Thought Machine closes $200M for its cloud native banking SaaS and becomes a unicorn

Thought Machine, a 2014 (Xoogler) founded startup that sells cloud-based b2b banking services, has closed a $200 million Series C round and announced that it’s achieved unicorn status (aka, passing a $1BN valuation).

The new funding follows an $83M Series B round last year — when it described its market cap as “increasing healthily”.

The Series C is led by New York- and San Francisco-based Nyca Partners, with other new investors including ING Ventures, JPMorgan Chase Strategic Investments and Standard Chartered Ventures — the investment arms of some of its global tier one banking clients.

Lloyds Banking Group, which led Thought Machine’s Series A, has also participated in the latest raise.

Other existing investors also returning for the Series C are British Patient Capital, Eurazeo, SEB, Molten Ventures (formerly Draper Esprit), Backed, and IQ Capital.

Thought Machine describes itself as a “cloud native core banking technology” firm — and is selling cloud-basked banking infrastructure to old and new banks as they look to offer their customers services via the cloud, moving away from mainframe, legacy banking tech (in the case of old school banks) or offering cloud-based services from the get-go in the case of challenger banks and fintech startups.

The startup’s Series C follows a period of accelerated growth, with Thought Machine noting it’s added 200+ employees since 2020 and relocating into a larger London HQ to accommodate its expanded headcount.

The new funding will be used to continue development and expansion of its flagship SaaS product Vault — a cloud-native platform which its b2b customers rely on to provide a range of retail banking services, from checking accounts, savings accounts, loans and credit cards to mortgages.

Vault is built around APIs, using a microservice architecture and a system of Smart Contracts — hosted on a cloud service of the customer’s choosing (the likes of Google Cloud Platform, Microsoft Azure, Amazon Web Services and IBM Cloud are supported) — with touted benefits including increased flexible and more scalable infrastructure, as well as reduced running costs vs maintaining legacy technology.

Commenting on the funding in a statement, Paul Taylor, CEO and founder of Thought Machine said: “We are delighted to have earned the support of our new and existing investors as we continue to move the world’s leading banks into the cloud. We set out to eradicate legacy technology from the industry and ensure that all banks deployed on Vault can succeed and deliver on their ambitions. These new funds will accelerate the delivery of Vault into banks around the world who wish to implement their future vision of financial services.”

In another supporting statement, Hans Morris, managing partner at Nyca Partners, added: “Thought Machine is the leading technology among the new generation of cloud native core platforms, and as a result it has become the top choice for tier one banks looking to upgrade their core architecture. These institutions tell us that Thought Machine’s engineering approach is unrivalled; Vault is highly configurable, flexible, scalable, and specifically designed for the complex environment and requirements of tier one banks. Investing in Thought Machine is an investment in the future of banking and we are very energized to be working with them as they build a new standard for core banking technology.”

Robotics startup FJDynamics raises $70M to make manual labor easier

FJDynamics, founded by DJI’s former chief scientist Wu Di, just closed a Series B round of $70 million as it advances its goal to empower workers in the harshest environment with robotic technologies.

When I asked Wu what’s special about his company’s farming robots, he gave an answer that would make any publicist sweat: “I don’t think our technology is that special.” The startup’s vision, he said, is to make useful and affordable robots for the most labor-intensive industries.

“You can have the most advanced AI algorithms,” he continued, “But if the technology doesn’t work on the production line or the farm, because you don’t have any industry experience, then how does your technology benefit people?”

The technologies that Wu worked on before FJDynamics were cutting-edge in every sense. At DJI, he served as the chief scientist and oversaw the drone giant’s acquisition of the 180-year-old Swedish format camera maker Victor Hasselblad AB in 2017. Before returning to China, he spent a decade in Sweden, during which he earned a PhD in domain-specific processor design. He also worked as a vice principal at fabless semiconductor company Coresonic AB and a director at the Swedish luxury sports car maker Koenigsegg AB.

“After seeing all these first-class technologies, it’s a stretch to say we [FJDynamics] are a high-tech company,” said the founder, who donned a slightly faded checkered shirt and a pair of thin-rimmed glasses on the morning of our interview.

We were sitting in a makeshift meeting room, a partition comprising a few desks separated from the rest of the open-plan office by movable walls. The company, located in Shenzhen’s bustling tech hub Shenzhen, was fast expanding and approaching 1,000 employees.

Wu Di, founder and CEO of FJDynamics

In 2019, Wu left DJI to start FJDynamics. The company set out with a focus on agricultural robots, building tools like unmanned lawnmowers, orchard sprayers and feed pushing machines. It has since ventured into other fields that depend heavily on manual work, such as construction and manufacturing.

As Beijing invokes a digital upgrade in the country’s traditional industries, Chinese companies like FJDynamics are in hot demand by investors. FJDynamics itself has attracted a rank of heavyweight financiers, including Tencent and state-owned automaker Dongfeng Asset Management. DJI had a stake in the company early on but has since sold off its shares.

It declined to name its sole investor in its latest Series B round and only said it is a major internet firm in China. The funding, the company said, will allow it to “grow its suite of robotics automation technology across agriculture, facility management, construction and gardening, along with supporting the increasing demand of the company’s ESG product offerings in over 60 countries.”

Over the years, a handful of engineers have left DJI to set up their own shops or join others’ fledgling projects. Portable battery maker EcoFlow, hairdryer Zuvi, electric toothbrush brand Evowera are among the most high-profile ones. For Wu, what drove him away from a prestigious position at the world’s largest drone company was a sense of disconnection he felt making “luxury” hardware.

“If you look at how robotic technology is being applied, there are a lot of companies using drones and autonomous vehicles. But the majority of people on earth aren’t benefiting from it.”

“Agriculture, construction, gardening… Work conditions in these sectors are physically demanding and there are still a lot of us doing this kind of job. The question is how we use robotic technology to improve their work environment, and that doesn’t mean simply replacing them with robots,” said the founder.

Image Credits: FJDynamics’ cow feed pusher, printed with the logo of Sveaverken, a Swedish farming company it acquired

One of FJDynamics’ popular products is the automated feed pusher. To produce high-quality milk, cows need to be fed about ten times throughout the day. The routine requires farms to have staff on-site 24 hours. A farm with 500 cows, for example, needs about three grass feeders to take shifts. But in poorer countries, farms can’t afford to have as many workers and staff could be out tending to the cows all day even in the coldest season.

FJDynamics aims to make farmers’ work easier. Its vision-guided feeder, which costs about 20,000 euros each, can feed up to 500 cows a day. In 2019, it acquired the 110-year-old Swedish farming company Sveaverken, which has helped put the Chinese firm’s feed pushing robots to work.

“I never talk about technology to my customers. The farmer is more interested in whether my product can help improve the crop yield,” said Wu. “Every farmer is an economist.”

Because of the company’s vision in “making tech affordable”, margins are “modest” and the management is vigilant about operational costs.

At the moment, about 40% of the startup’s sales happen outside China across some 60 countries. Many Chinese companies expanding overseas are increasingly cagey about their origin, fearing hostility against anything labeled “Chinese”. Wu takes a more proactive approach.

“Even though I’ve lived in Europe for ten years, I can’t rip off my skin. I don’t think that’s important — whether it’s a Chinese, American or Swedish entrepreneur… As long as you build great products and bring benefits to my customers, there will be users.”

Data compliance is especially key to a company’s global expansion. FJDynamics provides the hardware and software while its local partners help deploy the “system” using the data. Microsoft Azure is its main cloud partner outside China to allow “elastic deployment while meeting data privacy requirements such as GDPR.”

“Our culture is that we don’t want the data,” Wu said.

Unlike smartphones or drones that require sophisticated processors, FJDynamics’ products use relatively simple chips that could be found in China, so the firm is likely immune from the recent supply chain disruptions, the founder reckoned.

While Wu may not be working on the most advanced technology anymore, he looks for ways to impart his knowledge. When he’s not developing the next farming robot, he lectures at the Southern University of Science and Technology in Shenzhen.

“I live a simple life that focuses on two things — product [FJDynamics] and education,” the founder said. “I’ve seen a lot and realized that money can’t change you or make you happier. So you need a simple goal, and achieving the simple goal makes your life happier.”

Ex-Microsoft exec Harry Shum leads ‘digital economy’ research center in Shenzhen

Overlooking a lush wetland in Hong Kong, the International Digital Economy Academy (IDEA) quietly opened last year.

The research institute sits on the northern bank of the Shenzhen River, which separates Hong Kong from mainland China. But technically, it’s located inside a special area straddling the two cities: the Shenzhen-Hong Kong Innovation and Technology Cooperation Zone. The name is self-explanatory. It’s a joint effort by the governments of Shenzhen and Hong Kong, with support from Beijing, to collaborate on scientific and technological research.

IDEA is one of the organizations that have set up inside the 3.89 km² special zone — which is about the size of 540 football pitches — and is a brainchild of Harry Shum. The renowned computer scientist was an executive vice president at Microsoft from 2013 to 2019 and also co-founded Microsoft’s largest research branch outside the U.S., Microsoft Research Asia.

Like his former colleague at Microsoft, Kai-Fu Lee, Shum was active in both the research and business sides of AI. Now at IDEA, his team aims to “develop disruptive innovative technologies based on social needs and give back to society in a way that allows more people to benefit from the development of the digital economy.” Several research directors at IDEA are also Microsoft veterans, including Yutao Xie and Jiaping Wang.

The sweeping regulatory clampdown on China’s internet firms has led to headlines saying Beijing has turned against tech. But the government’s intent is more nuanced. It’s zeroing in on Big Tech deemed harmful to the society and economy, companies that have encouraged financial market risks, gaming addiction, exploitation of gig workers, and other ills.

In the meantime, China remains fixated on its goal to promote fundamental research and reduce reliance on Western technologies. In Shenzhen, home to tech giants like Huawei, DJI and Tencent, the government is recruiting world-class scientists. Harry Shum and his team are among the latest to have joined the raft.

IDEA definitely has a buzzy name (and a great acronym). The term “digital economy” comes up often in President Xi Jinping’s speeches on how technology can be a driving force for the economy. The “digital economy has become a key force in restructuring the global economy and transforming the global competitive landscape in recent years,” the President said in October. “The internet, big data, cloud computing and other technologies are being increasingly integrated into all sectors of economic and social development.”

IDEA is examining how AI can transform industries like finance, manufacturing and medical care. This week, it announced it’s partnering with leading Chinese quant trader Ubiquant on a joint lab to work on “risk monitoring and avoidance for financial transaction markets,” as well as “basic infrastructure for high-performance computing systems.”

IDEA is just one of the many research labs that have sprung up across Shenzhen in recent years. The Shenzhen Institute of Data Economy, located on the Shenzhen campus of the Chinese University of Hong Kong with support from the government, is another group working to advance China’s digital economy.

Report shows accessibility in gaming is both challenge and opportunity

The gaming community, developers, and publishers are beginning to embrace accessibility as a core part of the business and hobby, but there’s a long way to go. A report on the needs and habits of disabled gamers in the UK suggests that millions worldwide face difficulties regularly in how they play, buy, or otherwise enjoy games.

Performed by disability advocacy organization Scope and compellingly contextualized by Eurogamer contributor Vivek Gohil, the study polled 1,326 people (812 disabled, 514 not disabled) on the problems they face in the gaming world.

Two thirds said they face barriers in gaming, most commonly the availability or affordability of assistive technology. Many say they’ve avoided buying games because of a lack of accessibility options, or have been unable to play (or return) games they bought which lacked such options.

Interestingly, disabled gamers are considerably more likely to buy in-game items, watch esports, and otherwise engage with various platforms. As Gohil points out, just within the UK there are some 14 million people commanding billions in disposable income; a large proportion of whom are active gamers, valuable ones at that; yet they are seldom considered a demographic worth advertising to or including in-game.

That does seem to be changing as more big developers realize that accessibility options make their games better for everyone. Major titles like the new Ratchet & Clank, The Last of Us: Part II, and Forza Horizon 5 include a wide variety of accommodations for everything from colorblindness to gameplay slowdown and granular difficulty options.

Better hardware is also on the way as small companies produce assistive devices for lots of different needs, and of course Microsoft’s Xbox Adaptive Controller has been a huge hit for people who can’t use traditional controllers.

The company also recently hosted an inclusion-focused esports tournament in collaboration with the Special Olympics.

But they’ll be the first to admit that more needs to be done, and it’s not all engineering and development. In-game chat, notoriously toxic at the best of times, is positively horrific when people with disabilities join in, the Scope study found. In fact “doing more to tackle negative attitudes about disability online” was the most common priority cited by the respondents. More and better representation of people with disabilities in games, and more affordable assistive tech were also rated as important.

The need for better accessibility in the gaming world is clear, but difficult to quantify — so studies like this one are particularly valuable. You can read the full report here.

European Parliament’s IMCO backs limits on tech giants’ ability to run tracking ads

In what looks like bad news for adtech giants like Facebook and Google, MEPs in the European Parliament have voted for tougher restrictions on how Internet users’ data can be combined for ad targeting purposes — backing a series of amendments to draft legislation that’s set to apply to the most powerful platforms on the web.

The Internal Market and Consumer Protection Committee (IMCO) today voted overwhelmingly to support beefed up consent requirements on the use of personal data for ad targeting within the Digital Markets Act (DMA); and for a complete prohibition on the biggest platforms being able to process the personal data of minors for commercial purposes — such as marketing, profiling or behaviorally targeted ads — to be added to the draft legislation.

The original Commission proposal for the DMA was notably weak in the area of surveillance business models — with the EU’s executive targeting the package of measures at other types of digital market abuse, such as self-preferencing and unfair T&Cs for platform developers, which its central competition authority was more familiar with.

“The text says that a gatekeeper shall, ‘for its own commercial purposes, and the placement of third-party advertising in its own services, refrain from combining personal data for the purpose of delivering targeted or micro-targeted advertising’, except if there is a ‘clear, explicit, renewed, informed consent’, in line with the General Data Protection Regulation,” IMCO writes in a press release. “In particular, personal data of minors shall not be processed for commercial purposes, such as direct marketing, profiling and behaviourally targeted advertising.”

It’s fair to say that adtech giants are masters of manipulating user consent at scale — through the use of techniques like A/B testing and dark pattern design — so beefed up consent requirements (for adults) aren’t likely to offer as much of a barrier against ad-targeting abuse as the committee seems to think they might.

Although if Facebook was finally forced to offer an actual opt-out of tracking ads that would still be a major win (as it doesn’t currently give users any choice over being surveilled and profiled for ads).

However the stipulation that children should be totally protected from commercial stuff like profiling and behavioral ads is potentially a lot more problematic for the likes of Facebook and Google — given the general lack of robust age assurance across the entire Internet.

It suggests that if this partial prohibition makes it into EU law, adtech platforms may end up deciding it’s less legally risky to turn off tracking-based ads altogether (in favor of using alternatives that don’t require processing users’ personal data, such as contextual targeting) vs trying to correctly age verify their entire user base in order to firewall only minors’ eyeballs from behavioral ads.

At the very least, such a ban could present big (ad)tech with a compliance headache — and more work for their armies of in-house lawyers — though MEPs have not proposed to torpedo their entire surveillance business model at this juncture.

In recent months a number of parliamentarians have been pushing for just that: An outright ban on tracking-based advertising period to be included, as an amendment, to another pan-EU digital regulation that’s yet to be voted on by the committee (aka the Digital Services Act; DSA).

However IMCO does not look likely to go so far in amending either legislative package — despite a call this week by the European Data Protection Board for the bloc to move towards a total ban on behavioral ads given the risks posed to citizens fundamental rights.

Digital Markets Act

The European Parliament is in the process of finalizing its negotiating mandate on one of the aforementioned digital reforms — aka, the DMA — which is set to apply to Internet platforms that have amassed market power by occupying a so-called ‘gatekeeping’ role as online intermediaries, typically giving them a high degree of market leverage over consumers and other digital businesses.

Critics argue this can lead to abusive behaviors that negatively impact consumers (in areas like privacy) — while also chilling fair competition and impeding genuine innovation (including in business models).

For this subset of powerful platforms, the DMA — which was presented as a legislative proposal at the end of last year — will apply a list of pre-emptive ‘dos and don’ts’ in an attempt to rebalance digital markets that have become dominated by a handful of (largely) US-based giants.

EU lawmakers argue the regulation is necessary to respond to evidence that digital markets are prone to tipping and unfair practices as a result of asymmetrical dynamics such as network effects, big data and ‘winner takes all’ investor strategies.

Under the EU’s co-legislative process, once the Commission proposes legislation the European Parliament (consisting of directly elected MEPs) and the Council (the body that represents Member States’ governments) must adopt their own negotiating mandates — and then attempt to reach consensus — meaning there’s always scope for changes to the original draft, as well as a long period where lobbying pressure can be brought to bear to try to influence the final shape of the law.

The IMCO committee vote this morning will be followed by a plenary vote in the European Parliament next month to confirm MEPs’ negotiating mandate — before the baton passes to the Council next year. There trilogue negotiations, between the Parliament, Commission and Member States’ governments, are slated to start under the French presidency in the first semester of 2022. Which means more jockeying, horse-trading and opportunities for corporate lobbying lie ahead. And (likely) many months before any vote to approve a final DMA text.

Still, MEPs’ push to strengthen the tech giant-targeting package is notable nonetheless.

A second flagship digital update, the DSA, which will apply more broadly to digital services — dealing with issues like illegal content and algorithmic recommendations — is still being debated by MEPs and committee votes like IMCO’s remain outstanding.

So the DMA has passed through parliamentary debate relatively quickly (vs the DSA), suggesting there’s political consensus (and appetite) to rein in tech giants.

In its press release summarizing the DMA amendments, rapporteur Andreas Schwab (of the EPP and DE political grouping) made this point, loud and clear, writing: “The EU stands for competition on the merits, but we do not want bigger companies getting bigger and bigger without getting any better and at the expense of consumers and the European economy. Today, it is clear that competition rules alone cannot address all the problems we are facing with tech giants and their ability to set the rules by engaging in unfair business practices. The Digital Markets Act will rule out these practices, sending a strong signal to all consumers and businesses in the Single Market: rules are set by the co-legislators, not private companies!”

In other interesting tweaks, the committee has voted to expand the scope of the DMA — to cover not just online intermediation services, social networks, search engines, operating systems, online advertising services, cloud computing, and video-sharing services (i.e. where those platforms meet the relevant criteria to be designated “gatekeepers”) — but also add in web browsers (hi Google Chrome!), virtual assistants (Ok Google; hey Siri!) and connected TV (hi, Android TV) too.

On gatekeeper criteria, MEPs backed an increase in the quantitative thresholds for a company to fall under scope — to €8 billion in annual turnover in the European Economic Area; and a market capitalisation of €80 billion.

The sorts of tech giants who would qualify — based on that turnover and market cap alone (NB: other criteria would also apply) — include the usual suspects of Apple, Amazon, Meta (Facebook), Google, Microsoft etc but also — potentially — the European booking platform, Booking.com.

Although the raised threshold may keep another European gatekeeper, music streaming giant Spotify, out of scope.

MEPs supported the additional criteria for a platform to qualify as a gatekeeper and fall under scope of the DMA of: Namely, providing a “core platform service” in at least three EU countries; having at least 45M monthly end users and 10,000+ business users. The committee also noted their support that these thresholds do not prevent the Commission from designating other companies as gatekeepers — “when they meet certain conditions”.

In other changes, the committee backed adding new provisions around the interoperability of services, such as for number-independent interpersonal communication services and social network services.

And — making an intervention on so-called ‘killer acquisitions’ — MEPs voted for the Commission to have powers to impose “structural or behavioural remedies” where gatekeepers have engaged in systematic non-compliance.

“The approved text foresees in particular the possibility for the Commission to restrict gatekeepers from making acquisitions in areas relevant to the DMA in order to remedy or prevent further damage to the internal market. Gatekeepers would also be obliged to inform the Commission of any intended concentration,” they note on that.

The committee backed a centralized enforcement role for the Commission — while adding some clarifications around the role of national competition authorities.

Failures of enforcement have been a major bone of contention around the EU’s flagship data protection regime, the GDPR, which allows for enforcement to be devolved to Member States but also for forum shopping and gaming of the system — as a couple of EU countries have outsized concentrations of tech giants on their soil and have been critized as bottlenecks to effective GDPR enforcement.

(Only today, for example, Ireland’s Data Protection Commission has been hit with a criminal complaint accusing it of procedural blackmail in an attempt to gag complainants in a way that benefits tech giants like Facebook… )

On sanctions for gatekeepers which break the DMA rules, MEPs want the Commission to impose fines of “not less than 4% and not exceeding 20%” of total worldwide turnover in the preceding financial year — which, in the case of adtech giants Facebook’s and Google’s full year 2020 revenue would allow for theoretical sanctions in the $3.4BN-$17.2BN and $7.2BN-$36.3BN range, respectively.

Which would be a significant step up on the sorts of regulatory sanctions tech giants have faced to date in the EU.

Facebook has yet to face any fines under GDPR, for example — over three years since it came into application, despite facing numerous complaints. (Although Facebook-owned WhatsApp was recently fined $267M for transparency failures.)

While Google received an early $57M GDPR from France before it moved users to fall under Ireland’s legal jurisdiction — where its adtech has been under formal investigation since 2019 (without any decisions/sanctions as yet).

Mountain View has also faced a number of penalties elsewhere in Europe, though — with France again leading the charge and slapping Google with a $120M fine for dropping tracking cookies without consent (under the EU ePrivacy Directive) last year.

Its competition watchdog has also gone after Google — issuing a $268M penalty this summer for adtech abuses and a $592M sanction (also this summer) related to requirements to negotiate licensing fees with news publishers over content reuse.

It’s interesting to imagine such stings as a mere amuse-bouche compared to the sanctions EU lawmakers want to be able to hand out under the DMA.

European Parliament’s IMCO backs limits on tech giants’ ability to run tracking ads

In what looks like bad news for adtech giants like Facebook and Google, MEPs in the European Parliament have voted for tougher restrictions on how Internet users’ data can be combined for ad targeting purposes — backing a series of amendments to draft legislation that’s set to apply to the most powerful platforms on the web.

The Internal Market and Consumer Protection Committee (IMCO) today voted overwhelmingly to support beefed up consent requirements on the use of personal data for ad targeting within the Digital Markets Act (DMA); and for a complete prohibition on the biggest platforms being able to process the personal data of minors for commercial purposes — such as marketing, profiling or behaviorally targeted ads — to be added to the draft legislation.

The original Commission proposal for the DMA was notably weak in the area of surveillance business models — with the EU’s executive targeting the package of measures at other types of digital market abuse, such as self-preferencing and unfair T&Cs for platform developers, which its central competition authority was more familiar with.

“The text says that a gatekeeper shall, ‘for its own commercial purposes, and the placement of third-party advertising in its own services, refrain from combining personal data for the purpose of delivering targeted or micro-targeted advertising’, except if there is a ‘clear, explicit, renewed, informed consent’, in line with the General Data Protection Regulation,” IMCO writes in a press release. “In particular, personal data of minors shall not be processed for commercial purposes, such as direct marketing, profiling and behaviourally targeted advertising.”

It’s fair to say that adtech giants are masters of manipulating user consent at scale — through the use of techniques like A/B testing and dark pattern design — so beefed up consent requirements (for adults) aren’t likely to offer as much of a barrier against ad-targeting abuse as the committee seems to think they might.

Although if Facebook was finally forced to offer an actual opt-out of tracking ads that would still be a major win (as it doesn’t currently give users any choice over being surveilled and profiled for ads).

However the stipulation that children should be totally protected from commercial stuff like profiling and behavioral ads is potentially a lot more problematic for the likes of Facebook and Google — given the general lack of robust age assurance across the entire Internet.

It suggests that if this partial prohibition makes it into EU law, adtech platforms may end up deciding it’s less legally risky to turn off tracking-based ads altogether (in favor of using alternatives that don’t require processing users’ personal data, such as contextual targeting) vs trying to correctly age verify their entire user base in order to firewall only minors’ eyeballs from behavioral ads.

At the very least, such a ban could present big (ad)tech with a compliance headache — and more work for their armies of in-house lawyers — though MEPs have not proposed to torpedo their entire surveillance business model at this juncture.

In recent months a number of parliamentarians have been pushing for just that: An outright ban on tracking-based advertising period to be included, as an amendment, to another pan-EU digital regulation that’s yet to be voted on by the committee (aka the Digital Services Act; DSA).

However IMCO does not look likely to go so far in amending either legislative package — despite a call this week by the European Data Protection Board for the bloc to move towards a total ban on behavioral ads given the risks posed to citizens fundamental rights.

Digital Markets Act

The European Parliament is in the process of finalizing its negotiating mandate on one of the aforementioned digital reforms — aka, the DMA — which is set to apply to Internet platforms that have amassed market power by occupying a so-called ‘gatekeeping’ role as online intermediaries, typically giving them a high degree of market leverage over consumers and other digital businesses.

Critics argue this can lead to abusive behaviors that negatively impact consumers (in areas like privacy) — while also chilling fair competition and impeding genuine innovation (including in business models).

For this subset of powerful platforms, the DMA — which was presented as a legislative proposal at the end of last year — will apply a list of pre-emptive ‘dos and don’ts’ in an attempt to rebalance digital markets that have become dominated by a handful of (largely) US-based giants.

EU lawmakers argue the regulation is necessary to respond to evidence that digital markets are prone to tipping and unfair practices as a result of asymmetrical dynamics such as network effects, big data and ‘winner takes all’ investor strategies.

Under the EU’s co-legislative process, once the Commission proposes legislation the European Parliament (consisting of directly elected MEPs) and the Council (the body that represents Member States’ governments) must adopt their own negotiating mandates — and then attempt to reach consensus — meaning there’s always scope for changes to the original draft, as well as a long period where lobbying pressure can be brought to bear to try to influence the final shape of the law.

The IMCO committee vote this morning will be followed by a plenary vote in the European Parliament next month to confirm MEPs’ negotiating mandate — before the baton passes to the Council next year. There trilogue negotiations, between the Parliament, Commission and Member States’ governments, are slated to start under the French presidency in the first semester of 2022. Which means more jockeying, horse-trading and opportunities for corporate lobbying lie ahead. And (likely) many months before any vote to approve a final DMA text.

Still, MEPs’ push to strengthen the tech giant-targeting package is notable nonetheless.

A second flagship digital update, the DSA, which will apply more broadly to digital services — dealing with issues like illegal content and algorithmic recommendations — is still being debated by MEPs and committee votes like IMCO’s remain outstanding.

So the DMA has passed through parliamentary debate relatively quickly (vs the DSA), suggesting there’s political consensus (and appetite) to rein in tech giants.

In its press release summarizing the DMA amendments, rapporteur Andreas Schwab (of the EPP and DE political grouping) made this point, loud and clear, writing: “The EU stands for competition on the merits, but we do not want bigger companies getting bigger and bigger without getting any better and at the expense of consumers and the European economy. Today, it is clear that competition rules alone cannot address all the problems we are facing with tech giants and their ability to set the rules by engaging in unfair business practices. The Digital Markets Act will rule out these practices, sending a strong signal to all consumers and businesses in the Single Market: rules are set by the co-legislators, not private companies!”

In other interesting tweaks, the committee has voted to expand the scope of the DMA — to cover not just online intermediation services, social networks, search engines, operating systems, online advertising services, cloud computing, and video-sharing services (i.e. where those platforms meet the relevant criteria to be designated “gatekeepers”) — but also add in web browsers (hi Google Chrome!), virtual assistants (Ok Google; hey Siri!) and connected TV (hi, Android TV) too.

On gatekeeper criteria, MEPs backed an increase in the quantitative thresholds for a company to fall under scope — to €8 billion in annual turnover in the European Economic Area; and a market capitalisation of €80 billion.

The sorts of tech giants who would qualify — based on that turnover and market cap alone (NB: other criteria would also apply) — include the usual suspects of Apple, Amazon, Meta (Facebook), Google, Microsoft etc but also — potentially — the European booking platform, Booking.com.

Although the raised threshold may keep another European gatekeeper, music streaming giant Spotify, out of scope.

MEPs supported the additional criteria for a platform to qualify as a gatekeeper and fall under scope of the DMA of: Namely, providing a “core platform service” in at least three EU countries; having at least 45M monthly end users and 10,000+ business users. The committee also noted their support that these thresholds do not prevent the Commission from designating other companies as gatekeepers — “when they meet certain conditions”.

In other changes, the committee backed adding new provisions around the interoperability of services, such as for number-independent interpersonal communication services and social network services.

And — making an intervention on so-called ‘killer acquisitions’ — MEPs voted for the Commission to have powers to impose “structural or behavioural remedies” where gatekeepers have engaged in systematic non-compliance.

“The approved text foresees in particular the possibility for the Commission to restrict gatekeepers from making acquisitions in areas relevant to the DMA in order to remedy or prevent further damage to the internal market. Gatekeepers would also be obliged to inform the Commission of any intended concentration,” they note on that.

The committee backed a centralized enforcement role for the Commission — while adding some clarifications around the role of national competition authorities.

Failures of enforcement have been a major bone of contention around the EU’s flagship data protection regime, the GDPR, which allows for enforcement to be devolved to Member States but also for forum shopping and gaming of the system — as a couple of EU countries have outsized concentrations of tech giants on their soil and have been critized as bottlenecks to effective GDPR enforcement.

(Only today, for example, Ireland’s Data Protection Commission has been hit with a criminal complaint accusing it of procedural blackmail in an attempt to gag complainants in a way that benefits tech giants like Facebook… )

On sanctions for gatekeepers which break the DMA rules, MEPs want the Commission to impose fines of “not less than 4% and not exceeding 20%” of total worldwide turnover in the preceding financial year — which, in the case of adtech giants Facebook’s and Google’s full year 2020 revenue would allow for theoretical sanctions in the $3.4BN-$17.2BN and $7.2BN-$36.3BN range, respectively.

Which would be a significant step up on the sorts of regulatory sanctions tech giants have faced to date in the EU.

Facebook has yet to face any fines under GDPR, for example — over three years since it came into application, despite facing numerous complaints. (Although Facebook-owned WhatsApp was recently fined $267M for transparency failures.)

While Google received an early $57M GDPR from France before it moved users to fall under Ireland’s legal jurisdiction — where its adtech has been under formal investigation since 2019 (without any decisions/sanctions as yet).

Mountain View has also faced a number of penalties elsewhere in Europe, though — with France again leading the charge and slapping Google with a $120M fine for dropping tracking cookies without consent (under the EU ePrivacy Directive) last year.

Its competition watchdog has also gone after Google — issuing a $268M penalty this summer for adtech abuses and a $592M sanction (also this summer) related to requirements to negotiate licensing fees with news publishers over content reuse.

It’s interesting to imagine such stings as a mere amuse-bouche compared to the sanctions EU lawmakers want to be able to hand out under the DMA.

Render secures $20M Series A to scale its DevOps cloud platform

DevOps cloud platform Render, which won our Disrupt SF 2019 Startup Battlefield, announced today that it closed a $20 million Series A funding round led by Addition alongside existing investors General Catalyst and South Park Commons.

Addition first made a small investment in Render in February 2020 when the company was not looking to raise a round, co-founder and CEO Anurag Goel told TechCrunch in an email. 

Render announced its last raise in October 2020, a seed round for $4.5 million, after seeing strong inbound interest on the heels of Disrupt. The latest round brings the startup’s total funding to $26.75 million. 

The San-Francisco based company will use the proceeds to triple its employee base, currently 35 people, by the end of 2022, with a focus on product and customer growth, Goel said. It also plans to expand its data center footprint globally to at least 10 new regions in 2022 to improve latency, launching for the first time in both APAC and EMEA.

Among the new features it plans to roll out are a free plan for web services and databases to increase access to its product, as well as built-in DDoS protection for its customers, Goel said.

Most of Render’s customers use its platform for their entire cloud presence, according to Goel. Some of its notable customers include publicly-traded Anker, online developer community Indie Hackers, and Web3 platform NEAR

Goel added that many of its customers host popular open-source projects like Elasticsearch, MySQL and MongoDB on Render as an alternative to expensive managed versions of these services, because Render has simplified the process of managing such projects.

Render competes with the “big three” cloud providers — Amazon Web Services, Microsoft Azure, and Google Cloud — by offering a large suite of features at a competitive cost. Goel said many of Render’s customers migrate to its platform from Heroku and AWS because it provides “increased flexibility, better performance, and access to modern features like infrastructure-as-code, private networking and persistent storage.”

Once a customer chooses what service to deploy, Render helps them manage the process and infrastructure. 

“AWS and other large providers were built for the 2000s, when managing infrastructure was the norm at every company,” Goel said. “While the big three offerings require expensive and scarce DevOps engineering resources to manage, we offer simplicity and a world-class developer experience at a fraction of the cost.”

What open source-based startups can learn from Confluent’s success story

It’s common these days to launch an enterprise startup based on an open source project, often where one the founders was deeply involved in creating it. The beauty of this approach is that if the project begins to gain traction, you have the top of the sales funnel ready and waiting with potential customers when you move to commercialize your business.

In the past, this often meant providing help desk-style services for companies who appreciated what the open source software could do but wanted to have the so-called “throat to choke” if something went wrong. Another way that these companies have made money has been creating an on-prem version with certain enterprise features, particularly around scale or security, the kind of thing that large operations need as table stakes before using a particular product. Today, customers typically can install on-prem or in their cloud of choice.

“A key aspect of these kinds of technology-developer data products is they have to have a combination of bottom-up adoption and top-down SaaS, and you actually have to get both of those things working well to succeed.” Jay Kreps

In recent years, the model has shifted to building a SaaS product, where the startup builds a solution that handles all the back-end management and creates something that most companies can adopt without all of the fuss associated with installing yourself or trying to figure out how to use the raw open source.

One company that has flirted with these monetization approaches is Confluent, the streaming data company built on top of the open source Apache Kafka project. The founding team had helped build Kafka inside LinkedIn to move massive amounts of user data in real time. They open sourced the tool in 2011, and CEO and co-founder Jay Kreps helped launch the company in 2014.

It’s worth noting that Confluent raised $450 million as a private company with a final private valuation in April of $4.5 billion before going public in June. Today, it has a market cap of over $22 billion, not bad for less than six months as a public company.

Last month at TC Sessions: SaaS, I spoke to Kreps about how he built his open source business and the steps he took along the way to monetize his ideas. There’s certainly a lot of takeaways for open source-based startups launching today.

Going upmarket

Kreps said that when they launched the company in 2014, there were a bunch of enterprise-size companies already using the open source product, and they needed to figure out how to take the interest they had been seeing in Kafka and convert that into something that the fledgling startup could begin to make money on.

“There have been different paths for different companies in this space, and I think it’s actually very dependent on the type of product [as to] what makes sense. For us, one of the things we understood early on was that we would have to be wherever our customers had data,” Kreps said.

Pentagon announces new cloud initiative to replace ill-fated JEDI contract

The Pentagon announced a limited request for bids for a new cloud initiative today that replaces the cancelled $10 billion, decade-long JEDI contract initiative. You may recall (or not) that it previously ran a winner-take-all bid it had dubbed JEDI (short for Joint Enterprise Defense Infrastructure). The new initiative goes by the much less catchy name, Joint Warfighting Cloud Capability, or JWCC for short.

Under the terms of the RFP, Amazon, Microsoft, Google and Oracle have been invited to bid. That multi-vendor approach is markedly different from the JEDI RFP, where just a single vendor was going to walk away with the prize. In fact, the Pentagon makes clear that while it favors Amazon and Microsoft, any of the qualified (invited) vendors could get a piece of this deal.

As the RFP states, “The Government anticipates awarding two IDIQ contracts — one to Amazon Web Services, Inc. (AWS) and one to Microsoft Corporation (Microsoft) — but intends to award to all Cloud Service Providers (CSPs) that demonstrate the capability to meet DoD’s requirements.”

It appears it limited the number of vendors involved because after researching its requirements, the Pentagon found that there were a limited number of companies out there capable of meeting them. “Market research indicates that a limited number of sources are capable of meeting the Department’s requirements. Currently, the Department is aware of only five U.S.-based hyperscale CSPs (cloud service providers). Furthermore, only two of those hyperscale CSPs — AWS and Microsoft — appear to be capable of meeting all of the DoD’s requirements at this time, including providing cloud services at all levels of national security classification.”

The government is still working out the pricing for this one, but with multiple vendors involved, it’s entirely possible that it will exceed the $10 billion price tag of the now-defunct JEDI contract. “The Department is still evaluating the contract ceiling for this procurement, but anticipates that a multi-billion dollar ceiling will be required. The contract ordering ceiling will be included in any directed solicitations issued to vendors.”

It’s worth noting that each company that wins an award under the terms of the RFP will get a three-year contract for its piece, with two one-year option periods.

JEDI was mired in controversy from the start as top cloud vendors jockeyed for position, and lesser ones also tried to get into the act. There was much drama, complaints to the president, complaints from the president, complaints about presidential interference, formal inquiries galore and several lawsuits. In the end, in spite of everyone believing that Amazon would win the bid, it didn’t. Microsoft did.

But that wasn’t the end, and the two companies went to the mat over the decision, ending up in court, of course. Eventually the Pentagon tired of the whole thing and decided to scrap the project altogether.

That didn’t mean, however, that the military’s requirement to modernize its computing systems went away just because the contract did. That’s why today, the Pentagon announced the new initiative to push technology modernization involving cloud infrastructure back to the forefront.

It’s worth noting that according to Synergy Research, as of Q3 earnings reports, the top three vendors — Amazon, Microsoft and Google account for 70% of the market share. Amazon leads the cloud infrastructure market with 33% market share, Microsoft follows with around 20% and Google is in third with 10%. Oracle is in the low single digits, according to Synergy.