Sep
10
2018
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Zendesk expands into CRM with Base acquisition

Zendesk has mostly confined itself to customer service scenarios, but it seems that’s not enough anymore. If you want to truly know the customer behind the interaction, you need a customer system of record to go with the customer service component. To fill that need, Zendesk announced it was acquiring Base, a startup that has raised over $50 million.

The companies did not share the purchase price, but Zendesk did report that the acquisition should not have a significant impact on revenue.

While Base might not be as well known as Salesforce, Microsoft or Oracle in the CRM game, it has created a sophisticated sales force automation platform, complete with its own artificial intelligence underpinnings. CEO Uzi Shmilovici claimed his company’s AI could compete with its more well-heeled competitors when it was released in 2016 to provide salespeople with meaningful prescriptive advice on how to be more successful.

Zendesk CEO Mikkel Svane certainly sees the value of adding a company like Base to his platform. “We want to do for sales what Zendesk has already done for customer service: give salespeople tools built around them and the customers they serve,” he said in a statement.

If the core of customer data includes customer service, CRM and marketing, Base gives Zendesk one more of those missing components, says Brent Leary, owner at CRM Essentials, a firm that keeps close watch on this market.

“Zendesk has a great position in customer service, but now to strengthen their position with midmarket/enterprise customers looking for integrated platforms, Base adds a strong mobile sales force automation piece to their puzzle,” Leary told TechCrunch.

As he points out, we have seen HubSpot make a similar move with HubSpot Apps, while SugarCRM, which was recently sold to Accel-KKR, could be shopping too, with its new owner’s deeper pockets. “This is almost like a CRM enterprise software Hunger Games going on,” he joked. But he indicates that we should be expecting more consolidation here as these companies try to acquire missing pieces of their platforms to offer more complete solutions.

Matt Price, who previously had the title of senior vice president for product portfolio at Zendesk will lead the Base team moving forward.

Base was founded in 2009 and boasts more than 5,000 customers. It’s worth pointing out that Base was already available for sale in the company app marketplace, so there was some overlap here, but the company intends to try to move existing customers to Base, of course.

Zendesk has indicated it will continue to support all Base customers. In addition, Base’s 125 employees have been invited to join Zendesk, so there will be no blood-letting here.

Sep
10
2018
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Intel acquires NetSpeed Systems to boost its system-on-a-chip business

Intel today is announcing another acquisition as it continues to pick up talent and IP to bolster its next generation of computing chips beyond legacy PCs. The company has acquired NetSpeed Systems, a startup that makes system-on-chip (SoC) design tools and interconnect fabric intellectual property (IP). The company will be joining Intel’s Silicon Engineering Group, and its co-founder and CEO, Sundari Mitra, herself an Intel vet, will be coming on as a VP at Intel where she will continue to lead her team.

Terms of the deal are not being disclosed, but for some context, during NetSpeed’s last fundraise in 2016 (a $10 million Series C) it had a post-money valuation of $60 million, according to data from PitchBook.

SoC is a central part of how newer connected devices are being made. Moving away from traditional motherboards to create all-in-one chips that include processing, memory, input/output and storage is an essential cornerstone when building ever-smaller and more efficient devices. This is an area where Intel is already active but against others like Nvidia and Qualcomm many believe it has some catching up to do, and so this acquisition in important in that context.

“Intel is designing more products with more specialized features than ever before, which is incredibly exciting for Intel architects and for our customers,” said Jim Keller, senior vice president and general manager of the Silicon Engineering Group at Intel, in a statement. “The challenge is synthesizing a broader set of IP blocks for optimal performance while reining in design time and cost. NetSpeed’s proven network-on-chip technology addresses this challenge, and we’re excited to now have their IP and expertise in-house.”

Intel has made a series of acquisitions to speed up development of newer chips to work in connected objects and smaller devices beyond the PCs that helped the company make its name. Another recent acquisition in the same vein include eASIC for IoT chipsets, which Intel acquired in July. Intel has also been acquiring startups in other areas where it hopes to make a bigger mark, such as deep learning (case in point: its acquisition of Movidius in August).

NetSpeed has been around since 2011 and Intel was one of its investors and customers.

“Intel has been a great customer of NetSpeed’s, and I’m thrilled to once again be joining the company,” said Mitra, in a statement. “Intel is world class at designing and optimizing the performance of custom silicon at scale. As part of Intel’s silicon engineering group, we’re excited to help invent new products that will be a foundation for computing’s future.”

Intel said it will to honor NetSpeed’s existing customer contracts, but it also sounds like it the company will not be seeking future business as Intel integrates the company into its bigger business.

Sep
05
2018
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German mobility startup Wunder Mobility raises $30M Series B

Wunder Mobility, the Hamburg-based startup that provides a range of mobility services, from carpooling to electric scooter rentals, has raised $30 million in Series B funding. The round was led by KCK Group, with participation from previous backer Blumberg Capital and other non-disclosed investors.

The German company says the investment will be used to expand the company’s engineering team in its home country and to establish an international B2B sales organisation. Currently, Wunder Mobility has 70 employees working from four offices in Asia, Germany, and South America. The aim is to add another 100 employees over the next twelve months in the areas of product development and B2B sales.

Founded in Hamburg in 2014, but now with an international focus, including emerging markets, Wunder Mobility supplies software, hardware, and operational services for various “future-oriented” mobility concepts. These span smart shuttles, fleet management and carpooling, reaching more than two million users in a dozen countries, including France, Germany, Spain, Brazil, India, and the Philippines.

“We are enabling communities on four continents to address the global traffic challenge and to deploy more sustainable mobility options faster by hosting a full-stack urban mobility tech platform,” explains founder and CEO Gunnar Froh.

“Our three product lines either allow private people to share empty seats with people headed in the same direction (Wunder Carpool), match professional drivers with passengers in 6-10 seater vans (Wunder Shuttle), or give travellers the option to rent vehicles (electric scooters, cars) by the minute (Wunder Fleet)”.

In recent months, transport companies as well as customers from the automotive industry in Japan, Europe and America have committed to using Wunder technology. The company is already processing around one million trips per month worldwide.

To that end, Froh describes Wunder Mobility’s typical B2C customers as the emerging middle class in mega cities such as Rio de Janeiro, Manila or Dehli.

“Many of these customers commute to work every day for several hours, are often first-time car owners and are open to sharing empty seats in their cars in order save on gas and car expenses,” he says.

On the B2B side, the startup’s customers are large OEMs, and public transit companies or suppliers, such as the Japanese conglomerate Marubeni. “We are working with Marubeni on ambitious new mobility services worldwide,” adds Froh.

Meanwhile, Wunder Mobility’s competitors are cited as Via in New York on the shuttle side. In Europe it perhaps competes most directly with Berlin’s Door2Door, and Vulog in Paris.

Sep
04
2018
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Thoma Bravo buys majority stake in Apttus in unexpected ending

Apttus, a quote-to-cash vendor built on top of the Salesforce platform that looked to be heading toward an IPO in recent years has taken a different tack, instead being acquired by private equity firm Thoma Bravo today.

The company did not reveal the purchase price, but said it could be ready to share more details about the arrangement after the deal closes, probably next month. “What we can say is that Apttus views this development positively and believes Thoma Bravo can instill greater operational excellence, strengthen our market leadership and allow us to continue providing indispensable value to our customers,” a company spokesperson told TechCrunch.

They are describing this not as a full on acquisition, but as ‘taking a majority stake’. However you describe it, it probably wasn’t the ending the company envisioned after taking $404 million in investment since launching in 2006, one of the earliest startups to build a business on top of the Salesforce platform.

If the company believed that Salesforce would eventually buy it, that never happened. In fact, that dream probably went out the window when Salesforce bought SteelBrick, a similar company also built on Salesforce, at the end of 2015 for $360 million.

In spite of this, in an interview in 2016, CEO Kirk Krappe still was confident that an exit was coming, either by IPO or a possibly a Salesforce acquisition.

“We will be IPOing this year. That may be a function to figure what Salesforce wants to do and they may think about that [after purchasing SteelBrick at the end of last year]. There’s no reason they can’t buy us too. For me, I have to run the business, and we’re growing 100 percent year on year. If Salesforce came to the table, that would be great if the numbers work. If not, we have an amazingly strong business,” he said at the time.

That never came to pass of course, and the company tried to separate itself from Salesforce in April of 2016 when it released a version of Apttus that would work on Microsoft Dynamics. Krappe saw this as a way to show investors he wasn’t completely married to the Salesforce platform.

While Salesforce provided a system of record around the customer information and all that involved, once the salesperson actually closed in on a sale, that’s when software like Apttus came into play, allowing the company to generate a detailed proposal, a contract once the deal was agreed upon and finally collecting and recording the money from the sale.

Apttus took its last funding rounds in Sept 2017 for $55 million and later a debt financing round for another $75 million in February this year, according to data on Crunchbase.

Thoma Bravo has bought a number of enterprise software products over the years including Qlik, Sailpoint, Dynatrace, Solar Winds and others. Apttus should fit in well with that family of companies.

Sep
04
2018
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Encrypted cloud storage and collaboration company Tresorit secures €11.5M Series B

Tresorit, the Swiss-Hungarian company that provides end-to-end encrypted “file sync and sharing” for businesses, has closed €11.5 million in Series B financing. The round is led by European growth capital investor 3TS Capital Partners, alongside PortfoLion, a Central European venture capital.

A number of existing investors also participated, such as Andreas Kemi, an early investor in LogMeIn and co-founder of Scala Business Solutions, and Márton Anka, founder of LogMeIn. I also understand the round included some secondary funding, meaning not all of the cash has entered Tresorit’s balance sheet.

Operating in the enterprise cloud storage and collaboration market, Tresorit provides what it describes as zero-knowledge encryption technology and unique encryption key management. The high level pitch is that the company is able to offer on-premise equivalent security for businesses while offering the type of simple user experience we have come to expect in consumer apps. It serves more than 17,000 customers and says it has grown recurring revenue by an average of 3x every year in the last three years.

Meanwhile, Tresorit will use the new Series B funding to further accelerate this growth by tapping into what it says is rising demand for secure cloud solutions, in light of a plethora of high profiles security breaches seen at major enterprises in recent years. This will include beefing up its management team with the aim of scaling up marketing and sales, and establishing new channel partners.

“We are at an inflection point with our business as awareness regarding data protection and cybersecurity threats is getting stronger and demand is set to grow exponentially for our service in and outside of Europe,” says Tresorit founder and CEO Istvan Lam.

He also says there is large market potential in channeling traditional IT expenditure into the cloud, citing a recent Deloitte survey indicating that traditional IT expenditure still accounts for two-thirds of all IT spending, while only one-third goes towards IT-as-a-service.

“Many enterprises are holding back from migrating to the cloud due to security and privacy concerns. With security guaranteed by end-to-end encryption, more businesses can and will choose Tresorit’s cloud solution,” adds Lam.

To that end, Tresorit recently launched a Beta version of “Tresorit Send,” a standalone file sharing product that offers a secure and encrypted alternative to unreliable file transfer sites and email attachments. The idea, presumably, is for the product to act as a shop window for the Tresorit user experience and the company’s broader end-to-end encryption offering.

Aug
28
2018
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Very Good Security makes data ‘unhackable’ with $8.5M from Andreessen

“You can’t hack what isn’t there,” Very Good Security co-founder Mahmoud Abdelkader tells me. His startup assumes the liability of storing sensitive data for other companies, substituting dummy credit card or Social Security numbers for the real ones. Then when the data needs to be moved or operated on, VGS injects the original info without clients having to change their code.

It’s essentially a data bank that allows businesses to stop storing confidential info under their unsecured mattress. Or you could think of it as Amazon Web Services for data instead of servers. Given all the high-profile breaches of late, it’s clear that many companies can’t be trusted to house sensitive data. Andreessen Horowitz is betting that they’d rather leave it to an expert.

That’s why the famous venture firm is leading an $8.5 million Series A for VGS, and its partner Alex Rampell is joining the board. The round also includes NYCA, Vertex Ventures, Slow Ventures and PayPal mafioso Max Levchin. The cash builds on VGS’ $1.4 million seed round, and will pay for its first big marketing initiative and more salespeople.

“Hey! Stop doing this yourself!,” Abdelkader asserts. “Put it on VGS and we’ll let you operate on your data as if you possess it with none of the liability.” While no data is ever 100 percent unhackable, putting it in VGS’ meticulously secured vaults means clients don’t have to become security geniuses themselves and instead can focus on what’s unique to their business.

“Privacy is a part of the UN Declaration of Human Rights. We should be able to build innovative applications without sacrificing our privacy and security,” says Abdelkader. He got his start in the industry by reverse-engineering games like StarCraft to build cheats and trainer software. But after studying discrete mathematics, cryptology and number theory, he craved a headier challenge.

Abdelkader co-founded Y Combinator-backed payment system Balanced in 2010, which also raised cash from Andreessen. But out-muscled by Stripe, Balanced shut down in 2015. While transitioning customers over to fellow YC alumni Stripe, Balanced received interest from other companies wanting it to store their data so they could be PCI-compliant.

Very Good Security co-founder and CEO Mahmoud Abdelkader

Now Abdelkader and his VP from Balanced, Marshall Jones, have returned with VGS to sell that as a service. It’s targeting startups that handle data like payment card information, Social Security numbers and medical info, though eventually it could invade the larger enterprise market. It can quickly help these clients achieve compliance certifications for PCI, SOC2, EI3PA, HIPAA and other standards.

VGS’ innovation comes in replacing this data with “format preserving aliases” that are privacy safe. “Your app code doesn’t know the difference between this and actually sensitive data,” Abdelkader explains. In 30 minutes of integration, apps can be reworked to route traffic through VGS without ever talking to a salesperson. VGS locks up the real strings and sends the aliases to you instead, then intercepts those aliases and swaps them with the originals when necessary.

“We don’t actually see your data that you vault on VGS,” Abdelkader tells me. “It’s basically modeled after prison. The valuables are stored in isolation.” That means a business’ differentiator is their business logic, not the way they store data.

For example, fintech startup LendUp works with VGS to issue virtual credit card numbers that are replaced with fake numbers in LendUp’s databases. That way if it’s hacked, users’ don’t get their cards stolen. But when those card numbers are sent to a processor to actually make a payment, the real card numbers are subbed in last-minute.

VGS charges per data record and operation, with the first 500 records and 100,000 sensitive API calls free; $20 a month gets clients double that, and then they pay 4 cent per record and 2 cents per operation. VGS provides access to insurance too, working with a variety of underwriters. It starts with $1 million policies that can be much larger for Fortune 500s and other big companies, which might want $20 million per incident.

Obviously, VGS has to be obsessive about its own security. A breach of its vaults could kill its brand. “I don’t sleep. I worry I’ll miss something. Are we a giant honey pot?,” Abdelkader wonders. “We’ve invested a significant amount of our money into 24/7 monitoring for intrusions.”

Beyond the threat of hackers, VGS also has to battle with others picking away at part of its stack or trying to compete with the whole, like TokenEx, HP’s Voltage, Thales’ Vormetric, Oracle and more. But it’s do-it-yourself security that’s the status quo and what VGS is really trying to disrupt.

But VGS has a big accruing advantage. Each time it works with a clients’ partners like Experian or TransUnion for a company working with credit checks, it already has a relationship with them the next time another clients has to connect with these partners. Abdelkader hopes that, “Effectively, we become a standard of data security and privacy. All the institutions will just say ‘why don’t you use VGS?’”

That standard only works if it’s constantly evolving to win the cat-and-mouse game versus attackers. While a company is worrying about the particular value it adds to the world, these intelligent human adversaries can find a weak link in their security — costing them a fortune and ruining their relationships. “I’m selling trust,” Abdelkader concludes. That peace of mind is often worth the price.

Aug
15
2018
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To fight the scourge of open offices, ROOM sells rooms

Noisy open offices don’t foster collaboration, they kill it, according to a Harvard study that found the less-private floor plan led to a 73 percent drop in face-to-face interaction between employees and a rise in emailing. The problem is plenty of young companies and big corporations have already bought into the open office fad. But a new startup called ROOM is building a prefabricated, self-assembled solution. It’s the IKEA of office phone booths.

The $3,495 ROOM One is a sound-proofed, ventilated, powered booth that can be built in new or existing offices to give employees a place to take a video call or get some uninterrupted time to focus on work. For comparison, ROOM co-founder Morten Meisner-Jensen says, “Most phone booths are $8,000 to $12,000. The cheapest competitor to us is $6,000 — almost twice as much.” Though booths start at $4,500 from TalkBox and $3,995 from Zenbooth, they tack on $1,250 and $1,650 for shipping, while ROOM ships for free. They’re all dividing the market of dividing offices.

The idea might seem simple, but the booths could save businesses a ton of money on lost productivity, recruitment and retention if it keeps employees from going crazy amidst sales call cacophony. Less than a year after launch, ROOM has hit a $10 million revenue run rate thanks to 200 clients ranging from startups to Salesforce, Nike, NASA and JP Morgan. That’s attracted a $2 million seed round from Slow Ventures that adds to angel funding from Flexport CEO Ryan Petersen. “I am really excited about it since it is probably the largest revenue-generating company Slow has seen at the time of our initial Seed stage investment,” says partner Kevin Colleran.

“It’s not called ROOM because we build rooms,” Meisner-Jensen tells me. “It’s called ROOM because we want to make room for people, make room for privacy and make room for a better work environment.”

Phone booths, not sweatboxes

You might be asking yourself, enterprising reader, why you couldn’t just go to Home Depot, buy some supplies and build your own in-office phone booth for way less than $3,500. Well, ROOM’s co-founders tried that. The result was… moist.

Meisner-Jensen has design experience from the Danish digital agency Revolt that he started before co-founding digital book service Mofibo and selling it to Storytel. “In my old job we had to go outside and take the call, and I’m from Copenhagen, so that’s a pretty cold experience half the year.” His co-founder Brian Chen started Y Combinator-backed smart suitcase company Bluesmart, where he was VP of operations. They figured they could attack the office layout issue with hammers and saws. I mean, they do look like superhero alter-egos.

Room co-founders (from left): Brian Chen and Morten Meisner-Jensen

“To combat the issues I myself would personally encounter with open offices, as well as colleagues, we tried to build a private ‘phone booth’ ourselves,” says Meisner-Jensen. “We didn’t quite understand the specifics of air ventilation or acoustics at the time, so the booth got quite warm — warm enough that we coined it ‘the sweatbox.’ ”

With ROOM, they got serious about the product. The 10-square-foot ROOM One booth ships flat and can be assembled in less than 30 minutes by two people with a hex wrench. All it needs is an outlet to power its light and ventilation fan. Each is built from 1088 recycled plastic bottles for noise cancelling, so you’re not supposed to hear anything from outside. The box is 100 percent recyclable, plus it can be torn down and rebuilt if your startup implodes and you’re being evicted from your office.

The ROOM One features a bar-height desk with outlets and a magnetic bulletin board behind it, though you’ll have to provide your own stool. It’s actually designed not to be so comfy that you end up napping inside, which doesn’t seem like it’d be a problem with this somewhat cramped spot. “To solve the problem with noise at scale you want to provide people with space to take a call but not camp out all day,” Meisner-Jensen notes.

Booths by Zenbooth, Cubicall and TalkBox (from left)

A place to get into flow

Couldn’t office managers just buy noise-cancelling headphones for everyone? “It feels claustrophobic to me,” he laughs, but then outlines why a new workplace trend requires more than headphones. “People are doing video calls and virtual meetings much, much more. You can’t have all these people walking by you and looking at your screen. [A booth is] also giving you your own space to do your own work, which I don’t think you’d get from a pair of Bose. I think it has to be a physical space.”

But with plenty of companies able to construct physical spaces, it will be a challenge for ROOM to convey the subtleties of its build quality that warrant its price. “The biggest risk for ROOM right now are copycats,” Meisner-Jensen admits. “Someone entering our space claiming to do what we’re doing better but cheaper.” Alternatively, ROOM could lock in customers by offering a range of office furniture products. The co-founder hinted at future products, saying ROOM is already receiving demand for bigger multi-person prefab conference rooms and creative room divider solutions.

The importance of privacy goes beyond improved productivity when workers are alone. If they’re exhausted from overstimulation in a chaotic open office, they’ll have less energy for purposeful collaboration when the time comes. The bustle could also make them reluctant to socialize in off-hours, which could lead them to burn out and change jobs faster. Tech companies in particular are in a constant war for talent, and ROOM Ones could be perceived as a bigger perk than free snacks or a ping-pong table that only makes the office louder.

“I don’t think the solution is to go back to a world of cubicles and corner offices,” Meisner-Jensen concludes. It could take another decade for office architects to correct the overenthusiasm for open offices despite the research suggesting their harm. For now, ROOM’s co-founder is concentrating on “solving the issue of noise at scale” by asking, “How do we make the current workspaces work in the best way possible?”

Aug
09
2018
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Dropbox is crashing despite beating Wall Street expectations, announces COO Dennis Woodside is leaving

Back when Dennis Woodside joined Dropbox as its chief operating officer more than four years ago, the company was trying to justify the $10 billion valuation it had hit in its rapid rise as a Web 2.0 darling. Now, Dropbox is a public company with a nearly $14 billion valuation, and it once again showed Wall Street that it’s able to beat expectations with a now more robust enterprise business alongside its consumer roots.

Dropbox’s second quarter results came in ahead of Wall Street’s expectations on both the earnings and revenue front. The company also announced that Dennis Woodside will be leaving the company. Woodside joined at a time when Dropbox was starting to figure out its enterprise business, which it was able to grow and transform into a strong case for Wall Street that it could finally be a successful publicly traded company. The IPO was indeed successful, with the company’s shares soaring more than 40 percent in its debut, so it makes sense that Woodside has essentially accomplished his job by getting it into a business ready for Wall Street.

“I think as a team we accomplished a ton over the last four and a half years,” Woodside said in an interview. “When I joined they were a couple hundred million in revenue and a little under 500 people. [CEO] Drew [Houston] and Arash [Ferdowsi] have built a great business, since then we’ve scaled globally. Close to half our revenue is outside the U.S., we have well over 300,000 teams for our Dropbox business product, which was nascent there. These are accomplishments of the team, and I’m pretty proud.”

The stock initially exploded in extended trading by rising more than 7 percent, though even prior to the market close and the company reporting its earnings, the stock had risen as much as 10 percent. But following that spike, Dropbox shares are now down around 5 percent. Dropbox is one of a number of SaaS companies that have gone public in recent months, including DocuSign, that have seen considerable success. While Dropbox has managed to make its case with a strong enterprise business, the company was born with consumer roots and has tried to carry over that simplicity with the enterprise products it rolls out, like its collaboration tool Dropbox Paper.

Here’s a quick rundown of the numbers:

  • Q2 Revenue: Up 27 percent year-over-year to $339.2 million, compared to estimates of $331 million in revenue.
  • Q2 GAAP Gross Margin: 73.6 percent, as compared to 65.4 percent in the same period last year.
  • Q2 adjusted earnings: 11 cents per share compared, compared to estimates of 7 cents per share.
  • Paid users: 11.9 million paying users, up from 9.9 million in the same quarter last year.
  • ARPU: $116.66, compared to $111.19 same quarter last year.

So, not only is Dropbox able to show that it can continue to grow that revenue, the actual value of its users is also going up. That’s important, because Dropbox has to show that it can continue to acquire higher-value customers — meaning it’s gradually moving up the Fortune 100 chain and getting larger and more established companies on board that can offer it bigger and bigger contracts. It also gives it the room to make larger strategic moves, like migrating onto its own architecture late last year, which, in the long run could turn out to drastically improve the margins on its business.

“We did talk earlier in the quarter about our investment over the last couple years in SMR technology, an innovative storage technology that allows us to optimize cost and performance,” Woodside said. “We continue to innovate ways that allow us to drive better performance, and that drives better economics.”

The company is still looking to make significant moves in the form of new hires, including recently announcing that it has a new VP of product and VP of product marketing, Adam Nash and Naman Khan, respectively. Dropbox’s new team under CEO Drew Houston are tasked with continuing the company’s path to cracking into larger enterprises, which can give it a much more predictable and robust business alongside the average consumers that pay to host their files online and access them from pretty much anywhere.

In addition, there are a couple executive changes as Woodside transitions out. Yamini Rangan, currently VP of Business Strategy & Operations, will become Chief Customer Officer reporting to Houston, and comms VP Lin-Hua Wu will also report to Houston.

Dropbox had its first quarterly earnings check-in and slid past the expectations that Wall Street had, though its GAAP gross margin slipped a little bit and may have offered a slight negative signal for the company. But since then, Dropbox’s stock hasn’t had any major missteps, giving it more credibility on the public markets — and more resources to attract and retain talent with compensation packages linked to that stock.

“Our retention has been quite strong,” Woodside said. “We see strong retention characteristics across the customer set we have, whether it’s large or small. Obviously larger companies have more opportunity to expand over time, so our expansion metrics are quite strong in customers of over several hundred employees. But even among small businesses, Dropbox is the kind of product that has gravity. Once you start using it and start sharing it, it becomes a place where your business is small or large is managing all its content, it tends to be a sticky experience.”

Jul
30
2018
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A pickaxe for the AI gold rush, Labelbox sells training data software

Every artificial intelligence startup or corporate R&D lab has to reinvent the wheel when it comes to how humans annotate training data to teach algorithms what to look for. Whether it’s doctors assessing the size of cancer from a scan or drivers circling street signs in self-driving car footage, all this labeling has to happen somewhere. Often that means wasting six months and as much as a million dollars just developing a training data system. With nearly every type of business racing to adopt AI, that spend in cash and time adds up.

Labelbox builds artificial intelligence training data labeling software so nobody else has to. What Salesforce is to a sales team, Labelbox is to an AI engineering team. The software-as-a-service acts as the interface for human experts or crowdsourced labor to instruct computers how to spot relevant signals in data by themselves and continuously improve their algorithms’ accuracy.

Today, Labelbox is emerging from six months in stealth with a $3.9 million seed round led by Kleiner Perkins and joined by First Round and Google’s Gradient Ventures.

“There haven’t been seamless tools to allow AI teams to transfer institutional knowledge from their brains to software,” says co-founder Manu Sharma. “Now we have over 5,000 customers, and many big companies have replaced their own internal tools with Labelbox.”

Kleiner’s Ilya Fushman explains that “If you have these tools, you can ramp up to the AI curve much faster, allowing companies to realize the dream of AI.”

Inventing the best wheel

Sharma knew how annoying it was to try to forge training data systems from scratch because he’d seen it done before at Planet Labs, a satellite imaging startup. “One of the things that I observed was that Planet Labs has a superb AI team, but that team had been for over six months building labeling and training tools. Is this really how teams around the world are approaching building AI?,” he wondered.

Before that, he’d worked at DroneDeploy alongside Labelbox co-founder and CTO Daniel Rasmuson, who was leading the aerial data startup’s developer platform. “Many drone analytics companies that were also building AI were going through the same pain point,” Sharma tells me. In September, the two began to explore the idea and found that 20 other companies big and small were also burning talent and capital on the problem. “We thought we could make that much smarter so AI teams can focus on algorithms,” Sharma decided.

Labelbox’s team, with co-founders Ysiad Ferreiras (third from left), Manu Sharma (fourth from left), Brian Rieger (sixth from left) Daniel Rasmuson (seventh from left)

Labelbox launched its early alpha in January and saw swift pickup from the AI community that immediately asked for additional features. With time, the tool expanded with more and more ways to manually annotate data, from gradation levels like how sick a cow is for judging its milk production to matching systems like whether a dress fits a fashion brand’s aesthetic. Rigorous data science is applied to weed out discrepancies between reviewers’ decisions and identify edge cases that don’t fit the models.

“There are all these research studies about how to make training data” that Labelbox analyzes and applies, says co-founder and COO Ysiad Ferreiras, who’d led all of sales and revenue at fast-rising grassroots campaign texting startup Hustle. “We can let people tweak different settings so they can run their own machine learning program the way they want to, instead of being limited by what they can build really quickly.” When Norway mandated all citizens get colon cancer screenings, it had to build AI for recognizing polyps. Instead of spending half a year creating the training tool, they just signed up all the doctors on Labelbox.

Any organization can try Labelbox for free, and Ferreiras claims hundreds have. Once they hit a usage threshold, the startup works with them on appropriate SaaS pricing related to the revenue the client’s AI will generate. One called Lytx makes DriveCam, a system installed on half a million trucks with cameras that use AI to detect unsafe driver behavior so they can be coached to improve. Conde Nast is using Labelbox to match runway fashion to related items in their archive of content.

Eliminating redundancy, and jobs?

The big challenge is convincing companies that they’re better off leaving the training software to the experts instead of building it in-house where they’re intimately, though perhaps inefficiently, involved in every step of development. Some turn to crowdsourcing agencies like CrowdFlower, which has their own training data interface, but they only work with generalist labor, not the experts required for many fields. Labelbox wants to cooperate rather than compete here, serving as the management software that treats outsourcers as just another data input.

Long-term, the risk for Labelbox is that it’s arrived too early for the AI revolution. Most potential corporate customers are still in the R&D phase around AI, not at scaled deployment into real-world products. The big business isn’t selling the labeling software. That’s just the start. Labelbox wants to continuously manage the fine-tuning data to help optimize an algorithm through its entire life cycle. That requires AI being part of the actual engineering process. Right now it’s often stuck as an experiment in the lab. “We’re not concerned about our ability to build the tool to do that. Our concern is ‘will the industry get there fast enough?’” Ferreiras declares.

Their investor agrees. Last year’s big joke in venture capital was that suddenly you couldn’t hear a startup pitch without “AI” being referenced. “There was a big wave where everything was AI. I think at this point it’s almost a bit implied,” says Fushman. But it’s corporations that already have plenty of data, and plenty of human jobs to obfuscate, that are Labelbox’s opportunity. “The bigger question is ‘when does that [AI] reality reach consumers, not just from the Googles and Amazons of the world, but the mainstream corporations?’”

Labelbox is willing to wait it out, or better yet, accelerate that arrival — even if it means eliminating jobs. That’s because the team believes the benefits to humanity will outweigh the transition troubles.

“For a colonoscopy or mammogram, you only have a certain number of people in the world who can do that. That limits how many of those can be performed. In the future, that could only be limited by the computational power provided so it could be exponentially cheaper” says co-founder Brian Rieger. With Labelbox, tens of thousands of radiology exams can be quickly ingested to produce cancer-spotting algorithms that he says studies show can become more accurate than humans. Employment might get tougher to find, but hopefully life will get easier and cheaper too. Meanwhile, improving underwater pipeline inspections could protect the environment from its biggest threat: us.

“AI can solve such important problems in our society,” Sharma concludes. “We want to accelerate that by helping companies tell AI what to learn.”

Jul
26
2018
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Facebook acquires Redkix to enhance communications on Workplace by Facebook

Facebook had a rough day yesterday when its stock plunged after a poor earnings report. What better way to pick yourself up and dust yourself off than to buy a little something for yourself. Today the company announced it has acquired Redkix, a startup that provides tools to communicate more effectively by combining email with a more formal collaboration tool. The companies did not reveal the acquisition price.

Redkix burst out of the gate two years ago with a $17 million seed round, a hefty seed amount by any measure. What prompted this kind of investment was a tool that combined a collaboration tool like Slack or Workplace by Facebook with email. People could collaborate in Redkix itself, or if you weren’t a registered user, you could still participate by email, providing a more seamless way to work together.

Alan Lepofsky, who covers enterprise collaboration at Constellation Research, sees this tool as providing a key missing link. “Redkix is a great solution for bridging the worlds between traditional email messaging and more modern conversational messaging. Not all enterprises are ready to simply switch from one to the other, and Redkix allows for users to work in whichever method they want, seamlessly communicating with the other,” Lepofsky told TechCrunch.

As is often the case with these kinds of acquisitions, the company bought the technology  itself along with the team that created it. This means that the Redkix team including the CEO and CTO will join Facebook and they will very likely be shutting down the application after the acquisition is finalized.

Lepofsky thinks that enterprises that are adopting Facebook’s enterprise tool will be able to more seamlessly transition between the two modes of communication, the Workplace by Facebook tool and email, as they prefer.

Although a deal like this has probably been in the works for some time, after yesterday’s earning’s debacle, Facebook could be looking for ways to enhance its revenue in areas beyond the core Facebook platform. The enterprise collaboration tool does offer a possible way to do that in the future, and if they can find a way to incorporate email into it, it could make it a more attractive and broader offering.

Facebook is competing with Slack, the darling of this space and others like Microsoft, Cisco and Google around communications and collaboration. When it launched in 2015, it was trying to take that core Facebook product and put it in a business context, something Slack had been doing since the beginning.

To succeed in business, Facebook had to think differently than as a consumer tool, driven by advertising revenue and had to convince large organizations that they understood their requirements. Today, Facebook claims 30,000 organizations are using the tool and over time they have built in integrations to other key enterprise products, and keep enhancing it.

Perhaps with today’s acquisition, they can offer a more flexible way to interact with the platform and could increase those numbers over time.

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