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June 25, 2019
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Startups Weekly: Lessons from a failed founder

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I sat down with Menlo Ventures partner Shawn Carolan this week to talk about his early investment in Uber. Menlo, if you remember, led Uber’s Series B and has made a hefty sum over the year selling shares in the ride-hailing company. I’ll have more on that later; for now, I want to share some of the insights Carolan had on his experience ditching venture capital to become a founder.

Around when Menlo made its first investment in Uber, Carolan began taking a step back from the firm and building Handle, a startup that built tools to help people be more productive. Despite years of hard work, Handle was ultimately a failure. Carolan said he shed a lot of tears over its demise, but used the experience to connect more intimately with founders and to offer them more candid, authentic advice.

“People in the valley are always achievement-oriented; it’s always about the next thing and crushing it and whatever,” Carolan told TechCrunch. “When [Handle] shut down, I had this spreadsheet of all the people who I felt like I disappointed: Seed investors who invested in me, all the people at Menlo and my friends who had tweeted out early stuff. It was a long spreadsheet of like 60 people. And when I started a sabbatical, what I said was I’m going to go connect with everyone and apologize.”

Today, Carolan encourages founders to own their vulnerabilities.

“It’s OK to admit when you’re wrong,” he said. “Now I can see it on [founders’] faces, I can see when they’re scared. And they’re not going to say they’re scared but I know it’s tough. This is one of the toughest things that you’re going to go through. Now I can be there emotionally for these founders and I can say ‘here’s how you do it, here’s how you talk to your team and here’s what you share.’ A lot of founders feel like they have to do this alone and that’s why you have to get comfortable with your vulnerability.”

After Handle shuttered, Carolan returned to Menlo full time and made the firm a boatload of money from Roku’s IPO and now Uber’s. Anyway, thought those were some nice anecdotes that should be shared since most of our feeds are dominated by Silicon Valley hustle porn.

Want more TechCrunch newsletters? Sign up here. Ok, on to other news…

IPO corner

Funds on funds on funds

There were so many fund announcements this week; here’s a quick list.

Extra Crunch

Lots of great new exclusive content for our Extra Crunch subscribers is on the site, including this deep dive into the challenges of transportation startup profits. Plus: When to ditch a nightmare customer, before they kill your startup; The right way to do AI in security; and The definitive Niantic reading guide.

Lawsuits

Sinema, that one MoviePass competitor, has run into its fair share of bumps in the road. TechCrunch’s Brian Heater hopped on the phone with the startup’s CEO this week to learn more about those bumps, why its terminating accounts en masse, a class-action lawsuit its battling and more.

Photo by Stephen McCarthy / RISE via Sportsfile

Startup capital

Battlefield!

TechCrunch’s Startup Battlefield brings the world’s top early-stage startups together on one stage to compete for non-dilutive prize money, and the attention of media and investors worldwide. Here’s a quick update on some of our BF winners and finalists:

#Equitypod

If you enjoy this newsletter, be sure to check out TechCrunch’s venture-focused podcast, Equity. In this week’s episode, available here, Crunchbase News editor-in-chief Alex Wilhelm, myself and Phil Libin, the founder of Evernote and AllTurtles, chat about the importance of IPOs. Plus, in a special Equity Shot, Alex and I unpack the Uber S-1.

Roku is no longer a neutral platform after today’s Roku OS 9.1 update

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In the past, Roku seemed to be more of neutral platform compared with streaming media player rivals like Amazon Fire TV or Apple TV. The company gave everyone else’s content equal footing through its add-on channels and in Roku search, as had nothing of its own to promote. That’s changing with the rollout of Roku OS 9.1, beginning today. The update adds a feature that automatically plays back The Roku Channel’s movies and TV shows at times; another that better showcases the channel’s free content in genre-focused searches; and one that introduces a new navigation menu with offers for other Roku products.

These features arrive alongside other changes like a new guest mode and easier sign-in to subscriptions.

Among the more innocuous changes are the new guest mode and automatic account linking.

Roku in January first announced an “auto sign out mode,” which allowed guests to sign into subscription channels using their own accounts instead of the Roku owner’s credentials. And guests could specify when their credentials would expire on that device – a useful feature in particular for Airbnb operators. Today, “auto sign out mode” is being rebranded as “guest mode,” and can now be enabled or disabled on select devices. It also now allows Roku owners to sign out the guests themselves.

Meanwhile, Roku is making it easier for customers who move set up new Roku devices by addressing one of the bigger headaches: logging in again to all your streaming account subscriptions. With Automatic Account Link, Roku users won’t have to re-enter their credentials when activating a new Roku player or Roku TV – the subscription data will simply copy over from their existing account.

At launch, this feature is supported on less than 10 subscriptions, including Pandora and Sling TV. But Roku says more are in the works.

More notably, are the changes Roku is introducing today that will see it promoting its own content and products to users.

For starters, a change to Roku Search (currently only in the U.S.) is now organizing content more visually.

When users search for a genre like “comedy” or “action,” the content is displayed in a more Netflix-like fashion with larger image thumbnails and rows you scroll through horizontally. However, Roku has decided to organize content by type instead of, say, subsets of “comedy” or “action,” or whatever genre was being searched.

So while a service like Netflix lets you drill down into genres (e.g. Romantic Comedy, Action Comedy, Family Comedy, TV Comedy, etc.), Roku instead is organizing search results by whether the content is free, subscription, on-demand or 4K.

That’s not really an issue – in fact, it can be useful – but it’s worth noting that the second row from the top is “free.” Not surprisingly, this points users to the free, ad-supported content from The Roku Channel alongside other free sources.

That’s similar to how a search for “free” works on Roku today, but now Roku is giving free content more visibility by giving it a prominent spot in these more visual, genre-based searches, too.

With Voice Search, however, The Roku Channel gets its biggest push yet.

With Roku OS 9.1, when you search for movies and TV shows using your voice, content available on The Roku Channel that matches those results will automatically begin playing in some scenarios. That includes The Roku Channel’s ad-supported fare as well as content from any of the premium subscriptions you have through The Roku Channel.

“Playback will occur when the movie or show is available only in The Roku Channel, or when a customer specifically indicates the channel name in their voice command,” writes Roku, in a blog post.

The company even acknowledges that this product change introduces a bit of favoritism into its previously unbiased search platform.

If playback from a voice command is not available for a specific movie or show, you’ll continue to see unbiased search results ordered by price, so you can choose the best viewing option,” the company says, detailing how voice search works when The Roku Channel can’t be favored.

It’s not exactly a huge disservice to customers to start playing a title from the only available source for their request. But it is a way to juice views of The Roku Channel content instead of allowing users to choose to rent or buy the title elsewhere.

Today, voice search kicks users over to a search results list where they see all the options for streaming a title, which includes The Roku Channel, when available, as well as places where the movie or show can be purchased or rented. Those who don’t like ads often choose to buy or rent, rather than stream a free, ad-supported version. The 9.1 update makes this option more difficult.

Roku says other channels will gain automatic playback in the weeks ahead, which will work best when a customer says the full title and the channel name in the voice command.

Alongside this, Roku is adding voice commands: “replay” to go back a few seconds; “turn closed captions on/off; and “turn display off” for Roku TVs that offer the Fast TV Start feature.

Roku TV models will also receive the Automatic Volume Leveling feature that arrived to Roku players in Roku OS 9.

Another Roku OS 9.1 feature will advertise more Roku products to users through a My Offers link that appears in the left navigation menu of the Roku home screen.

Here, users can check to see if they’re eligible for special discounts on Roku products, accessories or – yep, even content subscriptions. The link appears when those personalized discounts are available, and users can make a purchase directly from the ad itself using their remote.

Roku OS 9.1 is rolling out as a software update to select Roku streaming players today (a full list is in the release notes), and will reach all supported players in the coming weeks. Roku TV models are expected to receive the update in early summer.

Roku on track for $1 billion in revenue in 2019

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Roku plans to be a billion-dollar company in 2019, the company said on Thursday as part of its announcement of strong earnings. The company beat analyst estimates and reported strong growth in active users and streaming hours with earnings of $0.05 per share, compared with the $0.03 analysts had estimated, and revenues of $276 million, compared with the expected $262 million.

Roku also reported 40 percent year-over-year active user growth, with 27.1 million active users by year-end, and a 69 percent year-over-year increase in streaming hours, which reached 7.3 billion.

The company said it plans this year to invest in international expansion, its ad-supported service The Roku Channel, advertising, and its Roku TV platform.

While cord cutting is driving some of Roku’s growth, only around half of Roku’s customers fit this description, CEO Anthony Wood pointed out. The other half are more like “cord shavers” – those who are still pay TV subscribers, but are shifting more of their TV viewing to streaming services.

Roku’s ability to also attract pay TV customers combined with the fact that 1 in four smart TVs sold in the U.S. now runs its software, is helping the company’s market share grow.

Roku estimates that 1 in 5 U.S. TV households now uses the Roku platform for at least a portion of their TV viewing. In the year ahead, Roku aims to better capitalize on its traction by increasing the monetization per user and scaling the number of households using Roku.

In addition, the company sees a big opportunity in international.

“International is one of the top four areas we’re investing in,” Wood noted.

“Roku has more than 27 million active accounts globally today. Most of those are in the United States. But we believe many of the assets we built for the U.S. market will help us expand into other markets. And clearly streaming is a global opportunity with one billion households worldwide,” he said.

The company begin investing more substantially in international in 2018, and has now reached 20 countries. It has added more local content and is expanding its relationships with international resellers, said Wood. “We think you’ll start to see the results of this increased investment bearing fruit in 2020,” he added.

Roku also has high hopes for The Roku Channel.

The channel is now one of the top five most popular on the platform and grew from around 1,000 free movies and TV episodes in 2017 to now around 10,000. Last year, it added more streaming partners like ABC, Cheddar and People TV and even expanded into subscriptions, with add-ons like Showtime, Starz, and Epix.

The company believes the channel will continue to become a main destination on its platform, which helps Roku to monetize through advertising and its cut of subscription revenue, when customer opt to add on extra packages. But today the channel is still lacking many of the major subscription services, compared with the more robust lineup offered by Amazon Channels. For example, HBO is not offered through The Roku Channel today, nor is CBS All Access.

However, the company believes its financial performance will improve this year – reaching the billion in revenue mark, with platform revenues accounting for two-thirds of that. This, in part, will be due to growing its installed base and extracting more revenue from each customer, including through The Roku Channel.

It’s worth noting that Roku recently made it possible to stream from The Roku Channel directly on mobile devices, which will likely play a role here.

Roku has been growing at a rapid pace alongside the larger cord cutting and streaming TV trend.

In the past three years, it increased active accounts by 4 million, 6 million and then nearly 8 million, respectively, it said. And it quadrupled the size of its platform revenue from just over $100 million in 2016 to over $400 million in 2018. In the U.S., its active account base of 27+ million would make it equivalent to the No. 2 traditional pay TV provider.

In addition to international expansions in 2019 and investments in The Roku Channel, Roku aims to increase its Roku TV market share, and roll out new ad products in areas like marketplace, programmatic, and self-serve.

Roku’s investments in its platform led to 77 percent year-over-year growth to reach 151.4 million in revenue in Q4. But the player business is still growing too – 21 percent year-over-year to reach 124.3 million in revenue, Roku said.

However, a lot will changing in the streaming landscape this year, as new offerings from AT&T (WarnerMedia streaming service), Apple, Disney, Viacom (which just bought Pluto TV), and NBC hit the market.

But Roku believes it will weather these changes, too.

“I founded this company on the belief that all television was going to be streamed,” Wood told investors. “And it wasn’t that many years ago when there was no streaming, and then the only streaming was Netflix. It took a long time for the incumbents to embrace streaming. But they have. And that’s very gratifying to see every major media company in the world developing streaming strategies, which is great — it’s great for us, because we’re the leading streaming platform,” he said.

 

 

Roku’s à la carte premium subscriptions arrive today, but without HBO

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Earlier this month, Roku announced it would soon begin selling subscriptions to premium video services directly from its own TV and movies hub, The Roku Channel. Today, those subscriptions are going live, allowing Roku users to sign up for channels like EPIX, Showtime, STARZ, and others, then stream them without needing to install the channel’s own app on their Roku device.

Instead, all the content from the add-ons will be found in The Roku Channel section itself, alongside the other free and ad-supported TV shows, movies, news, sports, and entertainment programming already offered. However, the premium channels will have their own area inside The Roku Channel, including a spot on the homepage, as well as their own dedicated tabs, the company earlier said.

In time, Roku hopes to leverage the data from users’ unique blend of subscriptions to better personalize its recommendations.

A number of companies today offer the ability to watch premium programming through add-ons subscriptions, but fewer allow you to do so à la carte – that is, most require you to subscribe to a core TV package first before adding on extras. Amazon’s Prime Video Channels is probably the best known of the à la carte providers, though Sling TV rolled out a selection of premium a la carte channels last year.

Roku doesn’t plan to offer its own “skinny bundle” base package of streaming TV content at this time, the company recently told TechCrunch.

“I think where we are today is really focused on these à la carte subscriptions,” said Roku’s vice president of Programming, Rob Holmes. “Ultimately, from a user standpoint, there’s a lot of value in being able to pick and choose exactly what you want to sign up for — without having to sign up for one of these base packages to start with. That’s how we think about it today.”

Once subscribed to one of Roku’s premium selections, customers will only be able to watch the content through The Roku Channel itself. In addition to the revenue split on these add-ons, this benefits Roku because it puts attractive premium content right next to Roku’s ad-supported fare of some 10,000+ free movies and TV episodes. When customers are in search of something to watch next, it will be easy for them to just browse within the section they’re already in.

Plus, Roku says add-ons subscribers won’t even be able to use the premium networks’ own apps at launch, which keeps them further isolated in Roku’s own universe.

In order for customers to watch the premium content outside of Roku devices, like Roku TVs or media players, they’ll need to install the free Roku mobile app. The updated version of the iOS app is arriving today, and the Android update will be available in mid-February, the company says.

The selection of premium networks at launch includes: STARZ, Showtime, EPIX, plus Baeble Music; CollegeHumor’s DROPOUT; CuriosityStream; Fandor Spotlight; FitFusion; The Great Courses Signature Collection; Grokker; Hi-YAH!; Hopster; Lifetime Movie Club; DOX, LOLFlicks, Monsters and Nightmares, Magnolia Selects, and Warriors & Gangsters presented by Magnolia Pictures; MHz Choice; NOGGIN; Shout! Factory TV, Smithsonian Channel Plus; Stingray Karaoke; Tastemade; Viewster Anime; and ZooMoo.

Notably missing from the lineup is HBO, which offers its own over-the-top streaming service, HBO NOW, and has deals with a number of à la carte and streaming TV providers.

Roku says the Premium Subscriptions feature will become available on select Roku devices in the U.S. today. They offer a 30-day trial period, and are paid for using the payment info you have on file with Roku’s own billing system.

All supported devices should receive the update in the coming weeks, starting with Roku players and then Roku TVs. To see if your device has been updated, look for a new row called “Browse Premium Subscriptions” below the Featured row in The Roku Channel.

 

 

Roku explains why it allowed Infowars on its platform

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Roku has just made a bad decision with regard to its growing advertising business by associating its brand with the toxic conspiracy theorist, Alex Jones. As Digiday first reported this morning, Roku has chosen to add the Infowars live show hosted by Jones to the Roku platform as a supported channel, much to the disgust of customers now hammering the company on its social media platforms.

The company, apparently, is opting for the “we’re a neutral platform” defense in the matter, despite the fact that most major platforms have backed away from this stance with regard to Jones.

Apple, Facebook, Spotify, YouTube, Twitter, Periscope, Stitcher, Pinterest, LinkedIn, and even YouPorn have removed Infowars from their respective platforms.

The decision to allow the channel comes at a time when Jones and Infowars are in the headlines again because of a recent update in the legal battle between the Sandy Hook families and the Infowars program. The families are suing the conspiracy theorist for spreading the false claim that the school shooting was an elaborate hoax, and that Infowars peddled these stories to stoke fear and sell more products like survivalist gear and gun paraphernalia, The New York Times reports.

A judge has ordered Infowars to turn over internal documents to the families that relate to its business plan or marketing strategies, the shooting itself, crisis actors, or mass shootings in general.

Roku’s decision to allow the channel at all is a poor one not only in terms of taking a moral stance on complicated matters (if you’re of the mindset that’s something companies should do) – it seems to go against Roku’s own policy that bans content which is “unlawful, incites illegal activities or violates third-party rights.”

This is the same general premise that saw Infowars banned everywhere else.

Because of Jones’ claims, the Sandy Hook families have received death threats and have been continually harassed, even offline. Jones has also promoted other theories that led to violence, like Pizzagate.

Roku’s position, seemingly, is that the channel hasn’t done any bad stuff yet on its platform, never mind its past.

Many Roku customers on social media are threatening to boycott. A search for terms including “roku,” “boycott,” and others related to the news are picking up speed on Twitter, the #boycottroku hashtag has just now re-appeared, as well. (It was used previously by customers protesting the NRA channel.)

Given Amazon Fire TV and Roku’s tight race and Roku’s hunt for ad revenue through newer initiatives like its Roku Channel, a boycott could have material impact. (It looks like Amazon picked the right day to launch its updated Fire TV Stick with the new Alexa remote. At $40, it’s not going to be hard for consumers to switch streamers, if it comes to that. A search for “infowars” in Amazon Fire TV apps is not currently returning results, if you’re curious.)

Roku has become one of the top streaming media device makers in the U.S. and globally, recently having reached nearly 24 million registered users. Digiday notes that it’s projected to generate $293 million in advertising in 2018, per eMarketer, putting it just behind Hulu.

Apparently, Roku believes it can distance itself from the content it hosts on its platform.

That’s not a good look for advertisers, however, many who won’t want their brand appearing anywhere near Infowars. And because Roku runs ads right on its homescreen, that means advertisers’ content can actually sit directly beside the Infowars channel icon, if not in the program itself.

For example:

It may also make advertisers hesitant to work with Roku on other initiatives because it shows a lack of understanding over how to manage brand safety, or because they fear a consumer backlash.

Roku’s full statement is below:

Our streaming platform allows our customers to choose from thousands of entertainment, news and special interest channels, representing a wide range of topics and viewpoints. Customers choose and control which channels they download or watch, and parents can set a pin to prevent channels from being downloaded. While the vast majority of all streaming on our platform is mainstream entertainment, voices on all sides of an issue or cause are free to operate a channel. We do not curate or censor based on viewpoint.

We are not promoting or being paid to distribute InfoWars. We do not have a commercial relationship with the InfoWars.

While open to many voices, we have policies that prohibit the publication of content that is unlawful, incites illegal activities or violates third-party rights, among other things. If we determine a channel violates these policies, it will be removed. To our knowledge, InfoWars is not currently in violation of these content policies.

UPDATE, 1/15/19, 2:43 PM ET: 

Following Roku’s statement about its decision, Josh Koskoff, the Koskoff, Koskoff & Bieder attorney representing several Sandy Hook families suing Jones after his repeated claims that the Sandy Hook massacre was a hoax, has released a statement as well:

Roku’s shocking decision to carry Infowars and provide a platform for Alex Jones is an insult to the memory of the 26 children and educators killed at Sandy Hook. Worse, it interferes with families’ efforts to prevent people like Jones from profiting off innocent victims whose lives have been turned upside down by unspeakable loss. We call on Roku to realize this and immediately pull the program. Until then, the families will be switching to alternate streaming providers that know the difference between authentic – if provocative – opinions and a lying opportunist seeking to make money by any means possible. There is no amount of anticipated revenue that could possibly justify Roku’s calculated decision.

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