The “splinternet” is already here

There is no question that the arrival of a fragmented and divided internet is now upon us. The “splinternet,” where cyberspace is controlled and regulated by different countries is no longer just a concept, but now a dangerous reality. With the future of the “World Wide Web” at stake, governments and advocates in support of a free and open internet have an obligation to stem the tide of authoritarian regimes isolating the web to control information and their populations.

Both China and Russia have been rapidly increasing their internet oversight, leading to increased digital authoritarianism. Earlier this month Russia announced a plan to disconnect the entire country from the internet to simulate an all-out cyberwar. And, last month China issued two new censorship rules, identifying 100 new categories of banned content and implementing mandatory reviews of all content posted on short video platforms.

While China and Russia may be two of the biggest internet disruptors, they are by no means the only ones. Cuban, Iranian and even Turkish politicians have begun pushing “information sovereignty,” a euphemism for replacing services provided by western internet companies with their own more limited but easier to control products. And a 2017 study found that numerous countries, including Saudi Arabia, Syria and Yemen have engaged in “substantial politically motivated filtering.”

This digital control has also spread beyond authoritarian regimes. Increasingly, there are more attempts to keep foreign nationals off certain web properties.

For example, digital content available to U.K. citizens via the BBC’s iPlayer is becoming increasingly unavailable to Germans. South Korea filters, censors and blocks news agencies belonging to North Korea. Never have so many governments, authoritarian and democratic, actively blocked internet access to their own nationals.

The consequences of the splinternet and digital authoritarianism stretch far beyond the populations of these individual countries.

Back in 2016, U.S. trade officials accused China’s Great Firewall of creating what foreign internet executives defined as a trade barrier. Through controlling the rules of the internet, the Chinese government has nurtured a trio of domestic internet giants, known as BAT (Baidu, Alibaba and Tencent), who are all in lock step with the government’s ultra-strict regime.

The super-apps that these internet giants produce, such as WeChat, are built for censorship. The result? According to former Google CEO Eric Schmidt, “the Chinese Firewall will lead to two distinct internets. The U.S. will dominate the western internet and China will dominate the internet for all of Asia.”

Surprisingly, U.S. companies are helping to facilitate this splinternet.

Google had spent decades attempting to break into the Chinese market but had difficulty coexisting with the Chinese government’s strict censorship and collection of data, so much so that in March 2010, Google chose to pull its search engines and other services out of China. However now, in 2019, Google has completely changed its tune.

Google has made censorship allowances through an entirely different Chinese internet platform called project Dragonfly . Dragonfly is a censored version of Google’s Western search platform, with the key difference being that it blocks results for sensitive public queries.

Sundar Pichai, chief executive officer of Google Inc., sits before the start of a House Judiciary Committee hearing in Washington, D.C., U.S., on Tuesday, Dec. 11, 2018. Pichai backed privacy legislation and denied the company is politically biased, according to a transcript of testimony he plans to deliver. Photographer: Andrew Harrer/Bloomberg via Getty Images

The Universal Declaration of Human Rights states that “people have the right to seek, receive, and impart information and ideas through any media and regardless of frontiers.”

Drafted in 1948, this declaration reflects the sentiment felt following World War II, when people worked to prevent authoritarian propaganda and censorship from ever taking hold the way it once did. And, while these words were written over 70 years ago, well before the age of the internet, this declaration challenges the very concept of the splinternet and the undemocratic digital boundaries we see developing today.

As the web becomes more splintered and information more controlled across the globe, we risk the deterioration of democratic systems, the corruption of free markets and further cyber misinformation campaigns. We must act now to save a free and open internet from censorship and international maneuvering before history is bound to repeat itself.

BRUSSELS, BELGIUM – MAY 22: An Avaaz activist attends an anti-Facebook demonstration with cardboard cutouts of Facebook chief Mark Zuckerberg, on which is written “Fix Fakebook”, in front of the Berlaymont, the EU Commission headquarter on May 22, 2018 in Brussels, Belgium. Avaaz.org is an international non-governmental cybermilitating organization, founded in 2007. Presenting itself as a “supranational democratic movement,” it says it empowers citizens around the world to mobilize on various international issues, such as human rights, corruption or poverty. (Photo by Thierry Monasse/Corbis via Getty Images)

The Ultimate Solution

Similar to the UDHR drafted in 1948, in 2016, the United Nations declared “online freedom” to be a fundamental human right that must be protected. While not legally binding, the motion passed with consensus, and therefore the UN was provided limited power to endorse an open internet (OI) system. Through selectively applying pressure on governments who are not compliant, the UN can now enforce digital human rights standards.

The first step would be to implement a transparent monitoring system which ensures that the full resources of the internet, and ability to operate on it, are easily accessible to all citizens. Countries such as North Korea, China, Iran and Syria, who block websites and filter email plus social media communication, would be encouraged to improve through the imposition of incentives and consequences.

All countries would be ranked on their achievement of multiple positive factors including open standards, lack of censorship, and low barriers to internet entry. A three tier open internet ranking system would divide all nations into Free, Partly Free or Not Free. The ultimate goal would be to have all countries gradually migrate towards the Free category, allowing all citizens full information across the WWW, equally free and open without constraints.

The second step would be for the UN to align itself much more closely with the largest western internet companies. Together they could jointly assemble detailed reports on each government’s efforts towards censorship creep and government overreach. The global tech companies are keenly aware of which specific countries are applying pressure for censorship and the restriction of digital speech. Together, the UN and global tech firms would prove strong adversaries, protecting the citizens of the world. Every individual in every country deserves to know what is truly happening in the world.

The Free countries with an open internet, zero undue regulation or censorship would have a clear path to tremendous economic prosperity. Countries who remain in the Not Free tier, attempting to impose their self-serving political and social values would find themselves completely isolated, visibly violating digital human rights law.

This is not a hollow threat. A completely closed off splinternet will inevitably lead a country to isolation, low growth rates, and stagnation.

Democracy is good for business

In America, democracy and capitalism go hand in hand. Watching our democracy function (or, more accurately, malfunction) over the past few years, I have come to the conclusion that there is a slow-moving crisis developing for our democracy — and our economy. For entrepreneurs to have a fighting chance and for existing companies to prosper, our legislators must strive to construct a truly competitive economic system that encourages innovation and works for everyone, not just those with the most political influence or campaign donations.

What might our country look like if we were to surrender policy-making to the anti-democratic forces of campaign donation-obsessed politicians, rent-seeking special interests and behemoth oligopolistic-minded corporations? Well, it would look a lot like what we have now:

The lack of courage demonstrated by our elected politicians to rein in corporate abuses and protect our markets is our giant white flag of surrender, and its effects can be found in nearly every sector of our economy. Our prosperity has been seized by the anti-competitive and anti-innovation forces of a dysfunctional political system dominated by monied special interests. And it’s happening right out in the open for all of us to see. Fret not, however, because it is entirely within our power to squash the bugs that have infested our democracy.

Our elected leaders seem to have hoisted a giant white flag of surrender — either unable or unwilling to rein in corporate abuses and protect our markets. The effects of these anti-competitive and anti- innovation forces of our dysfunctional political system can be found in nearly every sector of our economy. Monied special interests are draining our prosperity, and it’s happening right out in the open for all of us to see.

As business leaders and entrepreneurs, we must demand our politicians step up and take action to protect economic competitiveness and provide guard rails for expansion of our capital markets. For American citizens to have confidence that legislators are working toward these dual goals of protection and expansion, it is absolutely crucial that we first do everything possible to make our democratic elections as competitive and fair as possible.

For America to thrive and innovate in an increasingly competitive global economy, we need strong, uncorrupted, fairly regulated markets.

This notion of prodigious change to our electoral system is not new. In fact, more than two-thirds of the amendments to the U.S. Constitution since the Bill of Rights were crafted specifically to address voting, representation and election shortcomings in our democracy. Fortunately, we don’t have to wait for a constitutional amendment to resolve our problems. There are actionable things we can do right now to expand democratic participation and restore trust in our elections.

For starters, I, along with many other business leaders across America, am supporting the Secure Elections Act, a bipartisan bill introduced in the U.S. Senate last year by Senators Amy Klobuchar (D-MN) and James Lankford (R-OK). This bill requires paper records and rigorous audits to reduce the risk of vote hacking, improves information sharing between federal and state election officials and establishes cybersecurity guidelines to protect our elections.

Further, there are simple, proven changes that make voting accessible to more citizens:

  • Enable automatic (opt-out) voter registration upon turning 18
  • Allow no-fault absentee vote by mail for all voters
  • Expand early voting dates and locations
  • Restore voting rights for people who have served their time for non-violent offenses

Policies that expand voting rights benefit all members of a democracy, regardless their political affiliation. State by state, progress is already being made. In 2018, by an overwhelming margin, voters in Florida restored voting rights to non-violent ex-felons. On the same day, balloters in Nevada and Michigan approved initiatives to automatically register voters when they turn 18, bringing the total to 15 states where this is the law. It’s time to put partisan politics aside and do this in all 50 states.

Finally, elections can be made more democratic and competitive:

  • End gerrymandering of districts
  • Adopt open primaries
  • Enact ranked-choice voting

In 2018, anti-gerrymandering efforts passed at the ballot box in Michigan, Missouri, Utah, Ohio and Colorado. In Pennsylvania, the 21st Century Election Reform Modernization proposal, introduced by Governor Tom Wolf (D), would enact many of these voter-friendly upgrades. The Fair Representation Act, co-sponsored by Ro Khanna (D-CA) here in Silicon Valley, Don Beyer (D-VA) and Jamie Raskin (D-MD), proposes an innovative approach to ensuring we all have a voice in our democracy, no matter where we live.

House Democrats are making a statement with HR1, the first bill of the 116th Congress, which addresses money in politics, ethics and voting rights. It’s a great step in the right direction, but for this to be successful, Republicans must join Democrats to create bipartisan consensus.

As business leaders, our political ideologies are as diverse as our industries. But one thing we should all be able to recognize is that for America to thrive and innovate in an increasingly competitive global economy, we need strong, uncorrupted, fairly regulated markets. To reach that ideal, we must first protect and strengthen the democratic foundations of our elections. I invite every business leader across the nation to join me in fighting for a more democratic democracy for all Americans by supporting legislation and lawmakers working diligently toward that goal.

The responsibility for a sustainable digital future

On March 12, 2019, we celebrate the 30th anniversary of the “World Wide Web”, Tim Berners-Lee’s ground-breaking invention.

In just thirty years, this flagship application of the Internet has forever changed our lives, our habits, our way of thinking and seeing the world. Yet, this anniversary leaves a bittersweet taste in our mouth: the initial decentralized and open version of the Web, which was meant to allow users to connect with each other, has gradually evolved to a very different version, centralized in the hands of giants who capture our data and impose their standards.

We have poured our work, our hearts and a lot of our lives out on the internet. For better or for worse. Beyond business uses for Big Tech, our data has become an incredible resource for malicious actors, who use this windfall to hack, steal and threaten. Citizens, small and large companies, governments: online predators spare no one. This initial mine of information and knowledge has provided fertile ground for dangerous abuse: hate speech, cyber-bullying, manipulation of information or apology for terrorism – all of them amplified, relayed and disseminated across borders.

Laissez-faire or control: between Scylla and Charybdis

Faced with these excesses, some countries have decided to regain control over the Web and the Internet in general: by filtering information and communications, controlling the flow of data, using digital instruments for the sake of sovereignty and security. The outcome of this approach is widespread censorship and surveillance. A major threat to our values ​​and our vision of society, this project of “cyber-sovereignty” is also the antithesis of the initial purpose of the Web, which was built in a spirit of openness and emancipation. Imposing cyber-borders and permanent supervision would be fatal to the Web.

To avoid such an outcome, many democracies have favored laissez-faire and minimal intervention, preserving the virtuous circle of profit and innovation. Negative externalities remain, with self-regulation as the only barrier. But laissez-faire is no longer the best option to foster innovation: ​​data is monopolized by giants that have become systemic, users’ freedom of choice is limited by vertical integration and lack of interoperability. Ineffective competition threatens our economies’ ability to innovate.

In addition, laissez-faire means being vulnerable to those who have chosen a more interventionist or hostile stance. This question is particularly acute today for infrastructures: should we continue to remain agnostic, open and to choose a solution only based on its economic competitiveness? Or should we affirm the need to preserve our technological sovereignty and our security?

Internet of Things connecting in cloud over city scape.

Photo courtesy of Getty Images/chombosan

Paving a third way

To avoid these pitfalls, France, Europe and all democratic countries must take control of their digital future. This age of digital maturity involves both smart digital regulation and enhanced technological sovereignty.

Holding large actors accountable is a legitimate and necessary first step: “with great power comes great responsibility”.

Platforms that relay and amplify the audience of dangerous content must assume a stronger role in information and prevention. The same goes for e-commerce, when consumers’ health and safety is undermined by dangerous or counterfeit products, made available to them with one click. We should apply the same focus on systemic players in the field of competition: vertical integration should not hinder users’ choice of goods, services or content.

But for our action to be effective and leave room for innovation, we must design a “smart regulation”. Of course, our goal is not to impose on all digital actors an indiscriminate and disproportionate normative burden.

Rather, “smart regulation” relies on transparency, auditability and accountability of the largest players, in the framework of a close dialogue with public authorities. With this is mind, France has launched a six-month experiment with Facebook on the subject of hate content, the results of which will contribute to current and upcoming legislative work on this topic.

In the meantime, in order to maintain our influence and promote this vision, we will need to strengthen our technological sovereignty. In Europe, this sovereignty is already undermined by the prevalence of American and Asian actors. As our economies and societies become increasingly connected, the question becomes more urgent.

Investments in the most strategic disruptive technologies, construction of an innovative normative framework for the sharing of data of general interest: we have leverage to encourage the emergence of reliable and effective solutions. But we will not be able to avoid protective measures when the security of our infrastructure is likely to be endangered.

To build this sustainable digital future together, I invite my G7 counterparts to join me in Paris on May 16th. On the agenda, three priorities: the fight against online hate, a human-centric artificial intelligence, and ensuring trust in our digital economy, with the specific topics of 5G and data sharing.

Our goal? To take responsibility. Gone are the days when we could afford to wait and see.

Our leverage? If we join our wills and forces, our values can prevail.

We all have the responsibility to design a World Wide Web of Trust. It is still within our reach but the time has come to act.

U.S. rule changes could mean more startups would need government approval to hire immigrants

Big changes in DC could mean that more startups will need the government’s permission before foreign nationals do work at the company.  In some cases, the foreign national will need to leave the company if the government is wary of granting that permission. 

This is tied up in the same new law that gave a once obscure government body—CFIUS—enhanced abilities to scrutinize minority, non-controlling investments by foreign entities. 

CFIUS changes have grabbed most of the headlines, but a Commerce Department process to define “emerging technologies” could have a huge effect on startups that employ foreign nationals.

Here’s what you need to know: the U.S. government has long controlled exports of sensitive technology for national security reasons.  This is done through the export controls regime, which impacts things like arms and ammunition, but also telecommunications and encryption software, among other items. 

Today, many venture-backed companies are not impacted by export controls because their technology is not on one of the control lists.  But that stands to change soon. 

Recent legislation requires the Commerce Department to evaluate controls on “emerging technologies.”  To kick off this process, in November the government identified 14 categories of technology it is looking at.  This included tech in the sweet spot of the bat for venture: AI/ML, robotics, 3D printing, and biotechnology to name a few.  It is an open question as to which of these technologies will ultimately be subject to controls and to what degree.

Image: Bryce Durbin/TechCrunch

Once something is determined to be emerging technology, the government can establish controls on the export, re-export, or transfer (in-country) of that technology.  Export controls is often thought of as the need to get a license from the government before sending a technology outside the U.S., and that is indeed a major part of what startups will need to contend with. 

But perhaps far more impactful for the startup ecosystem is what’s called “deemed exports,” or the release of controlled technology to foreign persons situated in the United States, which is “deemed” to be an export to the person’s country or countries of nationality. 

“The ramifications of these changes could be tremendous if the government does not appropriately tailor what it means to be an emerging technology.”

“Release” is defined broadly to include visual inspection and oral or written exchanges regarding the technology; in other words, typical actions an engineer or scientist at a young company does.  One saving grace for some startups will be that the deemed export rule does not apply to green card holders, though does apply to employer-based visas, like the H-1B or O visa.

Let’s think about how this might play out in practice.  Imagine the government decides to control artificial intelligence as an emerging technology and that a U.S.-based AI company employs an engineer on an H-1B visa.  Under these facts, it seems the company would need an export license for the foreign national to work at the company. 

A large company might be able to set up a wall that allows the foreign national to work on non-emerging technologies, but for a startup that only does AI the ability to separate the foreign national from the emerging technology work is severely limited, if not impossible.

Obtaining these licenses would present a tremendous burden for small, high-growth startups that often build teams by attracting the best and brightest from foreign countries.

But that burden could be the least of the company’s problems if the foreign national is from a country like China. The U.S. government could be very reluctant to grant a license for someone from China to work on an emerging technology since the major motivation behind recent foreign investment scrutiny has been China. The result might be the foreign national has to leave the company entirely, exacerbating the severe talent drought in some disciplines.

IvancoVlad via Getty Images

Those working in the startup ecosystem understand the volume of foreign nationals working at high-growth companies, but also how impactful their work is to make the United States the world’s scientific and technological leader. 

In comments to the government, a consortium of life science investors backing companies in oncology, cystic fibrosis, anemia, and other areas sounded the alarm of how deemed exports could make laboratory collaboration between U.S. and foreign nationals difficult or impossible.  Certainly, this is not the result policymakers are shooting for given the public policy imperative of eradicating diseases. The ramifications of these changes could be tremendous if the government does not appropriately tailor what it means to be an emerging technology.

Comments from the National Venture Capital Association, where I work, stressed that many of the technologies the Commerce Department called out in November are not yet well-defined, which of course makes regulating them challenging. 

In addition, because many of the technologies—like AI/ML—will be widely used across many companies and industries, a broad set of controls could sweep in many unintended target companies and technologies. To alleviate these concerns, we recommended a targeted approach to classification of emerging technologies that categorizes only those technologies that have significant defense uses, and not broad commercial applications.

The U.S. government needs to tread carefully. 

The golf professional Sam Snead advised that a golf club needs to be gripped like you’re holding a live bird: firm enough so it doesn’t fly out of your hands but not so tight that you kill it. American innovation is the same in this way. 

Yes, policymakers need to consider the impact of emerging technology on national security and perhaps create some controls. But if policymakers ratchet up pressure too much, then talent, capital, and companies will flock to other countries, which means the United States loses out on the incredible benefits that high-growth startups bring to our country.  The rules of the road on emerging technologies have not been written, and each of us has an opportunity to make our voice heard during the process.

The next great debate will be about the role of tech in society and government

The Industrial Revolution dramatically re-ordered the sociology of politics. In the US, the Populist Party in the United States was founded as a force in opposition to capitalism, wary of modernity. In the UK, the profound economic changes reshaped policy: from the Factory and Workers Act through to the liberal reforms of David Lloyd George, which ultimately laid the ground for the welfare state, the consequences were felt for the whole of the next century.

Today, another far-reaching revolution is underway, which is causing similar ripple effects. Populists of both left and right have risen in prominence and are more successful than their American forebearers at the turn of the 19th century, but similarly rejecting of modernisation. And in their search for scapegoats to sustain their success, tech is now firmly in their firing line.

The risk is that it sets back progress in an area that is yet to truly transform public policy. In the UK at least, the government machine looks little different from how it did when Lloyd George announced the People’s Budget in 1909.

The first politicians who master this tech revolution and shape it for the public goodwill determine what the next century will look like. Rapid developments in technologies such as gene-editing and Artificial Intelligence, as well as the quest for potential ground-breaking leaps forward in nuclear fission and quantum computing, will provoke significant changes to our economies, societies and politics.

Yet, today, very few are even asking the right questions, let alone providing answers. This is why I’m focusing on technology as the biggest single topic that policymakers need to engage with. Through my institute, I’m hoping to help curate the best thinking on these critical issues and devise politically actionable policy and strategy to deal with them. This will help put tech, innovation and investment in research and development at the forefront of the progressive programme. And we do so in the belief that tech is – and will continue to be – a generally positive force for society.

This is not to ignore the problems that surfaced as a result of these changes, because there are genuine issues around privacy and public interest.

NEW YORK, NY – APRIL 23: Monitors show imagery from security cameras seen at the Lower Manhattan Security Initiative on April 23, 2013 in New York City. At the counter-terrorism center, police and private security personel monitor more than 4,000 surveillance cameras and license plate readers mounted around the Financial District and surrounding parts of Lower Manhattan. Designed to identify potential threats it is modeled after London’s “Ring of Steel” system. (Photo by John Moore/Getty Images)

The shifts that have and will occur in the labour market as a result of automation will require far more thinking about governments’ role, as those who are likely to bear the brunt of it are those already feeling left behind. Re-training alone will not suffice, and lifelong investment in skills may be required. So too does a Universal Basic Income feel insufficient and a last resort, rather than an active, well-targeted policy solution.

“The first politicians who master this tech revolution and shape it for the public goodwill determine what the next century will look like.”

But pessimism is a poor guide to the future. It ends in conservativism in one form or another, whether that is simple statism, protectionism or nationalism. And so the challenge for those us of who believe in this agenda of harnessing the opportunities, while mitigating its risks is to put this in a way that connects with people’s lives. This should be a New Deal or People’s Budget type moment; a seismic change in public policy as we pivot to the future.

At the highest level this is about the role of the state in the 21st century, which needs to move away from ideological debates over size and spend and towards how it is re-ordered to meet the demands of people today. In the US, President Obama made some big strides with the role of the Chief Technology Officer, but it will require a whole rethinking of government’s modus operandi, so that it is able to keep up with the pace of change around it.

Photo courtesy of Shutterstock/Kheng Guan Toh

Across all the key policy areas we should be asking: how can tech be used to enable people to live their lives as they choose, increase their quality of life and deliver more opportunities to flourish and succeed?

For example, in education it will include looking at new models of teaching. Online courses have raised the possibility of changing the business of learning, while AI may be able to change the nature of teaching, providing more personalised platforms and free teachers to spend their time more effectively. It could also include new models of funding, such as the Lambda School, which present exciting possibilities for the future.

Similarly with health, the use of technology in diagnostics is well-documented. But it can be transformative in how we deploy our resources, whether that is freeing up more front-line staff to give them more time with patients, or even in how the whole model currently works. As it stands a huge amount of costs go on the last days of life and on the elderly. But far more focus should go on prevention and monitoring, so that people can lead longer lives, have less anxiety about ill health and lower the risks of illnesses becoming far more serious than they need to be. Technology, which can often feel so intangible, can be revolutionary in this regard.

In infrastructure and transport too, there are potentially huge benefits. Whether this is new and more efficient forms of transport or how we design our public space so that it works better for citizens. This will necessitate large projects to better connect communities, but also focus on small and simple solutions to everyday concerns that people have about their day to day lives, such as using sensors to collect data and improve services improve every day standard of living. The Boston Major’s office has been at the frontier of such thinking, and more thought must go into how we use data to improve tax, welfare, energy and the public good.

Achieving this will better align government with the pace of change that has been happening in society. As it stands, the two are out of sync and unless government catches up, the belief and trust in institutions to be seen to working for people will continue to fall. Populism thrives in this space. But the responsibility is not solely on politicians. It is not enough for those in the tech world to say they don’t get it.

Those working in the sector must help them to understand and support policy development, rather than allow misunderstandings and mistrust to compound. Because in little more than two decades, the digital revolution has dramatically altered the shape of our economies in society. This can continue, but only if companies work alongside governments to truly deliver the change that so many slogans aspire to.

With these numbers, it’s no surprise SoftBank is investing in Latin America

After SoftBank announced its plans to launch a $5 billion innovation fund in Latin America, we reached out to the good folks at the Latin American Venture Capital Association (LAVCA) for some context, and what they told me only validates the reasoning behind SoftBank’s interest in the region. (In 2017, we reported on the growing interest in Latin America.)

Let’s start with some numbers. Venture funding in Latin American startups is up — way up — from previous years. Specifically, LAVCA’s data shows that VC funding more than doubled in 2017 to $1.14 billion compared to $500 million in 2016. While 2018 numbers haven’t been finalized, LAVCA is projecting another record year with venture investments topping $1.5 billion.

If you combine private equity and venture investing, the numbers are even more impressive. LAVCA estimates that PE and VC fundraising together in Latin America in 2017 totaled $4.3 billion, up from $2.3 billion in 2016.1

Julie Ruvolo, director of venture capital for LAVCA, said all this “fits squarely in this larger momentum that’s been building over the last year or two.”

“We’ve been seeing the continued, and increased, entry of significant global players in the market,” she told Crunchbase News. “Plus, we’ve been seeing an uptick in $100 million-plus rounds, which was a relatively rare thing in Latin America.”

Also unsurprising is the breakdown of where the majority of venture dollars have gone in Latin America. Brazil led the region across all stages of VC investment, capturing 73 percent of VC investment dollars in 2017 and the first half of 2018 (201 startup investments totaling $1.4 billion). Mexico was the second most active market by number of deals (82 startup investments totaling $154 million), but Colombia saw more money invested ($188 million over 23 deals).

Here’s a quick rundown of just some of the bigger deals that took place during that same time frame:

It’s worth noting that fintech is the top sector of VC investment by dollars and number of deals in Latin America. The region also hosts a number of unicorns, including Brazilian ride-hailing startup 99; Colombian last-mile delivery service Rappi; Brazilian learning systems provider Arco Educação; and Brazilian fintech startup Stone Pagamentos.

With all this innovation and investing going on in Latin America, there is clearly large potential. And SoftBank is now poised to capitalize on that.

  1. The fundraising and investment data LAVCA collects is specific to fund managers that have raised capital from third-party institutional investors/limited partners and doesn’t account for other types of private capital investors, like a SoftBank fund or sovereign wealth fund, corporate, etc.

It’s time to disrupt nuclear weapons

“Atomic bombs are primarily a means for the ruthless annihilation of cities.”

Those are the words of Leo Szilard, one of the scientists who pushed for the development of nuclear weapons. He wrote them as part of a petition signed by dozens of other scientists who had worked on the Manhattan Project pleading with President Harry Truman not to use the nuclear bomb on Japan.

Mere months after its introduction in 1945, the architects of today’s nuclear world feared the implications of the technology they had created.

Nearly 75 years later it’s time again to ask technologists, innovators, entrepreneurs and academics: will you be party to the ‘ruthless annihilation of cities’? Will you expend your talents in the service of nuclear weapons? Will you use technology to create or to destroy?

Our moment of choice

Humanity is at another turning point.

A new nuclear arms race has begun in earnest with the US and Russia leading the way; tearing up the promise of lasting peace in favor of a new Cold War. Russia’s latest weapon is built to destroy entire coast lines with a radioactive tsunami. The US is building new nuclear weapons that are ‘more likely to be used’.

Meanwhile, North Korea appears to again be building its nascent nuclear weapons program. And India and Pakistan stand on the verge of open nuclear conflict, which climate modeling shows could lead to a global famine killing upwards of 2 billion people.

An Indian student wearing a mask poses with her hands painted with a slogans for peace during a rally to mark Hiroshima Day, in Mumbai on August 6, 2018. (PUNIT PARANJPE/AFP/Getty Images)

How do we stop this march toward oblivion?

The Treaty on the Prohibition of Nuclear Weapons has created an opening — a chance to radically change course with the power of international law and shifting norms. The nuclear ban treaty will become international law once 50 nations have ratified it. We are already at 22.

The financial world is also recognizing the risk, with some of the world’s biggest pension funds divesting from nuclear weapons. But there is something even more powerful than the almighty dollar; human capital.

“It took innovation, technological disruption, and ingenuity to create the nuclear dawn. We will need those same forces in greater measure to bring about a nuclear dusk.”

The nuclear weapons industrial complex relies on the most talented scientists, engineers, physicists and technologists to build this deadly arsenal. As more of that talent moves into the tech sector, defense contractors and the Pentagon is seeking to work with major technology companies and disruptive startups, as well as continue their work with universities.

Without those talented technologists, there would be no new nuclear arms race. It’s time to divest human capital from nuclear weapons.

A mistake to end humanity?

Just over one year ago Hawaiians took cover and frantically Googled, “What to do during a nuclear attack”. Days later many Japanese mobile phone users also received a false alert for an inbound nuclear missile.

The combination of human error and technological flaws these incidents exposed makes accidental nuclear attacks an inevitability if we don’t move to end nuclear weapons before they end us.

The development of new machine learning technologies, autonomous weapons systems, cyber threats and social media manipulation are already destabilizing the global political order and potentially increasing the risk of a nuclear cataclysm. That is why it’s vital that the technology community collectively commits to using their skills and knowledge to protect us from nuclear eradication by joining the effort for global nuclear abolition.

A mock “killer robot” is pictured in central London on April 23, 2013 during the launching of the Campaign to Stop “Killer Robots,” which calls for the ban of lethal robot weapons that would be able to select and attack targets without any human intervention. The Campaign to Stop Killer Robots calls for a pre-emptive and comprehensive ban on the development, production, and use of fully autonomous weapons. (Photo: CARL COURT/AFP/Getty Images)

We need to stop this foolish nuclear escalation in its tracks. Our commitment must be to a nuclear weapons-free world, by disrupting the trajectory we are currently heading on. Business as usual will likely end in nuclear war.

It took innovation, technological disruption, and ingenuity to create the nuclear dawn. We will need those same forces in greater measure to bring about a nuclear dusk — the complete disarmament of nuclear-armed states and safeguards against future proliferation.

The belief that we can keep doing what we have done for seven decades for another seven decades is naive. It relies on a fanciful, misplaced faith in the illogical idea of deterrence. We are told simultaneously that nuclear weapons keep the world safe, by never being used. They bestow power, but only make certain states powerful.

This fallacy has been exposed by this moment in time. Thirty years after the end of the Cold War, nuclear weapons have proliferated. Key treaties have been torn up or are under threat. And even more states are threatening to develop nuclear weapons.

So I am putting out a call to you: join us with this necessary disruption; declare that you will not have a hand in our demise; declare that you will use technology for good.

Small VC funds continue to raise, despite pressure from above

Recently, we bore out with data what has been felt for several years in most U.S. tech scenes: a rising venture market raises funds of all sizes. But it’s a trend that most favors entrenched firms, which raise ever-larger funds to accommodate a shift in the startup life cycle. Private companies are dawdling at the exit door, postponing graduation to public markets because private-market money is cheap and plentiful, for now.

In a time when “blitzscaling” is the business strategy du jour, some high-growth companies raise supergiant nine and 10-figure VC rounds to help them build moats around walled-garden markets they’re trying to build up from both sides, or they’ll die trying.

This is all to point out that, at the high end of the assets-under-management (AUM) spectrum, fund size has ballooned. This nets the biggest size class of VC funds a supermajority of all the capital general partners (GPs) call down from limited partners (LPs). This trend has accelerated in more recent fund vintages.

Small-dollar funds may get less of the overall fundraising pie, but their ranks continue to grow as more fund managers enter the industry. In most cases, sub-$100 million funds aren’t competing for the same institutional capital or sovereign wealth that typically invests in much bigger funds.

All this said, the upswing in smaller-sum funds continues. U.S.-based general partners raised more sub-$100 million venture funds in 2018 than in any year prior. This is true for two separate size classes: “Micro” and “Nano,” which exhibit similar growth patterns over time.

Featherweight funds soar on market thermals

Let’s tackle the smallest funds first. “Nano VC” is a relatively new entrant into the venture lexicon, and its definition is somewhat in flux. Samir Kaji, a managing director at First Republic Bank who has tracked the phenomenon of small venture funds for years, coined the term in early 2017 to describe new venture funds raising $15 million or less. Recently, we’ve heard the term “Nano VC” used to reference funds under $25 million, a slightly more expansive definition (perhaps accounting for growing seed and early-stage deal size).

Below, we plot the count of new U.S. Nano VC funds raising $25 million or less, by year announced (via press release or regulatory filing), over time. It is based on a snapshot of Crunchbase’s data taken at the time of writing.

Funds at these sizes are mostly focused on pre-seed, seed and Series A deals. Many are led by first-time and other “emerging” fund managers early on in their investing careers, according to follow-up research by Kaji.

The next size class up, Micro VC, includes venture funds in the $25 million to $100 million range. (Quick terminology note: Sometimes, people refer to all funds under $100 million as Micro, without designating Nano funds as a separate size class.) Micro VC funds are also generally focused on investing in seed and early-stage companies, and are also commonly run by new and emerging managers.

Creation of Micro VC funds also picked up over time, as well.

Although it’s a tidy little coincidence that our analysis shows roughly the same number of Micro and Nano VC funds raised in 2018, it’s important to remember that we’re sometimes talking about an order-of-magnitude difference in AUM between the two size classes. Nano and Micro VC funds accounted for roughly 24 and 25 percent, respectively, of the count of new venture firms announced or disclosed (via SEC filing) in 2018. However, Micro VC funds ($25 million-$100 million) raised six percent of the total capital raised by venture firms, while Nano VC funds (<$25 million) accounted for roughly one percent of total LP-GP dollar volume in 2018.

Good reason for caution

Lately, there’s been a lot of talk about declines in the reported number of seed-stage deals, a primary destination for capital raised by smaller funds. However, it’s likely that these declines aren’t as precipitous as the numbers may suggest. There are known delays in seed and early-stage deal reporting, as documented by Crunchbase News (in our quarterly reporting and methodology guide) and others. And, at least anecdotally, it seems like startups are staying in “stealth mode” longer, which only serves to exacerbate the reporting lag.

All this being said, projections (which try to compensate for delays using historical patterns of deal disclosures) from our Q4 2018 report on U.S. and Canadian venture investing found that seed-stage deal volume has declined for the past couple of quarters, while total dollar volume raised by seed-stage companies rose slightly in the final quarter of last year. Projected early-stage deal volume leveled off in the past several quarters, while projected dollar volume grew more than 11 percent quarter over quarter.

In other words, both seed and early-stage deals are getting bigger, on average, at the same time deal volume growth is stagnating in the U.S. and Canada. If this trend continues, funds on the smaller end of the AUM spectrum may face deal-flow pipeline problems in the future, or get priced out of bidding wars for a diminishing supply of equity in fledgling technology ventures with high growth potential.

Which types of startups are most often profitable?

I co-run an agency that teaches a hundred startups per year how to do growth marketing. This gives me a unique vantage point: I know which types of startups most often reach profitability.

That’s an important metric, because startups that don’t reach this milestone typically fail to raise additional funding — then die.

Here’s what we’ll learn:

  1. Companies are increasingly living and dying by ads. Because it’s the startup’s approach to customer acquisition — not its business model or market — that most determines its early-stage profitability.
  2. E-commerce companies lend themselves best to ads, and SMB SaaS the worst. Meanwhile, most startup founders in 2019 are starting SaaS companies. They’d benefit from the data we share in this post.
  3. In fact, our agency has found that every other type of business reaches profitability quicker than SMB SaaS, including mobile apps, Chrome extensions and enterprise SaaS.

Our sampling of startups isn’t as biased as startup valuation leaderboards, because we also see those that failed. That’s the key.

You can use our experience to de-risk your startup. That’s what this post explores: How to change your product roadmap to pursue a path more likely to reach profitability.

The startups that frequently reach profitability

Here’s the data my agency is referencing for this post:

  • We train 12+ venture-backed and bootstrapped startups every month. Half are Y Combinator graduates. This is how we study early-stage product-market fit trends.
  • We run ads full-time for between 20 and 30 mature companies per year. On average, each spends $2.5 million annually on paid acquisition. And, on average, each has 30 employees. Our clients include Tovala.com, PerfectKeto.com, SPYSCAPE.com, ImperfectProduce.com, Clearbit.com and Woodpath.com.
  • Our students and clients are roughly evenly distributed across D2C e-commerce, B2B, mobile apps and marketplaces.

When we try to control for founder skill and funds raised, the types of startups that first reach profitability do so in this order:

  1. E-commerce
  2. Chrome extensions
  3. Mobile apps
  4. Enterprise SaaS
  5. Small-to-medium business SaaS

On average, an e-commerce company is more likely to first reach profitability than an SMB SaaS company.

Before I explain why, let me explain how we’re differentiating startups: I use the word “type” instead of “business model” or “markets” because I’ve learned that business model and market are often not the best predictors of success. Instead, it’s your approach to customer acquisition. That’s what typically determines the likelihood of profitability.

Three imperatives for educators to get more women in tech

Women in tech.

In addition to turning up nearly two billion Google search results, those three words are music to the ears of every informed CEO or human resources manager across the U.S. And while most executives are under pressure to portray and speak in the vernacular of diversity, there’s one slight problem.

Bridging the gender gap in tech starts long before a woman joins the workforce: it starts in the classroom.

When I studied computer science at Dartmouth, there were times when I was one of the only women in the classroom. This didn’t affect my studies or my ambition, but it was frustrating because I knew other women who were capable of being in those classes, but they felt like outsiders.

Whether it’s middle school, high school or college, the time young women spend in classrooms is formative — it’s where passions are ignited and life paths are plotted. Needless to say, bridging the gender gap in tech at this source is an imperative. But this isn’t about meeting quotas, sharing platitudes on social media and trumpeting hollow awards. Reversing the brogramming trend and cultivating a more diverse tech workforce requires a tangible, scalable model to see that idea come to fruition.

During my career at Google, I had my finger on the pulse of the tech industry and realized that a realistic plan to get more women into tech would be far different than what journalists and authors were talking about. As Whitney Wolfe, the CEO and founder of the dating app Bumble, pointed out, we don’t need to criticize the workplace — we need to criticize the classroom.

With that said, here are three essential strategies that educators must embrace to get to the root of gender imbalance in tech.

Mentorship is a must

Many undergraduate women are under the impression that getting their foot in the doors of tech companies necessitates more classes or more hard skills. These are helpful, but even more important for young women is having an actual human being who can help them navigate foreign territory.

Social media influencers and sugar-bomb self-help authors are not mentors.

Let’s be clear: Social media influencers and sugar-bomb self-help authors are not mentors. In order to have a lasting impact, mentors must formalize relationships with young women, not haphazardly come in to deliver rah-rah talks. That’s why we have Entrepreneurs-in-Residence at The Garage like Northwestern alumnae Lilia Kogan, a Chicago angel investor, for students to bounce ideas off of. This transparent access to another woman who has been in their shoes, and gone on to succeed, often gives them the extra nudge they need to go from idea to execution.

Less preaching, more opportunities

Simply telling a young woman, “You can do it!” or “We value diversity!” is a cop-out. Uprooting years of gender inequity in tech requires more than saccharine speeches and corporate platitudes. It requires giving young women not just permission, but tangible opportunities to experiment, build and explore.

For example, we launched the Propel Program at Northwestern, which provides grants of up to $1,000 for women students to experiment with their ideas. The six-month program allows students to demonstrate what they did with the funding and what they learned. The most engaged participants are invited to guide the following year’s participants, reinforcing the mentorship and community components.

Collaboration with women’s student organizations

Entering an environment in which you’re the minority can be discouraging, but if young women see their peers launching startups, writing code and leading teams, that confidence has a viral impact. Nearly every school has a variety of women’s student organizations, and uniting them under a common bond is far more effective than relying on them to do so alone.

In 2015, only 25 percent of students incubating startups in The Garage were women. But once we partnered with groups on campus like The Society of Women Engineers and Women in Business, we saw a spike in women. Today, half of our student-founders are women.

Sure, “strength in numbers” sounds cliché, but camaraderie has profound psychological benefits that can inspire people, especially young women, to break through barriers. Getting more women into innovative environments is no exception.

Why are these steps so important? Because diverse teams — especially in tech — are unequivocally better equipped to solve problems and ultimately give organizations a competitive advantage. It’s just that simple.

If we want to get serious about reversing the brogramming trend, we have to go beyond quotas or playing the blame game with history, companies and “the system.” Instead, we must connect with young women early on, through mentorship, tangible opportunities and communities in which they can thrive.