Tag: EC News Analysis

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What’s going on with the TikTok ban?

With a U.S. ban of TikTok looming, it might look like game-over for the hit video sharing app, which has taken the world by storm in recent years, reshaping every aspect of culture in the process.

Uncertainty abounds right now, but TikTok’s fate is far from sealed. We’ve answered some common questions about a situation that’s complex, confusing and changing as we speak.

What happened in Congress?

TikTok CEO Shou Zi Chew testified before Congress last week, enduring five hours of intense questioning from lawmakers over concerns that China might leverage the app to compromise U.S. national security. TikTok is owned by Chinese tech giant ByteDance, setting it apart from other major social media companies based in the U.S.

“Let me state this unequivocally: ByteDance is not an agent of China or any other country,” Chew said in his opening statements, a refrain TikTok’s CEO repeated throughout the hearing as he sought to reassure lawmakers.

National security concerns were just one of the worries that representatives expressed about TikTok. Members of the House Energy and Commerce Committee committee also raised red flags over issues ranging from the app’s eating disorder content and viral challenges to its flimsy tools designed to prevent social media addiction among teens. Those concerns, which focus mainly on vulnerable underage users, are serious, but also issues that TikTok shares with U.S.-based social media companies like Instagram and YouTube.

In many ways, the TikTok hearing went much like other major tech CEO hearings have gone in recent years. Lawmakers generally spent their time grandstanding and posturing for sound bytes, dredging up little in the way of new information on TikTok, ByteDance and their operations in the process. Ultimately, the hearing isn’t likely to move the needle on TikTok’s domestic fate, but it does serve as a useful barometer for the headwinds the company faces in its biggest market.

Why ban TikTok?

The effort to ban TikTok in the U.S. began during the Trump administration, but the Biden White House recently picked up the baton.

What’s going on with the TikTok ban? by Taylor Hatmaker originally published on TechCrunch

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Yeah, of course, YC’s winter class is oozing with AI companies

Being an artificial intelligence company has become the soup du jour of startup land. Companies are scrambling to either incorporate AI into their existing business model or change up their marketing so whatever they were already quietly using AI to do is front and center. Y Combinator’s latest class is no different.

Angel investor Gokul Rajaram tweeted recently that he had heard from a company in the latest YC cohort that half of the class was looking to use chatGPT. Now, with a letter circulating that asks AI researchers to pause development and with YC demo day next week, we decided to see if that checks out. Turns out, it’s not that far off.

Ninety-one startups, or 34%, of the current YC class list that they are an AI company or use AI in some kind of way, according to the accelerator’s handy online database. If you narrow that down to generative AI you get 54, or 20%. While not quite half, it’s still striking when compared to past cohorts. In previous years, the highest number of companies using generative AI in a single YC class was nine, and a count of more general AI usage brought the number to 44; both numbers hail from classes much larger than the current one, too.

This isn’t particularly surprising.

Yeah, of course, YC’s winter class is oozing with AI companies by Rebecca Szkutak originally published on TechCrunch

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SVB collapse spared an already muted venture deal market

When Silicon Valley Bank collapsed earlier this month, venture had already been navigating choppy waters for over a year as it confronted overinflated company valuations and a seemingly nonexistent exit market.

But while SVB’s failure may have a long-lasting impact on the banking and venture debt industries, it doesn’t look likely to have any lasting adverse impact on one of venture’s hardest-hit areas: deal activity.

Venture capital deal volume has been almost steadily declining since the beginning of 2022. While many investors and founders hoped for some relief in 2023, that hasn’t materialized — yet, at least. So far, January and February have continued trending down, according to Crunchbase data, with global funding in February totaling $18 billion, the lowest total since February 2020.

With deal-making in such a vulnerable state, it seemed like any market trigger could have an impact, but lawyers and VC firms told TechCrunch+ that the demise of SVB doesn’t look like it will make things any worse. It seems that any pause the news did create for investors and founders has likely already passed.

SVB collapse spared an already muted venture deal market by Rebecca Szkutak originally published on TechCrunch

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As Elliott withdraws Salesforce board nominations, activist pressure could be easing

Could activist peace be at hand at Salesforce? With the announcement Monday that Elliott would be withdrawing its nomination for the board of directors, it seems that the CRM leader could have forged a peace agreement. The question is: At what cost?

While it’s not clear what this agreement means to the other four activist firms operating inside the company, Elliott is likely pleased with the company’s recent changes including a surprisingly strong quarter combined with some moves like shareholder buy-backs, disbanding the M&A group and cost reduction strategies (which partly translated to laying off 10% of the staff).

But this doesn’t necessarily mean that Elliott’s work is done with the company, a person familiar with the agreement told TechCrunch+.

Surprisingly, the terms between the two companies doesn’t include a standstill agreement. There wasn’t even an information-sharing agreement or any type of legal document prohibiting Elliott from speaking badly about the company, talking to the press or anything like that.

“So Elliott established an ongoing relationship. That doesn’t mean it’s walking away, or never going to come back,” said the person, who asked to remain anonymous because they were not authorized to speak publicly on behalf of the company. “Like I said, with the freedom of no standstill if everything goes south a month from now or a couple of months from now, the firm can always come back and say, ‘You know, we’re still watching. We’re still involved, and here’s what we think you should do to make it better.’ Elliott doesn’t want that to happen. But that is a possibility that could happen.”

All of that gives Elliott a lot of leeway to continue to pressure the company should circumstances warrant it. But for now, at least, Salesforce appears to have appeased the activist firm, and it has the activists off its back ahead of the stockholder’s meeting in June.

As Elliott withdraws Salesforce board nominations, activist pressure could be easing by Ron Miller originally published on TechCrunch

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Blinded by the speed of change

My grandfather lived through an incredible period of technological change. He saw the invention of the automobile, the airplane and the rocket. He lived through the dawn of the atomic age and the mainframe computer. He didn’t live long enough to see the PC or the impact it would have on my professional life, but he was around for the creation of a lot of the technology that laid the foundation for what’s happening today.

I’ve been at this for a long time myself. I remember working on an early IBM PC. Later, I accessed the text-based internet via a 300 baud modem. I can recall the earliest days of the world wide web.

My first cell phone was a Motorola brick phone. My first iPhone was the 3. Bottom line is I’ve seen a lot of technological change, and I’ve never seen anything like we’re seeing these past months, weeks and days.

Consider for a moment that ChatGPT 3.5 took the world by storm in December. Last week, while I was on vacation, OpenAI released ChatGPT 4, which OpenAI unabashedly called “state of the art.” This week, we saw the announcement of plug-ins for the internet itself and useful tools like Expedia, WolframAlpha and so many others, suddenly accelerating generative AI in new and exciting directions.

All of this is happening with stunning speed. It feels like we’re living through an inflection point, much like we saw with the first IBM PC, the internet, the web, the iPhone. But this moment of change is happening so fast, we’ve barely got time to process the latest twist before the next iteration comes flying down the chute.

And like those moments we saw with the advent of personal computing, connected computing and mobile computing, you know that something huge is happening, but it’s not clear yet what it will become. At the moment, we know that there is an exciting new technology that can change the way we interact with computers, but we aren’t clear yet how that will play out, any more than we knew how the web or smartphones would transform our lives in ways we really couldn’t imagine in the earliest days.

On a panel last week led by Docker CEO Scott Johnston, Ilan Rabinovich, SVP of product and community at Datadog, talked about the similarities between what we’re seeing now and the early days of the internet.

Blinded by the speed of change by Ron Miller originally published on TechCrunch

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The layoffs will continue until (investor) morale improves

Since the start of 2023, more than 150,000 people have been laid off at tech companies, large and small. That’s a staggering number of people who have been put out of work.

When you think about how Meta, Amazon and Salesforce have handled these layoffs, the situation becomes even more grim.

Salesforce announced in January that it was laying off 10% of its approximately 80,000 employee workforce. Since then, it has been letting people go in dribs and drabs. Amazon also announced in January that it was laying off 18,000 employees, then announced another 9,000 this week. Meta laid off 11,000 in November and let another 10,000 people go in a second round this week. In addition, the company shut down another 5,000 open recs.

This, some would say, cruel, rolling approach to layoffs leaves employees anxious and uncertain about their own positions, while grieving about the loss of valued colleagues who have been let go.

Investors, on the other hand, seem to like layoffs as a way to move companies toward greater operating efficiency. CEOs typically are less concerned about the well being of their employees as they are in keeping investors happy.

An argument could be made, of course, that these companies overhired during the recent tech boom, and now it’s time to right size to better fit a changing market. That argument would carry more weight if the companies in question weren’t profitable. However, large American tech companies are very often both profitable and incredibly wealthy, even if their market cap has fallen from record highs.

While there is some truth to the idea that companies grew too quickly in recent years and need to reset, layoffs feel like the worst kind of short-term thinking: sacrificing employees to please investors. Are companies at least getting what they want from investors out of this devil’s bargain?

Investor response

If companies are looking to impress investors with their cost-cutting measures, we can rate how effective their layoffs are by how investors have reacted to them.

The layoffs will continue until (investor) morale improves by Ron Miller originally published on TechCrunch

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How to use the secondary market to find clues about who will IPO first

Venture capitalists and startup founders alike went into 2023 eagerly hoping for the return of the industry’s exit environment — specifically, the resurgence of IPOs.

After 2021, a record-breaking year for IPOs, everything screeched to a halt in 2022. PitchBook counted 296 venture-backed companies that went public in 2021, which doubles — or more — any other year prior. This plummeted to 28 in 2022, the lowest number recorded since 2009, amid the financial crisis.

There were a few companies, including Instacart, Chime and Reddit, that filed for IPO in late 2021 or early 2022 that have yet to exit the private market. As many hope exit opportunities will roar back in the latter half of 2023, we’re still curious about which companies will go public first.

While not a perfect predictor by any means, the secondaries market might offer hints at how close some of these companies are to going public.

How to use the secondary market to find clues about who will IPO first by Rebecca Szkutak originally published on TechCrunch

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Corporate investment in AI is on the rise, driven by the tech’s promise

It’s safe to say that AI is top of mind for enterprises — assuming it wasn’t before.

According to a recent Accenture survey, 63% of organizations are now prioritizing AI over all other digital technologies. That might sound drastic. But on the other hand, it’s not entirely surprising, what with tech like GPT-4 and ChatGPT dominating the conversation about digital transformation.

Accenture’s stats are similar to McKinsey’s, which show that more than half of companies are investing more than 5% of their digital budgets in AI. Sixty-three percent, meanwhile, say that they expect their investment to increase over the next three years.

The enthusiasm is reflected in the growing financing AI startups have been able to attract. An analysis published by WriterBuddy, an AI content writing platform, found that corporate AI backing has risen consistently in the past decade, to the tune of billions.

Corporate investment in AI is on the rise, driven by the tech’s promise by Kyle Wiggers originally published on TechCrunch

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Emerging managers hope the new SVB offers the same support to new VCs

Before it crashed, Silicon Valley Bank was known to many startups and venture firms as the place to park their money or take out a capital line. But for emerging managers, it was a lot more than just a financial institution.

Multiple emerging managers told TechCrunch+ that SVB was instrumental in helping them build their firms from the ground up. It also provided support to help them build networks and feel included in the venture ecosystem despite their size. After the bank’s collapse and the ensuing chaos, many were left wondering if the things they loved most about SVB would continue.

Unlike many of their banking competitors — other than equally venture-friendly First Republic Bank — SVB was designed to work with people in the venture community; it had options for smaller funds that other banks did not.

Nisha Desai, the CEO and managing general partner of Andav Capital, said that SVB was a natural choice for emerging managers like herself because it didn’t have the account minimums — or net worth requirements — that many other banks had. Those kinds of limits often restrict first-time funds. Plus, SVB offered capital lines to these small funds, which allowed them to start building their track records while they were still fundraising.

“They gave you some capital to go ahead and invest in companies out of your new funds,” Desai said. “That was helpful. Obviously it wasn’t extended to everybody, but that allowed newer managers to get off of the ground.”

But emerging managers said that while the back-end banking operations got them involved with SVB in the first place, its commitment to emerging managers is what made them want to continue the relationship.

Emerging managers hope the new SVB offers the same support to new VCs by Rebecca Szkutak originally published on TechCrunch