Ethicists fire back at ‘AI Pause’ letter they say ‘ignores the actual harms’

A group of well-known AI ethicists have written a counterpoint to this week’s controversial letter asking for a 6-month “pause” on AI development, criticizing it for a focus on hypothetical future threats when real harms are attributable to misuse of the tech today.

Thousands of people, including such familiar names as Steve Wozniak and Elon Musk, signed the open letter from the Future of Life institute earlier this week, proposing that development of AI models like GPT-4 should be put on hold in order to avoid “loss of control of our civilization,” among other threats.

Timnit Gebru, Emily M. Bender, Angelina McMillan-Major, and Margaret Mitchell are all major figures in the domains of AI and ethics, known (in addition to their work) for being pushed out of Google over a paper criticizing the capabilities of AI. They are currently working together at the DAIR Institute, a new research outfit aimed at studying and exposing and preventing AI-associated harms.

But they were not to be found on the list of signatories, and now have published a rebuke calling out the letter’s failure to engage with existing problems caused by the tech.

“Those hypothetical risks are the focus of a dangerous ideology called longtermism that ignores the actual harms resulting from the deployment of AI systems today,” they wrote, citing worker exploitation, data theft, synthetic media that props up existing power structures, and the further concentration of those power structures in fewer hands.

The choice to worry about a Terminator- or Matrix-esque robot apocalypse is a red herring when we have, in the same moment, reports of companies like Clearview AI being used by the police to essentially frame an innocent man. No need for a T-1000 when you’ve got Ring cams on every front door accessible via online rubber-stamp warrant factories.

After being pushed out of Google, Timnit Gebru forms her own AI research institute: DAIR

While the DAIR crew agree with some of the letter’s aims, like identifying synthetic media, they emphasize that action must be taken now, on today’s problems, with remedies we have available to us:

What we need is regulation that enforces transparency. Not only should it always be clear when we are encountering synthetic media, but organizations building these systems should also be required to document and disclose the training data and model architectures. The onus of creating tools that are safe to use should be on the companies that build and deploy generative systems, which means that builders of these systems should be made accountable for the outputs produced by their products.

The current race towards ever larger “AI experiments” is not a preordained path where our only choice is how fast to run, but rather a set of decisions driven by the profit motive. The actions and choices of corporations must be shaped by regulation which protects the rights and interests of people.

It is indeed time to act: but the focus of our concern should not be imaginary “powerful digital minds.” Instead, we should focus on the very real and very present exploitative practices of the companies claiming to build them, who are rapidly centralizing power and increasing social inequities.

Incidentally, this letter echoes a sentiment I heard from Uncharted Power founder Jessica Matthews at yesterday’s AfroTech event in Seattle: “You should not be afraid of AI. You should be afraid of the people building it.” (Her solution: become the people building it.)

While it is vanishingly unlikely that any major company would ever agree to pause its research efforts in accordance with the open letter, it’s clear judging from the engagement it received that the risks — real and hypothetical — of AI are of great concern across many segments of society. But if they won’t do it, perhaps someone will have to do it for them.

Ethicists fire back at ‘AI Pause’ letter they say ‘ignores the actual harms’ by Devin Coldewey originally published on TechCrunch

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Ethicists fire back at ‘AI Pause’ letter they say ‘ignores the actual harms’

A group of well-known AI ethicists have written a counterpoint to this week’s controversial letter asking for a 6-month “pause” on AI development, criticizing it for a focus on hypothetical future threats when real harms are attributable to misuse of the tech today.

Thousands of people, including such familiar names as Steve Wozniak and Elon Musk, signed the open letter from the Future of Life institute earlier this week, proposing that development of AI models like GPT-4 should be put on hold in order to avoid “loss of control of our civilization,” among other threats.

Timnit Gebru, Emily M. Bender, Angelina McMillan-Major, and Margaret Mitchell are all major figures in the domains of AI and ethics, known (in addition to their work) for being pushed out of Google over a paper criticizing the capabilities of AI. They are currently working together at the DAIR Institute, a new research outfit aimed at studying and exposing and preventing AI-associated harms.

But they were not to be found on the list of signatories, and now have published a rebuke calling out the letter’s failure to engage with existing problems caused by the tech.

“Those hypothetical risks are the focus of a dangerous ideology called longtermism that ignores the actual harms resulting from the deployment of AI systems today,” they wrote, citing worker exploitation, data theft, synthetic media that props up existing power structures, and the further concentration of those power structures in fewer hands.

The choice to worry about a Terminator- or Matrix-esque robot apocalypse is a red herring when we have, in the same moment, reports of companies like Clearview AI being used by the police to essentially frame an innocent man. No need for a T-1000 when you’ve got Ring cams on every front door accessible via online rubber-stamp warrant factories.

After being pushed out of Google, Timnit Gebru forms her own AI research institute: DAIR

While the DAIR crew agree with some of the letter’s aims, like identifying synthetic media, they emphasize that action must be taken now, on today’s problems, with remedies we have available to us:

What we need is regulation that enforces transparency. Not only should it always be clear when we are encountering synthetic media, but organizations building these systems should also be required to document and disclose the training data and model architectures. The onus of creating tools that are safe to use should be on the companies that build and deploy generative systems, which means that builders of these systems should be made accountable for the outputs produced by their products.

The current race towards ever larger “AI experiments” is not a preordained path where our only choice is how fast to run, but rather a set of decisions driven by the profit motive. The actions and choices of corporations must be shaped by regulation which protects the rights and interests of people.

It is indeed time to act: but the focus of our concern should not be imaginary “powerful digital minds.” Instead, we should focus on the very real and very present exploitative practices of the companies claiming to build them, who are rapidly centralizing power and increasing social inequities.

Incidentally, this letter echoes a sentiment I heard from Uncharted Power founder Jessica Matthews at yesterday’s AfroTech event in Seattle: “You should not be afraid of AI. You should be afraid of the people building it.” (Her solution: become the people building it.)

While it is vanishingly unlikely that any major company would ever agree to pause its research efforts in accordance with the open letter, it’s clear judging from the engagement it received that the risks — real and hypothetical — of AI are of great concern across many segments of society. But if they won’t do it, perhaps someone will have to do it for them.

Ethicists fire back at ‘AI Pause’ letter they say ‘ignores the actual harms’ by Devin Coldewey originally published on TechCrunch

source https://techcrunch.com/2023/03/31/ethicists-fire-back-at-ai-pause-letter-they-say-ignores-the-actual-harms/

NASA’s DAGGER could give advance warning of the next big solar storm

There’s enough trouble on this planet already that we don’t need new problems coming here from the sun. Unfortunately, we can’t yet destroy this pitiless star, so we are at its mercy. But NASA at least may soon be able to let us know when one of its murderous flares is going to send our terrestrial systems into disarray.

Understanding and predicting space weather is a big part of NASA’s job. There’s no air up there, so no one can hear you scream, “Wow, how about this radiation!” Consequently, we rely on a set of satellites to detect and relay this important data to us.

One such measurement is of solar wind, “an unrelenting stream of material from the sun.” Even NASA can’t find anything nice to say about it! Normally this stream is absorbed or dissipated by our magnetosphere, but if there’s a solar storm, it may be intense enough that it overwhelms the local defenses.

When this happens, it can set electronics on the fritz, since these charged particles can flip bits or disrupt volatile memory like RAM and solid state storage. NASA relates that even telegraph stations weren’t safe, blowing up during the largest on-record solar storm, 1859’s Carrington Event.

While we can’t stop these stellar events from occurring, we might be able to better prepare for them if we knew they were coming. But usually by the time we know, they’re basically already here. But how can we predict such infrequent and chaotic events?

View of NASA’s SOHO satellite being overwhelmed during a 2003 solar storm. Image Credits: NASA

A joint project between NASA, the U.S. Geological Survey, and the Department of Energy at the Frontier Development Lab has been looking into this issue, and the answer is exactly what you’d expect: machine learning.

The team collected data on solar flares from multiple satellites monitoring the sun, as well as from ground stations watching for geomagnetic disruptions (called perturbations), like those that affect technology. The deep learning model they designed identified patterns in how the former leads to the latter, and they call the resulting system DAGGER: Deep leArninG Geomagnetic pErtuRbation.

Yes, it’s a stretch. But it seems to work.

Using geomagnetic storms that hit Earth in 2011 and 2015 as test data, the team found that DAGGER was able to quickly and accurately forecast their effects across the globe. This combines the strengths of previous approaches while avoiding their disadvantages. As NASA put it:

Previous prediction models have used AI to produce local geomagnetic forecasts for specific locations on Earth. Other models that didn’t use AI have provided global predictions that weren’t very timely. DAGGER is the first one to combine the swift analysis of AI with real measurements from space and across Earth to generate frequently updated predictions that are both prompt and precise for sites worldwide.

It may be a bit before you get a solar alert on your phone telling you to pull over or your car might stop working (this won’t actually happen…probably), but it could make a big difference when we know there’s vulnerable infrastructure that could suddenly shut down. A few minutes’ warning is better than none!

You can read the paper describing the DAGGER model, which, by the way, is open source, in this issue of the journal Space Weather.

NASA’s DAGGER could give advance warning of the next big solar storm by Devin Coldewey originally published on TechCrunch

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NASA’s DAGGER could give advance warning of the next big solar storm

There’s enough trouble on this planet already that we don’t need new problems coming here from the sun. Unfortunately, we can’t yet destroy this pitiless star, so we are at its mercy. But NASA at least may soon be able to let us know when one of its murderous flares is going to send our terrestrial systems into disarray.

Understanding and predicting space weather is a big part of NASA’s job. There’s no air up there, so no one can hear you scream, “Wow, how about this radiation!” Consequently, we rely on a set of satellites to detect and relay this important data to us.

One such measurement is of solar wind, “an unrelenting stream of material from the sun.” Even NASA can’t find anything nice to say about it! Normally this stream is absorbed or dissipated by our magnetosphere, but if there’s a solar storm, it may be intense enough that it overwhelms the local defenses.

When this happens, it can set electronics on the fritz, since these charged particles can flip bits or disrupt volatile memory like RAM and solid state storage. NASA relates that even telegraph stations weren’t safe, blowing up during the largest on-record solar storm, 1859’s Carrington Event.

While we can’t stop these stellar events from occurring, we might be able to better prepare for them if we knew they were coming. But usually by the time we know, they’re basically already here. But how can we predict such infrequent and chaotic events?

View of NASA’s SOHO satellite being overwhelmed during a 2003 solar storm. Image Credits: NASA

A joint project between NASA, the U.S. Geological Survey, and the Department of Energy at the Frontier Development Lab has been looking into this issue, and the answer is exactly what you’d expect: machine learning.

The team collected data on solar flares from multiple satellites monitoring the sun, as well as from ground stations watching for geomagnetic disruptions (called perturbations), like those that affect technology. The deep learning model they designed identified patterns in how the former leads to the latter, and they call the resulting system DAGGER: Deep leArninG Geomagnetic pErtuRbation.

Yes, it’s a stretch. But it seems to work.

Using geomagnetic storms that hit Earth in 2011 and 2015 as test data, the team found that DAGGER was able to quickly and accurately forecast their effects across the globe. This combines the strengths of previous approaches while avoiding their disadvantages. As NASA put it:

Previous prediction models have used AI to produce local geomagnetic forecasts for specific locations on Earth. Other models that didn’t use AI have provided global predictions that weren’t very timely. DAGGER is the first one to combine the swift analysis of AI with real measurements from space and across Earth to generate frequently updated predictions that are both prompt and precise for sites worldwide.

It may be a bit before you get a solar alert on your phone telling you to pull over or your car might stop working (this won’t actually happen…probably), but it could make a big difference when we know there’s vulnerable infrastructure that could suddenly shut down. A few minutes’ warning is better than none!

You can read the paper describing the DAGGER model, which, by the way, is open source, in this issue of the journal Space Weather.

NASA’s DAGGER could give advance warning of the next big solar storm by Devin Coldewey originally published on TechCrunch

source https://techcrunch.com/2023/03/31/nasas-dagger-could-give-advance-warning-of-the-next-big-solar-storm/

Ambani bats for cricket glory as Disney scales back in India

Mukesh Ambani’s Jio, the South Asian telecom powerhouse, has long sought to entice its customer base with a plethora of services aimed at boosting subscriber retention. Despite amassing over 425 million customers and claiming the mantle of India’s top network provider—due in large part to its aggressively competitive data pricing—Jio’s array of additional services has yet to gain significant traction.

With the highly anticipated Indian Premier League (IPL) cricket tournament starting later today, Ambani is eyeing this as the perfect opportunity to revamp Jio’s service adoption strategy.

Viacom18 – a venture between Ambani’s Reliance and Paramount – outbid Disney to secure five years of IPL’s streaming rights for the Indian subcontinent region with a sum of $3 billion. Unlike Disney’s Hotstar, which restricted access to IPL streaming to paid subscribers in recent seasons, Viacom18 is opening the floodgates for IPL games to everyone on the Jio network.

In a move that proved transformative, Star India executives Ajit Mohan and Uday Shankar’s strategic investment in cricket streaming nearly a decade ago catapulted Hotstar to prominence as a household name. The platform drew over 100 million digital viewers during the two-month-long event year after year, with cricket alone solidifying Hotstar’s position at the pinnacle of the market.

Star India’s Hotstar was a crown jewel in Fox’s large portfolio in the $71 billion acquisition by Disney, prompting the Mickey Mouse company to expand the service to many international markets.

However, Disney’s decision last year to relinquish digital streaming bids in favor of securing television broadcast rights under the leadership of former CEO Bob Chapek left many industry insiders perplexed. The company has also decided not to renew the licensing rights for HBO content in India in a move that has understandably frustrated many Hotstar subscribers.

In 2016, as Reliance prepared to launch Jio, the company emerged as the first telecom operator to believe in Hotstar’s vision and commit to collaboration, according to a source familiar with the discussions. Disney reaped significant benefits from Jio’s competitively priced data plans, which enabled tens of millions of Indian consumers to alter their internet consumption habits virtually overnight.

Now, it appears that Reliance is shifting gears and focusing on its own interests.

Jio has been assertively recruiting talent from Disney’s Hotstar, restructuring its infrastructure to accommodate a large user base. The company plans to provide 16 distinct feeds for IPL matches, featuring ultra-HD resolution – a first for cricket in India – and coverage in 12 languages.

Analyst group Media Partners Asia estimates that Jio Cinema, where Viacom18 plans to stream matches, will be able to drive sales of up to $350 million during the IPL season this year, up from $128 million in digital sales in 2022. The group marked down advertising sales on pay TV to $220 million, from $442 million last year.

“The US$550 mil. number across digital and pay-TV is marginally flat Y/Y and represents a steep loss against annualized 2023-27 IPL rights fees of US$1.2 bil. Subscription fees are expected to be very modest this year because of challenges on pay-TV distribution and the lack of a subscription fee on digital,” it wrote in a report.

Reliance has “promised” advertisers that cricket streaming on Jio Cinema will reach 400 million users, said Media Partners Asia. Jio Cinema has also promised a concurrent user base of 100 million, nearly four times of the current records, the analyst group added.

Nonetheless, this underscores a considerable leap for Jio Cinema, which currently boasts fewer than 30 million monthly active users, as per data from mobile intelligence firm Sensor Tower. This is despite the fact that over 400 million Jio subscribers are eligible to access Jio Cinema at no extra charge.

Numerous industry executives have expressed skepticism regarding the likelihood of such a significant number of users transitioning to streaming on their smartphones when they have the option of watching games on their satellite televisions.

Additionally, whether Jio Cinema can effectively manage the technical demands of tens of millions of viewers tuning in to cricket matches remains an open question for the time being.

Ambani bats for cricket glory as Disney scales back in India by Manish Singh originally published on TechCrunch

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Ambani bats for cricket glory as Disney scales back in India

Mukesh Ambani’s Jio, the South Asian telecom powerhouse, has long sought to entice its customer base with a plethora of services aimed at boosting subscriber retention. Despite amassing over 425 million customers and claiming the mantle of India’s top network provider—due in large part to its aggressively competitive data pricing—Jio’s array of additional services has yet to gain significant traction.

With the highly anticipated Indian Premier League (IPL) cricket tournament starting later today, Ambani is eyeing this as the perfect opportunity to revamp Jio’s service adoption strategy.

Viacom18 – a venture between Ambani’s Reliance and Paramount – outbid Disney to secure five years of IPL’s streaming rights for the Indian subcontinent region with a sum of $3 billion. Unlike Disney’s Hotstar, which restricted access to IPL streaming to paid subscribers in recent seasons, Viacom18 is opening the floodgates for IPL games to everyone on the Jio network.

In a move that proved transformative, star executives Ajit Mohan and Uday Shankar’s strategic investment in cricket streaming nearly a decade ago catapulted Hotstar to prominence as a household name. The platform drew over 100 million digital viewers during the two-month-long event year after year, with cricket alone solidifying Hotstar’s position at the pinnacle of the market.

Hotstar was a crown jewel in Fox’s large portfolio in the $71 billion acquisition by Disney, prompting the Mickey Mouse company to expand the service to many international markets.

However, Disney’s decision last year to relinquish digital streaming bids in favor of securing television broadcast rights under the leadership of former CEO Bob Chapek left many industry insiders perplexed. The company has also decided not to renew the licensing rights for HBO content in India in a move that has understandably frustrated many Hotstar subscribers.

In 2016, as Reliance prepared to launch Jio, the company emerged as the first telecom operator to believe in Hotstar’s vision and commit to collaboration, according to a source familiar with the discussions. Disney reaped significant benefits from Jio’s competitively priced data plans, which enabled tens of millions of Indian consumers to alter their internet consumption habits virtually overnight.

Now, it appears that Reliance is shifting gears and focusing on its own interests.

Jio has been assertively recruiting talent from Disney’s Hotstar, restructuring its infrastructure to accommodate a large user base. The company plans to provide 16 distinct feeds for IPL matches, featuring ultra-HD resolution – a first for cricket in India – and coverage in 12 languages.

Analyst group Media Partners Asia estimates that Jio Cinema, where Viacom18 plans to stream matches, will be able to drive sales of up to $350 million during the IPL season this year, up from $128 million in digital sales in 2022. The group marked down advertising sales on pay TV to $220 million, from $442 million last year.

“The US$550 mil. number across digital and pay-TV is marginally flat Y/Y and represents a steep loss against annualized 2023-27 IPL rights fees of US$1.2 bil. Subscription fees are expected to be very modest this year because of challenges on pay-TV distribution and the lack of a subscription fee on digital,” it wrote in a report.

Reliance has “promised” advertisers that cricket streaming on Jio Cinema will reach 400 million users, said Media Partners Asia. Jio Cinema has also promised a concurrent user base of 100 million, nearly four times of the current records, the analyst group added.

Nonetheless, this underscores a considerable leap for Jio Cinema, which currently boasts fewer than 30 million monthly active users, as per data from mobile intelligence firm Sensor Tower. This is despite the fact that over 400 million Jio subscribers are eligible to access Jio Cinema at no extra charge.

Numerous industry executives have expressed skepticism regarding the likelihood of such a significant number of users transitioning to streaming on their smartphones when they have the option of watching games on their satellite televisions. Additionally, whether Jio Cinema can effectively manage the technical demands of tens of millions of viewers tuning in to cricket matches remains an open question for the time being.

Ambani bats for cricket glory as Disney scales back in India by Manish Singh originally published on TechCrunch

source https://techcrunch.com/2023/03/31/ambani-bats-for-cricket-glory-as-disney-scales-back/

EV company Canoo agrees to $1.5M settlement with SEC

Electric vehicle startup Canoo has agreed to a $1.5 million settlement with the U.S. Securities and Exchange Commission, according to a regulatory filing.

The SEC began investigating Canoo in May 2021, just a few months after the company merged with special purpose acquisition company Hennessy Capital Acquisition Corp. The investigation covered the Hennessy’s IPO and merger with Canoo, Canoo’s operations, business model, revenues, revenue strategy, customer agreements, earnings and more. It also delved into the departures of certain company officers, including co-founder and CEO Ulrich Kranz.

Canoo shared the news Thursday as part of its fourth quarter and full year 2022 earnings report. The company’s stock price, which closed Thursday at $0.62, tumbled nearly 10% after hours on the news.

Canoo was one of several EV SPACs that had incurred the investigative gaze of the SEC, including Lordstown Motors, Arrival, Nikola and Faraday Future.

Canoo didn’t share many details about the SEC investigation, but the $1.5 million did show up on the company’s balance sheet for the fourth quarter.

The EV SPAC is a pre-revenue company that has repeatedly warned it was low on cash and needed to raise more capital to stay in the game. Canoo did deliver its first Light Tactical Vehicle to the U.S. Army in the fourth quarter for a demonstration, but that contract is only worth $67,600 — not exactly a material amount given the company’s losses. In February, Canoo agreed to sell 50 million shares at a 16% discount, or $1.05 per share. The gross proceeds from the offering came in at around $52.5 million.

That infusion of cash seems to be inadequate to get Canoo into revenue-generating status. The company closed 2022 out with only $36.6 million in cash and cash equivalents. With a Q4 net loss of $80.2 million ($487.7 million for the full year), the company will likely need to raise more money to cover whatever expenses come in Q1 alone. By the way, on a quarterly basis, that loss is down from $138 million in Q4 2021. However, Canoo ended 2021 with a net loss of $346.8 million, so that’s a year-over-year increase of over 40%.

Canoo said during Thursday’s earnings call that it was exploring diversified funding sources that it will announce over the next couple of quarters. Canoo’s CEO Tony Aquila noted that “legacy matters” like messy executive shakeups and the now-concluded SEC investigation made it difficult to file for funding from the Department of Energy’s loan program, for example.

“Now our opportunities are exponential to access capital as we start to establish this management team’s track record,” said Aquila.

Aquila is clearly trying to send a message to investors that Canoo’s problems are due to issues from past management teams. Aquila took over as CEO in 2021, and since then says Canoo shifted from a company that offered a single product to one with a “new business strategy” that includes on-shore manufacturing. Canoo also recently brought on Ken Magnet as a new chief financial officer and Tony Elias as the new EVP of operations.

Hopefully it’ll be enough to turn this electric ship around. Canoo reported negative $60 million in adjusted EBITDA for Q4 2022 and negative $408.6 million for the full year. Last year, those numbers were negative $120 million and negative $332.6 million for Q4 and full year 2021, respectively.

Canoo’s Q1 2023 outlook

Canoo said it expects Q1 operating expenses (excluding stock-based compensation and depreciation) to be somewhere between $55 million to $70 million, with capital expenditures between $30 million to $45 million.

“As we move through 2023, we are focused on bringing our facilities online, scaling production and aligning with our strategic distribution partners for our global expansion,” said Aquila in a statement.

Canoo said it is getting close to start of production in Pryor and Oklahoma City, where Canoo is building an EV battery module facility and a vehicle manufacturing facility to bring its Lifestyle Delivery Vehicle and Lifestyle Vehicle SUV to market in 2023. Oklahoma provided Canoo with $400 million in incentives to build there and agreed in March to buy 1,000 Canoo EVs, but the state can always pull out of that agreement.

Canoo in January also signed an exclusive distribution agreement with GCC Olayan for vehicles in Saudi Arabia, the company’s first phase of international expansion.

Aquila said during Thursday’s earnings call that Canoo thinks it can reach a 20,000 run rate exit for the year. The company claims it has had a 300% growth in orders this year with around $2.8 billion worth of total orders.

EV company Canoo agrees to $1.5M settlement with SEC by Rebecca Bellan originally published on TechCrunch

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Virgin Orbit burns up in uncontrolled descent

Virgin Orbit is laying off around 85% of its workforce in order to further reduce expenses, after the troubled space company said it was unable to secure additional funding to keep it afloat.

The news, which Virgin Orbit filed with the U.S. Securities and Exchange Commission Thursday, comes just two weeks after the company furloughed all employees and entered an “operational pause” in order to find more cash. There were talks that Matthew Brown, a Texas-based venture capitalist, may come to the rescue, but those talks dissolved over the last weekend. Today’s filing confirms that Virgin was unable to find another lifeline.

According to audio of an employee all-hands on Thursday afternoon obtained by CNBC, Virgin CEO Dan Hart – reportedly choking up, again per CNBC – said, “We have no choice but to implement immediate, dramatic and extremely painful changes.”

He said the call would “probably the hardest all-hands that we’ve ever done in my life.”

The layoffs span all departments. But even the workforce reduction comes with a price tag for cash-strapped Virgin Orbit: the company will pay around $8.8 million in severance payments and employee benefits costs, plus a separate $6.5 million related to outplacement services and regulatory compliance.

To pay for these immediate expenses, Virgin got a $10.9 million injection from Virgin Group, the umbrella company that oversees billionaire Richard Branson’s various businesses.

Virgin Orbit is the brainchild of Branson, who is still the company’s majority owner. But evidently even Branson – who in recent months, through his conglomerate Virgin Group, threw upwards of $55 million to the sinking space company – is done funding the company.

Virgin Orbit can lay claim to four successful missions using its unique system, which uses a modified Boeing 747 to release a rocket mid-flight. The company’s most recent mission, from Cornwall, U.K., ended in failure due to an issue with the rocket’s second stage, posing a major blow to Virgin’s plans to continue launch this year.

Shares of Virgin Orbit have tanked to just $0.34, down from $1.32 at the beginning of the month.

Developing…

Virgin Orbit burns up in uncontrolled descent by Aria Alamalhodaei originally published on TechCrunch

source https://techcrunch.com/2023/03/30/virgin-orbit-burns-up-in-uncontrolled-descent/

Virgin Orbit burns up in uncontrolled descent

Virgin Orbit is laying off around 85% of its workforce in order to further reduce expenses, after the troubled space company said it was unable to secure additional funding to keep it afloat.

The news, which Virgin Orbit filed with the U.S. Securities and Exchange Commission Thursday, comes just two weeks after the company furloughed all employees and entered an “operational pause” in order to find more cash. There were talks that Matthew Brown, a Texas-based venture capitalist, may come to the rescue, but those talks dissolved over the last weekend. Today’s filing confirms that Virgin was unable to find another lifeline.

According to audio of an employee all-hands on Thursday afternoon obtained by CNBC, Virgin CEO Dan Hart – reportedly choking up, again per CNBC – said, “We have no choice but to implement immediate, dramatic and extremely painful changes.”

He said the call would “probably the hardest all-hands that we’ve ever done in my life.”

The layoffs span all departments. But even the workforce reduction comes with a price tag for cash-strapped Virgin Orbit: the company will pay around $8.8 million in severance payments and employee benefits costs, plus a separate $6.5 million related to outplacement services and regulatory compliance.

To pay for these immediate expenses, Virgin got a $10.9 million injection from Virgin Group, the umbrella company that oversees billionaire Richard Branson’s various businesses.

Virgin Orbit is the brainchild of Branson, who is still the company’s majority owner. But evidently even Branson – who in recent months, through his conglomerate Virgin Group, threw upwards of $55 million to the sinking space company – is done funding the company.

Virgin Orbit can lay claim to four successful missions using its unique system, which uses a modified Boeing 747 to release a rocket mid-flight. The company’s most recent mission, from Cornwall, U.K., ended in failure due to an issue with the rocket’s second stage, posing a major blow to Virgin’s plans to continue launch this year.

Shares of Virgin Orbit have tanked to just $0.34, down from $1.32 at the beginning of the month.

Developing…

Virgin Orbit burns up in uncontrolled descent by Aria Alamalhodaei originally published on TechCrunch

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Indian edtech Unacademy slashes another 12% jobs

Unacademy has laid off 12% of its workforce, or over 350 roles, in its latest round of layoffs — just over four months after cutting about 350 roles in November.

Unacademy co-founder and CEO Gaurav Munjal announced the new layoff decision in a Slack post to employees.

“We have taken every step in the right decision to make our core business profitable, yet it’s not enough. We have to go further, we have to go deeper,” he wrote in the message reviewed by TechCrunch.

“Today’s reality is a contrast from two years ago where we saw unprecedented growth because of accelerated adoption of online learning. Today, the global economy is enduring a recession, funding is scare and running a profitable business is key. We have to adapt to these changes, build and operate in a much leaner manner so we can truly create value for our users and shareholders,” he said.

The latest move comes just days after the Bengaluru-based startup hived off programming learning platform CodeChef, which it acquired in 2020.

Indian edtech giant Byju’s not acquiring Unacademy

Unacademy, valued at $3.4 billion, cut 1,000 full-time and contractual employees in April last year. The startup in June also announced a pay cut and shut down of “certain businesses” to survive the funding crunch.

Edtech startups in India are struggling to attract investments and facing challenges due to the market downturn. Unacademy competitor and India’s most valuable startup Byju’s also cut thousands of jobs last year and recently discussed shutting down coding platform WhiteHat Jr.

“To those of our employees impacted by this decision, this is never the experience I hoped you would have had at Unacademy. I take complete responsibility for the way things have turned out,” Munjal said in his message.

Unacademy, which counts Sequoia Capital India, SoftBank and Tiger Global among its key investors, will provide a severance pay equivalent of notice period and an additional one month’s pay to impacted employees. The startup has also promised to give medical insurance coverage for additional six months until September 30 and dedicated placement as well as career support and accelerate the vesting period of their stock by one year.

Exact details on which roles are affected by the move were not disclosed.

Indian edtech Unacademy slashes another 12% jobs by Jagmeet Singh originally published on TechCrunch

source https://techcrunch.com/2023/03/29/unacademy-layoffs-2023/

Jeep puts electrification front and center at Easter Jeep Safari

When Stellantis brand Jeep descended on Moab, Utah this week for its annual off-roading and concept roadshow, electrification ruled the road.

The automaker showed off this week seven concepts — four of which are electrified — from the Jeep brand and Jeep Performance Parts (JPP) by Mopar ahead of the Easter Jeep Safari, an annual multi-day event hosted by Moab’s Red Rock 4-Wheelers. Jeep is not the organizer of the Easter Jeep Safari. However, the company does use the annual gathering to showcase a handful of concept vehicles to give the world (and media) a sense of what might be coming down the road.  TechCrunch was on hand to test all of them in a controlled off-road environment.

While the concept vehicles were equipped with an array of powertrains, it was hard to ignore the variety of plug-in hybrid and battery-electric setups. (Although it was also sure hard to miss the Jeep Scrambler 392 concept equipped with a 6.4-liter HEMI V-8 engine that’s inspired by the 1981 Jeep Scrambler (CJ-8), the brand’s first convertible, compact truck.)

Magneto 3.0

Jeep Wrangler Magneto 3.0 Concept Image credits: Jeep

The main electric showstopper was the Magneto 3.0, the third version of an battery-electric vehicle concept developed by the Jeep brand.

As a reminder, the Magneto 2.0, which was shown last year, was equipped with an 800-volt electrical architecture and four lithium-ion battery packs — for a total of 70 kWh — located in the middle and rear to distribute the weight. An axial flux electric motor, along with an inverter derived from race cars that converts DC power to AC in the new motor, operated up to 5,250 rpm. The most notable feature in the Jeep Wrangler Magneto concept 2.0 was a six-speed manual transmission and a propulsion system that could maintain a peak amperage of 600 A for 10 seconds. The end result was a system that could deliver 850 pound-feet (1,152 Nm) of torque to the wheels and travel from 0 to 60 miles per hour in two seconds.

Jeep makes a number of improvements to the Magneto 3.0, including the addition of a more efficient motor that boosts the torque output. Importantly, that manual transmission remains in this third version.

The Magneto 3.0 also has three new driver settings and developers tweaked the vehicle’s software to increase useable energy and range by 20%.

Drivers can chose between two power settings in the Magneto 3.0. The standard setting provides 
285 horsepower and 273 pound-feet of torque or maximum setting for 650 horsepower and 900 lb.-ft. of torque. There’s also a two-stage power feature that lets drivers enhance or diminish brake regeneration using the electric motor. Jeep also added an aggressive hill descent mode that can be selected in low range to offer ‘one pedal’ off-road driving in serious rock-crawling situations.

Image Credits: Jeep

Jeep’s designers also tinkered a bit with the vehicle proportion as well as exterior and interior touches.

The door opening is now swept back an additional six inches and the B-pillar also moves a bit to the rear to make room for a custom anti-roll bar. The windshield has been adjusted back about 12 degrees to give a chopped roof feel without shortening the front glass, according to Jeep.

On the exterior, designers stuck with the white and surf blue paint motif and added some zippier red accents. Inside, the color theme continues with the front seats re-trimmed in a blue leather and xxx with red accent stitching to match the exterior.

To complete the look, the Jeep team gave the concept Dynatrac 60 front axles, Dynatrac 80 rear axles, 20-inch off-road beadlock wheels, 40-inch mud terrain tires and a custom 3-inch lift.

Plug-in hybrid concepts

Image credit: Jeep

Jeep also showed off three other electrified concepts — all plug-in hybrids under the 4xe label that has become a popular seller for the brand.

The company developed an eye-popping chromatic magenta Jeep Wrangler Rubicon 4xe concept, a Jeep Wrangler Rubicon 4xe Departure concept that experiments with the location of the spare wheel and tire mount to push the limits of departure angles, and a resto-moded Jeep Cherokee 4xe concept that gives homage to the two-door 1978 Jeep Cherokee SJ.

1978 Jeep Cherokee 4xe Concept Image credit: Jeep

While all of these are concepts, there are elements that will likely make it the showroom floor. Do we think a resto-moded SJ will make it to market? Nope.

But looking under the hood, so to speak, the ’78 Jeep Cherokee 4xe concept does contain features that will — and do — exist. The powertrain combines two electric motors, a battery pack and a 2.0-liter turbocharged I-4 engine. That combined with an eight-speed automatic transmission, mated to a 4:1 transfer case, delivers plenty of power for on and off road travel.

The same holds true for the other 4xe concepts, which contain a number of elements that are either available today or soon will be. For instance, look past the special paint and gloss black accents on the Jeep Wrangler Rubicon 4xe Concept and you’ll notice a seven-slot grille that was borrowed from the new Jeep Wrangler Rubicon 20^th Anniversary model.

Those tricked out paint jobs and boundary-pushing exterior designs might not make it to market next year. But based on what Jeep is showcasing at Easter Jeep Safari 2023, there’s no doubt that the brand will continue to put electrification at the center of its roadmap.

Jeep puts electrification front and center at Easter Jeep Safari by Kirsten Korosec originally published on TechCrunch

from TechCrunch https://ift.tt/yrLbk57
via IFTTT

Jeep puts electrification front and center at Easter Jeep Safari

When Stellantis brand Jeep descended on Moab, Utah this week for its annual off-roading and concept roadshow, electrification ruled the road.

The automaker showed off this week seven concepts — four of which are electrified — from the Jeep brand and Jeep Performance Parts (JPP) by Mopar ahead of the Easter Jeep Safari, an annual multi-day event hosted by Moab’s Red Rock 4-Wheelers. Jeep is not the organizer of the Easter Jeep Safari. However, the company does use the annual gathering to showcase a handful of concept vehicles to give the world (and media) a sense of what might be coming down the road.  TechCrunch was on hand to test all of them in a controlled off-road environment.

While the concept vehicles were equipped with an array of powertrains, it was hard to ignore the variety of plug-in hybrid and battery-electric setups. (Although it was also sure hard to miss the Jeep Scrambler 392 concept equipped with a 6.4-liter HEMI V-8 engine that’s inspired by the 1981 Jeep Scrambler (CJ-8), the brand’s first convertible, compact truck.)

Magneto 3.0

Jeep Wrangler Magneto 3.0 Concept Image credits: Jeep

The main electric showstopper was the Magneto 3.0, the third version of an battery-electric vehicle concept developed by the Jeep brand.

As a reminder, the Magneto 2.0, which was shown last year, was equipped with an 800-volt electrical architecture and four lithium-ion battery packs — for a total of 70 kWh — located in the middle and rear to distribute the weight. An axial flux electric motor, along with an inverter derived from race cars that converts DC power to AC in the new motor, operated up to 5,250 rpm. The most notable feature in the Jeep Wrangler Magneto concept 2.0 was a six-speed manual transmission and a propulsion system that could maintain a peak amperage of 600 A for 10 seconds. The end result was a system that could deliver 850 pound-feet (1,152 Nm) of torque to the wheels and travel from 0 to 60 miles per hour in two seconds.

Jeep makes a number of improvements to the Magneto 3.0, including the addition of a more efficient motor that boosts the torque output. Importantly, that manual transmission remains in this third version.

The Magneto 3.0 also has three new driver settings and developers tweaked the vehicle’s software to increase useable energy and range by 20%.

Drivers can chose between two power settings in the Magneto 3.0. The standard setting provides 
285 horsepower and 273 pound-feet of torque or maximum setting for 650 horsepower and 900 lb.-ft. of torque. There’s also a two-stage power feature that lets drivers enhance or diminish brake regeneration using the electric motor. Jeep also added an aggressive hill descent mode that can be selected in low range to offer ‘one pedal’ off-road driving in serious rock-crawling situations.

Image Credits: Jeep

Jeep’s designers also tinkered a bit with the vehicle proportion as well as exterior and interior touches.

The door opening is now swept back an additional six inches and the B-pillar also moves a bit to the rear to make room for a custom anti-roll bar. The windshield has been adjusted back about 12 degrees to give a chopped roof feel without shortening the front glass, according to Jeep.

On the exterior, designers stuck with the white and surf blue paint motif and added some zippier red accents. Inside, the color theme continues with the front seats re-trimmed in a blue leather and xxx with red accent stitching to match the exterior.

To complete the look, the Jeep team gave the concept Dynatrac 60 front axles, Dynatrac 80 rear axles, 20-inch off-road beadlock wheels, 40-inch mud terrain tires and a custom 3-inch lift.

Plug-in hybrid concepts

Image credit: Jeep

Jeep also showed off three other electrified concepts — all plug-in hybrids under the 4xe label that has become a popular seller for the brand.

The company developed an eye-popping chromatic magenta Jeep Wrangler Rubicon 4xe concept, a Jeep Wrangler Rubicon 4xe Departure concept that experiments with the location of the spare wheel and tire mount to push the limits of departure angles, and a resto-moded Jeep Cherokee 4xe concept that gives homage to the two-door 1978 Jeep Cherokee SJ.

1978 Jeep Cherokee 4xe Concept Image credit: Jeep

While all of these are concepts, there are elements that will likely make it the showroom floor. Do we think a resto-moded SJ will make it to market? Nope.

But looking under the hood, so to speak, the ’78 Jeep Cherokee 4xe concept does contain features that will — and do — exist. The powertrain combines two electric motors, a battery pack and a 2.0-liter turbocharged I-4 engine. That combined with an eight-speed automatic transmission, mated to a 4:1 transfer case, delivers plenty of power for on and off road travel.

The same holds true for the other 4xe concepts, which contain a number of elements that are either available today or soon will be. For instance, look past the special paint and gloss black accents on the Jeep Wrangler Rubicon 4xe Concept and you’ll notice a seven-slot grille that was borrowed from the new Jeep Wrangler Rubicon 20^th Anniversary model.

Those tricked out paint jobs and boundary-pushing exterior designs might not make it to market next year. But based on what Jeep is showcasing at Easter Jeep Safari 2023, there’s no doubt that the brand will continue to put electrification at the center of its roadmap.

Jeep puts electrification front and center at Easter Jeep Safari by Kirsten Korosec originally published on TechCrunch

source https://techcrunch.com/2023/03/29/jeep-puts-electrification-front-and-center-at-easter-jeep-safari/

NASA pushes back Boeing Starliner’s crewed flight test to July

The first crewed flight test of Boeing’s Starliner capsule is facing yet another delay, with NASA officials saying Wednesday that it was now targeting no earlier than July 21 for launch.

The space agency and Boeing blamed the delay on certification issues related to the capsule’s parachute system and other verifications on Starliner’s components and capabilities, as well as scheduling constraints with other missions scheduled to fly to and from the International Space Station (ISS).

Steve Stich, NASA’s program manager for the commercial crew program, told reporters that NASA and Boeing needs to complete an additional ground test on the parachute system, as well as a test of Starliner’s abort system. Stress testing of the flight and guidance, navigation and control systems and additional testing with crew are due to be complete by the end of this month.

“The Starliner spacecraft is in really good shape,” Stich told reporters during a media briefing Wednesday, adding that it’s “largely ready for flight.”

Some of the additional testing is a result from Boeing engineers discovering an error in one of Starliner’s components.

“We fixed that. That was pretty simple to go do with a with a minor mod to the vehicle,” Mark Nappi, Boeing’s Starliner program manager, said Wednesday. “However, we want to make sure that that same condition doesn’t exist anywhere else. So part of this testing is to validate that this was an isolated case.”

The CST-100 Starliner mission was scheduled to launch in April, but that was pushed back last week to May to accommodate the Axiom Space’s Ax-2 private spaceflight mission to the ISS.

This mission is a key part of the overall testing campaign for the Starliner spacecraft, which NASA wants to use to regularly ferry astronauts to and from the International Space Station (ISS). If all goes to plan, Boeing’s Starliner would join SpaceX’s Dragon capsule and Russia’s Soyuz as the only human-certified spacecraft capable of the task. Starliner’s first orbital test, an uncrewed mission, successfully docked with the ISS last May.

Boeing’s CST-100 Starliner spacecraft after it landed at White Sands Missile Range last May. Image Credit: NASA/Bill Ingalls via Getty Images

This upcoming crewed flight test will see Starliner carry two NASA astronauts, Barry Wilmore and Sunita Williams, to the ISS for at least an eight-day stint. While the spacecraft is docked with the station, the astronauts will perform additional vehicle check-outs. The mission is scheduled to launch on a United Launch Alliance Atlas V rocket from Cape Canaveral Space Force Base in Florida.

If the mission is a success, NASA plans to likely certify Starliner for ISS missions. It has been a long road for the capsule’s development, with the Starliner program facing myriad issues including a botched test mission in 2019 and numerous delays.

“We know that what we’re doing is extremely important, launching humans in space and providing NASA with the second provider,” Nappi said. “So we’ll take our time and we’ll make sure that everybody’s confident with the work that’s been done.”

NASA pushes back Boeing Starliner’s crewed flight test to July by Aria Alamalhodaei originally published on TechCrunch

source https://techcrunch.com/2023/03/29/nasa-pushes-back-boeing-starliners-crewed-flight-test-to-july/

Battery sourcing guidance might slash EV tax credits

The U.S. Treasury Department’s guidance on battery sourcing requirements for the electric vehicle tax credits will result in fewer vehicles being eligible for full or partial credits, reports Reuters, citing an unnamed U.S. official.

The proposed EV credit guidance as included in the Inflation Reduction Act says that in order for vehicles to qualify for $3,750, which is half of the total credit, 50% of the value of battery components must be produced or assembled in North America. To get the remainder of the credit, 40% of critical minerals must be sourced from the U.S. or a country with which it has a free trade agreement.

The guidance on battery sourcing was meant to kick in on January 1, 2023, but in December the Treasury Dept. decided to hold off until March to give some EV-makers a grace period to meet the requirements.

The Treasury Dept. is expected to share its guidance Friday, and while the Reuters report doesn’t state exactly what it will be, we can guess that the full guidance will kick in, meaning many EVs will lose tax credits or see them cut. The Treasury Dept. is also expected to define key terms like processing, extraction, recycling and free trade deals.

Why startups should care about geopolitical repercussions of US climate law

The battery sourcing rules are aimed at helping the U.S. decrease its reliance on China for batteries. While most automakers have been reorganizing supply chains and bringing more processes onshore since COVID, not all will have had the chance to completely upgrade their battery sourcing in time to meet both the Treasury Dept.’s requirements and the increased demand for EVs.

China currently makes 81% of the world’s cathodes, 91% of the world’s anodes and 79% of the world’s lithium-ion battery production capacity, according to data from Benchmark Mineral Intelligence, a market research firm. For comparison, the U.S. has just 0.16%, 0.27% and 5.5% market share, respectively.

Despite the U.S., and most of its free trade agreement partners, being woefully behind China, the Biden administration has said it thinks over time, the tax credit will result in more EVs sold as automakers reorganize supply chains to meet the IRA rules, the source told Reuters.

In February, the Treasury Dept. updated the vehicle classification standard to redefine what makes a vehicle a sedan, an SUV, a crossover or a wagon. The change made more Tesla, Ford, General Motors and Volkswagen EVs eligible for up to $7,500 tax credits. Those vehicles stand to lose some or all of the tax credits once the battery sourcing guidance is out.

Can battery recycling help end US reliance on China?

Battery sourcing guidance might slash EV tax credits by Rebecca Bellan originally published on TechCrunch

source https://techcrunch.com/2023/03/29/battery-sourcing-guidance-might-slash-ev-tax-credits/

Amazon-backed Acko nears $120 million in new funding

Indian insurtech Acko is in late-stage discussions to secure $120 million in a funding round at a time when weak global market conditions have subdued large financing deliberations in the South Asian market.

General Atlantic is in talks to lead a $120 million round into Acko, the first tranche of which is about $100 million, a source familiar with the matter said. The round values the Indian startup at $1.5 billion, the source said, requesting anonymity as the matter is private. The round could close within weeks but there’s still possibility that terms of the deal may slightly change, the source said.

Acko, which became a unicorn in October 2021, has been in the market to raise new capital for at least eight months, people familiar with the matter said. TechCrunch reported earlier that General Atlantic was engaging with Acko to increase its stake in the insurtech firm.

The New York-headquartered growth equity investor — which has backed a number of Indian firms including Jio, BillDesk, Byju’s, PhonePe, Amagi, NoBroker and Unacademy over the past decade — plans to deploy at least $2 billion to $3 billion in India over the next five to seven years, according to people familiar with the matter.

Acko and General Atlantic declined to comment.

Acko — which counts Amazon, Lightspeed Venture Partners India and CPPIB as existing backers — is among a handful of startups that is attempting to take on the country’s antiquated insurance industry with a digital-first product.

It develops and sells bite-sized auto insurance products (aimed at drivers and others in transportation-related scenarios), healthcare protections to employers, as well as protection on gadgets.

The startup has distribution partnerships with a number of firms including Amazon, travel and hotel booking platform MakeMyTrip, ride-hailing firm Ola, insurance giant Bajaj Finance, Urban Company and fintech CRED.

Amazon-backed Acko nears $120 million in new funding by Manish Singh originally published on TechCrunch

source https://techcrunch.com/2023/03/28/amazon-backed-acko-nears-120-million-in-new-funding/

Amazon-backed Acko nears $120 million in new funding

Indian insurtech Acko is in late-stage discussions to secure $120 million in a funding round at a time when weak global market conditions have subdued large financing deliberations in the South Asian market.

General Atlantic is in talks to lead a $120 million round into Acko, the first tranche of which is about $100 million, a source familiar with the matter said. The round values the Indian startup at $1.5 billion, the source said, requesting anonymity as the matter is private. The round could close within weeks but there’s still possibility that terms of the deal may slightly change, the source said.

Acko, which became a unicorn in October 2021, has been in the market to raise new capital for at least eight months, people familiar with the matter said. TechCrunch reported earlier that General Atlantic was engaging with Acko to increase its stake in the insurtech firm.

The New York-headquartered growth equity investor — which has backed a number of Indian firms including Jio, BillDesk, Byju’s, PhonePe, Amagi, NoBroker and Unacademy over the past decade — plans to deploy at least $2 billion to $3 billion in India over the next five to seven years, according to people familiar with the matter.

Acko and General Atlantic declined to comment.

Acko — which counts Amazon, Lightspeed Venture Partners India and CPPIB as existing backers — is among a handful of startups that is attempting to take on the country’s antiquated insurance industry with a digital-first product.

It develops and sells bite-sized auto insurance products (aimed at drivers and others in transportation-related scenarios), healthcare protections to employers, as well as protection on gadgets.

The startup has distribution partnerships with a number of firms including Amazon, travel and hotel booking platform MakeMyTrip, ride-hailing firm Ola, insurance giant Bajaj Finance, Urban Company and fintech CRED.

Amazon-backed Acko nears $120 million in new funding by Manish Singh originally published on TechCrunch

from TechCrunch https://ift.tt/xVikYNj
via IFTTT

The market has changed, but super-voting shares are here to stay, says Mr. IPO

Yesterday, the ride-sharing company Lyft said its two co-founders, John Zimmer and Logan Green, are stepping down from managing the company’s day-to-day operations, though they are retaining their board seats. According to a related regulatory filing, they actually need to hang around as “service providers” to receive their original equity award agreements. (If Lyft is sold or they’re fired from the board, they’ll see “100% acceleration” of these “time-based” vesting conditions.)

As with so many founders who’ve used multi-class voting structures in recent years to cement their control, their original awards were fairly generous. When Lyft went public in 2019, its dual-class share structure provided Green and Zimmer with super-voting shares that entitled them to 20 votes per share in perpetuity, meaning not just for life but also for a period of nine to 18 months after the passing of the last living co-founder, during which time a trustee would retain control.

It all seemed a little extreme, even as such arrangements became more common in tech. Now, Jay Ritter, the University of Florida professor whose work tracking and analyzing IPOs has earned him the moniker Mr. IPO, suggests that if anything, Lyft’s trajectory might make shareholders even less nervous about dual-stock structures.

For one thing, with the possible exception of Google’s founders — who came up with an entirely new share class in 2012 to preserve their power — founders lose their stranglehold on power as they sell their shares, which then convert to a one-vote-per-one-share structure. Green, for example, still controls 20% of the shareholder voting rights at Lyft, while Zimmer now controls 12% of the company’s voting rights, he told the WSJ yesterday.

Further, says Ritter, even tech companies with dual-class shares are policed by shareholders who make it clear what they will or will not tolerate. Again, just look at Lyft, whose shares were trading at 86% below their offering price earlier today in a clear sign that investors have — at least for now — lost confidence in the outfit.

We talked with Ritter last night about why stakeholders aren’t likely to push too hard against super-voting shares, despite that now would seem the time to do it. Excerpts from that conversation, below, have been lightly edited for length and clarity.

TC: Majority voting power for founders became widespread over the last dozen years or so, as VCs and even exchanges did what they could to appear founder-friendly. According to your own research, between 2012 and last year, the percentage of tech companies going public with dual-class shares shot from 15% to 46%. Should we expect this to reverse course now that the market has tightened and money isn’t flowing so freely to founders?

JR: The bargaining power of founders versus VCs has changed in the last year, that’s true, and public market investors have never been enthusiastic about founders having super voting stock. But as long as things go well, there isn’t pressure on managers to give up super voting stock. One reason U.S. investors haven’t been overly concerned about dual-class structures is that, on average, companies with dual-class structures have delivered for shareholders. It’s only when stock prices decline that people start questioning: Should we have this?

Isn’t that what we are seeing currently?

With a general downturn, even if a company is executing according to plan, shares have fallen in many cases.

So you expect that investors and public shareholders will remain complacent about this issue despite the market.

In recent years, there haven’t been a lot of examples where entrenched management is doing things wrong. There have been cases where an activist hedge fund is saying, “We don’t think you’re pursuing the right strategy.” But one of the reasons for complacency is that there are checks and balances. It’s not the case where, as in Russia, a manager can loot the company and public shareholders can’t do anything about it. They can vote with their feet. There are also shareholder lawsuits. These can be abused, but the threat of them [keeps companies in check]. What’s also true, especially of tech companies where employees have so much equity-based compensation, is that CEOs are going to be happier when their stock goes up in price but they also know their employees will be happier when the stock is doing well.

Before WeWork’s original IPO plans famously imploded in the fall of 2019, Adam Neumann expected to have so much voting control over the company that he could pass it along to future generations of Neumanns.

But when the attempt to go public backfired — [with the market saying] just because SoftBank thinks it’s worth $47 billion doesn’t mean we think it’s worth that much —  he faced a trade-off. It was, “I can keep control or take a bunch of money and walk away” and “Would I rather be poorer and in control or richer and move on?” and he decided, “I’ll take the money.”

I think Lyft’s founders have the same trade-off.

Meta is perhaps a better example of a company whose CEO’s super-voting power has worried many, most recently as the company leaned into the metaverse.

A number of years ago, when Facebook was still Facebook, Mark Zuckerberg proposed doing what Larry Page and Sergey Brin had done at Google but he got a lot of pushback and backed down instead of pushing it through. Now if he wants to sell off stock to diversify his portfolio, he gives up some votes. The way most of these companies with super voting stock are structured is that if they sell it, it automatically converts into one-share-one-stock sales, so someone who buys it doesn’t get extra votes.

A story in Bloomberg earlier today asked why there are so many family dynasties in media — the Murdochs, the Sulzbergers — but not in tech. What do you think?

The media industry is different from the tech industry. Forty years ago, there was analysis of dual-class companies and, at the time, a lot of the dual-class companies were media: the [Bancroft family, which previously owned the Wall Street Journal], the Sulzbergers with the New York Times. There were also a lot of dual-class structures associated with gambling and alcohol companies before tech firms began [taking companies public with this structure in place]. But family firms are nonexistent in tech because the motivations are different; dual-class structures are [solely] meant to keep founders in control. Also, tech companies come and go pretty rapidly. With tech, you can be successful for years and then a new competitor comes along and suddenly . . .

So the bottom line, in your view, is that dual-class shares aren’t going away, no matter that shareholders don’t like them. They don’t dislike them enough to do anything about them. Is that right?

If there was concern about entrenched management pursuing stupid policies for years, investors would be demanding bigger discounts. That might have been the case with Adam Neumann; his control wasn’t something that made investors enthusiastic about the company. But for most tech companies — of which I would not consider WeWork — because you have not only the founder but employees with equity-linked compensation, there is a lot of implicit, if not explicit, pressure on shareholder value maximization rather than kowtowing to the founder’s whims. I’d be surprised if they disappeared.

The market has changed, but super-voting shares are here to stay, says Mr. IPO by Connie Loizos originally published on TechCrunch

source https://techcrunch.com/2023/03/28/the-market-has-changed-but-super-voting-shares-are-here-to-stay-says-mr-ipo/

The market has changed, but super-voting shares are here to stay, says Mr. IPO

Yesterday, the ride-sharing company Lyft said its two co-founders, John Zimmer and Logan Green, are stepping down from managing the company’s day-to-day operations, though they are retaining their board seats. According to a related regulatory filing, they actually need to hang around as “service providers” to receive their original equity award agreements. (If Lyft is sold or they’re fired from the board, they’ll see “100% acceleration” of these “time-based” vesting conditions.)

As with so many founders who’ve used multi-class voting structures in recent years to cement their control, their original awards were fairly generous. When Lyft when public in 2019, its dual-class share structure provided Green and Zimmer with super-voting shares that entitled them to 20 votes per share in perpetuity, meaning not just for life but for a period of nine to 18 months after the passing of the last living cofounder, during which time a trustee would retain control.

It all seemed a little extreme, even as such arrangements became more common in tech. Now, Jay Ritter, the University of Florida professor whose work tracking and analyzing IPOs has earned him the moniker Mr. IPO, suggests that if anything, Lyft’s trajectory might make shareholders even less nervous about dual-stock structures.

For one thing, with the possible exception of Google’s founders – who came up with an entirely new share class in 2012 to preserve their power – founders lose their stranglehold on power as they sell their shares, which then convert to a one-vote-per-one-share structure. Green, for example, still controls 20% of the shareholder voting rights at Lyft, while Zimmer now controls 12% of the company’s voting rights, he told the WSJ yesterday.

Further, says Ritter, even tech companies with dual-class shares are policed by shareholders who make it clear what they will or will not tolerate. Again, just look at Lyft, whose shares were trading at 86% below their offering price earlier today in a clear sign that investors have — at least for now — lost confidence in the outfit.

We talked with Ritter last night about why stakeholders aren’t likely to push too hard against super-voting shares, despite that now would seem the time to do it. Excerpts from that conversation, below, has been lightly edited for length and clarity.

Majority voting power for founders became widespread over the last dozen years or so, as VCs and even exchanges did what they could to appear founder-friendly. According to your own research, between 2012 and last year, the percentage of tech companies going public with dual-class shares shot from 15% to 46%. Should we expect this to reverse course now that the market has tightened and money isn’t flowing so freely to founders?

The bargaining power of founders versus VCs has changed in the last year, that’s true, and public market investors have never been enthusiastic about founders having super voting stock. But as long as things go well, there isn’t pressure on managers to give up super voting stock. One reason U.S. investors haven’t been overly concerned about dual-class structures is that, on average, companies with dual-class structures have delivered for shareholders. It’s only when stock prices decline that people start questioning: should we have this?

Isn’t that what we are seeing currently?

With a general downturn, even if a company is executing according to plan, shares have fallen in many cases.

So you expect that investors and public shareholders will remain complacent about this issue despite the market.

In recent years, there haven’t been a lot of examples where entrenched management is doing things wrong. There have been cases where an activist hedge fund is saying, ‘We don’t think you’re pursuing the right strategy.’ But one of the reasons for complacency is that there are checks and balances. It’s not the case where, as in Russia, a manager can loot the company and public shareholders can’t do anything about it. They can vote with their feet. There are also shareholder lawsuits. These can be abused, but the threat of them [keeps companies in check]. What’s also true, especially of tech companies where employees have so much equity-based compensation, is that CEOs are going to be happier when their stock goes up in price but they also know their employees will be happier when the stock is doing well.

Before WeWork’s original IPO plans famously imploded in the fall of 2019, Adam Neumann expected to have so much voting control over the company that he could pass it along to future generations of Neumanns.

But when the attempt to go public backfired — [with the market saying] just because SoftBank thinks it’s worth $47 billion doesn’t mean we think it’s worth that much —  he faced a trade-off. It was, ‘I can keep control or take a bunch of money and walk away’ and ‘Would I rather be poorer and in control or richer and move on?’ and he decided, ‘I’ll take the money.’

I think Lyft’s founders have the same tradeoff.

Meta is perhaps a better example of a company whose CEO’s super-voting power power has worried many, most recently as the company leaned into metaverse.

A number of years ago, when Facebook was still Facebook, Mark Zuckerberg proposed doing what Larry Page and Sergey Brin had done at Google but he got a lot of pushback and backed down instead of pushing it through. Now if he wants to sell off stock to diversify his portfolio, he gives up some votes. The way most of these companies with super voting stock are structured is that if they sell it, it automatically converts into one-share-one-stock sales, so someone who buys it doesn’t get extra votes.

A story in Bloomberg earlier today asked why there are so many family dynasties in media — the Murdochs, the Sulzbergers — but not in tech. What do you think?

The media industry is different from the tech industry. Forty years ago, there was analysis of dual-class companies and, at the time, a lot of the dual-class companies were media: the [Bancroft family, which previously owned the Wall Street Journal], the Sulzbergers with the New York Times. There were also a lot of dual-class structures associated with gambling and alcohol companies before tech firms began [taking companies public with this structure in place]. But family firms are non-existent in tech because the motivations are different; dual-class structures are [solely] meant to keep founders in control. Also tech companies come and go pretty rapidly. With tech, you can be successful for years and then a new competitor comes along and suddenly . . .

So the bottom line, in your view, is that dual-class shares aren’t going away, no matter that shareholders don’t like them. They don’t dislike them enough to do anything about them. Is that right?

If there was concern about entrenched management pursuing stupid policies for years, investors would be demanding bigger discounts. That might have been the case with Adam Neumann; his control wasn’t something that made investors enthusiastic about the company. But for most tech companies — of which I would not consider WeWork — because you have not only the founder but employees with equity-linked compensation, there is a lot of implicit, if not explicit, pressure on shareholder value maximization rather than kowtowing to the founder’s whims. I’d be surprised if they disappeared.

The market has changed, but super-voting shares are here to stay, says Mr. IPO by Connie Loizos originally published on TechCrunch

from TechCrunch https://techcrunch.com/2023/03/28/the-market-has-changed-but-super-voting-shares-are-here-to-stay-says-mr-ipo/
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