It's November 01, 2020 at 12:15PM
Saturday, October 31, 2020
Friday, October 30, 2020
You can start a venture fund if you’re not rich; here’s how
For years — decades, even — there was little question about whether you could become a venture capitalist if you weren’t comfortable financially. You couldn’t. The people and institutions that invest in venture funds want to know that fund managers have their own “skin in the game,” so they’ve long required a sizable check from the investor’s own pocket before jumping aboard. Think 2% to 3% of the fund’s total assets, which often equates to millions of dollars.
Five years ago, I wrote that the real obstacle to becoming a venture capitalist ties to financial inequality. At the time, I focused on women, who are paid less (especially Black and Hispanic women), and who possess less wealth, but the same is true of anyone of lesser means.
Consider that one or two partners trying trying to raise a $50 million debut fund have to come up with $1.5 million. They’ll collect management fees off that $50 million fund — the standard is 2% annually for the fund’s investment period — but they have to use that $1 million per year to pay for everyone’s salaries, along with rent, auditing, legal costs and back-office administration fees. That doesn’t leave much, which is why having something to start with helps.
LPs: The ≧1% of a fund capital commitment you expect from GPs makes it hard for POCs to raise funds.
Consider that “for a $20M fund, a 2% commitment with 2 GPs is still a $200K commitment for each partner.” This is out of reach for many of us. https://t.co/bguXpa3CiY
— lolitataub (@lolitataub) October 29, 2020
Thankfully, things are changing, with a growing number of ways that aspiring VCs can jump into the business who can’t write a big check. None of these approaches can guarantee success in raising a fund, but these are paths that other VCs have used in the past when starting out.
1.) Find investors, i.e. limited partners, who are willing to take less than 3% and maybe even less than 1% of the overall fund size being targeted. You’ll likely find fewer investors as that “commit” shrinks. But for example Joanna Rupp, who runs the $1.1 billion private equity portfolio for the University of Chicago’s endowment, suggests that both she and other managers she knows are willing to be flexible based on the “specific situation of the GP.”
Says Rupp, “I think there are industry ‘norms,’ but we haven’t required a [general partner] commitment from younger GPs when we have felt that they don’t have the financial means.”
Bob Standish, founder of the fund administration firm Standish Management, echoes the sentiment, saying that a smaller general partner commitment in exchange for special investor economics is also fairly common. “You might see a reduced management fee for the LP for helping them or reduced carry or both, and that has been done for years.”
2.) Learn more about what are called management fee offsets, which investors in venture funds often determine to be reasonable. These aren’t uncommon, says, Michael Kim of Cendana Capital, a firm that has stakes in dozens of seed stage funds, because they also offer tax advantages (though the IRS has talked about doing away with these).
How does theses work? Say your “commit” was $1 million over 10 years (the standard life of a fund). Instead of trying to come up with $1 million that you presumably don’t have, you can offset up to 80% of that, putting in $200,000 instead but reducing your management fees by that same amount over time so that it’s a wash and you’re still getting credit for the entire $1 million. You’re basically converting fee income into the investment you’re supposed to make.
3.) Use your existing portfolio companies as collateral. Kim has had at least two managers whose brands have come to be highly regarded launch a fund not with a “commit” but rather by bringing to the table stakes in startups they’d funded as angel investors.
In both of these cases, it was a great deal for Kim, who says the companies were quickly marked up. For the fund managers’ part, it meant not having to put more of their own money into the funds.
4.) Make a deal with wealthier friends if you can. When Kim launched his fund of funds to invest in venture managers after working for years as a VC himself, he raised $1 million in working capital from six friends to get it off the ground. The money gave Kim, who had a mortgage at the time and young children, enough runway for two years. Obviously, your friends have to be willing to gamble on you, but sweeteners certainly help, too. In Kim’s case, he gave his friends a percentage of Cendana’s economics in perpetuity.
5.) Get a bank loan. Rupp said she would be uncomfortable if a GP’s commit was being funded through a bank loan for several reasons, including that there’s no guarantee a fund manager will make money on his or her fund, a loan adds risk on top of risk, and because should a manager need liquidity related to that loan, he or she might sell a strongly performing position too early.
That said, loans aren’t uncommon, says Raynard. He says banks with venture capital relationships like Silicon Valley bank and First Republic are typically happy to lend a fund manager a line of credit to help him or her to make capital calls, though he says it does depend on who else is involved with the fund. “As long as it’s a diverse group of LPs,” the banks are comfortable moving forward in exchange for winning over a new fund’s business, he suggests.
6.) Consider the merits of so-called front loading. This is a technique with which “more creating LPs can sometimes get comfortable,” says Kim. It’s also how investor Chris Sacca, now a billionaire, got started when he first turned to fund management. How does it work? Say a fund manager is getting paid a 2.5% management fee over the life of a 10-year fund. Over that decade, that amounts to 25% of the fund. Typically, management fees decline over time, to 2% and even slightly lower because you are typically no longer actively managing it but rather managing out the bets you’ve made in the first few years.
Some beginning managers blend that management fee — say it’s 20% over the fund’s duration — and pay themselves a higher percentage — say 5% for each of its first three years — until by the end of the fund’s life, the manager is receiving no management fee for it at all.
Without carry, that could mean no income if you aren’t yet seeing profits from your investments. But presumably — especially given pacing in recent years — you, the general partner, have raised another fund by the time that happens so have resources coming in from that second fund.
These are just a few of the ways to get started. There are other paths to take, too, notes Lo Toney of Plexo Capital — which, like Cendana Capital — has stakes in many venture funds. Just one of these is to structure to use a self-directed IRA to finance that GP “commit.” Another is to sell a portion of the management company or to sell a greater percentage of future profits and to use those proceeds, though VCs Charles Hudson of Precursor Ventures and Eva Ho of Fika Ventures avoided that path and suggested that first-time managers do the same if they can.
Either way, suggests Toney, a former partner with the Alphabet’s venture arm, GV, it’s important to know one’s options but keep in mind, too, that what you start with may ultimately prove irrelevant.
Said Toney via email this week: “I have not seen any data on the front end of a VC’s career that wealth indicates future success.”
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TikTok stars got a judge to block Trump’s TikTok ban
TikTok has won another battle in its fight against the Trump administration’s ban of its video-sharing app in the U.S. — or, more accurately in this case, the TikTok community won a battle. On Friday, a federal judge in Pennsylvania issued an injunction that blocked the restrictions that would have otherwise blocked TikTok from operating in the U.S. on November 12.
This particular lawsuit was not led by TikTok itself, but rather a group of TikTok creators who use the app to engage with their million-plus followers.
According to the court documents, plaintiff Douglas Marland has 2.7 million followers on the app; Alec Chambers has 1.8 million followers; and Cosette Rinab has 2.3 million followers. The creators argued — successfully as it turns out — that they would lose access to their followers in the event of a ban, as well as the “professional opportunities afforded by TikTok.” In other words, they’d lose their brand sponsorships — meaning, their income.
This is not the first time that the U.S. courts have sided with TikTok to block the Trump administration’s proposed ban over the Chinese-owned video sharing app. Last month, a D.C. judge blocked the ban that would have removed the app from being listed in U.S. app stores run by Apple and Google.
That ruling had not, however, stopped the November 12 ban that would have blocked companies from providing internet hosting services that would have allowed TikTok to continue to operate in the U.S.
The Trump administration had moved to block the TikTok app from operating in the U.S. due to its Chinese parent company, ByteDance, claiming it was a national security threat. The core argument from the judge in this ruling was the “Government’s own descriptions of the national security threat posed by the TikTok app are phrased in the hypothetical.”
That hypothetical risk was unable to be stated by the government, the judge argued, to be such a risk that it outweighed the public interest. The interest, in this case, was the more than 100 million users of TikTok and the creators like Marland, Chambers and Rinab that utilized it to spread “informational materials,” which allowed the judge to rule that the ban would shut down a platform for expressive activity.
“We are deeply moved by the outpouring of support from our creators, who have worked to protect their rights to expression, their careers, and to help small businesses, particularly during the pandemic,” said Vanessa Pappas, Interim Global Head of TikTok, in a statement. “We stand behind our community as they share their voices, and we are committed to continuing to provide a home for them to do so,” she added.
The TikTok community coming to the rescue on this one aspect of the overall TikTok picture just elevates this whole story. Though the company has been relatively quiet through this whole process, Pappas has thanked the community several times for its outpouring of support. Though there were some initial waves of “grief” on the app with creators frantically recommending people follow them on other platforms, that has morphed over time into more of a “let’s band together” vibe. This activity coalesced around a big swell in voting advocacy on the platform, where many creators are too young to actually participate but view voting messaging as their way to participate.
TikTok has remained active in the product department through the whole mess, shipping elections guides and trying to ban QAnon conspiracy spread, even as Pakistan banned and then un-banned the app.
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Cough-scrutinizing AI shows major promise as an early warning system for COVID-19
Asymptomatic spread of COVID-19 is a huge contributor to the pandemic, but of course if there are no symptoms, how can anyone tell they should isolate or get a test? MIT research has found that hidden in the sound of coughs is a pattern that subtly, but reliably, marks a person as likely to be in the early stages of infection. It could make for a much-needed early warning system for the virus.
The sound of one’s cough can be very revealing, as doctors have known for many years. AI models have been built to detect conditions like pneumonia, asthma and even neuromuscular diseases, all of which alter how a person coughs in different ways.
Before the pandemic, researcher Brian Subirana had shown that coughs may even help predict Alzheimer’s — mirroring results from IBM research published just a week ago. More recently, Subirana thought if the AI was capable of telling so much from so little, perhaps COVID-19 might be something it could suss out as well. In fact, he isn’t the first to think so.
He and his team set up a site where people could contribute coughs, and ended up assembling “the largest research cough dataset that we know of.” Thousands of samples were used to train up the AI model, which they document in an open access IEEE journal.
The model seems to have detected subtle patterns in vocal strength, sentiment, lung and respiratory performance, and muscular degradation, to the point where it was able to identify 100% of coughs by asymptomatic COVID-19 carriers and 98.5% of symptomatic ones, with a specificity of 83% and 94% respectively, meaning it doesn’t have large numbers of false positives or negatives.
“We think this shows that the way you produce sound, changes when you have COVID, even if you’re asymptomatic,” said Subirana of the surprising finding. However, he cautioned that although the system was good at detecting non-healthy coughs, it should not be used as a diagnosis tool for people with symptoms but unsure of the underlying cause.
I asked Subirana for a bit more clarity on this point.
“The tool is detecting features that allow it to discriminate the subjects that have COVID from the ones that don’t,” he wrote in an email. “Previous research has shown you can pick up other conditions too. One could design a system that would discriminate between many conditions but our focus was on picking out COVID from the rest.”
For the statistics-minded out there, the incredibly high success rate may raise some red flags. Machine learning models are great at a lot of things, but 100% isn’t a number you see a lot, and when you do you start thinking of other ways it might have been produced by accident. No doubt the findings will need to be proven on other data sets and verified by other researchers, but it’s also possible that there’s simply a reliable tell in COVID-induced coughs that a computer listening system can hear quite easily.
The team is collaborating with several hospitals to build a more diverse data set, but is also working with a private company to put together an app to distribute the tool for wider use, if it can get FDA approval.
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Apple acknowledges AirPods Pro issues, will replace those that crackle and rattle
Are your AirPods Pro earbuds making weird noises? You’re not imagining it — and you’re not the only one.
Just a few months after Apple started shipping AirPods Pro, some users started noticing that one or both of their earbuds were rattling or crackling. The noises would reportedly get worse whenever the user moved, and would sometimes only develop after months of use.
Apple didn’t say too much about it at first, but would usually replace crackling earbuds if you took the time to hit up support. A few folks here at TechCrunch have had the rattle rear its head on our own AirPods Pro buds… only to have it pop up again in the replacements.
It seems the problem has become widespread enough for an official acknowledgement: today Apple launched an “AirPods Pro Service Program” (as first pointed out by Mark Gurman) specifically for swapping out crackling buds.
A newly published support page outlines the potential symptoms, both of which suggest the issue has to do with the noise cancellation system:
- Crackling or static sounds that increase in loud environments, with exercise or while talking on the phone
- Active Noise Cancellation not working as expected, such as a loss of bass sound, or an increase in background sounds, such as street or airplane noise
Apple notes that only units made before October 2020 are affected, suggesting they’ve fixed the issue in units now coming off the line. The support page repeatedly says faulty units will be “replaced” rather than “repaired” — so for the most part, it sounds like turnaround should be pretty quick.
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Thursday, October 29, 2020
AOL founder Steve Case, involved early in Section 230, says it’s time to change it
AOL founder Steve Case was there in Dulles, Virginia, just outside of Washington, D.C., when in 1996 the Communications Decency Act was passed as part of a major overhaul of U.S. telecommunications laws that President Bill Clinton signed into law. Soon after, in its first test, a provision of that act which states that, “[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider,” would famously save AOL’s bacon, too.
That wasn’t coincidental. In a wide-ranging call earlier today with Case — who has become an influential investor over the last 15 years through his Washington, D.C.-based firm Revolution and its early-stage, growth-stage, and seed-stage funds — he talked about his involvement in Section 230’s creation, and why the thinks it’s time to change it.
We’ll have more from our interview with Case tomorrow. In the meantime, here he talks about the related legal protections for online platforms that took center stage yesterday or, at least, were supposed to during the Senate’s latest Big Tech hearing.
In that early birthing stage of the internet, [we were all] figuring out what the rules of the road were, and the 230 provision was something I was involved in. I do think the first lawsuit related to it was related to AOL. But 25 years later, it’s fair to take a fresh look at it — [it’s] appropriate to take a fresh look at it. I’ve not recently spent enough time digging in to really have a strong point of view in terms of exactly what to change, but I think it’s fair to say that what made sense in those early days when very few people were online maybe doesn’t make as much sense now when when the entire world is online and the impact these platforms have is so significant.
At the same time, I think you have to be super careful. I think that’s what what the CEOs testifying [yesterday] were trying to emphasize. [It was] ‘We get that there’s a desire to relook at it. We also get that because of the election season, it’s become a highly politicized issue. Let’s engage in this discussion, and perhaps there are some things that need to be modified to reflect the current reality . . .let’s don’t do it just in the heat of a political moment.’
When we started AOL 35 years ago, only 3% of people are connected. They were only online about an hour a week, and it was still illegal, actually, for consumers or businesses to be on the internet [so] I spent a lot of time on commercializing the internet, opening up consumers and businesses, figuring out what the right rules of the road were in terms of things like taxes on e-commerce. And generally, we were able to convince regulators and government leaders that a light touch for the internet made sense, because it was a new idea, and it wasn’t clear exactly how it was going to develop.
But now, it’s not a new idea. And now it has a profound impact on people’s lives and our communities and countries. And so I’m not surprised that there’s more more focus on it, [though] it’s a little too bad that there’s so much attention right this moment because in an election season, things tend to get a little bit hot on both sides.
Putting that aside, I think there are legitimate issues that the policymakers need to be looking at and are starting to look at, not just in Washington, DC, but more broadly in Brussels. And I think having more of a dialogue between the innovators and the policymakers is actually going to be critical in this internet third wave, because the sectors up for grabs are most important aspects of our lives — things like health care and education and food and agriculture. And that’s really going to require not just innovation from a technology standpoint, but thoughtfulness from a a policy standpoint.
I understand entrepreneurs who get frustrated by regulations kind of slowing down the pace of information. I get that. Obviously, some of the businesses that we back have suffered from that. But at the same time, you can’t not expect the government — which is elected by the people — to serve the people, including protecting the people.”
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[CSF] Developing a Database Management Tool Editor
Introduction
This article is a project presentation of a SQL database management tool and the whole development process. The project name is LightBox and the source code can be found HERE.
What This Project Is About
This project is a windows SQL database management tool. Some of the main features are the following.
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Python: How to Add a Trend Line to a Line Chart/Graph
In this article, you will learn how to add a trend line to the line chart/line graph using Python Matplotlib. As a data scientist, it proves to be helpful to learn the concepts and related Python code, which can be used to draw or add the trend line to the line charts as it helps understand the trend and make decisions.
In this post, we will consider an example of IPL average batting scores of Virat Kohli, Chris Gayle, MS Dhoni, and Rohit Sharma of the last 10 years and assess the trend related to their overall performance using trend lines. What's the main reason we want to understand the trend line? The primary goal is to assess who could the larger money be put in order to acquire him for the team? The batsman who has the largest upward trend line with the highest slope is the one I would like to put my money on. Having said that, the batting scores mean and variance/standard deviation also comes into the picture in taking the final decision on who to put larger money on.
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Amazon pegs COVID-19 costs at an estimated $4 billion next quarter
Amazon expects to incur $4 billion in COVID-related costs next quarter, an estimate that provides a bellwether for other businesses, large and small, trying to stay operational and control expenses amid the pandemic.
The upshot: Amazon is planning for COVID to remain an unwelcome companion through the end of the year with costs higher than the previous quarter.
The company said Thursday in its third-quarter earnings call that it logged $7.5 billion in COVID-related costs since the disease took root earlier this year. Amazon previously said its COVID costs were about $600 million in the first quarter and more than $4 billion in the second. The company’s COVID costs in the third quarter were about $2.5 billion, CFO Brian Olsavsky told an analyst during an earnings call. While Amazon was able to lower its costs in the third quarter due to efficiencies that number is on rise for next quarter.
Olsavsky said the majority of the increase in costs is due to the expansion of its operations. Amazon has hired 100,000 new workers in October.
COVID-19 along with other uncertainties related to the economy, holiday sales and even weather patterns weighed on its guidance for operating income in the fourth quarter. Amazon provided a wide-ranging guidance of between $1 billion and $4.5 billion in operating income in the fourth quarter compared with $3.9 billion in the same period last year. This guidance assumes about $4 billion of costs related to COVID-19.
But what is most telling is that even after providing a lengthy list of possible uncertainties in the fourth quarter, Olsavsky noted that COVID still trumps them all.
“So there’s a whole host of issues that generally come to bear in Q4,” Olsavsky said. “I think the fact that COVID is dwarfing all of those is causing us a lot of uncertainty on our top line range.”
Olsavsky said costs were related to productivity losses caused by changing how it operates as well as expenses related to personal protective equipment and other upfront costs.
“The largest portion of these costs relate to continuing productivity headwinds in our facilities, including process revisions to allow for social distancing and incremental costs to ramp up new facilities, and the large influx of new employees hired to support strong customer demand also includes investments in PPE for employees and enhanced cleaning of our facilities,” Olsavsky said during Thursday’s earnings call.
Amazon said Thursday it also continues to ramp up its in-house COVID-19 testing program with capacity reaching 50,000 tests a day across 650 sites by November.
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WhatsApp is now delivering roughly 100 billion messages a day
WhatsApp, the popular instant messaging app owned by Facebook, is now delivering roughly 100 billion messages a day, company’s chief executive Mark Zuckerberg said at the quarterly earnings call Thursday.
For some perspective, users exchanged 100 billion messages on WhatsApp on last New Year’s Eve. That is the day when WhatsApp tops its engagement figures, and as many of you may remember, also the time when the service customarily suffered glitches in the past years. (No outage on last New Year’s Eve!)
At this point, WhatsApp is just competing with itself. Facebook Messenger was being used to exchange 8 billion messages a day as of May 2018. Apple chief executive Tim Cook said in May that iMessage and FaceTime were seeing record usage, but did not share specific figures. The last time Apple did share the figure, it was far behind WhatsApp’s then usage (podcast). WeChat, which has also amassed over 1 billion users, is behind in daily volume of messages, too.
In early 2014, WhatsApp was being used to exchange about 50 billion texts a day, its then chief executive Jan Koum revealed at an event.
At the time, WhatsApp had fewer than 500 million users. WhatsApp now has more than 2 billion users and at least in India, its largest market by users, its popularity surpasses those of every other smartphone app including the big blue app.
“This year we’ve all relied on messaging more than ever to keep up with our loved ones and get business done,” tweeted Will Cathcart, head of WhatsApp.
Sadly, that’s all the update the company shared on WhatsApp today. Mystery continues for when WhatsApp expects to resume its payments service in Brazil, and when it plans to launch its payments in India, where it began testing the service in 2018. (It has already shared big plans around financial services in India, though.)
“We are proud that WhatsApp is able to deliver roughly 100B messages every day and we’re excited about the road ahead,” said Cathcart.
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