Tesla’s board is about to get a lot smaller

Tesla is cutting its board down by more than one-third to seven directors by 2020, a move that includes the loss of some CEO Elon Musk’s early advisers and allies, according to regulator filings posted Friday.

The filing comes days before a busy week for Tesla that will include an April 22 event meant to highlight its progress with autonomous vehicle technology, its April 24 quarterly earnings call, and a hearing with a judge to determine whether Musk and the SEC were able to reach a resolution contempt of court request over his Twitter use.

Longtime board member Brad Buss and Linda Johnson Rice, who joined two years ago as an independent director, will not seek re-election this year. Their terms will expire at the upcoming annual meeting. The board said in the proxy filing that it doesn’t plan to fill their seats.

Antonio Gracias, whose term ends in 2020, and venture capitalist Steve Jurvetson will leave the board in 2020.

The changes are the latest moves by the board to gain more independence and follow the company and Musk’s settlement with the U.S. Securities and Exchange Commission last year. Under the settlement, Tesla agreed to add two independent directors and Musk would step down as chairman for three years.

In December, Tesla added two independent directors to its board — Oracle founder, chairman and CTO Larry Ellison and Walgreens executive Kathleen Wilson-Thompson.

Jurvetson, an early adviser of Musk, just returned this month from a leave of absence from the board. Jurvetson had been on leave from the Tesla and SpaceX since 2017 following his resignation as partner at Draper Fisher Jurvetson amid an investigation into allegations of sexual harassment. Jurvetson has since launched an early-stage venture firm Future Ventures, and recently announced he has raised $200 million for its debut fund.

Ira Ehrenpreis and Kathleen Wilson-Thompson were nominated for re-election at the 2019 annual meeting.

The settlement between Musk, Tesla and the SEC grew out of a tweet in August that he had “funding secured” for a private takeover of the company at $420 per share.  The SEC filed a complaint in federal district court in September alleging that Musk lied.

Musk and Tesla settled with the SEC without admitting wrongdoing and Tesla agreed to pay a $20 million fine; Musk had to agree to step down as Tesla chairman for a period of at least three years; the company had to appoint two independent directors to the board; and Tesla was also told to put in place a way to monitor Musk’s statements to the public about the company, including via Twitter.

The relationship between Musk and the SEC has remained strained. Musk has openly criticized the SEC via Twitter on various occasions, openly mocking the agency at times, even days after the settlement was reached. The SEC requested Musk be held in contempt for a tweet sent in February that the agency argued contained material information.

Fastly, the content delivery network, files for an IPO

Fastly, the content delivery network that’s raised $219 million in financing from investors (according to Crunchbase), is ready for its close up in the public markets.

The eight-year-old company is one of several businesses that improve the download time and delivery of different websites to internet browsers and it has just filed for an IPO.

Media companies like The New York Times use Fastly to cache their homepages, media and articles on Fastly’s servers so that when somebody wants to browse the Times online, Fastly’s servers can send it directly to the browser. In some cases, Fastly serves up to 90 percent of browser requests.

E-commerce companies like Stripe and Ticketmaster are also big users of the service. They appreciate Fastly because its network of servers enable faster load times — sometimes as quickly as 20 or 30 milliseconds, according to the company.

The company raised its last round of financing roughly nine months ago, a $40 million investment that Fastly said would be the last before a public offering.

True to its word, the company is hoping public markets have the appetite to feast on yet another “unicorn” business.

While Fastly lacks the sizzle of companies like Zoom, Pinterest or Lyft, its technology enables a huge portion of the activities in which consumers engage online, and it could be a bellwether for competitors like Cloudflare, which recently raised $150 million and was also exploring a public listing.

The company’s public filing has a placeholder amount of $100 million, but given the amount of funding the company has received, it’s far more likely to seek closer to $1 billion when it finally prices its shares.

Fastly reported revenue of roughly $145 million in 2018, compared to $105 million in 2017, and its losses declined year on year to $29 million, down from $31 million in the year-ago period. So its losses are shrinking, its revenue is growing (albeit slowly) and its cost of revenues are rising from $46 million to around $65 million over the same period.

That’s not a great number for the company, but it’s offset by the amount of money that the company’s getting from its customers. Fastly breaks out that number in its dollar-based net expansion rate figure, which grew 132 percent in 2018.

It’s an encouraging number, but as the company notes in its prospectus, it’s got an increasing number of challenges from new and legacy vendors in the content delivery network space.

The market for cloud computing platforms, particularly enterprise-grade products, “is highly fragmented, competitive and constantly evolving,” the company said in its prospectus. “With the introduction of new technologies and market entrants, we expect that the competitive environment in which we compete will remain intense going forward. Legacy CDNs, such as Akamai, Limelight, EdgeCast (part of Verizon Digital Media), Level3, and Imperva, and small business-focused CDNs, such as Cloudflare, InStart, StackPath, and Section.io, offer products that compete with ours. We also compete with cloud providers who are starting to offer compute functionality at the edge like Amazon’s CloudFront, AWS Lambda, and Google Cloud Platform.”

Equity Shot: Pinterest zooms into the public markets (and yet another tech company files for an IPO)

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

This is a relaxed, Friday, Equity Shot. That means Kate and Alex were on deck to chew through the latest from the IPO front. We’ll keep doing extra episodes as long as we have to, though we’re slightly sorry if we’re becoming a bit much.

That’s a joke — we’re not sorry at all.

So, three things this week. First, Fastly filed an S-1 (Alex’s notes here); second, Zoom completed its highly anticipated IPO (Kate’s post here, Alex has notes too); and third, Pinterest went public too (more from TechCrunch here). Ultimately, Pinterest’s stock offering valued the company at $12.6 billion (higher than its latest private valuation), but we’ve got some notes on the “undercorn” phenomenon anyway (here and here).

Fastly is going public after raising more than $200 million at a valuation greater than $900 million. Founded in 2011, the content-delivery company surpassed the $100 million revenue mark in 2017, growing a little under 40 percent in 2018. It’s an unprofitable shop, but it has a clear path to profitability. And given how Zoom’s IPO went, it’s probably drafting a bit off of market momentum.

As mentioned, Zoom had a wildly successful first day of trading. The company ended up pricing its shares above range at $36 apiece, only to debut on the Nasdaq at $65 apiece. Yes, that’s an 81 percent pop, and yes, we were a bit floored.

Finally, Pinterest’s debut was solid, leading to a more than 25 percent gain over its above-range IPO price. What’s not to like about that? It’s hard to find fault with the offering. Pinterest got past the negative press and questions about private market valuations, went public, raised a truckload of money and now just has to execute. We’ll be watching.

If you’re looking for more Uber IPO content, don’t worry, there’s plenty more of that to come. See ya next week.

Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple PodcastsOvercast, Pocket Casts, Downcast and all the casts.

Malware researcher Marcus Hutchins pleads guilty, ending his legal case

Malware researcher Marcus Hutchins has pleaded guilty to two counts of creating and selling a powerful banking malware, ending a long and protracted battle with U.S. prosecutors.

Hutchins, a British national who goes by the online handle MalwareTech, was arrested in August 2017 as he was due to fly back to the U.K. following the Def Con security conference in Las Vegas. Prosecutors charged Hutchins with his involvement with creating the Kronos banking malware, dating back to 2014. He was later freed on bail.

A plea agreement was filed with the Eastern District of Wisconsin, where the case was being heard on Friday. His trial was set to begin later this year.

Hutchins agreed to plead guilty to distributing Kronos, a trojan that can be used to steal passwords and credentials from banking websites. In recent years, the trojan has continued to spread. He also agreed to plead guilty to a second count of conspiracy.

Hutchins faces up to 10 years in prison. Prosecutors have dropped the remaining charges.

In a brief statement on his website, Hutchins said: “I regret these actions and accept full responsibility for my mistakes.”

“Having grown up, I’ve since been using the same skills that I misused several years ago for constructive purposes,” he said. “I will continue to devote my time to keeping people safe from malware attacks.”

His attorney Marcia Hoffman did not immediately return a request for comment.

Hutchins rose to prominence after he stopped the spread of the WannaCry ransomware attack in May 2017, months before his arrest. The attack used powerful hacking tools developed by the National Security Agency, which were later leaked, to backdoor thousands of Windows computers and install ransomware. The attack was later attributed to hackers backed by North Korea, knocking U.K. hospitals offline and crippling major companies around the world.

By registering a domain name found in the malware’s code, Hutchins stemmed the spread of the infection. He was hailed a hero for stopping the attack.

Prior to his release and after, Hutchins gained further praise and respect from the security community for his contributions to the malware-reversing field, and demonstrating his findings so others can learn from his findings.

Justice Department spokesperson Nicole Navas declined to comment.

Prosper is the latest Silicon Valley company to get dinged by, and settle charges with, the SEC

Another Silicon Valley company is settling with the SEC: the online lending company Prosper, which the SEC had accused of “miscalculating and materially overstating annualized net returns to retail and other investors.” Prosper has agreed to pay $3 million as part of the settlement, in which it has neither admitted nor denied the agency’s allegations.

According to a new release from the SEC: “For almost two years, Prosper told tens of thousands of investors that their returns were higher than they actually were despite warning signs that should have alerted Prosper that it was miscalculating those returns.” The 14-year-old, San Francisco-based company “excluded certain non-performing charged off loans from its calculation of annualized net returns” that it communicated to investors from around July 2015 through May 2017.

The mistake owed to a coding error that excluded the defaulted loans from its computations, the SEC said, causing Prosper to overstate its annualized net returns to more than 30,000 investors on individual account pages on its site and in emails soliciting additional investments from investors.

The SEC added that “many” investors decided to make additional investments based on the overstated annualized net returns and the “Prosper failed to identify and correct the error despite [its] knowledge that it no longer understood how annualized net returns were calculated and despite investor complaints about the calculation.”

The settlement is the second for the SEC in two week’s time. On April 2, the SEC announced that the founder and former chief executive of Jumio has agree to pay the agency $17.4 million to settle charges that he defrauded investors in the mobile payments and identity verification start-up before it went bankrupt.

Hacker dumps thousands of sensitive Mexican embassy documents online

A hacker stole thousands of documents from Mexico’s embassy in Guatemala and posted them online.

The hacker, who goes by the online handle @0x55Taylor, tweeted a link to the data earlier this week. The data is no longer available for download after the cloud host pulled the data offline, but the hacker shared the document dump with TechCrunch to verify its contents.

The hacker told TechCrunch in a message: “A vulnerable server in Guatemala related to the Mexican embassy was compromised and I downloaded all the documents and databases.” He said he contacted Mexican officials but he was ignored.

In previous correspondence with the hacker, he said he tries to report problems and has received bounty payouts for his discoveries. “But when I don’t get a reply, then it’s going public,” he said.

More than 4,800 documents were stolen, most of which related to the inner workings of the Mexican embassy in the Guatemalan capital, including its consular activities, such as recognizing births and deaths, dealing with Mexican citizens who have been incarcerated or jailed and the issuing of travel documents.

More than a thousand passports — including identification issued to diplomats — were stolen. (Image: supplied)

We found more than a thousand highly sensitive identity documents of primarily Mexican citizens and diplomats — including scans of passports, visas, birth certificates and more — but also some Guatemalan citizens.

Several documents contained scans of the front and back of payment cards.

One of the diplomatic visas issued to a Mexican diplomat stolen in the files. (Image: supplied)

The stolen data also included dozens of letters granting diplomatic rights, privileges and immunities to embassy staff. Diplomatic rights grant employees of the foreign embassy certain protections from their host country’s government and law enforcement. Diplomatic immunity, for example, allows staff to be granted safe passage in and out of the country and are generally safe from prosecution. Other documents seen by TechCrunch were signed off personally by Mexico’s ambassador to Guatemala, Luis Manuel López Moreno, and were instructed to be transported by diplomatic bag, which foreign missions use to transport official correspondence between countries that cannot be searched by police or customs.

Many of the files were marked “confidential,” though it’s not known if the hacked data included anything considered by the Mexican government to be classified or secret. Other files were internal administrative documents relating to staff medical expenses, vacation and time off and vehicle certifications.

When reached Friday, Gerardo Izzo, a spokesperson for the consul general in New York, said it is taking the matter “very seriously” but did not immediately have comment.

Friday is a national holiday in Mexico.

Related stories:

Apply now to be a TC Top Pick at Disrupt San Francisco 2019

Psst! We’re looking at you, early-stage startup founders. How would you like your startup to be a media and investor darling at Disrupt San Francisco 2019? If you think your startup has what it takes to make the cut, apply to be a TC Top Pick. The application process is super easy, free and potentially — dare we say — life changing. Yup, we dare.

Our TC Top Picks program is competitive and highly selective. TechCrunch editors are a notoriously picky bunch, and they’ll review every application thoroughly before choosing up to five top startups in each of these categories: AI/Machine Learning, Biotech/Healthtech, Blockchain, Fintech, Mobility, Privacy/Security, Retail/E-commerce, Robotics/IoT/Hardware, SaaS and Social Impact & Education.

Every startup selected as a TC Top Pick receives a free Startup Alley Exhibition package, invitations to special events at Disrupt SF — like the investor reception — and prime real estate in the Startup Alley exhibition hall.

It’s one thing for us to tell you that being a TC Top Pick can change your startup’s trajectory, but it’s more effective to hear first-hand experiences from previous Top Picks — like this one.

Israeli-based CAARESYS earned a TC Top Pick designation in the mobility category at Disrupt SF 2018. The startup’s vehicle monitoring system uses low-emission radio frequency radar and contactless biometrics to track the body location and physical state — respiration rate, heart rate and heart-rate variability — of each passenger in the car.

According to Konstantin Berezin, the company’s COO and co-founder, the connections they made as a TC Top Pick at Disrupt SF resulted in projects with three OEM and Tier 1 companies. The company is currently in the integration phase with auto manufacturers to get the systems into cars by 2021.

“We also followed up with a potential customer we met at Disrupt and, as a result of that meeting, we signed a memorandum of understanding to partner on a mutual project,” said Berezin. “I can’t disclose the name just yet, but we’re very excited. Being a TC Top Pick really put us on the map.”

Another perk that comes with being a TC Top Pick is the interview with a TechCrunch editor on the Showcase stage in Startup Alley. That video interview, which we promote across our social media platforms, provides valuable media exposure long after the conference ends.

“The interview was terrific, and TechCrunch did a very professional job shooting and editing the video,” said Berezin. “Sending our video to current and potential customers gives us prestige and a certain cool factor. We love it!”

Of course, there’s more than one way to grab the spotlight at Disrupt SF. While you’re applying to be a TC Top Pick, why not apply to compete in Startup Battlefield, too? Our epic startup pitch competition carries a $100,000 equity-free cash prize. Yowza!

Disrupt San Francisco 2019 takes place October 2-4. Take a life-changing step to get the most out of your time at Disrupt and apply to the TC Top Pick program today.

Is your company interested in sponsoring or exhibiting at Disrupt SF? Contact our sponsorship sales team by filling out this form.

Alphabet’s Sidewalk Labs is developing visual cues to indicate when their tech is monitoring you

Alphabet’s subsidiary focused on urban tech development, Sidewalk Labs, is now trying to reinvent signage for smart cities. These signs aren’t to direct the flow of traffic, or to point the way to urban landmarks — they’re designed to let citizens know when they’re being monitored.

The proposal is part of a push by the company to acclimate people to the technologies that it’s deploying in cities like New York and Toronto.

Globally, competition for contracts to deploy sensors, data management, and predictive technologies in cities can run into the tens of millions, if not billions of dollars, and Sidewalk Labs knows this better than most. Because its projects are among the most ambitious deployments of sensing and networking technologies for smart cities, the company has also faced the most public criticism.

So at least partially in an attempt to blunt attacks from critics, the company is proposing to make its surveillance and monitoring efforts more transparent.

“Digital technology is all around us, but often invisible. Consider: on any one urban excursion (your commute, perhaps), you could encounter CCTVs, traffic cameras, transit card readers, bike lane counters, Wi-Fi access points, occupancy sensors that open doors — potentially all on the same block.” writes Jacqueline Lu, who’s title is “assistant director of the public realm” at Sidewalk Labs.

Lu notes that while the technologies can be useful, there’s little transparency around the data these technologies are collecting, who the data is being collected by, and what the data is collected for.

Cities like Boston and London already indicate when technology is being used in the urban environment, but Sidewalk Labs convened a group of designers and urban planners to come up with a system for signage that would make the technology being used even more public for citizens going about their day.

Image courtesy of Sidewalk Labs

Back in 2013, the U.S. Federal Trade Commission called for the development of these types of indicators when it issued a call for mobile privacy disclosures. But that seems to have resulted in companies just drafting reams of jargon-filled disclosures that obscured more than they revealed.

At Sidewalk, the goal is transparency, say the authors of the company’s suggested plan.

“We strongly believe that people should know how and why data is being collected and used in the public realm, and we also believe that design and technology can meaningfully facilitate this understanding. For these reasons, we embarked on a collaborative project to imagine what digital transparency in the public realm could be like,” writes Lu and her co-authors Principal Designer Patrick Keenan and Legal Associate Chelsey Colbert.

As an example, Sidewalk showed off potential designs for signage that would alert people to the presence of the company’s Numina technology.

That tech monitors traffic patterns by recording, anonymizing and transmitting data from sensors using digital recording and algorithmically enhanced software to track movement in an area. These sensors are installed on light poles and transmit data wirelessly.

At the very least, the technology can’t be any worse than the innocuously intended cameras that are monitoring publicly spaces already (and can be turned into surveillance tools easily).

The hexagonal designs indicate the purpose of the technology, the company deploying it, the reason for its use, whether or not the tech is collecting sensitive information and a QR code that can be scanned to find out more information.

The issue is with experiments like these in the public sphere is that there’s no easy way to opt out of them. Sidewalk Lab’s Toronto project is both an astounding feat of design and the apotheosis of surveillance capitalism.

Once these decisions are made to cede public space to the private sector, or sacrifice privacy for security (or simply better information about a location for the sake of convenience) they’re somewhat difficult to unwind. As with most of the salient issues with technology today, it’s about unintended consequences.

Information about a technology’s deployment isn’t enough if the relevant parties haven’t thought through the ramifications of that technology’s use.

Netflix says it’s testing a shuffle feature for when you don’t know what to watch

Netflix is testing a new feature that can help you start streaming when you don’t know what to watch. The company confirmed it’s testing a shuffle mode of sorts, that will allow you to easily click on a popular show to start playing a random episode. The idea with the feature is to offer an experience that’s more like traditional TV — where you could just turn the set on, and there would be something to watch.

With today’s streaming services, that sort of seamless experience is more difficult to achieve. Instead, viewers now have to first select a streaming app, then scroll through endless menus and recommendations before they can settle on their next title.

The new shuffle feature, instead, offers something closer to the experience of turning on cable TV, when there was always some classic favorite show playing in syndication.

The shows being tested with the new feature appear to be those that people choose when they don’t know what else to watch, like The Office, New Girl, Our Planet, Arrested Development and others.

The Office, in particular, has a reputation for being a go-to pick for when you’re not in the middle of some other binge fest.

The TV shows appear in a new row, titled “Play a Random Episode.” To get started, you’d click any TV show’s thumbnail, and a random episode from the series then starts playing.

The thumbnails themselves are also adorned with a red “shuffle” icon to indicate they’ll play a random episode.

(Above: Seems someone had the right idea)

The new feature was first spotted by the folks at Android Police, who saw the option appear in the Android version of Netflix’s app.

Netflix confirmed to TechCrunch the shuffle feature is something it’s considering, but hasn’t yet committed to rolling out.

“We are testing the ability for members to play a random episode from different TV series on the Android mobile app. These tests typically vary in length of time and by region, and may not become permanent,” a Netflix spokesperson said.

Netflix for some time has been focused on ways to get users streaming its content faster, after they log in. That’s where it’s decision to run autoplaying trailers comes in, for example, or why it now features those Stories-inspired previews; or why it tested promoting its shows right on the login screen.

Image credit: Android Police

Daily Crunch: Zoom and Pinterest go public

The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 9am Pacific, you can subscribe here.

1. Zoom pops 81 percent in Nasdaq debut

Thursday was a big day for tech IPOs, with Zoom opening trading at $65 a share. The company’s initial public offering gave it a fully diluted market cap of roughly $16 billion.

Meanwhile, Pinterest debuted on the New York Stock Exchange at $23.75 per share.

2. Facebook now says its password leak affected ‘millions’ of Instagram users

“We discovered additional logs of Instagram passwords being stored in a readable format,” the company said. “We now estimate that this issue impacted millions of Instagram users. We will be notifying these users as we did the others.”

3. Mueller report sheds new light on how the Russians hacked the DNC and the Clinton campaign

At one point, the Russians used servers located in the U.S. to carry out the massive data exfiltration effort, the report says.

The Instagram app is seen on an iPhone on 16 March, 2017. (Photo by Jaap Arriens/NurPhoto via Getty Images)

4. Instagram hides Like counts in leaked design prototype

Hiding Like counts could reduce the herd mentality, where people just Like what’s already got tons of Likes. It could also reduce the sense of competition.

5. The consumer version of BBM is shutting down on May 31

While the consumer version of BlackBerry Messenger is shutting down, the service will still exist. In fact, BlackBerry announced a plan to open its enterprise version to general consumers.

6. Amazon launches ad-supported music service to Echo owners

Until this week, Echo owners who wanted to stream music from Amazon could either pay for an annual Prime membership in order to access Prime Music, or they could pay $3.99 per month to stream from Amazon Music Unlimited.

7. The different playbooks of D2C brands

Venture capital firms have invested over $4 billion in D2C brands since 2012, with 2018 alone accounting for over $1 billion. How are these D2C brands going to evolve and how could they sustain as businesses? (Extra Crunch membership required.)