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California has no water and lots of liquidity

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

Danny, Natasha, and Alex were on deck this week, with Grace on the recording and edit. But, if you want to hear more about Robinhood, this is not the episode for you. If you want to learn more about the consumer fintech company’s IPO filing this is the episode you want. Basically, Robinhood filed after we had wrapped taping, so we had to do a special pod for the news.

So, this is the everything-but-Robinhood episode. And here’s what’s inside of it:

A four-episode week! With only Grace handling production! She’s amazing.

Equity drops every Monday at 7:00 a.m. PST, Wednesday, and Friday morning at 7:00 a.m. PST, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.

 

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Swedish gaming firm MTG acquires India’s PlaySimple for $360 million

Swedish gaming giant Modern Times Group (MTG) has acquired Indian startup PlaySimple for at least $360 million, the two firms said Friday.

MTG said it will pay 77% of the acquisition sum to Indian game developer and publisher in cash and the rest in company shares. There’s also another $150 million reward put aside if certain undisclosed performance metrics are hit, the two firms said.

Friday’s deal marks one of the largest exits in the Indian startup ecosystem. PlaySimple had raised $4 million Series A at a valuation of about $16 million from Elevation Capital and Chiratae Ventures in 2016. (The startup, which began its journey in Bangalore, raised just $4.5 million in total from external investors.)

And it’s clear why: the revenues of PlaySimple — which operates nine word games including “Daily Themed Crossword,” “Word Trip,” “Word Jam,” and “Word Wars” — grew by 144% y-o-y to $83 million last year and it was on track to hit over $60 million revenue in the first half of 2021.

Cap table of PlaySimple after Series A in 2016.

“We’re very proud of the games we’ve developed over the years, and of the infrastructure and scale that we’ve achieved with our team,” said PlaySimple co-founders and management team members — Siddhanth Jain, Suraj Nalin and Preeti Reddy — in a joint statement.

“As we join the MTG family, we look forward to leveraging our proprietary technology across MTG’s gaming portfolio, expanding into the European market, investing in cutting-edge technology and building exciting new games.”

PlaySimple, which says its free-to-play games have amassed over 75 million installs and maintain nearly 2 million daily active users, plans to launch a number of games later this year and also expand into the card games genre.

“PlaySimple is a rapidly growing and highly profitable games studio that quickly has established itself as one of the leading global developers of free-to-play word games, an exciting new genre for MTG,” said Maria Redin, MTG Group President and CEO, said in a statement.

The Stockholm-headquartered firm, which has also acquired Hutch and Ninja Kiwi in recent quarters, said PlaySimple will help it build a diversified gaming vertical. “Scaling and diversifying the GamingCo [an MTG subsidiary] helps to accelerate the operational performance while at the same time creating a more stable business,” the firm said.

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Edtech startup Microverse raises $12.5M to bring income share agreements to the developing world

Edtech startup Microverse has tapped new venture funding in its quest to help train students across the globe to code through its online school that requires zero upfront cost, instead relying on an income-share agreement that kicks in when students find a job.

The startup tells TechCrunch it has closed a $12.5 million Series A led by Northzone with additional participation from General Catalyst, All Iron Ventures and a host of angel investors. We last covered the company after it had closed a bout of seed funding from General Catalyst and Y Combinator; this latest round brings the startup’s total funding to just under $16 million.

The company’s vision has seen added pandemic-era traction as larger tech companies have embraced remote work that spans geographic boundaries and time zones. Microverse has now brought English-speaking students from over 188 countries through its program.

Since we last chatted, CEO Ariel Camus says the startup has landed some 300 early graduates in positions at tech companies including Microsoft, VMWare and Huawei. The company says its has above a 95% employment rate for its students within six months of graduation so far, pushing past one of the bigger issues that income-share-agreement-based schools have had stateside — getting graduates employed.

Microverse does have notably less generous terms than counterparts like Lambda School when it comes to when students begin loan repayment, the terms of both are actually quite different, as noted in my previous article:

While Lambda School’s ISA terms require students to pay 17% of their monthly salary for 24 months once they begin earning above $50,000 annually — up to a maximum of $30,000, Microverse requires that graduates pay 15% of their salary once they begin making more than just $1,000 per month, though there is no cap on time, so students continue payments until they have repaid $15,000 in full. In both startups’ cases, students only repay if they are employed in a field related to what they studied, but with Microverse, ISAs never expire, so if you ever enter a job adjacent to your area of study, you are on the hook for repayments. Lambda School’s ISA taps out after five years of deferred repayments.

The startup has made efforts to streamline their online program since launch to ensure that students are being set up to succeed in the full-time, 10-month program. Part of Microverse’s efforts have included condensing lesson segments into shorter time frames to ensure students aren’t starting the program unless they have enough free time to commit. Camus says the startup is receiving thousands of applications per month, of which only a fraction are accepted in an effort to ensure that the small startup isn’t overcommitting itself early on. The startup estimates it will usher 1,000 students through its program this year.

The startup has big plans for the future, including working more closely with tech companies to ensure that students have easier access to job placement once they graduate.

“We have data now that the day we launch a partner program — which we haven’t done yet but we will eventually — it opens up the market by 5x,” Camus tells TechCrunch. “To get 10,000 students per year in a world where 90% of the world’s population doesn’t have access to higher education — it’s not going to be that hard, to be honest, I’m not too worried.”

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The 2021 edtech avalanche has just begun

Last week was a good one for edtech in Europe.

GoStudent became Europe’s first edtech unicorn (IPO’d companies aside), raising its third round in 12 months and the biggest ever in the sector in Europe. Brighteye Ventures’ analysis showed that VC investments in European edtech had breached $1 billion in a calendar year for the first time, even without GoStudent’s mega-round, with six months left to go.

Edtech deal flow in 2021 looks set to match or even outpace 2020 levels, per the report: At $9.4 million, average deal size is triple 2020 levels; seven companies have raised $50 million in five different markets; and the U.K. has more than three times as many deals as the next individual market.

Deal size progression in edtech over the years

Deal-size progression in edtech over the years. Image Credits: Brighteye Ventures

It’s interesting that we are not seeing enormous increases in deal count. The $1.05-billion mark in the report is spread across 111 transactions — there were 237 in 2020, so we could expect a similar total this year. More funding and stable deal count of course means that we are seeing significant increases in deal size.

It seems generalist investors are recognizing that edtech investments can reap outsized returns, similar to sectors like deep tech, health tech and fintech.

We can draw a few conclusions from this. We can construe that companies created last year and in previous years matured significantly during the pandemic due to increased demand. Moreover, this rapid natural selection process provided insights on verticals and possible winners.

Lastly, it seems generalist investors are recognizing that edtech investments can reap outsized returns, similar to sectors like deep tech, health tech and fintech.

This is contributing to larger early rounds than we have seen in previous years — investors can’t pick the winner, but they can slant the playing field instead. We therefore expect to see a surge in the number of pre-seed, seed and Series A rounds in the second half of 2021, as companies founded during the pandemic begin to raise meaningful funding.

Another reason that edtech is being taken seriously by generalist investors is that the true size of the market (and the extent of digitization to come) is becoming more conceivable.

Spending on edtech is undergoing a similar growth to that of media spending in 2010

Edtech spending is growing like media spending did in the 2010s. Image Credits: Brighteye Ventures

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How Robinhood’s explosive growth rate came to be

This afternoon Robinhood filed to go public. TechCrunch’s first look at its results can be found here. Now that we’ve done a first dig, we can take the time to dive into the company’s filing more deeply.

Robinhood’s IPO has long been anticipated not only because there are billions of dollars in capital riding on its impending liquidity, but also because the company became something of a poster child for the savings and investing boom that 2020 saw and the COVID-19 pandemic helped engender.

The consumer trading service’s products became so popular and enmeshed in popular culture thanks to both the “stonks” movement and the larger GameStop brouhaha, that the company’s public offering carries much more weight than that of a more regular venture-backed entity. Robinhood has fans, haters, and many an observer in Congress.

Regardless of all that, today we are digging into the company’s business and financial results. So, if you want to better understand how Robinhood makes money, and how profitable or not it really is, this is for you.

We will start with a more in-depth look at growth and profitability, pivot to learning about the company’s revenue makeup, discuss a risk factor or two, and close on its decision to offer some of its own shares to its users. Let’s go!

Inside Robinhood’s growth engine

Before we get into the how of Robinhood’s growth, let’s discuss how big the company has become.

The fintech unicorn’s revenue grew from $277.5 million in 2019 to $958.8 million in 2020, which works out to growth of around 245%. Robinhood expanded even more quickly in the first quarter of 2021, scaling from year-ago revenue of $127.6 million to $522.2 million, a gain of around 309%.

Those are numbers that we frankly do not see often amongst companies going public; 300% growth is a pre-Series A metric, usually.

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Twitter considers new features for tweeting only to friends, under different personas and more

Twitter has a history of sharing feature and design ideas it’s considering at very early stages of development. Earlier this month, for example, it showed off concepts around a potential “unmention” feature that would let users untag themselves from others’ tweets. Today, the company is sharing a few more of its design explorations that would allow users to better control who can see their tweets and who ends up in their replies. The new concepts include a way to tweet only to a group of trusted friends, new prompts that would ask people to reconsider the language they’re using when posting a reply, and a “personas” feature that would allow you to tweet based on your different contexts — like tweets about your work life, your hobbies and interests, and so on.

The company says it’s thinking through these concepts and is looking to now gather feedback to inform what it may later develop.

The first of the new ideas builds on work that began last year with the release of a feature that allows an original poster to choose who’s allowed to reply to their tweet. Today, users can choose to limit replies to only people mentioned in the tweet, only people they follow, or they can leave it defaulted to “everyone.” But even though this allows users to limit who can respond, everyone can see the tweet itself. And they can like, retweet or quote tweet the post.

With the proposed Trusted Friends feature, users could tweet to a group of their own choosing. This could be a way to use Twitter with real-life friends, or some other small network of people you know more personally. Perhaps you could post a tweet that only your New York friends could see when you wanted to let them know you were in town. Or maybe you could post only to those who share your love of a particular TV show, sporting event or hobby.

Image Credits: Twitter

This ability to have private conversations alongside public ones could boost people’s Twitter usage and even encourage some people to try tweeting for the first time. But it also could be disruptive to Twitter, as it would chip away at the company’s original idea of a platform that’s a sort of public message board where everyone is invited into the conversation. Users may begin to think about whether their post is worthy of being shared in public and decide to hold more of their content back from the wider Twitter audience, which could impact Twitter engagement metrics. It also pushes Twitter closer to Facebook territory where only some posts are meant for the world, while more are shared with just friends.

Twitter says the benefit of this private, “friends only” format is that it could save people from the workarounds they’re currently using — like juggling multiple alt accounts or toggling between public to protected tweets.

Another new feature under consideration is Reply Language Prompts. This feature would allow Twitter users to choose phrases they don’t want to see in their replies. When someone is writing back to the original poster, these words and phrases would be highlighted and a prompt would explain why the original poster doesn’t want to see that sort of language. For instance, users could configure prompts to appear if someone is using profanity in their reply.

Image Credits: Twitter

The feature wouldn’t stop the poster from tweeting their reply — it’s more a gentle nudge that asks them to be more considerate.

These “nudges” can have impact. For example, when Twitter launched a nudge that suggested users read an article before they amplify it with a retweet, it found that users opened articles before sharing them 40% more often. But in the case of someone determined to troll, it may not do that much good.

The third, and perhaps most complicated, feature is something Twitter is calling “Facets.”

This is an early idea about tweeting from different personas from one account. The feature would make sense for those who often tweet about different aspects of their lives, including their work life, their side hustles, their personal life or family, their passions and more.

Image Credits: Twitter

Unlike Trusted Friends, which would let you restrict some tweets to a more personal network, Facets would give other users the ability to choose whether they wanted to follow all your tweets, or only those about the “facet” they’re interested in. This way, you could follow someone’s tweets about tech, but ignore their stream of reactions they post when watching their favorite team play. Or you could follow your friend’s personal tweets, but ignore their work-related content. And so on.

This is an interesting idea, as Twitter users have always worried about alienating some of their followers by posting “off-topic” so to speak. But this also puts the problem of determining what tweets to show which users on the end user themselves. Users may be better served by the algorithmic timeline that understands which content they engage with, and which they tend to ignore. (Also: “facets‽”)

Twitter says none of the three features are in the process of being built just yet. These are only design mockups that showcase ideas the company has been considering. It also hasn’t yet made the decision whether any of the three will go under development — that’s what the user feedback it’s hoping to receive will help to determine.

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Robinhood is going public and we’re very excited

It’s a sweltering day here in New York City, and that means Wall Street is on fire, and so is Robinhood, apparently. The popular stock trading app officially filed its Form S-1 with the SEC a few hours ago to go public, where it will trade under the ticker “HOOD.”

The Equity crew has been yammering about Robinhood for years now, and we have been chomping at the bit to see those S-1 results for what feels like ages. Well, we finally got the numbers, we chomped that bit (or at least Alex and Danny did, since Natasha went on vacation about 15 minutes before the IPO hit the wires), and so here’s a special Equity Shot to talk about all the highlights.

We talked about so much in an itsy-bitsy 15-minute episode: crazy revenue growth, crazy revenue concentration from two major sources, regulatory hurdles that the company has been clearing up, better financials with a bit of nuance on the company’s Q1 finances, and the company’s special plan for its IPO.

Wowza.

Here’s what we got up to:

  • Historical growth and profitability.
  • Revenue mix and revenue concentration, along with constituent concerns.
  • The importance of options-related incomes for the company.
  • Dogecoin.
  • Why the company’s adjusted income may help it assuage investors who have their eyes pop out of their skulls when they see its GAAP Q1 2021 results.

And a lot more. Of course, if you hate Robinhood, we will be back with our normally scheduled Friday episode of Equity tomorrow.

Equity drops every Monday at 7:00 a.m. PDT, Wednesday, and Friday morning at 7:00 a.m. PDT, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.

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To guard against data loss and misuse, the cybersecurity conversation must evolve

Data breaches have become a part of life. They impact hospitals, universities, government agencies, charitable organizations and commercial enterprises. In healthcare alone, 2020 saw 640 breaches, exposing 30 million personal records, a 25% increase over 2019 that equates to roughly two breaches per day, according to the U.S. Department of Health and Human Services. On a global basis, 2.3 billion records were breached in February 2021.

It’s painfully clear that existing data loss prevention (DLP) tools are struggling to deal with the data sprawl, ubiquitous cloud services, device diversity and human behaviors that constitute our virtual world.

Conventional DLP solutions are built on a castle-and-moat framework in which data centers and cloud platforms are the castles holding sensitive data. They’re surrounded by networks, endpoint devices and human beings that serve as moats, defining the defensive security perimeters of every organization. Conventional solutions assign sensitivity ratings to individual data assets and monitor these perimeters to detect the unauthorized movement of sensitive data.

It’s painfully clear that existing data loss prevention (DLP) tools are struggling to deal with the data sprawl, ubiquitous cloud services, device diversity and human behaviors that constitute our virtual world.

Unfortunately, these historical security boundaries are becoming increasingly ambiguous and somewhat irrelevant as bots, APIs and collaboration tools become the primary conduits for sharing and exchanging data.

In reality, data loss is only half the problem confronting a modern enterprise. Corporations are routinely exposed to financial, legal and ethical risks associated with the mishandling or misuse of sensitive information within the corporation itself. The risks associated with the misuse of personally identifiable information have been widely publicized.

However, risks of similar or greater severity can result from the mishandling of intellectual property, material nonpublic information, or any type of data that was obtained through a formal agreement that placed explicit restrictions on its use.

Conventional DLP frameworks are incapable of addressing these challenges. We believe they need to be replaced by a new data misuse protection (DMP) framework that safeguards data from unauthorized or inappropriate use within a corporate environment in addition to its outright theft or inadvertent loss. DMP solutions will provide data assets with more sophisticated self-defense mechanisms instead of relying on the surveillance of traditional security perimeters.

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Singularity 6 raises $30M to fund upcoming fantasy ‘community simulation’ MMO

LA-based game studio Singularity 6 has banked more funding as it scales itself up and readies for the launch of its debut title.

The startup tells TechCrunch they’ve raised $30 million in a Series B bout of funding led by FunPlus Ventures with additional participation from Andreessen Horowitz (a16z), LVP, Transcend, Anthos Capital and Mitch Lasky. The studio has now disclosed some $49 million in funding, a sizable sum, but one that showcases how much investors are looking to rally around gaming platform plays in the wake of Roblox’s monster IPO.

In 2019, Singularity 6 raised a $16.5 million Series A led by Andreessen Horowitz. At the time, the studio was mum on details about its upcoming debut title, but we’ve learned more about it since.

The title, Palia, is a community simulation game that seems to be more focused on Animal Crossing-like community mechanics in an MMO environment, rather than endless battles. Last month, the studio showcased a launch trailer of the title which hinted at a good deal of the gameplay. Palia looks to be a medieval Zelda-like environment where users can move between towns in an open world environment while farming and collecting resources to build structures in a shared world.

The company has said in marketing materials that the title is “designed to create community, friendships and a real sense of belonging.” In a statement, a16z partner Jonathan Lai called the upcoming title, “warm and dynamic.”

There are still quite a bit of unanswered questions about the title, which is currently taking sign-ups on its website to be alerted to pre-alpha access. We do know that plenty of VCs are betting millions on the prospect that this multiplayer title could be big.

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Google update will allow digital COVID-19 vaccination cards and test results to be stored on Android devices

Google is making it possible to store digital versions of either COVID-19 test results or vaccination cards on users’ Android devices. The company on Wednesday announced it’s updating its Passes API, which will give developers at healthcare organizations, government agencies, and other organizations authorized by public health authorities the ability to create digital versions of tests and vaccination cards that can then be saved directly to the user’s device. The Passes API is typically used to store things like boarding passes, loyalty cards, gift cards, tickets and more to users’ Google Pay wallet. However, the Google Pay app in this case will not be required, Google says.

Instead, users without the Google Pay app will have the option to store the digital version of the COVID Card directly to their device, where it’s accessible from a home screen shortcut. Because Google is not retaining a copy of the card, anyone who needs to store the COVID Card on multiple devices will need to download it individually on each one from the healthcare provider or other organization’s app.

The cards themselves show the healthcare provider or organization’s logo and branding at the top, followed by the person’s name, date of birth and other relevant information, like the vaccine manufacturer or date of shot or test. According to a support document, healthcare providers or organizations could alert users to the ability to download their card via email, text, or through a mobile website or app.

In an example photo, Google showed the COVID-19 Vaccination Card from Healthvana, a company that serves L.A. County, However, it didn’t provide any other information about which healthcare providers are interested in or planning to adopt the new technology. Reached for comment, Google says there are some other big partners and states in the pipeline, but it doesn’t have permission to share those names at this time. Over the next few weeks, some of these names will be released, we understand.

The Passes API update doesn’t mean Android users can immediately create digital versions of their COVID vaccination cards — something people have been taking pictures of as a means of backup or, unfortunately in some cases, laminating it. (That’s not advised, however, as the card is meant to be used again for recording booster shots.)

Rather, the update is about giving developers the ability to begin building tools to export the data they have in their own systems about people’s COVID tests and vaccinations to a local digital card on Android devices. To what extent these digital cards will become broadly available to end users will depend on developer adoption.

For the feature to work, the Android device needs to run Android 5 or later and it will need to be Play Protect certified, which is a licensing program that ensures the device is running real Google apps. Users will also need to set a lock screen on their device for additional security.

Google says the update will initially roll out in the U.S., followed by other countries.

The U.S. is behind other markets in making digital versions of vaccination cards possible. Today, the EU’s COVID certificate, which shows an individual’s vaccination status, test results or recovery status from COVID-19, went live. The certificate (EUDCC) will be recognized by all EU members and will aid with cross-border travel. Israel released a vaccine passport earlier this year that allows vaccinated people to show their “green pass” at places that require vaccinations. Japan aims to have vaccination passports ready by the end of July for international travel.

In the U.S., only a few states have active vaccine certification apps. Many others have either outright banned vaccine passports — which has become a politically loaded term — or are considering doing so.

Given this context, Google’s digital vaccination card is just that — a digital copy of a paper card. It’s not tied to any other government initiatives nor is it a “vaccine passport.”

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