the RAD successfully captured some moon jellies in a pool, then at around 2,000 feet below the ocean surface was able to snag squid, octopus and wild jellies and release them again with no harm done. They didn’t capture the octopus on camera, but apparently it was curious about the device.

Because of the RAD’s design, it would work just as well miles below the surface, the researchers said, though they haven’t had a chance to test that yet.

“The RAD sampler design is perfect for the difficult environment of the deep ocean because its controls are very simple, so there are fewer elements that can break,” Teoh said.

There’s also no barrier to building a larger one, or a similar device that would work in space, he pointed out. As for current applications like sampling of ocean creatures, the setup could easily be enhanced with cameras and other tools or sensors.

“In the future, we can capture an animal, collect lots of data about it like its size, material properties, and even its genome, and then let it go,” said co-author David Gruber, from CUNY. “Almost like an underwater alien abduction.”

Senate wants emergency alerts to go out through Netflix, Spotify, etc.

An emergency alert goes out, trying to let you know about incoming bad news — a missile, a tsunami or something else terrifying. Your phone starts shouting… but it’s downstairs. A warning ticker pops on TVs, if you’re watching cable… but you’ve got your eyes glued to Netflix, or Hulu, or some other online streaming service.

Should these services, with their ever-increasing ownership of our screen time, be prepped to broadcast these warnings?

Senators in Hawaii and South Dakota think so, having just introduced a bill (the “Reliable Emergency Alert Distribution Improvement,” or READI, act) that would “explore” broadcasting alerts to “online streaming services, such as Netflix and Spotify,” amongst other changes to the Emergency Alert System.

“Hawaii? Wasn’t that the state that had a very public false alarm with its emergency alert system?”

Yep! But it seems that in investigating what went wrong, the state found plenty of long-lived shortcomings in the existing, aging alert system.

Some of the other things the bill touches on:

  • Users on many phones can currently disable federal alerts; they want to get rid of that option
  • Building a better system for reporting false alarms and figuring out what happened
  • Updating the system to better prevent false alarms, and to better retract them when they do happen

The idea of sending emergency alerts to Netflix etc. seems a bit obvious at this point — hell, I was mulling over it right here on TechCrunch back in 2011, and it seemed a bit obvious even back then.

With that said, I still have the same hesitations I had at the time. After the recent false alarms and ensuing panic, it’s clear that any such system needs to be rock solid from a security standpoint — one missed bug or exploit and half the country is freaking out about non-existent incoming missiles when all they wanted to do was watch Orange Is the New Black. If it can be done right, though, it seems like a reasonable idea.

Hyundai teams up with Amazon to offer virtual showroom

Next time you’re grabbing a new charging cord on Amazon, you might be tempted to grab a new Hyundai as well. Hyundai announced today a partnership with Amazon to create a digital showroom to allow customers to compare pricing and reviews, book a test drive and find a dealer in their area to purchase the car (no, you can’t order them directly from Amazon — yet.)

“The car industry is changing, and customer demands and expectations around a frictionless, efficient and transparent experience are key drivers,” Dean Evans, Hyundai Motor America CMO, said in a statement.

The digital showroom will be incorporated into Amazon’s Vehicle section, which Amazon launched in 2016 for customers to browse automobile makes and models, from Tesla cars to vehicles from Toyota. But, while some of these vehicle profiles are lacking in detailed pictures or model information, Hyundai has created a more robust experience.

On its own unique landing page, Hyundai highlights the brand’s features, such as its compatibility with Alexa and its Shopper Assurance program, and creates a selection of Hyundai vehicles for you based on your preferences and buying habits. From there, you can select a model you’d like to look at and explore it in typical Amazon style — flipping between different product pictures, colors and customer reviews.

After you’re happy with your selection, you can either schedule a test-drive — where you have the option for the car to pick you up in your driveway — or go directly to a dealer near you to sign the paperwork.

With the average industry price of $36,270 for a new car in 2018, according to Kelly Blue Book, maybe it’s a good thing there’s no Dash button for these vehicles just yet.

The Galaxy Note 9 is leaking out all over the place

The Galaxy Note 9 won’t be announced until August. You wouldn’t know it by reading the internet, however. Every nook and cranny of the upcoming phablet has been bared for the world, in a series of leaks over the past several weeks.

Sure, not all of them will pan out, but plenty have come from leakers with established track records, and enough of the details line up so as to paint a wholly believable portrait of the phone we’ll finally get an official look at early next month.

And then there’s this:

That’s a picture of Samsung CEO DJ Koh using what appears to be the Note 9 at a media event. The differences are subtle, but they’re there in the camera housing, which is among a few small visible changes to the upcoming device. Like, good on DJ Koh for using the company’s products, S Pen and all, but even by Samsung’s traditionally leaky standards, that’s a little silly.

Maybe Samsung doesn’t mind. Maybe it’s just happy to have everyone talking about the Note 9, while it’s hard at work on that folding phone we’ve heard so much about.

The above camera housing is in line with another recent post from perennial leaker, EVLeaks, which shows off a full front and back render of the upcoming handset:

S Pen? pic.twitter.com/xizmWw9J2W

— Evan Blass (@evleaks) July 17, 2018

There’s also an S Pen, with a yellow coat of paint that’s in line with the image the company sent out with the invite to the August event. The fingerprint sensor has been moved below the camera there, rather than next to it as it was on the Note 8. That was a clear mistake, and Samsung fixed it for the S9. Logic follows that they would do the same on the new Note.

That, in turn, appears to confirm this photo of an actual unit from Slashleaks, which bears an extremely effective “No photo allowed/Do not leak info” sticker. At least Samsung tried, I guess.

#Samsung#GalaxyNote9 – Samsung Galaxy Note 9 live images leaked https://t.co/WEgJIsWtEy pic.twitter.com/kMwHm7kpBc

— /LEAKS (@Slashleaks) July 17, 2018

More (but not that much more, from the looks of it) will be revealed on August 9.

Roblox responds to the hack that allowed a child’s avatar to be raped in its game

There’s a special place in Hell for people who think it’s funny to rape a 7-year-old girl’s avatar in an online virtual world designed for children. Yes, that happened. Roblox, a hugely popular online game for kids, was hacked by an individual who subverted the game’s protection systems in order to have customized animations appear. This allowed two male avatars to gang rape a young girl’s avatar on a playground in one of the Roblox games.

The company has now issued an apology to the victim and its community, and says it has determined how the hacker was able to infiltrate its system so it can prevent future incidents.

The mother of the child, whose avatar was the victim of the in-game sexual assault, was nearby when the incident took place. She says her child showed her what was happening on the screen and she took the device away, fortunately shielding her daughter from seeing most of the activity. The mother then captured screenshots of the event in order to warn others.

She described the incident in a public Facebook post that read, in part:

At first, I couldn’t believe what I was seeing. My sweet and innocent daughter’s avatar was being VIOLENTLY GANG-RAPED ON A PLAYGROUND by two males. A female observer approached them and proceeded to jump on her body at the end of the act. Then the 3 characters ran away, leaving my daughter’s avatar laying on her face in the middle of the playground.

Words cannot describe the shock, disgust, and guilt that I am feeling right now, but I’m trying to put those feelings aside so I can get this warning out to others as soon as possible. Thankfully, I was able to take screenshots of what I was witnessing so people will realize just how horrific this experience was. *screenshots in comments for those who can stomach it* Although I was immediately able to shield my daughter from seeing the entire interaction, I am shuddering to think of what kind of damage this image could have on her psyche, as well as any other child that could potentially be exposed to this.

Roblox has since issued a statement about the attack:

Roblox’s mission is to inspire imagination and it is our responsibility to provide a safe and civil platform for play. As safety is our top priority — we have robust systems in place to protect our platform and users. This includes automated technology to track and monitor all communication between our players as well as a large team of moderators who work around the clock to review all the content uploaded into a game and investigate any inappropriate activity. We provide parental controls to empower parents to create the most appropriate experience for their child, and we provide individual users with protective tools, such as the ability to block another player.

The incident involved one bad actor that was able to subvert our protective systems and exploit one instance of a game running on a single server. We have zero tolerance for this behavior and we took immediate action to identify how this individual created the offending action and put safeguards in place to prevent it from happening again. In addition, the offender was identified and permanently banned from the platform. Our work on safety is never-ending and we are committed to ensuring that one individual does not get in the way of the millions of children who come to Roblox to play, create, and imagine.

The timing of the incident is particularly notable for the kids’ gaming platform, which has more than 60 million monthly active users and is now raising up to $150 million to grow its business. The company has been flying under the radar for years, while quietly amassing a large audience of both players and developers who build its virtual worlds. Roblox recently stated that it expects to pay out its content creators $70 million in 2018, which is double that of last year. 

Roblox has a number of built-in controls to guard against bad behavior, including a content filter and a system that has moderators reviewing images, video and audio files before they’re uploaded to Roblox’s site. It also offers parental controls that let parents decide who can chat with their kids, or the ability to turn chat off. And parents can restrict kids under 13 from accessing anything but a curated list of age-appropriate games.

However, Roblox was also in the process of moving some of its older user-generated games to a newer system that’s more secure. The hacked game was one of several that could have been exploited in a similar way.

Since the incident, Roblox had its developers remove all the other potentially vulnerable games and ask their creators to move them over to the newer, more fortified system. Most have done so, and those who have not will not see their games allowed back online until that occurs. The games that are online now are not vulnerable to the exploit the hacker used.

The company responded quickly to take action, in terms of taking the game offline, banning the player and reaching out the mother — who has since agreed to help Roblox get the word out to others about the safeguards parents can use to protect kids in Roblox further.

But the incident raises questions as to whether kids should be playing these sorts of massive multiplayer games at such a young age at all.

Roblox, sadly, is not surprised that someone was interested in a hack like this.

YouTube is filled with videos of Roblox rape hacks and exploits, in fact. The company submits takedown requests to YouTube when videos like this are posted, but YouTube only takes action on a fraction of the requests. (YouTube has its own issues around content moderation.)

It’s long past time for there to be real-world ramifications for in-game assaults that can have lasting psychological consequences on victims, when those victims are children.

Roblox, for its part, is heavily involved in discussions about what can be done, but the issue is complex. COPPA laws prevent Roblox from collecting data on its users, including their personal information, because the law is meant to protect kids’ privacy. But the flip side of this is that Roblox has no way of tracking down hackers like this.

“I think that we’re not the only one pondering the challenges of this. I think every platform company out there is struggling with the same thing,” says Tami Bhaumik, head of marketing and community safety at Roblox.

“We’re members of the Family Online Safety Institute, which is over 30 companies who share best practices around digital citizenship and child safety and all of that,” she continues. “And this is a constant topic of conversation that we all have – in terms of how do we use technology, how do we use A.I. and machine learning? Do we work with the credit card companies to try to verify [users]? How do we get around not violating COPPA regulations?,” says Bhaumik.

“The problem is super complex, and I don’t think anyone involved has solved that yet,” she adds.

One solution could be forcing parents to sign up their kids and add a credit card, which would remain uncharged unless kids broke the rules.

That could dampen user growth to some extent — locking out the under-banked, those hesitant to use their credit cards online and those just generally distrustful of gaming companies and unwanted charges. It would mean kids couldn’t just download the app and play.

But Roblox has the momentum and scale now to lock things down. There’s enough demand for the game that it could create more of a barrier to entry if it chose to, in an effort to better protect users. After all, if players knew they’d be fined (or their parents would be), it would be less attractive to break the rules.

Essential discounts its 360 Camera to $19, a day after its phone was half-off

At $250, the Essential Phone was arguably the best deal of Amazon Prime Day. Which is saying a lot. But no matter how you slice it, 50 percent off an Android flagship is a pretty tough deal to beat. I know of at least one TechCruncher who couldn’t resist the lure of that kind of discount.

Now that Prime Day is over, the phone’s price is back up at $499 — but the deals, it seems, keep on coming. Over on Essential’s site, you’ll find the company’s modular 360 Camera for $19. That’s a mind-boggling 90 percent off its MSRP — the kind of deal that has “fire sale” written all over it.

In other circumstances, you could chalk up a killer deal or two to an inventory refresh. Hell, it’s almost a year since the PH-1 handset hit the market, so the company could have a replacement in the works. The context of other recent news around the company, however, paints a very different picture.

In February, the company was reported to have only shipped 88,000 phones the prior year. In May, word got out that founder Andy Rubin was looking to put the company up for sale and had cancelled work on the followup phone. The company didn’t issue a flat-out denial, but instead insisted that it still had products in the works.

“We always have multiple products in development at the same time and we embrace canceling some in favor of the ones we think will be bigger hits,” it said at the time. “We are putting all of our efforts towards our future, game-changing products, which include mobile and home products.”

Indeed, the gears are still turning and the lights are on over at Essential HQ. The company announced that it was expanding to additional markets, including Canada, France, Japan and the U.K. And last month the company finally announced its second modular accessory, the Audio Adapter HD. That plug-in brings HD audio playback to the device. The company is also continuing to offer quick software support and has already promised to be one of the first to offer an update to Android P when it arrives. 

We reached out to the company for an update and received the following statement from a spokesperson, “We’re offering a great deal on the Essential 360 Camera accessory so new customers who bought our phone during Amazon Prime Day can enjoy the full Essential experience.”

So, perhaps there’s something to be said for roping people into the ecosystem and then offering a doubly deep discount on an accessory that only works with that device.

For its part, Essential has always acknowledged that it’s had a tough road ahead. At an event in New York prior to the release of the PH-1, an executive outlined a 10-year plan to become a truly successful contender in a category dominated by tech titans like Samsung and Apple. And that $300 million from Access Technology Ventures, Tencent, Foxconn and Amazon certainly didn’t hurt.

If the rumors are true, this would be a sad end for a hardware startup with good devices and a grand ambition. Given what the company laid out early on, it was clear that it’s only just getting started with its innovative approach to mobile and the smart home. But hardware is hard, as the well-trod saying goes — that’s the case even if you have boatloads of funding and happen to be the guy who created Android.

Coinbase didn’t get (or need) SEC approval for acquisitions after all, company says

Hmm. Well, after Coinbase confirmed to Bloomberg (and us) that they had received regulatory approval for some acquisitions that would let it eventually usher in trading tokenized securities on its exchange, the company is now walking back from which agencies it received approval.

While a Coinbase spokesperson had initially indicated that the company had received approval from both FINRA and the SEC, it is now saying that the SEC did not offer approval, but only because Coinbase did not need their approval for a change of control application in the first place.

“The SEC’s approval is not required for the change of control application. Coinbase has discussed aspects of its proposed operations, including the acquisition of the Keystone Entity, on an informal basis with several members of SEC staff,” the spokesperson told TechCrunch. “So it’s not correct to say that the SEC and FINRA approved Coinbase’s purchase of Keystone because SEC was not involved in the approval process. Approval was received from FINRA.”

It’s all a bit confusing, though it doesn’t appear to change much as they still seem to have the needed approval from FINRA, but it is certainly an error in communication. The cryptocurrency industry and the SEC have not always had the most pleasant of interactions, so the news made it sound like both regulatory agencies were on a united front on this when the SEC didn’t offer any official input — so there really aren’t any takeaways, good or bad.

New law forces Airbnb to open its books to New York authorities

The New York City Council has voted in favor of a new law requiring Airbnb and similar home-share companies to share data on their users. The company has fought the law tooth and nail, but city authorities say it’s basically common sense for the local government to be informed of the number and nature of residents using the service.

The law was characterized by the council as one that would “provide the City with an additional tool to enforce the laws against illegal short term rentals.”

“This bill is about transparency and bringing accountability to billion-dollar companies who are not being good neighbors,” explained NYC Councilwoman Carlina Rivera.

You can read the text here; what it amounts to is that Airbnb is required to collect and present the following information monthly:

  • Name, physical address, email, Airbnb profile URL, and phone number of hosts active that month
  • Addresses and URLs of any properties a given host rents out, and whether it was a full-home or partial-home rental
  • Total days the property was rented, rent/price paid, and any fees collected by Airbnb

Failure to do so will result in a substantial fine: $1,500 or more per item, depending on the listing. Some of this data has already been provided voluntarily by Airbnb for a year and a half in monthly reports for its New York operations; here’s one it totally coincidentally issued today.

It is however one thing to give statistics like average amount earned per month in this or that borough, and quite another to say Jane Jamison of 224 East 85th St. earned $3,712 from 12 nights at this address and 8 at her second place over in Brooklyn.

The granularity of the data matters. In the first case, Airbnb is in a position of power, voluntarily granting data more or less of its own choosing, while also protecting the privacy of its users. But in the second case, hosts can be identified individually for all kinds of purposes: fines, taxes, licenses, inspections and so on.

It’s not ideal for Airbnb or hosts, both of which will have their liberty curtailed considerably by the mere fact of their commerce being open for inspection by the city and potentially released publicly as part of studies, lawsuits and so on.

But as with so many other new industries that have gotten ahead of regulation, this kind of clampdown was inevitable from the start; how long did Airbnb really think it could get away with its limited disclosure of data so obviously valuable to local government fighting skyrocketing rents, property scams, unscrupulous landlords and so on?

Airbnb says that the whole thing is bought and paid for by the hotel industry, which of course does have an enormous interest in keeping its thumb pressed firmly down on this new challenger.

“We’re not surprised the City Council refused to meet with their own constituents who rely on home sharing to pay the bills and then voted to protect the profits of big hotels,” Airbnb thundered in one of its usual bombastic statements. “The fix was in from the start and now New Yorkers will be subject to unchecked, aggressive harassment and privacy violations, rubber stamped by the City Council.”

But while Airbnb may be a young company, it is fabulously rich and extremely politically active, so this argument comes off as a bit disingenuous. We’ve seen similar rants from other unregulated companies as they run headlong into the red tape and inertia inherent to the establishment.

What the harassment and violations comprise isn’t clear. Certainly there is one man suing the city, saying he was targeted with housing code violations after speaking out against the proposed law; Airbnb is paying his legal fees.

But the city says its targets are bad actors, people running what amount to off-the-books hotels, renting units with unsafe conditions, or keeping housing units off the market for long-term residents so they can make a greater profit off visitors.

There’s no doubt that, armed with this more complete information, city authorities will have the opportunity to do legal and financial harm to the people who are taking part in this technically unsanctioned but largely harmless (and in many ways beneficial) business.

If they’re going to require this information to be disclosed, users of Airbnb and other services deserve to know exactly what it is going to be used for. It’s not enough to say that bad actors are being targeted when a man who opposed the city has $30,000 in fines leveled at him the next week.

Regulation is necessary for healthy and safe industry, and data is necessary for regulation, so this bill seems reasonable to me and to the city council members who voted for it in overwhelming majority. But it’s only part of the puzzle; citizens should feel that their elected officials are acting to protect them, not expose them.

Facebook can now sync your Instagram contacts to Messenger

Facebook wants to expand your Messenger contact list with a little help from Instagram. The company has launched a feature in Messenger that pulls in your contacts from Instagram, if you opt to connect your account. The option appears in Messenger’s “People” tab, alongside the existing option to sync your phone’s contacts with Messenger.

The feature was first spotted by Jane Manchun Wong, who posted a screenshot to Twitter.

Facebook Messenger is testing (?) syncing with Instagram account pic.twitter.com/bJzFpRS7zD

— Jane Manchun Wong (@wongmjane) July 16, 2018

Others outside the U.S. noticed the option as well.

#TECNOLOGÍA– Facebook Messenger ya permite sincronizar la cuenta de Instagram.

?https://t.co/tikO1KVuBY pic.twitter.com/JHqemcLVKW

— After Office (@AfterOfficeEc) July 18, 2018

We also found the option enabled in our own Messenger app, and have now confirmed with Facebook it’s a full public launch.

When you tap on “Connect Instagram,” Messenger adds contacts from Instagram automatically. In addition, your Instagram username and account also then becomes visible to other people on Messenger.

The result is an expanded social graph of sorts — one that combines the friends and family you know from Facebook, with those you know from Instagram.

Not everyone is thrilled with the feature, however.

As one Twitter user pointed out, it’s not clear that pushing “Connect Instagram” (the button’s title that appeared to some), means Messenger will automatically add your Instagram contacts to Messenger. It seems that you should be given a choice here as to if you want to add them, but that’s not the case.

OMG FACEBOOK MESSENGER JUST ADDED ALL MY INSTAGRAM FRIENDS … WTF … I DIDNT MEAN 2 DO THAT I SWEAR I'M NOT A BEG LOOOL https://t.co/EgudOTfZyB

— rellz. (@RelliRellz) July 18, 2018

In December 2017, TechCrunch spotted a very similar option to sync Instagram contacts to Messenger in the same People section. However, the option never launched to the public and later disappeared. But the recent re-emergence of the feature is not a continued test — it’s now rolled out, Facebook says.

This is not the first time Facebook has added integrations between its apps.

For example, in 2016 it gave businesses access to a unified inbox of conversations from across its platforms, including Facebook, Instagram and Messenger. Last year, it also tested a cross-app notification feature. There’s even an option to launch Facebook right in Instagram itself, via an icon on your Instagram profile page.

The timing of the launch is notable, given that Instagram’s own Direct Messaging service has become a popular communications service of its own.

Instagram Direct as of April 2017 had 375 million users, and was spun off into its own standalone app last year in select countries outside the U.S. With so many users now messaging through Facebook-owned Instagram, it’s clear that Facebook wants to capitalize on that activity to grow its own Messenger app, too.

Rolls-Royce demonstrates robotic bugs as the future of engine maintenance

Rolls-Royce showed off its new vision for the future of engine maintenance this week at the Farnborough Airshow, and it might make your skin crawl.

As part of its IntelligentEngine vision (which the company announced at the Singapore Airshow earlier this year), it demonstrated plans for both a robotic snake and swarm of cockroach-like miniature robots that, in theory, will work together to inspect the interior of aircraft engines without removing the entire engine.

Neither technology is mature enough to be put into practice yet, but here’s how it should work:

In partnership with Harvard University and the University of Nottingham, Rolls-Royce is working to build 10mm miniature, collaborative robots — called SWARM — that will be able to provide to the human operator a live video feed of an engine interior via small cameras.

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While scaling these bots down to size will be a challenge for the company and its collaborators, it’s a challenge that Harvard University researchers have been working at for eight years now, according to a statement given by Harvard researcher Sebastien de Rivas at the show.

For SWARM to access the engines, these small bots will catch a ride with FLARE — a pair of endoscopic, snake-like robots that can slither inside the nooks and crannies of a large piece of machinery and deposit SWARM at the inspection point. The company also has plans for FLARE to carry out internal patch repairs.

In addition to these ambitious plans, Rolls-Royce also displayed slightly more mature technologies, including a network of periscope-like INSPECT bots, which they plan to permanently install inside engines for constant spot maintenance, as well as remote boreblending robots that can be controlled by specialist engineers to assist with complicated maintenance tasks.

These kinds of advancements in engineering could help lead to more cost-efficient maintenance of large crafts, where previously maintenance was driven by internal sensor data and carried out manually — a process that can last up to five hours, James Kell, Rolls-Royce on-wing technology specialist, told The Engineer. With robots like SWARM, Kell told the publication, the process could take as little as five minutes.

While the efficiency of these robotic assistants cannot be denied, the accuracy and reliability has yet to be demonstrated, and the level of comfort passengers have knowing their aircraft was inspected by an intelligent swarm of robotic bugs is still up in the air.