#USA Subscription platform Substack adds podcast support

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Substack started out by providing individual writers and publishers with a set of tools enabling them to charge a subscription fee for their newsletters. Now it’s giving them the ability to do the same thing with podcasts.

In fact, Morgan Creek Digital Assets founder Anthony “Pomp” Pompliano is already using the platform to introduce a daily podcast to complement his existing, crypto-focused Off the Chain newsletter.

“We’ve always thought the magic of what Substack is doing is the fact that we’re disintermediating the people creating stuff and the people who are consuming it — you are the brand they’re paying for,” Substack CEO Chris Best told me. “That whole model works incredibly well for newsletters, and to us, there’s no reason why it wouldn’t be a great model for podcast content.”

Substack’s podcasting capabilities will allow publishers to either offer a podcast-specific subscription — or, like Pompliano, to include it as part of a broader package with their newsletter subscription. The podcast itself will be distributed through an audio player that can be embedded in both newsletters and on the web.

A web-based audio player might seem like a clunky way to listen to podcasts, but Substack’s player (which you can try out here) works pretty smoothly and includes features like the ability to jump backward and forward 30 seconds, and to play podcasts at various speeds.

Substack audio

Best added that he’s also open to the idea of creating a private, subscriber-only feed that can be accessed by podcast apps.

“We’re going to put it out there and see what people want,” he said. But he argued that the “existing feed-based podcast system” is “not living up to its potential” when it comes to enabling podcasters to make money from subscriptions.

We spoke shortly after Spotify announced that it was acquiring podcast companies Gimlet and Anchor, which Best said illustrates the importance of a tool like Substack, because it’s focused on “empowering individuals”: “We let people get paid directly by people, rather than aggregated into a wider system.”

I also brought up the patronage model for supporting content creators enabled by Patreon (which is currently how I support one of my favorite podcasts).

“We definitely think the world is big enough for both of those things,” Best replied. While he expressed admiration for the Patreon model, he argued, “There’s also room for another kind of thing, where you say, ‘Hey, I’m doing this professionally, it’s my job, I do a good job with it and you should pay for it.’”

And Best doesn’t intend to stop with newsletters and podcasts. There are plans to support other media formats, although the exact timing will depend on Substack’s customers.

“We are hyper-focused on serving the authors that we’re working with,” he said. “The timing tends to depend on when we find people that want to do it. Why we did the podcast thing now [comes from] Pomp wanting to do it now.”

from Startups – TechCrunch https://tcrn.ch/2BmAUoA

#USA Interior Define and Monica + Andy collaborate to make children’s furniture

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It isn’t super common to find two entrepreneurs in one marriage, especially two entrepreneurs that want to work together. But married couple Rob and Monica Royer are making it happen with a new collaboration between Interior Define and Monica + Andy.

Interior Define, founded by Rob Royer and Steve McClearn, looks to offer super customizable, high-quality furniture at an affordable price point. Users can pick the style of their furniture, the materials used, and even specify dimensions to ensure that their stuff fits perfectly in their space.

Monica + Andy, on the other hand, was founded by Monica Royer and Brian Bloom, launched in 2014 to provide high-quality baby and children’s apparel, all of which is made with Global Organic Textile Standard certified cotton. Both Interior Define and Monica + Andy are digitally native brands, but both have various physical guide shops across the country.

One of Monica + Andy’s claims to fame is the brand’s limited edition prints. With that in mind, Monica and Rob Royer hatched a plan to collaborate on child-sized furniture using fun Monica + Andy prints. The children’s furniture is real furniture, shrunken down, according to Rob Royer. However, the slip covers are 100 percent washable to ensure that kids can still play happily without completely destroying the furniture in the play room.

“To be brutally honest, working together as married, founding CEOs is probably a really bad idea and I do not recommend trying this yourself,” said Monica Royer with a laugh. “But we stumbled into it with this idea, and we’re incredibly passionate about the brands we’ve created. And we have a unique understanding of each other, both as partners, but also as fellow founding CEOs.”

Rob and Monica said that part of the reason the collaboration made sense is because of the faith they have in their teams to execute.

“We both have fantastic teams,” said Rob Royer. “Teams are the ones that do all of the great work. We came to the table with an idea and our teams were the ones who really executed on the vision.”

The children’s furniture, which includes chairs, loveseats, couches and even sectionals, will be sold through the Interior Define website, but Monica + Andy will be selling extra throw pillows through the M+A website.

“We cut our teeth on children’s apparel,” said Monica Royer. “To expand into additional product categories is a unique opportunity for us in general, but it’s made better by working with a brand that aligns from a customer experience, aesthetic, and team perspective.”

from Startups – TechCrunch https://tcrn.ch/2MR7Ry3

#USA Gong.io nabs $40M investment to enhance CRM with voice recognition

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With traditional CRM tools, sales people add basic details about the companies to the database, then a few notes about their interactions. AI has helped automate some of that, but Gong.io wants to take it even further using voice recognition to capture every word of every interaction. Today, it got a $40M Series B investment.

The round was led by Battery Ventures with existing investors Norwest Venture Partners, Shlomo Kramer, Wing Venture Capital, NextWorld Capital and Cisco Investments also participating. Battery general partner Dharmesh Thakker will join the startup’s Board under the terms of the deal. Today’s investment brings the total raised so far to $68 million, according to the company.

$40 million is a hefty Series B, but investors see a tool that has the potential to have a material impact on sales, or at least give management a deeper understanding of why a deal succeeded or failed using artificial intelligence, specifically natural language processing.

Company co-founder and CEO Amit Bendov says the solution starts by monitoring all customer-facing conversation and giving feedback in a fully automated fashion. “Our solution uses AI to extract important bits out of the conversation to provide insights to customer-facing people about how they can get better at what they do, while providing insights to management about how staff is performing,” he explained. It takes it one step further by offering strategic input like how your competitors are trending or how are customers responding to your products.

Screenshot: Gong.io

Bendov says he started the company because he has had this experience at previous startups where he wants to know more about why he lost a sale, but there was no insight from looking at the data in the CRM database. “CRM could tell you what customers you have, how many sales you’re making, who is achieving quota or not, but never give me the information to rationalize and improve operations,” he said.

The company currently has 350 customers, a number that has more than tripled since the end of 2017 when it had 100. He says it’s not only that it’s adding new customers, existing ones are expanding, and he says that there is almost zero churn.

Today, Gong has 120 employees with headquarters in San Francisco and a 55-person R&D team in Israel. Bendov expects the number of employees to double over the next year with the new influx of money to keep up with the customer growth.

from Startups – TechCrunch https://tcrn.ch/2MV4QNg

#USA Deepomatic raises $6.2 million for its industrial computer vision technology

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French startup Deepomatic just raised a new funding round of $5.1 million in equity funding and $1.1 million in debt. Hi Inov is leading the round, with Alven Capital and Bertrand Diard also participating.

Deepomatic lets you build your own computer vision applications for your industrial needs. The company gives you all the tools to train a model and connect it to your video feeds. You can then deploy your new shiny service at the edge or on your own infrastructure, wherever you need it. You remain in control of your data.

After that, you can integrate that brick with the rest of your infrastructure using API calls. With such a low barrier to entry, it takes you around three months to deploy Deepomatic.

And it’s already working quite well for some companies. For instance, Compass Group is using it in some of its cafeterias. Instead of waiting in line for the cashier when your food is getting cold on your tray, you can simply pass your tray in front of a camera.

The camera will take a photo of your food and automatically recognize what you got — it works pretty much like Amazon Go. There’s no QR code, no RFID tags. There are 15,000 people using this system every day already.

Belron, the company behind Carglass, Autoglass, Safelite and other vehicle glass repair shops, is also using Deepomatic. Employees can take a photo of a broken windshield with a coin for scale, and the service will tell you the next steps — replacing the windshield, fixing it with resin, etc.

Parking company Indigo is also leveraging Deepomatic’s technology for its security cameras. In addition to traditional CCTV, security cameras can detect if someone is acting suspicious based on various factors — Indigo is keeping those factors confidential so that people can’t defeat the system.

Deepomatic customers pay annual subscription fees like other enterprise software solutions. The startup is going to focus on energy, transportation and infrastructure companies at first.

This is quite a departure from Deepomatic’s first product. The company started with a sort of ‘Shazam for fashion’ using computer vision. “Shopping and retail weren’t in our DNA, we are engineers,” co-founder and CEO Augustin Marty told me.

With today’s funding round, the company is opening a new office in New York to focus on the American market. Deepomatic currently has 20 clients but could quickly become an essential technological brick for many big companies.

from Startups – TechCrunch https://tcrn.ch/2Sf146Z

#USA Car subscription service Cluno scores $28M in Series B funding led by Peter Thiel’s Valar Ventures

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Cluno, the Munich startup providing what it calls a “car subscription” service, has raised $28 million in Series B funding. The round is led by Valar Ventures, the U.S.-based venture capital firm founded by Peter Thiel.

Acton Capital Partners and Atlantic Labs, which both backed the company’s Series A round, also participated. It brings total raised by Cluno to $36 million in funding in under one year.

Founded in 2017 by the same team behind easyautosale (which exited to Autoscout24 in 2015), Cluno offers an alternative to car ownership or a more restrictive lease by enabling you to subscribe to a car for an all-inclusive monthly fee. Available in Germany only, you book your car online or via the Cluno app, with the monthly fee covering all costs except fuel. After a minimum term of six months, subscribers can return or switch their car with three months notice.

Cluno says it will use the additional capital to further accelerate the company’s growth and to invest in its technology. This sees bookings, as well as credit checks and signatures, all carried out paperlessly via the Cluno app. In terms of car choice, the startup offers almost 50 models from nine different car companies, including BMW, VW, Audi and Ford. Models span small cars to SUVs, including hybrid and electric vehicles.

“Cluno is a full-stack provider,” is how Cluno co-founder and CEO Nico Polleti frames the company. “We control the whole value chain”. This, he tells me, includes doing solvency checks, scoring, buying and financing the cars, analysing and estimating residual values, insurance, and more. “One of the VCs I spoke to said Cluno is 50 percent mobility and 50 percent fintech,” he says. “We invest time and money in structured financing to buy more Cluno cars and make more customers happy”.

The Cluno team is now 55 strong and will grow to around 85 by the end of the year. In particular, Cluno is hiring tech, finance and marketing people based at its office in Munich. The product roadmap still has a way to go, too.

“At the moment, the app only allows you to subscribe to a car out of the predefined Cluno portfolio,” explains Polleti. “[The] next step will be the Cluno app giving access to dealer stock via an API”. This will see Cluno form partnerships with dealers and OEMs to grow the supply side of its offering.

from Startups – TechCrunch https://tcrn.ch/2UNMBvT

#USA The plot to revive Mt. Gox and repay victims’ Bitcoin

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It was the Lehman Brothers of blockchain. 850,000 Bitcoin disappeared when cryptocurrency exchange Mt. Gox imploded in 2014 after a series of hacks. The incident cemented the industry’s reputation as frighteningly insecure. Now a controversial crypto celebrity named Brock Pierce is trying to get the Mt. Gox flameout’s 24,000 victims their money back and build a new company from the ashes.

Pierce spoke to TechCrunch for the first interview about Gox Rising — his plan to reboot the Mt. Gox brand and challenge Coinbase and Binance for the title of top cryptocurrency exchange. He claims there’s around $630 million and 150,000 Bitcoin are waiting in the Mt. Gox bankruptcy trust, and Pierce wants to solve the legal and technical barriers to getting those assets distributed back to their rightful owners.

The consensus from several blockchain startup CEOs I spoke with was that the plot is “crazy”, but that it also has the potential to right one of the biggest wrongs marring the history of Bitcoin.

The Fall Of Mt. Gox

The story starts with Magic: The Gathering. Mt. Gox launched in 2006 as a place for players of the fantasy card game to trade monsters and spells before cryptocurrency came of age. The Magic: The Gathering Online eXchange wasn’t designed to safeguard huge quantities of Bitcoin from legions of hackers, but founder Jed McCaleb pivoted the site to do that in 2010. Seeking to focus on other projects, he gave 88 percent of the company to French software engineer Mark Karpeles, and kept 12 percent. By 2013, the Tokyo-based Mt. Gox had become the world’s leading cryptocurrency exchange, handling 70 percent of all Bitcoin trades. But security breaches, technology problems, and regulations were already plaguing the service.

Then everything fell apart. In February 2014, Mt. Gox halted withdrawls due to what it called a bug in Bitcoin, trapping assets in user accounts. Mt. Gox discovered that it had lost over 700,000 Bitcoins due to theft over the past few years. By the end of the month, it had suspended all trading and filed for bankruptcy protection, which would contribute to a 36 percent decline in Bitcoin’s price. It admitted that 100,000 of its own Bitcoin atop 750,000 owned by customers had been stolen.

Mt. Gox is now undergoing bankruptcy rehabilitation in Japan overseen by court-appointed trustee and veteran bankruptcy lawyer Nobuaki Kobayashi to establish a process for compensating the 24,000 victims who filed claims. There’s now 137,892 Bitcoin, 162,106 Bitcoin Cash, and some other forked coins in Mt. Gox’s holdings, along with $630 million cash from the sale of 25 percent of the Bitcoin that Kobayashi handled at a precient price point above where it is today. But five years later, creditors still haven’t been paid back. 

A Rescue Attempt

Brock Pierce, the eccentric crypto celebrity

Pierce had actually tried to acquire Mt. Gox in 2013. The child actor known from The Mighty Ducks had gone on to work with a talent management company called Digital Entertainment Network. But accusations of sex crimes led Pierce and some team members to flee the US to Spain until they were extradited back. Pierce wasn’t charged and paid roughly $21,000 to settle civil suits, but his cohorts were convicted of child molestation and child pornography.

The situation still haunts Pierce’s reputation and makes some in the industry apprehensive to be associated with him. But he managed to break into the virtual currency business, setting up World Of Warcraft gold mining farms in China. He claims to have eventually run the world’s largest exchanges for WOW Gold and Second Life Linden Dollars.

Soon Pierce was becoming a central figure in the blockchain scene. He co-founded Blockchain Capital, and eventually the EOS Alliance as well as a “crypto utopia” in Puerto Rico called Sol. His eccentric, Burning Man-influenced fashion made him easy to spot at the industry’s many conferences.

As Bitcoin and Mt. Gox rose in late 2012, Pierce tried to buy it, but “my biggest investor was Goldman Sachs. Goldman was not a fan of me buying the biggest Bitcoin exchange” due to the regulatory issues, Pierce tells me. But he also suspected the exchange was built on a shaky technical foundation that led him to stop pursuing the deal. “I thought there was a big risk factor in the Mt. Gox back-end. That was may intuition and I’m glad I was because my intuition was dead right.”

After Mt. Gox imploded, Pierce claims his investment group Sunlot Holdings successfully bought founder McCaleb’s 12 percent stake for 1 Bitcoin, though McCaleb says he didn’t receive the Bitcoin and it’s not clear if the deal went through. Pierce also claims he had a binding deal with Karpeles to buy the other 88 percent of Mt. Gox, but that Karpeles tried to pull out of the deal that remains in legal limbo.

The Supposed Villain

The Sunlot has since been trying to handle the bankruptcy proceedings, but that arrangement was derailed by a lawsuit from CoinLab. That company had partnered with Mt. Gox to run its North American operations but claimed it never received the necessary assets, and sued Mt. Gox for $75 million, though Mt. Gox countersued saying CoinLab wasn’t legally certified to run the exchange in the US and that it hadn’t returned $5.3 million in customer deposits. For a detailed account the tangle of lawsuits, check out Reuters’ deep-dive into the Mt. Gox fiasco.

CoinLab co-founder Peter Vessenes

This week, CoinLab co-founder Peter Vessenes increased the claim and is now seeking $16 billion. Pierce alleges “this is a frivolous lawsuit. He’s claiming if [the partnership with Mt. Gox] hadn’t been cancelled, CoinLab would have been Coinbase and is suing for all the value. He believes Coinbase is worth $16 billion so he should be paid $16 billion. He embezzled money from Mt. Gox, he committed a crime, and he’s trying to extort the creditors. He’s holding up the entire process hoping he’ll get a payday.” Later, Pierce reiterated that “Coinlab is the villain trying to take all the money and see creditors get nothing.” Industry sources I spoke to agreed with that characterization

Mt. Gox customers worried that they might only receive the cash equivalent of their Bitcoin according to the currency’s $486 value when Gox closed in 2014. That’s despite the rise in Bitcoin’s value rising to around 7X that today, and as high as 40X at the currency’s peak. Luckily, in June 2018 a Japanese District Court halted bankruptcy proceedings and sent Mt. Gox into civil rehabilitation which means the company’s assets would be distributed to its creditors (the users) instead of liquidated. It also declared that users would be paid back their lost Bitcoin rather than the old cash value.

The Plan For Gox Rising

Now Pierce and Sunlot are attempting another rescue of Mt. Gox’s  $1.2 billion assets. He wants to track down the remaining cryptocurrency that’s missing, have it all fairly valued, and then distribute the maximum amount to the robbed users with Mt. Gox equity shareholders including himself receiving nothing.

That’s a much better deal for creditors than if Mt. Gox paid out the undervalued sum, and then shareholders like Pierce got to keep the remaining Bitcoins or proceeds of their sale at today’s true value. “I‘ve been very blessed in my life. I did commit to giving my first billion away” Pierce notes, joking that this plan could account for the first $700 million he plans to ‘donate’.

“Like Game Of Thrones, the last season of Mt. Gox hasn’t been written” Pierce tells me, speaking in terms HBO’s Silicon Valley would be quick to parody. “What kind of ending do we want to make for it? I’m a Joseph Campbell fan so I’m obviously going to go with a hero’s journey, with a rise and a fall, and then a rise from the ashes like a phoenix.”

But to make this happen, Sunlot needs at least half of those Mt. Gox users seeking compensation, or roughly 12,000 that represent the majority of assets, to sign up to join a creditors committee. That’s where GoxRising.com comes in. The plan is to have users join the committee there so they can present a united voice to Kobayashi about how they want Mt. Gox’s assets distributed. “I think that would allow the process to move faster than it would otherise. Things are on track to be resolved in the next three to five years. If [a majority of creditors sign on] this could be resolved in maybe 1 year.

Beyond providing whatever the Mt. Gox estate pays out, Pierce wants to create a Gox Coin that gives original Mt Gox creditors a stake in the new company. He plans to have all of Mt. Gox’s equity wiped out, including his own. Then he’ll arrange to finance and tokenize an independent foundation governed by the creditors that will seek to recover additional lost Mt. Gox assets and then distribute them pro rata to the Gox Coin holders. There are plenty of unanswered questions about the regulatory status of a Gox Coin and what holders would be entitled to, Pierce admits.

Meanwhile, Pierce is bidding to buy the intangibles of Mt. Gox, aka the brand and domain. He wants to then relaunch it as a Gox or Mt. Gox exchange that doesn’t provide custody itself for higher security.

“We want to offer [creditors] more than the bankruptcy trustee can do on its own” Pierce tells me. He concedes that the venture isn’t purely altruistic. “If the exchange is very successful I stand to benefit sometime down the road.” Still, he stands by his plan, even if the revived Mt. Gox never rises to legitimately challenge Binance, Coinbase, and other leading exchanges. Pierce concludes, “Whether we’re successful or not, I want to see the creditors made whole.” Those creditors will have to decide for themselves who to trust.

from Startups – TechCrunch https://tcrn.ch/2GtDcp7

#USA Tink, the European open banking platform, scores €56M in new funding

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Tink, the European open banking platform headquartered in Sweden, has deposited €56 million in new funding. Leading the round is U.S.-based Insight Venture Partners. Existing backers Sunstone, SEB, Nordea Ventures and ABN AMRO Digital Impact Fund also participated.

A number of other investors have been added to Tink’s cap table, too. They include Christian Clausen, former Chairman of the European Banking Federation, and — most notably — Nikolay Storonsky, co-founder of banking app and fintech ‘unicorn’ Revolut. According to sources, the new round of funding gives Tink a post-money valuation of €240 million.

Originally launched in Sweden in 2013 as a consumer-facing finance app with bank account aggregation at its heart, Tink has since repositioned its offering to provide the same underlying technology and more to banks and other financial service providers who want to ride the open banking/PSD2 train.

Through various APIs, Tink provides four pillars of technology: “Account Aggregation,” “Payment Initiation,” “Personal Finance Management” and “Data Enrichment”. These can be used by third parties to roll their own standalone apps or integrated into existing banking applications.

To that end, Tink says its developer platform is launching in five new markets, significantly boosting the fintech’s European coverage. They are U.K., Austria, Germany, Belgium and Spain, adding to the company’s Nordics base and bringing the total number of markets to nine countries.

Armed with new capital, Tink says the plan is to get to 20 markets by the end of 2019, targeting a range of customers “from big banks to individual developers”. In other words, the aim is to become a truly pan-European open banking platform. To help with this, headcount will increase significantly.

As it stands, Tink employs 150 people at its Stockholm headquarters, and recently opened an office in London. It plans to establish four more offices this year, doubling its European team to around 300. Customers include SEB, ABN AMRO, BNP Paribas Fortis, Nordea and Klarna.

Cue statement from Daniel Kjellén, co-founder and CEO, of Tink: “This funding round allows us to accelerate our European roll-out but also invest further in our data services. As Europe gradually embraces open banking, our platform has proved to be its rails and brains – delivering the technology that makes it possible. We attribute our success to being the first platform provider to combine account aggregation and payment initiation, the scale of our connectivity and our smart data products that make it all understandable”.

That’s not to say that Tink isn’t without competition, even if open banking/PSD2 feels like a bronze stroll rather than a gold rush so far, although things are definitely starting to heat up. Other fintechs in the space with overlapping products include Bud (which is backed by a host of banks, including HSBC), Meniga, and upstart TrueLayer.

from Startups – TechCrunch https://tcrn.ch/2RJH0on

#USA Fabula AI is using social spread to spot ‘fake news’

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UK startup Fabula AI reckons it’s devised a way for artificial intelligence to help user generated content platforms get on top of the disinformation crisis that keeps rocking the world of social media with antisocial scandals.

Even Facebook’s Mark Zuckerberg has sounded a cautious note about AI technology’s capability to meet the complex, contextual, messy and inherently human challenge of correctly understanding every missive a social media user might send, well-intentioned or its nasty flip-side.

“It will take many years to fully develop these systems,” the Facebook founder wrote two years ago, in an open letter discussing the scale of the challenge of moderating content on platforms thick with billions of users. “This is technically difficult as it requires building AI that can read and understand news.”

But what if AI doesn’t need to read and understand news in order to detect whether it’s true or false?

Step forward Fabula, which has patented what it dubs a “new class” of machine learning algorithms to detect “fake news” — in the emergent field of “Geometric Deep Learning”; where the datasets to be studied are so large and complex that traditional machine learning techniques struggle to find purchase on this ‘non-Euclidean’ space.

The startup says its deep learning algorithms are, by contrast, capable of learning patterns on complex, distributed data sets like social networks. So it’s billing its technology as a breakthrough. (Its written a paper on the approach which can be downloaded here.)

It is, rather unfortunately, using the populist and now frowned upon badge “fake news” in its PR. But it says it’s intending this fuzzy umbrella to refer to both disinformation and misinformation. Which means maliciously minded and unintentional fakes. Or, to put it another way, a photoshopped fake photo or a genuine image spread in the wrong context.

The approach it’s taking to detecting disinformation relies not on algorithms parsing news content to try to identify malicious nonsense but instead looks at how such stuff spreads on social networks — and also therefore who is spreading it.

There are characteristic patterns to how ‘fake news’ spreads vs the genuine article, says Fabula co-founder and chief scientist, Michael Bronstein.

“We look at the way that the news spreads on the social network. And there is — I would say — a mounting amount of evidence that shows that fake news and real news spread differently,” he tells TechCrunch, pointing to a recent major study by MIT academics which found ‘fake news’ spreads differently vs bona fide content on Twitter.

“The essence of geometric deep learning is it can work with network-structured data. So here we can incorporate heterogenous data such as user characteristics; the social network interactions between users; the spread of the news itself; so many features that otherwise would be impossible to deal with under machine learning techniques,” he continues.

Bronstein, who is also a professor at Imperial College London, with a chair in machine learning and pattern recognition, likens the phenomenon Fabula’s machine learning classifier has learnt to spot to the way infectious disease spreads through a population.

“This is of course a very simplified model of how a disease spreads on the network. In this case network models relations or interactions between people. So in a sense you can think of news in this way,” he suggests. “There is evidence of polarization, there is evidence of confirmation bias. So, basically, there are what is called echo chambers that are formed in a social network that favor these behaviours.”

“We didn’t really go into — let’s say — the sociological or the psychological factors that probably explain why this happens. But there is some research that shows that fake news is akin to epidemics.”

The tl;dr of the MIT study, which examined a decade’s worth of tweets, was that not only does the truth spread slower but also that human beings themselves are implicated in accelerating disinformation. (So, yes, actual human beings are the problem.) Ergo, it’s not all bots doing all the heavy lifting of amplifying junk online.

The silver lining of what appears to be an unfortunate quirk of human nature is that a penchant for spreading nonsense may ultimately help give the stuff away — making a scalable AI-based tool for detecting ‘BS’ potentially not such a crazy pipe-dream.

Although, to be clear, Fabula’s AI remains in development at this stage, having been tested internally on Twitter data sub-sets at this stage. And the claims it’s making for its prototype model remain to be commercially tested with customers in the wild using the tech across different social platforms.

It’s hoping to get there this year, though, and intends to offer an API for platforms and publishers towards the end of this year. The AI classifier is intended to run in near real-time on a social network or other content platform, identifying BS.

Fabula envisages its own role, as the company behind the tech, as that of an open, decentralised “truth-risk scoring platform” — akin to a credit referencing agency just related to content, not cash.

Scoring comes into it because the AI generates a score for classifying content based on how confident it is it’s looking at a piece of fake vs true news.

A visualisation of a fake vs real news distribution pattern; users who predominantly share fake news are coloured red and users who don’t share fake news at all are coloured blue — which Fabula says shows the clear separation into distinct groups, and “the immediately recognisable difference in spread pattern of dissemination”.

In its own tests Fabula says its algorithms were able to identify 93 percent of “fake news” within hours of dissemination — which Bronstein claims is “significantly higher” than any other published method for detecting ‘fake news’. (Their accuracy figure uses a standard aggregate measurement of machine learning classification model performance, called ROC AUC.)

The dataset the team used to train their model is a subset of Twitter’s network — comprised of around 250,000 users and containing around 2.5 million “edges” (aka social connections).

For their training dataset Fabula relied on true/fake labels attached to news stories by third party fact checking NGOs, including Snopes and PolitiFact. And, overall, pulling together the dataset was a process of “many months”, according to Bronstein, He also says that around a thousand different stories were used to train the model, adding that the team is confident the approach works on small social networks, as well as Facebook-sized mega-nets.

Asked whether he’s sure the model hasn’t been trained to identified patterns caused by bot-based junk news spreaders, he says the training dataset included some registered (and thus verified ‘true’) users.

“There is multiple research that shows that bots didn’t play a significant amount [of a role in spreading fake news] because the amount of it was just a few percent. And bots can be quite easily detected,” he also suggests, adding: “Usually it’s based on some connectivity analysis or content analysis. With our methods we can also detect bots easily.”

To further check the model, the team tested its performance over time by training it on historical data and then using a different split of test data.

“While we see some drop in performance it is not dramatic. So the model ages well, basically. Up to something like a year the model can still be applied without any re-training,” he notes, while also saying that, when applied in practice, the model would be continually updated as it keeps digesting (ingesting?) new stories and social media content.

Somewhat terrifyingly, the model could also be used to predict virality, according to Bronstein — raising the dystopian prospect of the API being used for the opposite purpose to that which it’s intended: i.e. maliciously, by fake news purveyors, to further amp up their (anti)social spread.

“Potentially putting it into evil hands it might do harm,” Bronstein concedes. Though he takes a philosophical view on the hyper-powerful double-edged sword of AI technology, arguing such technologies will create an imperative for a rethinking of the news ecosystem by all stakeholders, as well as encouraging emphasis on user education and teaching critical thinking.

Let’s certainly hope so. And, on the educational front, Fabula is hoping its technology can play an important role — by spotlighting network-based cause and effect.

“People now like or retweet or basically spread information without thinking too much or the potential harm or damage they’re doing to everyone,” says Bronstein, pointing again to the infectious diseases analogy. “It’s like not vaccinating yourself or your children. If you think a little bit about what you’re spreading on a social network you might prevent an epidemic.”

So, tl;dr, think before you RT.

Returning to the accuracy rate of Fabula’s model, while ~93 per cent might sound pretty impressive, if it were applied to content on a massive social network like Facebook — which has some 2.3BN+ users, uploading what could be trillions of pieces of content daily — even a seven percent failure rate would still make for an awful lot of fakes slipping undetected through the AI’s net.

But Bronstein says the technology does not have to be used as a standalone moderation system. Rather he suggests it could be used in conjunction with other approaches such as content analysis, and thus function as another string on a wider ‘BS detector’s bow.

It could also, he suggests, further aid human content reviewers — to point them to potentially problematic content more quickly.

Depending on how the technology gets used he says it could do away with the need for independent third party fact-checking organizations altogether because the deep learning system can be adapted to different use cases.

Example use-cases he mentions include an entirely automated filter (i.e. with no human reviewer in the loop); or to power a content credibility ranking system that can down-weight dubious stories or even block them entirely; or for intermediate content screening to flag potential fake news for human attention.

Each of those scenarios would likely entail a different truth-risk confidence score. Though most — if not all — would still require some human back-up. If only to manage overarching ethical and legal considerations related to largely automated decisions. (Europe’s GDPR framework has some requirements on that front, for example.)

Facebook’s grave failures around moderating hate speech in Myanmar — which led to its own platform becoming a megaphone for terrible ethnical violence — were very clearly exacerbated by the fact it did not have enough reviewers who were able to understand (the many) local languages and dialects spoken in the country.

So if Fabula’s language-agnostic propagation and user focused approach proves to be as culturally universal as its makers hope, it might be able to raise flags faster than human brains which lack the necessary language skills and local knowledge to intelligently parse context.

“Of course we can incorporate content features but we don’t have to — we don’t want to,” says Bronstein. “The method can be made language independent. So it doesn’t matter whether the news are written in French, in English, in Italian. It is based on the way the news propagates on the network.”

Although he also concedes: “We have not done any geographic, localized studies.”

“Most of the news that we take are from PolitiFact so they somehow regard mainly the American political life but the Twitter users are global. So not all of them, for example, tweet in English. So we don’t yet take into account tweet content itself or their comments in the tweet — we are looking at the propagation features and the user features,” he continues.

“These will be obviously next steps but we hypothesis that it’s less language dependent. It might be somehow geographically varied. But these will be already second order details that might make the model more accurate. But, overall, currently we are not using any location-specific or geographic targeting for the model.

“But it will be an interesting thing to explore. So this is one of the things we’ll be looking into in the future.”

Fabula’s approach being tied to the spread (and the spreaders) of fake news certainly means there’s a raft of associated ethical considerations that any platform making use of its technology would need to be hyper sensitive to.

For instance, if platforms could suddenly identify and label a sub-set of users as ‘junk spreaders’ the next obvious question is how will they treat such people?

Would they penalize them with limits — or even a total block — on their power to socially share on the platform? And would that be ethical or fair given that not every sharer of fake news is maliciously intending to spread lies?

What if it turns out there’s a link between — let’s say — a lack of education and propensity to spread disinformation? As there can be a link between poverty and education… What then? Aren’t your savvy algorithmic content downweights risking exacerbating existing unfair societal divisions?

Bronstein agrees there are major ethical questions ahead when it comes to how a ‘fake news’ classifier gets used.

“Imagine that we find a strong correlation between the political affiliation of a user and this ‘credibility’ score. So for example we can tell with hyper-ability that if someone is a Trump supporter then he or she will be mainly spreading fake news. Of course such an algorithm would provide great accuracy but at least ethically it might be wrong,” he says when we ask about ethics.

He confirms Fabula is not using any kind of political affiliation information in its model at this point — but it’s all too easy to imagine this sort of classifier being used to surface (and even exploit) such links.

“What is very important in these problems is not only to be right — so it’s great of course that we’re able to quantify fake news with this accuracy of ~90 percent — but it must also be for the right reasons,” he adds.

The London-based startup was founded in April last year, though the academic research underpinning the algorithms has been in train for the past four years, according to Bronstein.

The patent for their method was filed in early 2016 and granted last July.

They’ve been funded by $500,000 in angel funding and about another $500,000 in total of European Research Council grants plus academic grants from tech giants Amazon, Google and Facebook, awarded via open research competition awards.

(Bronstein confirms the three companies have no active involvement in the business. Though doubtless Fabula is hoping to turn them into customers for its API down the line. But he says he can’t discuss any potential discussions it might be having with the platforms about using its tech.)

Focusing on spotting patterns in how content spreads as a detection mechanism does have one major and obvious drawback — in that it only works after the fact of (some) fake content spread. So this approach could never entirely stop disinformation in its tracks.

Though Fabula claims detection is possible within a relatively short time frame — of between two and 20 hours after content has been seeded onto a network.

“What we show is that this spread can be very short,” he says. “We looked at up to 24 hours and we’ve seen that just in a few hours… we can already make an accurate prediction. Basically it increases and slowly saturates. Let’s say after four or five hours we’re already about 90 per cent.”

“We never worked with anything that was lower than hours but we could look,” he continues. “It really depends on the news. Some news does not spread that fast. Even the most groundbreaking news do not spread extremely fast. If you look at the percentage of the spread of the news in the first hours you get maybe just a small fraction. The spreading is usually triggered by some important nodes in the social network. Users with many followers, tweeting or retweeting. So there are some key bottlenecks in the network that make something viral or not.”

A network-based approach to content moderation could also serve to further enhance the power and dominance of already hugely powerful content platforms — by making the networks themselves core to social media regulation, i.e. if pattern-spotting algorithms rely on key network components (such as graph structure) to function.

So you can certainly see why — even above a pressing business need — tech giants are at least interested in backing the academic research. Especially with politicians increasingly calling for online content platforms to be regulated like publishers.

At the same time, there are — what look like — some big potential positives to analyzing spread, rather than content, for content moderation purposes.

As noted above, the approach doesn’t require training the algorithms on different languages and (seemingly) cultural contexts — setting it apart from content-based disinformation detection systems. So if it proves as robust as claimed it should be more scalable.

Though, as Bronstein notes, the team have mostly used U.S. political news for training their initial classifier. So some cultural variations in how people spread and react to nonsense online at least remains a possibility.

A more certain challenge is “interpretability” — aka explaining what underlies the patterns the deep learning technology has identified via the spread of fake news.

While algorithmic accountability is very often a challenge for AI technologies, Bronstein admits it’s “more complicated” for geometric deep learning.

“We can potentially identify some features that are the most characteristic of fake vs true news,” he suggests when asked whether some sort of ‘formula’ of fake news can be traced via the data, noting that while they haven’t yet tried to do this they did observe “some polarization”.

“There are basically two communities in the social network that communicate mainly within the community and rarely across the communities,” he says. “Basically it is less likely that somebody who tweets a fake story will be retweeted by somebody who mostly tweets real stories. There is a manifestation of this polarization. It might be related to these theories of echo chambers and various biases that exist. Again we didn’t dive into trying to explain it from a sociological point of view — but we observed it.”

So while, in recent years, there have been some academic efforts to debunk the notion that social media users are stuck inside filter bubble bouncing their own opinions back at them, Fabula’s analysis of the landscape of social media opinions suggests they do exist — albeit, just not encasing every Internet user.

Bronstein says the next steps for the startup is to scale its prototype to be able to deal with multiple requests so it can get the API to market in 2019 — and start charging publishers for a truth-risk/reliability score for each piece of content they host.

“We’ll probably be providing some restricted access maybe with some commercial partners to test the API but eventually we would like to make it useable by multiple people from different businesses,” says requests. “Potentially also private users — journalists or social media platforms or advertisers. Basically we want to be… a clearing house for news.”

from Startups – TechCrunch https://tcrn.ch/2GedEgz

#USA How students are founding, funding and joining startups

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There has never been a better time to start, join or fund a startup as a student. 

Young founders who want to start companies while still in school have an increasing number of resources to tap into that exist just for them. Students that want to learn how to build companies can apply to an increasing number of fast-track programs that allow them to gain valuable early stage operating experience. The energy around student entrepreneurship today is incredible. I’ve been immersed in this community as an investor and adviser for some time now, and to say the least, I’m continually blown away by what the next generation of innovators are dreaming up (from Analytical Space’s global data relay service for satellites to Brooklinen’s reinvention of the luxury bed).

Bill Gates in 1973

First, let’s look at student founders and why they’re important. Student entrepreneurs have long been an important foundation of the startup ecosystem. Many students wrestle with how best to learn while in school —some students learn best through lectures, while more entrepreneurial students like author Julian Docks find it best to leave the classroom altogether and build a business instead.

Indeed, some of our most iconic founders are Microsoft’s Bill Gates and Facebook’s Mark Zuckerberg, both student entrepreneurs who launched their startups at Harvard and then dropped out to build their companies into major tech giants. A sample of the current generation of marquee companies founded on college campuses include Snap at Stanford ($29B valuation at IPO), Warby Parker at Wharton (~$2B valuation), Rent The Runway at HBS (~$1B valuation), and Brex at Stanford (~$1B valuation).

Some of today’s most celebrated tech leaders built their first ventures while in school — even if some student startups fail, the critical first-time founder experience is an invaluable education in how to build great companies. Perhaps the best example of this that I could find is Drew Houston at Dropbox (~$9B valuation at IPO), who previously founded an edtech startup at MIT that, in his words, provided a: “great introduction to the wild world of starting companies.”

Student founders are everywhere, but the highest concentration of venture-backed student founders can be found at just 5 universities. Based on venture fund portfolio data from the last six years, Harvard, Stanford, MIT, UPenn, and UC Berkeley have produced the highest number of student-founded companies that went on to raise $1 million or more in seed capital. Some prospective students will even enroll in a university specifically for its reputation of churning out great entrepreneurs. This is not to say that great companies are not being built out of other universities, nor does it mean students can’t find resources outside a select number of schools. As you can see later in this essay, there are a number of new ways students all around the country can tap into the startup ecosystem. For further reading, PitchBook produces an excellent report each year that tracks where all entrepreneurs earned their undergraduate degrees.

Student founders have a number of new media resources to turn to. New email newsletters focused on student entrepreneurship like Justine and Olivia Moore’s Accelerated and Kyle Robertson’s StartU offer new channels for young founders to reach large audiences. Justine and Olivia, the minds behind Accelerated, have a lot of street cred— they launched Stanford’s on-campus incubator Cardinal Ventures before landing as investors at CRV.

StartU goes above and beyond to be a resource to founders they profile by helping to connect them with investors (they’re active at 12 universities), and run a podcast hosted by their Editor-in-Chief Johnny Hammond that is top notch. My bet is that traditional media will point a larger spotlight at student entrepreneurship going forward.

New pools of capital are also available that are specifically for student founders. There are four categories that I call special attention to:

  • University-affiliated accelerator programs
  • University-affiliated angel networks
  • Professional venture funds investing at specific universities
  • Professional venture funds investing through student scouts

While it is difficult to estimate exactly how much capital has been deployed by each, there is no denying that there has been an explosion in the number of programs that address the pre-seed phase. A sample of the programs available at the Top 5 universities listed above are in the graphic below — listing every resource at every university would be difficult as there are so many.

One alumni-centric fund to highlight is the Alumni Ventures Group, which pools LP capital from alumni at specific universities, then launches individual venture funds that invest in founders connected to those universities (e.g. students, alumni, professors, etc.). Through this model, they’ve deployed more than $200M per year! Another highlight has been student scout programs — which vary in the degree of autonomy and capital invested — but essentially empower students to identify and fund high-potential student-founded companies for their parent venture funds. On campuses with a large concentration of student founders, it is not uncommon to find student scouts from as many as 12 different venture funds actively sourcing deals (as is made clear from David Tao’s analysis at UC Berkeley).

Investment Team at Rough Draft Ventures

In my opinion, the two institutions that have the most expansive line of sight into the student entrepreneurship landscape are First Round’s Dorm Room Fund and General Catalyst’s Rough Draft VenturesSince 2012, these two funds have operated a nationwide network of student scouts that have invested $20K — $25K checks into companies founded by student entrepreneurs at 40+ universities. “Scout” is a loose term and doesn’t do it justice — the student investors at these two funds are almost entirely autonomous, have built their own platform services to support portfolio companies, and have launched programs to incubate companies built by female founders and founders of color. Another student-run fund worth noting that has reach beyond a single region is Contrary Capital, which raised $2.2M last year. They do a particularly great job of reaching founders at a diverse set of schools — their network of student scouts are active at 45 universities and have spoken with 3,000 founders per year since getting started. Contrary is also testing out what they describe as a “YC for university-based founders”. In their first cohort, 100% of their companies raised a pre-seed round after Contrary’s demo day. Another even more recently launched organization is The MBA Fund, which caters to founders from the business schools at Harvard, Wharton, and Stanford. While super exciting, these two funds only launched very recently and manage portfolios that are not large enough for analysis just yet.

Over the last few months, I’ve collected and cross-referenced publicly available data from both Dorm Room Fund and Rough Draft Ventures to assess the state of student entrepreneurship in the United States. Companies were pulled from each fund’s portfolio page, then checked against Crunchbase for amount raised, accelerator participation, and other metrics. If you’d like to sift through the data yourself, feel free to ping me — my email can be found at the end of this article. To be clear, this does not represent the full scope of investment activity at either fund — many companies in the portfolios of both funds remain confidential and unlisted for good reasons (e.g. startups working in stealth). In fact, the In addition, data for early stage companies is notoriously variable in quality, even with Crunchbase. You should read these insights as directional only, given the debatable confidence interval. Still, the data is still interesting and give good indicators for the health of student entrepreneurship today.

Dorm Room Fund and Rough Draft Ventures have invested in 230+ student-founded companies that have gone on to raise nearly $1 billion in follow on capital. These funds have invested in a diverse range of companies, from govtech (e.g. mark43, raised $77M+ and FiscalNote, raised $50M+) to space tech (e.g. Capella Space, raised ~$34M). Several portfolio companies have had successful exits, such as crypto startup Distributed Systems (acquired by Coinbase) and social networking startup tbh (acquired by Facebook). While it is too early to evaluate the success of these funds on a returns basis (both were launched just 6 years ago), we can get a sense of success by evaluating the rates by which portfolio companies raise additional capital. Taken together, 34% of DRF and RDV companies in our data set have raised $1 million or more in seed capital. For a rough comparison, CB Insights cites that 40% of YC companies and 48% of Techstars companies successfully raise follow on capital (defined as anything above $750K). Certainly within the ballpark!

Source: Crunchbase

Dorm Room Fund and Rough Draft Ventures companies in our data set have an 11–12% rate of survivorship to Series A. As a benchmark, a previous partner at Y Combinator shared that 20% of their accelerator companies raise Series A capital (YC declined to share the official figure, but it’s likely a stat that is increasing given their new Series A support programs. For further reading, check out YC’s reflection on what they’ve learned about helping their companies raise Series A funding). In any case, DRF and RDV’s numbers should be taken with a grain of salt, as the average age of their portfolio companies is very low and raising Series A rounds generally takes time. Ultimately, it is clear that DRF and RDV are active in the earlier (and riskier) phases of the startup journey.

Dorm Room Fund and Rough Draft Ventures send 18–25% of their portfolio companies to Y Combinator or Techstars. Given YC’s 1.5% acceptance rate as reported in Fortune, this is quite significant! Internally, these two funds offer founders an opportunity to participate in mock interviews with YC and Techstars alumni, as well as tap into their communities for peer support (e.g. advice on pitch decks and application content). As a result, Dorm Room Fund and Rough Draft Ventures regularly send cohorts of founders to these prestigious accelerator programs. Based on our data set, 17–20% of DRF and RDV companies that attend one of these accelerators end up raising Series A venture financing.

Source: Crunchbase

Dorm Room Fund and Rough Draft Ventures don’t invest in the same companies. When we take a deeper look at one specific ecosystem where these two funds have been equally active over the last several years — Boston — we actually see that the degree of investment overlap for companies that have raised $1M+ seed rounds sits at 26%. This suggests that these funds are either a) seeing different dealflow or b) have widely different investment decision-making.

Source: Crunchbase

Dorm Room Fund and Rough Draft Ventures should not just be measured by a returns-basis today, as it’s too early. I hypothesize that DRF and RDV are actually encouraging more entrepreneurial activity in the ecosystem (more students decide to start companies while in school) as well as improving long-term founder outcomes amongst students they touch (portfolio founders build bigger and more successful companies later in their careers). As more students start companies, there’s likely a positive feedback loop where there’s increasing peer pressure to start a company or lean on friends for founder support (e.g. feedback, advice, etc).Both of these subjects warrant additional study, but it’s likely too early to conduct these analyses today.

Dorm Room Fund and Rough Draft Ventures have impressive alumni that you will want to track. 1 in 4 alumni partners are founders, and 29% of these founder alumni have raised $1M+ seed rounds for their companies. These include Anjney Midha’s augmented reality startup Ubiquity6 (raised $37M+), Shubham Goel’s investor-focused CRM startup Affinity (raised $13M+), Bruno Faviero’s AI security software startup Synapse (raised $6M+), Amanda Bradford’s dating app The League (raised $2M+), and Dillon Chen’s blockchain startup Commonwealth Labs (raised $1.7M). It makes sense to me that alumni from these communities that decide to start companies have an advantage over their peers — they know what good companies look like and they can tap into powerful networks of young talent / experienced investors.

Beyond Dorm Room Fund and Rough Draft Ventures, some venture capital firms focus on incubation for student-founded startups. Credit should first be given to Lightspeed for producing the amazing Summer Fellows bootcamp experience for promising student founders — after all, Pinterest was built there! Jeremy Liew gives a good overview of the program through his sit-down interview with Afterbox’s Zack Banack. Based on a study they conducted last year, 40% of Lightspeed Summer Fellows alumni are currently active founders. Pear Ventures also has an impressive summer incubator program where 85% of its companies successfully complete a fundraise. Index Ventures is the latest to build an incubator program for student founders, and even accepts founders who want to work on an idea part-time while completing a summer internship.

Let’s now look at students who want to join a startup before founding one. Venture funds have historically looked to tap students for talent, and are expanding the engagement lifecycle. The longest running programs include Kleiner Perkins’ class=”m_1196721721246259147gmail-markup–strong m_1196721721246259147gmail-markup–p-strong”> KP Fellows and True Ventures’ TEC Fellows, which focus on placing the next generation’s most promising product managers, engineers, and designers into the portfolio companies of their parent venture funds.

There’s also the secretive Greylock X, a referral-based hand-picked group of the best student engineers in Silicon Valley (among their impressive alumni are founders like Yasyf Mohamedali and Joe Kahn, the folks behind First Round-backed Karuna Health). As these programs have matured, these firms have recognized the long-run value of engaging the alumni of their programs.

More and more alumni are “coming back” to the parent funds as entrepreneurs, like KP Fellow Dylan Field of Figma (and is also hosting a KP Fellow, closing a full circle loop!). Based on their latest data, 10% of KP Fellows alumni are founders — that’s a lot given the fact that their community has grown to 500! This helps explain why Kleiner Perkins has created a structured path to receive $100K in seed funding to companies founded by KP Fellow alumni. It looks like venture funds are beginning to invest in student programs as part of their larger platform strategy, which can have a real impact over the long term (for further reading, see this analysis of platform strategy outcomes by USV’s Bethany Crystal).

KP Fellows in San Francisco

Venture funds are doubling down on student talent engagement — in just the last 18 months, 4 funds have launched student programs. It’s encouraging to see new funds follow in the footsteps of First Round, General Catalyst, Kleiner Perkins, Greylock, and Lightspeed. In 2017, Accel launched their Accel Scholars program to engage top talent at UC Berkeley and Stanford. In 2018, we saw 8VC Fellows, NEA Next, and Floodgate Insiders all launch, targeting elite universities outside of Silicon Valley. Y Combinator implemented Early Decision, which allows student founders to apply one batch early to help with academic scheduling. Most recently, at the start of 2019, First Round launched the Graduate Fund (staffed by Dorm Room Fund alumni) to invest in founders who are recent graduates or young alumni.

Given more time, I’d love to study the rates by which student founders start another company following investments from student scout funds, as well as whether or not they’re more successful in those ventures. In any case, this is an escalation in the number of venture funds that have started to get serious about engaging students — both for talent and dealflow.

Student entrepreneurship 2.0 is here. There are more structured paths to success for students interested in starting or joining a startup. Founders have more opportunities to garner press, seek advice, raise capital, and more. Venture funds are increasingly leveraging students to help improve the three F’s — finding, funding, and fixing. In my personal view, I believe it is becoming more and more important for venture funds to gain mindshare amongst the next generation of founders and operators early, while still in school.

I can’t wait to see what’s next for student entrepreneurship in 2019. If you’re interested in digging in deeper (I’m human — I’m sure I haven’t covered everything related to student entrepreneurship here) or learning more about how you can start or join a startup while still in school, shoot me a note at sxu@dormroomfund.comA massive thanks to Phin Barnes, Rei Wang, Chauncey Hamilton, Peter Boyce, Natalie Bartlett, Denali Tietjen, Eric Tarczynski, Will Robbins, Jasmine Kriston, Alicia Lau, Johnny Hammond, Bruno Faviero, Athena Kan, Shohini Gupta, Alex Immerman, Albert Dong, Phillip Hua-Bon-Hoa, and Trevor Sookraj for your incredible encouragement, support, and insight during the writing of this essay.

from Startups – TechCrunch https://tcrn.ch/2taTc7E

#USA Instacart CEO apologizes for tipping debacle

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On the heels of a recently-filed class action lawsuit over wages and tips, as well as drivers and shoppers speaking out about Instacart’s alleged practices of subsidizing wages with tips, Instacart is taking steps to ensure tips are counted separately from what Instacart pays shoppers.

In a blog post today, Instacart CEO Apoorva Mehta said all shoppers will now have a guaranteed higher base compensation, paid by Instacart. Depending on the region, Instacart says it will pay shoppers between $7 to $10 for full-service orders (shopping, picking and delivering) and $5 for delivery-only tasks. The company will also stop including tips in its base pay for shoppers.

“After launching our new earnings structure this past October, we noticed that there were small batches where shoppers weren’t earning enough for their time,” Mehta wrote. “To help with this, we instituted a $10 floor on earnings, inclusive of tips, for all batches. This meant that when Instacart’s payment and the customer tip at checkout was below $10, Instacart supplemented the difference. While our intention was to increase the guaranteed payment for small orders, we understand that the inclusion of tips as a part of this guarantee was misguided. We apologize for taking this approach.”

For the shoppers who were subject that approach, Instacart says it will retroactively pay people whose tips were included in payment minimums.

You can read the full blog post at the bottom of this post. For background, Instacart had previously guaranteed its workers at least $10 per job, but workers said Instacart offsets wages with tips from customers.

The suit alleges Instacart “intentionally and maliciously misappropriated gratuities in order to pay plaintiff’s wages even though Instacart maintained that 100 percent of customer tips went directly to shoppers. Based on this representation, Instacart knew customers would believe their tips were being given to shoppers in addition to wages, not to supplement wages entirely.”

In addition to the lawsuit, workers have taken to Reddit and other online forums to speak out against Instacart’s paying practices. Since introducing a new payments structure in October, which includes things like payments per mile, quality bonuses and customer tips, workers have said the pay has gotten worse — far below minimum wage. In one case, Instacart paid a worker just 80 cents for over an hour of work. Instacart has since said it was a glitch — caused by the fact that the customer tipped $10 — and has introduced a new minimum payment for orders. So, Instacart paid the worker $10.80, but just 80 cents of it came from Instacart.

While Instacart has said this was an edge case, Working Washington says this has happened in other cases. In another case, Instacart paid a worker just $7.26 (including cost of mileage) for over two hour’s worth of work.

“We heard loud and clear the frustration when your compensation didn’t match the effort you put forth,” Mehta wrote in the blog post. “As we looked at some of the extreme examples that have been surfaced by you over the last few days, it’s become clear to us that we can and should do better. Instacart shouldn’t be paying a shopper $0.80 for a batch. It doesn’t matter that this only happens 1 out of 100,000 times – it happened to one shopper and that’s one time too many.”

Here’s the full text of Mehta’s post:

To Our Shopper Community:

Every day, millions of people entrust Instacart to help get the food they need to feed their families and get back valuable time to spend with their loved ones. By delivering to and for our customers, you’ve become household heroes for millions of families across North America. This past week however, it’s become clear, that we’ve fallen short in delivering on our promise to you.

As you know, we’ve made changes to our shopper earnings model over the last year. These changes were designed to increase transparency while also keeping pace with a rapidly-evolving industry. In doing so, we’ve tried, in good faith, to balance those needs, but clearly we haven’t always gotten it right.

As a company, we remain committed to listening and putting our shoppers more at the forefront of our decision making. Based on your feedback, today we’re launching new measures to more fairly and competitively compensate all our shoppers. As part of this, our earnings approach moving forward will adhere to the following:

  • Tips should always be separate from Instacart’s contribution to shopper compensation

  • All batches will have a higher guaranteed compensation floor for shoppers, paid for by Instacart

  • Instacart will retroactively compensate shoppers when tips were included in minimums

Below are details on each new element of shopper earnings, which we will be rolling out in the coming days.

Tips Should Always Be Separate From Instacart’s Contribution to Shopper Compensation – After launching our new earnings structure this past October, we noticed that there were small batches where shoppers weren’t earning enough for their time. To help with this, we instituted a $10 floor on earnings, inclusive of tips, for all batches. This meant that when Instacart’s payment and the customer tip at checkout was below $10, Instacart supplemented the difference. While our intention was to increase the guaranteed payment for small orders, we understand that the inclusion of tips as a part of this guarantee was misguided. We apologize for taking this approach.

All Batches Will Have a Higher Guaranteed Floor for Shoppers, Paid by Instacart – We’re instituting a higher minimum floor payment from Instacart on all batches. Today our minimum batch payment is $3. Depending on the region, our minimum batch payment will increase to between $7 and $10 for full service batches (where a shopper picks, packs and delivers the order) and $5 for delivery only batches (where a shopper delivers the order after a separate person picks the groceries). These increased batch floors will be consistent for all shoppers within a particular geographic area. In addition to the higher guaranteed floors, Instacart will also pay a quality bonus and peak boosts for orders that qualify. Any tips earned by shoppers will be separate and in addition to Instacart’s contribution.

Instacart Will Retroactively Compensate Shoppers When Tips Were Included in Minimums – Over the coming days, as we transition to the new higher minimum floor payments, we will make you whole on the transactions that have occurred since the launch of this feature. Specifically, we will proactively reach out to all shoppers who were adversely affected by instances in which Instacart’s payment was below the $10 threshold. For example, if a shopper was paid $6 by Instacart, to compensate for our mistake, he or she will receive an additional $4 from Instacart.

In creating these changes to improve, enhance and create clarity for shopper compensation, these new measures will do the following:

1. Better protect shoppers from smaller, outlying batches. We heard loud and clear the frustration when your compensation didn’t match the effort you put forth. As we looked at some of the extreme examples that have been surfaced by you over the last few days, it’s become clear to us that we can and should do better. Instacart shouldn’t be paying a shopper $0.80 for a batch. It doesn’t matter that this only happens 1 out of 100,000 times – it happened to one shopper and that’s one time too many. We believe that these new guaranteed floor minimums will better protect our shoppers going forward.

2. Customer tips will no longer have any impact on Instacart’s contribution to shopper earnings. With an average tip of $5, our customers regularly recognize shoppers with tips for the services they provide. We believe that with these changes customers will continue to be able to recognize great service and have full confidence that their tips are going to the shopper who delivered their order, with no impact whatsoever on what the shopper receives from Instacart. As always, shoppers will receive 100% of their tips, regardless of the batch compensation.  

3. These changes will increase Instacart’s overall contribution to our shopper’s earnings and we believe that the change in tip structure will separate Instacart from an industry standard that’s no longer working for our shoppers and our customers.

Finally, I want to thank you for your feedback. It’s our responsibility to change course quickly when we realize we’re on the wrong path and we believe today’s changes are a step in the right direction.

Apoorva Mehta

Founder & CEO of Instacart

from Startups – TechCrunch https://tcrn.ch/2TAyWbk