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February 22, 2019
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Timing and why we’re all VCs

in Ajay Royan/Delhi/India/Infrastructure/Los Angeles/mithril capital/Politics/The Extra Crunch Daily/Venture Capital by

Timing is the single most valuable skill of the modern economy, but I would argue its’s the least understood and also the least practiced.

Capitalism is fundamentally about timing, since market competition is about finding opportunities before others. When should you start a company? What company should you start? When should a VC invest? When should you join a company? When should you switch industries? When should you back a candidate for public office?

Every single one of our professional decisions is about timing, and yet, we do so little to practice and perfect it. Most employees only make 3-4 major career decisions in their lifetimes — hardly enough feedback for this skill to mature. Anyone who has worked in a large company further knows that timing a product launch or a new marketing strategy has more to do with internal politics than reading market forces.

Most of us want to make more money and accelerate our careers, but the truth is that these opportunities are few and far between. Most jobs have limited growth potential. Most startups die. Most VCs don’t make money. Most political candidates fail to get elected. The difference between success and failure sometimes has to do with hard work and tenacity, but far more often with the strategy of timing.

It’s obvious that we can be too late to these decisions of course. We can miss the round of financing, we can start a company a year or two behind someone else and lose the first-mover advantage. But we can also be way too early, ahead of the market and losing out on alternative opportunities that might have been more valuable.

Now, some perceive that “timing” is synonymous with “luck.” There is some truth there, in the sense that life is random and sometimes — completely unintentionally — people stumble upon a treasure chest of gold.

Don’t be distracted by that, because there are also people who just seem to have timing nailed. There are engineers (I know because I have seen their recruiter profiles) who have joined three unicorns in a row in the first handful of employees. There are VCs who get a string of wins that is far from chance. There are CEOs that always seem to guide their companies to the right place at the right time and drive their stock valuations up.

We talked a lot about why we can’t build infrastructure in America yesterday. One of the challenges is simply timing: so many things have to happen at once for these projects to get off the ground, and most governors and mayors lack the timing skills required to get them over the finish line.

How can you practice timing? Start writing down predictions about people, companies, and markets. Check in with the companies you talked with a few years ago — how are they doing? Ditto people you met a while back. Start evaluating your predictions: were they correct? Were they too early or too late?

More importantly, start cultivating networks of friends who have a sense of pulse on the frontiers of the economy. That could mean someone at the edge of a new science (quantum computing or AI) or someone who gets marketing to new demographics, or someone who tracks new regulatory and legal changes. Find a peer group of people who get timing and practice it as a craft.

Between TechCrunch today and my former roles in venture capital, I’ve had the opportunity to practice timing a lot. I have a list of companies that I would have backed, and some have turned into unicorns while others have ended up on the ash heap of history. I’ve predicted some trends well, while flubbed others. I’ve been way too early (a huge bias for me), and sometimes stupidly late.

But all along, I am practicing that timing muscle. It’s the only way forward in capitalism, and it’s worth every investment you can make.

Mithril Capital, management fees, and VC strategic drift

Peter Kim via Getty Images

Theodore Schleifer at Recode reported a rare deep dive into the internal intrigue at a prominent VC firm, in this case Mithril Capital. From the article:

Mithril had its best moment yet last week when a portfolio company, Auris Health, sold to Johnson & Johnson for more than $3 billion — returning at least $500 million to the fund.

All appears well. But behind the scenes, a far different story has been unfolding.

The late-stage investment firm has been a slow-burning mess for the past several months, angering current and former employees, limited partners, and, crucially, [Peter] Thiel himself, sources say.

Among the issues is the firm’s huge management fee … and I guess lack of expenses?

The firm is likely collecting as much as $20 million a year in management fees, sources familiar with the figures say.

We don’t know exactly how much the firm spends, but people close to Mithril say they can’t imagine that the firm, given its staff size, is spending more than half of that on operational expenses. [Mithril Capital founder Ajay] Royan’s salary, like that of other venture capitalists, is not publicly disclosed.

One limited partner called the fees, given the size of Mithril’s staff, “outrageous.”

What? I don’t understand this line of reasoning at all. The firm negotiates a fairly standard agreement with its limited partners, and then the LPs are pissed because the firm isn’t spending the money on massive staff and large, expensive offices? The whole point of delegating investment decisions to a GP is to empower them to organize their firm to win deals and get stuff done. If — and it’s a big if of course — they can do that on the cheap, then why should an LP care at all? Burn the management fee in a fireplace if it makes the deals happen.

Ajay Royan told Bloomberg in 2017 that Mithril does not “charge excessive fees.” But he was not exactly known for being thrifty with management money. Former employees describe Friday catered lunches where costs could run over $100 per person, and Royan was known internally for a “book ordering problem” — a former employee said that “unbelievable amounts of books” would be delivered each week to the office by Amazon to maintain the firm’s extensive library.

Pro tip: take on the mantle of book editor for a major tech publication, and the publishers will mail you books for free. We get at least a dozen at the TC offices every week, which is why we write about books so often around here these days. Alas, no $100 catered lunches.

The wider story here though appears to be one of a firm completely strategically adrift. Mithril is struggling to compete against ferocious competition in the growth-stage equity market. The best deals are obvious to dozens of firms, and the ones that are less obvious have huge risks attached to them that make it hard to write the big checks required.

“[Royan] literally did not want to compete. If there was a process or bidding war or something resembling a competition, he would just walk,” the employee said. “And he would just say, ‘I don’t want to outbid.’”

Mithril is hardly the only VC firm that is strategically adrift. Every time I go back to SF, this seems to be the norm these days among venture capitalists. There is a huge amount of money sloshing around, and very few deals that are in that sweet spot between obvious and highly risky. Startups either get three dozen term sheets or none at all, since every firm is walking around with the same frameworks and metrics in their head.

It’s so rare to actually hear a VC strategy that isn’t generic capital, that has some differentiation on sourcing, and picking, and growing businesses beyond the “we invest in great companies.” VCs don’t like strategy because it means making choices, and making choices means saying no to certain things, and those things might be the next Facebook. So they do everything, all the time, which really means they do nothing. And so we get book ordering problems and expensive lunches and weirdly angry LPs. What a boring mess.

Quality tech news from around the web

Written by Arman Tabatabai

Carl Larson Photography via Getty Images

South California is also seeing declining seed investment

Today, the Los Angeles Economic Development Corporation (LAEDC) published its updated economic forecast for LA and the Southern California region. One interesting note in the report is an observed slow down in early-stage venture investing. The report highlighted that while growth-stage investments in CA were hitting record highs, total deal count and seed investing — both in terms of total seed dollars and seed deal count — were at their lowest points since 2012.

The data points in LA, Southern CA, and the rest of the state seem to follow the trend of declining seed rounds seen in the rest of the country. While the topic is one we’ve previously discussed and one which has heated up in recent weeks with commentary from Marc Suster, Fred Wilson, and others, it’s interesting to see the trend occurring even in more nascent startup markets.

Will “Diet CA-HSR” even get done as feds look to pull back California funding

The federal government announced that it would be pulling back $1 billion in funding that was slated for the California high-speed rail project through 2022, while also pursuing legal action to help recoup the $2.5 billion it has already coughed up. The Federal Railroad Administration is arguing that the state’s updated plan — completing only a route from Bakersfield to Merced — is starkly different from the plan for which the funds were originally allocated. Ouch.

As stock exchanges compete to attract IPOs, unicorns and investors win?

It might be getting easier for companies to go public around the world. With ample late-stage capital keeping more companies staying private for longer, looser rules from the SEC and the Hong Kong Stock Exchange may be on the way to help entice more IPOs.

In the US, the SEC proposed allowing all companies to market themselves to investors before announcing IPOs versus just those that fall under the agency’s “emerging growth” definition. Across the Pacific, Bloomberg reported that Chinese tech companies have been lobbying the HK Exchange for a number of more favorable rules, including allowing companies to maintain extra voting rights and letting major shareholders buy extra stock in the process. With a serious number of Chinese companies opting to list on foreign exchanges last year, the HK Exchange might be feeling pressure to cough up concessions that could help them win local listings — especially if the US moves forward with friendlier rules.

How Japan lost half its citizens with poor data

The Japanese government failed to pay out billions of yen in government benefits for years due to faulty data. If that wasn’t bad enough, Nikkei Asian Review reported yesterday that the government is struggling to even locate roughly half of those who are owed since they don’t have their current addresses on file.

As simple as it may seem, tracking the indebted is actually a tall task since citizens have changed residences, changed names, and since the Japanese government has historically destroyed benefit applications (containing address info) after the period required to maintain them. At this point, it’s unclear whether everyone who is owed will even end up getting paid, with the Japanese government now offering a prime example of how poor data maintenance and not just poor data collection can make a situation go from bad to a whole lot worse.

Can the race to build roads in Southeast Asia avoid development gridlock?

As we harp on our “Why can’t we build anything?” obsession, infrastructure development in Southeast Asia is continuing to heat up and everyone seems to want a piece of the pie. Japan announced plans to further accelerate investment into infrastructure and urban development in the region — where China is also actively engaged — with initial expansion talks focused on Cambodia and the Philippines. At the same time, a newly unveiled government budget in Singapore and the ongoing election in Indonesia have brought infrastructure development strategies into the spotlight, with open debate on how these projects have been and should be funded.

Obsessions

  • More discussion of megaprojects, infrastructure, and “why can’t we build things”
  • We are going to be talking India here, focused around the book “Billonnaire Raj” by James Crabtree
  • We have a lot to catch up on in the China world when the EC launch craziness dies down. Plus, we are covering The Next Factory of the World by Irene Yuan Sun.
  • Societal resilience and geoengineering are still top-of-mind
  • Some more on metrics design and quantification

Thanks

To every member of Extra Crunch: thank you. You allow us to get off the ad-laden media churn conveyor belt and spend quality time on amazing ideas, people, and companies. If I can ever be of assistance, hit reply, or send an email to danny@techcrunch.com.

This newsletter is written with the assistance of Arman Tabatabai from New York

News Source = techcrunch.com

With its Greenlots acquisition, Shell is moving from gas stations to charging stations

in America/bp/california/ceo/ChargePoint/charging stations/Chevron Technology Ventures/chief executive officer/Delhi/electric car/electric vehicle/electric vehicles/energy/Greenlots/India/inductive charging/Los Angeles/managing partner/new jersey/New York/Politics/Software/TC/Technology/Tesla/transport/United States/volkswagen by

In a bid to show that it’s getting ready for the electrification of American roads, Royal Dutch Shell is buying Greenlots, a Los Angeles-based developer of electric vehicle charging and energy management technologies.

Shell, which is making the acquisition through its Shell New Energies US subsidiary, snatched the company from Energy Impact Partners, a cleantech-focused investment firm.

“As our customers’ needs evolve, we will increasingly offer a range of alternative energy sources, supported by digital technologies, to give people choice and the flexibility, wherever they need to go and whatever they drive,” said Mark Gainsborough, Executive Vice President, New Energies for Shell, in a statement. “This latest investment in meeting the low-carbon energy needs of US drivers today is part of our wider efforts to make a better tomorrow. It is a step towards making EV charging more accessible and more attractive to utilities, businesses and communities.”

Courtesy of Ed Robinson/Shell

Since Greenlots raised its cash from Energy Impact Partners, the company has become the partner of choice for utilities for electric vehicle charging, according to the firm. Greenlots was selected as the sole software provider for VolksWagen’s “Electrify America” charging program  last January.

“Utilities are playing a pivotal role in accelerating the transition to a future electric mobility system that is safer, cleaner and more efficient,” said Greenlots CEO Brett Hauser, adding, “We look forward to now working with the resources, scale and reach of Shell to further accelerate this transition.”

“Greenlots is on an incredible trajectory and, in the hands of a company with the resources such as Shell, will be able to advance the important electrification of transportation even faster,” said EIP managing partner Hans Kobler in a statement.

For Shell, the deal adds to a portfolio of electric charging assets including the Dutch-based company, NewMotion.

Across the board energy companies are spending more time and money backing and deploying electric charging technology companies. ChargePoint, a Greenlots competitor, raised $240 million in a November financing that included Chevron Technology Ventures, while BP bought the UK-based public charging network Chargemaster last year.

Despite pushback in some corners of America to the increasing electrification of U.S. highways and byways, the future of mobility needs to be electric if there’s any hope of slowing (and ideally halting and reversing) climate change globally.

Some signs of hope can be found in the latest earnings statement from Tesla, which points to increased uptake of its electric vehicles.  The teased release of an electric truck could potentially even help win converts among those drivers who like to “roll coal” in the presence of hybrids or electric cars.

 

States are already investing heavily in electric infrastructure themselves to promote the adoption of vehicles. California, New York, and New Jersey announced last June a total of $1.3 billion in new infrastructure projects focused on electric vehicle charging.

That’s still not enough to meet the goals necessary to reduce greenhouse gases significantly enough. In all, the U.S. needs to put roughly 13 million electric vehicles on the road in order to meet the targets put forward in the Paris Accords climate treaty (which the U.S. walked away from last year).

According to estimates from the Center for American Progress, the U.S. needs to spend $4.7 billion through 2025 to buy and install the 330,000 public charging outlets the nation will need to meet that electric demand.

“As power and mobility converge, there will be a seismic shift in how people and goods are transported,” said Brett Hauser, Chief Executive Officer of Greenlots. “Electrification will enable a more connected, autonomous and personalized experience. Our technology, backed by the resources, scale and reach of Shell, will accelerate this transition to a future mobility ecosystem that is safer, cleaner and more accessible.”

News Source = techcrunch.com

As it raises new cash, Recharge adds homes to its supply of on-demand spaces

in Airbnb/Airlines/aviation/Companies/Delhi/Fifth Wall Ventures/India/JetBlue/Los Angeles/New York/Politics/TC by

Recharge, the business which got its start pitching pay-as-you-go rentals of unused hotel rooms, is adding private homes to its inventory of spaces — offering the first 100 signups in cities where the plan is available a guaranteed income of $1,000 per month.

“To celebrate the launch and continue to expand our community early Recharge hosts thate approved to be part of the Recharge 100 of each city will receive a guaranteed $1000/month,” said a spokesperson for the company. “Recharge 100 is a group of  early supporters and activists in each city that share their homes.”

The company began with a simple premise — that users might not need a hotel room for 24 hours. ” People are purchasing privacy,” says the company’s chief executive, Emmanuel (“Manny”) Banfo. “If you think about getaround — allow you to purchase a car in 30 minute increments. There are so many services that have come out right now and that allow you take your amount of time and control how much time you buy it for,” says the company’s chief executive, Emmanuel (“Manny”) Banfo. 

Recharge chief executive Manny Banfo.

Banfo says that Recharge actually began with homes as its first spaces available for rent back in 2016. At the time the spaces were all friends houses, but the company hadn’t figured out a way to vet and service the home inventory.

So Banfo took his pitch to hotels. The company has done over 50,000 bookings and managed to attract industry investors like JetBlue Technology Ventures. JetBlue liked the company’s ability to offer private space to weary travelers off of red eye flights on well-traveled routes from Los Angeles to New York, according to Banfo.

If JetBlue’s investment offered Recharge access to the demand side of the equation, then the company’s new investment partner, Fifth Wall Ventures, gives the company new access to supply.

Backed by a clutch of property developers, managers, and homebuilding companies, Fifth Wall will give Recharge access to new developments as they come online — and give property managers and owners access to instant revenue for unused spaces. That’s likely what attracted Fifth Wall — and its partner Brad Greiwe (who’ll be taking a seat on the board of directors) — to the company. To date, the company has raised $10 million in funding from Fifth Wall, JetBlue Technology Ventures, and

The Homes service, which is launching with just over 1,000 listings in Los Angeles, New York and the San Francisco Bay Area and another 80,000 people on its waiting list, can be offered in two ways. Homeowners can let Recharge manage the process and make up to $500 a month, or take care of cleaning and maintenance themselves and make upwards of $2000 or more per month.

There are two options available to homeowners that use the Recharge service.

“If you’re doing the work yourself we’re vetting you very hard,” says Banfo. “We’ll qualify the overall character and will qualify the unit… whether it has a doorman, an elevator, other neighbors on the floor, a fob for the door, fob for the lock.”

In cities like New York and San Francisco Recharge is able to avoid regulatory scrutiny by not allowing its users to stay overnight — thereby skirting the rules that have landed Airbnb in hot water with local regulators.

On average, users stay for roughly two-and-a-half hours and spent between $80 to $100 for their use of spaces.

Average stay is roughly two and a half hours. People are spending $80 to $100… average is lower in homes.. Becaues there’s so much more of them and the money is going directly to people’s pockets..

“What’s missing in a city is privacy.. In your home right now you can shower, you can cry, you can do pushups, you can run around, you can meditate, pray… when you’re in the city there’s just.. You have this mask on… and you can’t unmask and offices don’t allow you to unmask, because you’re being watched still,” says Banfo. 

News Source = techcrunch.com

Google partners with Sony Pictures Imageworks to launch an open source VFX render manager

in Cloud/cloud computing/cloud platform/computer graphics/Delhi/Developer/Google/India/Los Angeles/Politics/sony pictures entertainment/special effects/Zync by

Google today announced that it has partnered with Sony Pictures Imageworks, Sony’s visual effects and animation studio, to launch OpenCue, an open source render manager. OpenCue doesn’t handle any of the actual rendering processes but it provides all the tools to break down those different steps and then schedule and manage the different rendering jobs across large rendering farms, both local and in the cloud.

Google, of course, is interested in bringing these workloads to its cloud and it has made a concerted effort to bring the Hollywood studios to its Cloud Platform. That includes the launch of its Los Angeles cloud region last year, as well as its acquisition of the Zync cloud renderer back in 2014. Google was also a founding member of the Academy Software Foundation, an open source foundation that focuses specifically on tools for the film industry. Sony Pictures Entertainment/Imageworks wasn’t a founding member but joined a few months after the foundation got off the ground.

Cue 3 was actually Imageworks’ internal queuing system, which is at least fifteen years old. Google worked with the company to open source the system, which Google and Imageworks have scaled to up to 150,000 cores.

“As content production continues to accelerate across the globe, visual effects studios are increasingly turning towards the cloud to keep up with demand for high-quality content,” writes Google product manager Todd Prives in today’s announcement. “While on-premise render farms are still in heavy use, the scalability and the security that the cloud offers provides studios with the tools needed to adapt to today’s fast-paced, global production schedules.”

It’s worth noting that this isn’t Sony’s for foray into open source. The company previously also open sourced and contributed to tools like OpenColorIO and Alembic.

News Source = techcrunch.com

Dreaming of Mars, the startup Relativity Space gets its first launch site on Earth

in 3d printing/Air Force/Amazon/Blue Origin/california/Delhi/Elon Musk/Florida/hyperloop/India/jeff bezos/Los Angeles/Louisiana/Mississippi/Politics/Relativity Space/Seattle/Space/spaceflight/spaceport/SpaceX/Startups/TC/transport/U.S. Air Force/United Launch Alliance/United States/WeWork by

3D-printing the first rocket on Mars.

That’s the goal Tim Ellis and Jordan Noone set for themselves when they founded Los Angeles-based Relativity Space in 2015.

At the time they were working from a WeWork in Seattle, during the darkest winter in Seattle history, where Ellis was wrapping up a stint at Blue Origin . The two had met in college at USC in their jet propulsion lab. Noone had gone on to take a job at SpaceX and Ellis at Blue Origin, but the two remained in touch and had an idea for building rockets quickly and cheaply — with the vision that they wanted to eventually build these rockets on Mars.

Now, more than $35 million dollars later, the company has been awarded a multi-year contract to build and operate its own rocket launch facilities at Cape Canaveral Air Force Station in Florida.

That contract, awarded by The 45th Space Wing of the Air Force, is the first direct agreement the U.S. Air Force has completed with a venture-backed orbital launch company that wasn’t also being subsidized by billionaire owner-operators.

By comparison, Relativity’s neighbors at Cape Canaveral are Blue Origin (which Jeff Bezos has been financing by reportedly selling $1 billion in shares of Amazon stock since 2017); SpaceX (which has raised roughly $2.5 billion since its founding and initial capitalization by Elon Musk); and United Launch Alliance, the joint venture between the defense contracting giants Lockheed Martin Space Systems and Boeing Defense.

Like the other launch sites at Cape Canaveral, Launch Complex 16, where Relativity expects to be launching its first rockets by 2020, has a storied history in the U.S. space and missile defense program. It was used for Titan missile launches, the Apollo and Gemini programs and Pershing missile launches.

From the site, Relativity will be able to launch its first designed rocket, the Terran 1, which is the only fully 3D-printed rocket in the world.

That rocket can carry a maximum payload of 1,250 kilograms to a low earth orbit of 185 kilometers above the Earth. Its nominal payload is 900 kilograms of a Sun-synchronous orbit 500 kilometers out, and it has a 700 kilogram high-altitude payload capacity to 1,200 kilometers in Sun-synchronous orbit. Relativity prices its dedicated missions at $10 million, and $11,000 per kilogram to achieve Sun-synchronous orbit.

If the company’s two founders are right, then all of this launch work Relativity is doing is just a prelude to what the company considers to be its real mission — the advancement of manufacturing rockets quickly and at scale as a test run for building out manufacturing capacity on Mars.

“Rockets are the business model now,” Ellis told me last year at the company’s offices at the time, a few hundred feet from SpaceX. “That’s why we created the printing tech. Rockets are the largest, lightest-weight, highest-cost item that you can make.”

It’s also a way for the company to prove out its technology. “It benefits the long-term mission,” Ellis continued. “Our vision is to create the intelligent automated factory on Mars… We want to help them to iterate and scale the society there.”

Ellis and Noone make some pretty remarkable claims about the proprietary 3D printer they’ve built and housed in their Inglewood offices. Called “Stargate,” the printer is the largest of its kind in the world and aims to go from raw materials to a flight-ready vehicle in just 60 days. The company claims that the speed with which it can manufacture new rockets should pare down launch timelines by somewhere between two and four years.

Another factor accelerating Relativity’s race to market is a long-term contract the company signed last year with NASA for access to testing facilities at the agency’s Stennis Space Center on the Mississippi-Louisiana border. It’s there, deep in the Mississippi delta swampland, that Relativity plans to develop and quality control as many as 36 complete rockets per year on its 25-acre space.

All of this activity helps the company in another segment of its business: licensing and selling the manufacturing technology it has developed.

“The 3D factory and automation is the other product, but really that’s a change in emphasis,” says Ellis. “It’s always been the case that we’re developing our own metal 3D printing technology. Not only can we make rockets. If the long-term mission is 3D printing on Mars, we should think of the factory as its own product tool.”

Not everyone agrees. At least one investor I talked to said that in many cases, the cost of 3D printing certain basic parts outweighs the benefits that printing provides.

Still, Relativity is undaunted.

But first, the company — and its competitors at Blue Origin, SpaceX, United Launch Alliance and the hundreds of other companies working on launching rockets into space again — need to get there. For Relativity, the Canaveral deal is one giant step for the company, and one great leap toward its ultimate goal.

“This is a giant step toward being a launch company,” says Ellis. “And it’s aligned with the long-term vision of one day printing on Mars.”

News Source = techcrunch.com

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