Finding free money for your social impact startup

Congratulations; you’ve decided to launch a technology-enabled startup with a positive social impact! Nearly every major Silicon Valley venture-capital firm has now invested in a B Corp; maybe you will be one of them!

The bad news: some venture capitalists have a bias against startups with an explicit positive social impact on the grounds that they have a smaller addressable market, and that the founders are not sufficiently focused on creating shareholder wealth. And of course, effectively all venture capitalists are going to require some equity for their investment.

Fortunately, there are a wide range of organizations that specifically want to support you, not just the VC community. I’m now researching non-dilutive funding for Action Tank, a startup I’m gestating to “Make America Functional Again.” I worked with outsourced research firm Wonder* to identify all of the institutions we could who support tech impact startups with cash and community, and in many cases without dilution.  I emphasize my focus here is organizations which are backing for-profit companies and do not take equity. If you think I’ve missed any, please contact me.

I suggest start by looking at the many programs offered by the Fortune 500’s startup networks. In addition, there are many other groups will give you cash, training, and community with few or no strings attached:

Ashoka is a foundation that engages in scouring for and choosing the leading social entrepreneurs across the globe, who it refers to as Ashoka Fellows.

Aspen Tech Policy Hub. “Our program mixes the best of both Washington and Silicon Valley, bringing together stakeholders in policy and technology to train the next generation of policy entrepreneurs. The Aspen Tech Policy Hub is a West Coast policy incubator, training a new generation of tech policy entrepreneurs. We take tech experts, teach them the policy process through an in-residence fellowship program in the Bay Area, and encourage them to develop outside-the-box solutions to society’s problems. We model ourselves after tech incubators like Y Combinator, but train new policy thinkers and focus the impact of their ideas.

Bluhm/Helfand Social Innovation (BHSI) Fellowship. Since 2011, the Bluhm/Helfand Social Innovation (BHSI) Fellowship has supported the work of 36 innovators—representing the United States as well as 18 other countries on five continents—who address pressing global issues, from healthcare delivery to college persistence and sustainable construction in developing nations.  From the beginning, the BHSI Fellowship has created meaningful, customized experiences for Fellows with connections to influential business and civic leaders, exposure to a broad audience as a speaker at Chicago Ideas, and over $3 million in financial support and in-kind contributions.”

The Clayton, Dubilier & Rice Fund for Entrepreneurial Studies. “The Clayton, Dubilier & Rice Fund for Entrepreneurial Studies supports entrepreneurs attempting to build something that advances business and society in revolutionary ways. “

Columbia Business School Tamer Fund for Social Ventures. Requires Columbia affiliation.

Draper Richards Kaplan Foundation identifies entrepreneurs that display characteristics of “exceptional social leadership through discretion, influence, vision, ambition, intelligence, and follow-through.” 

DV Hacks, led by BCG Digital Ventures: “A 48-hour hackathon to improve how we live, work, collaborate, and learn.”

Echoing Green is a foundation that distinguishes transformational leaders via its fellowships. Their foci include addressing environmental sustainability, racial and gender equity, economic development concerns, etc.

Future Labs Flash Pitch. “For pre-seed and seed companies based in the U.S. and Israel with a focus on AI for social impact,” 

Google AI for Social Good. “Our 20 selected organizations will receive coaching from Google’s AI experts, Google.org grant funding from a $25 million pool, and credits and consulting from Google Cloud. They will also be offered the opportunity to join a customized 6-month Google Developers Launchpad Accelerator program, including guidance from our nonprofit partner, DataKind, to jumpstart their work. We looked for projects across a range of social impact domains and levels of technical expertise, from organizations that are experienced in AI to those with an idea for how they could put their data to better use. “

Google for Startups Accelerator. “Geared toward social impact startups working to create a healthier and more sustainable future, the accelerator provides access to training, products and technical support. Startup founders will work with Google engineers and receive mentoring from over 20 teams at Google, as well as outside experts and local mentors.  

J.M.Kaplan Innovation Prize. “The J.M.K. Innovation Prize seeks out innovators who are spearheading transformative early-stage projects in the fields of the environment, heritage conservation, and social justice. The J.M.K. Innovation Prize is open to nonprofit and mission-driven for-profit organizations that are tackling America’s most pressing challenges through social innovation. In 2019, we will award up to ten prizes, each including a cash award of $150,000 over three years, plus $25,000 for project expenses, for a total award of $175,000. 

Kairos Fellows. “The Kairos Fellowship is designed to build the next generation of leaders in the field of technology, analytics, digital campaigning, and online organizing.”

MIT Solve initiative. “MIT Solve advances lasting solutions from tech entrepreneurs to address the world’s most pressing problems. Solve is a marketplace for social impact: we find tech entrepreneurs from around the world and broker partnerships across our community to scale their innovative work — driving lasting, transformational change.”

Mulago Foundation Rainer Arnhold Fellowship. “The course brings Fellows and faculty together for an intensive week to work on design for maximum impact and scalability. Held in a retreat center on the coast in Bolinas, California, the course gives Fellows the rare opportunity to focus completely on their ideas and a systematic way to apply them.”

Bloomberg New Economy Forum Solutions. “Mike Bloomberg announces an open call for solutions to global challenges facing the new economy. Entrepreneurs, academics, founders, and big thinkers are invited to submit their solutions to societal problems that need momentum, support, and adoption from the private sector.”

Notley Ventures.Notley is a catalyst for social innovation unlocking opportunities with today’s impact organizations and changing communities.  Our mission is to scale and support businesses, nonprofits, individuals, and programs making positive change in the world.” 

Recurse Center. “The Recurse Center is a self-directed, community-driven educational retreat for people who want to get better at programming.”

Skoll Foundation. “The Skoll Foundation drives large-scale change by investing in, connecting, and celebrating social entrepreneurs and innovators who help them solve the world’s most pressing problems.”

Summit Fellows. “Through a series of invitation-only events, Summit fosters a global community of entrepreneurs, academics, athletes, artists, astronauts, authors, chefs, engineers, explorers, philanthropists, spiritual leaders, scientists, and beyond.”

Thiel Fellowship. “Founded by technology entrepreneur and investor Peter Thiel in 2011, the Thiel Fellowship is a two-year program for young people [under 22] who want to build new things. Thiel Fellows skip or stop out of college to receive a $100,000 grant and support from the Thiel Foundation’s network of founders, investors, and scientists.”

Pioneer.app.Get funding and guidance for your project.  Pioneer is a weekly contest for creative people around the world making their ideas become real.  Winners get $7000, a round-trip ticket to Silicon Valley, access to world-class mentorship, and more.”

Roddenberry Foundation Catalyst Fund. “The Catalyst Fund awards small grants for early-stage, innovative, and unconventional ideas that address serious global challenges.“

SEIF Awards Tech for Impact. The SEIF Awards target European impact entrepreneurs who develop or make innovative use of technologies to tackle social and/or environmental challenges and contribute to the UN SDGs [Sustainable Development Goals]. Each Award grants the winners CHF 10’000. Together with our partners UBS and PwC we provide finalists a unique opportunity to increase their international awareness, gain reputation and present themselves to a top-class jury.

Three dot dash. “Powers the most influential social entrepreneurs between the ages of 13 -19, who have found a solution or innovation to address a basic human need.” 

YC120 (part of Y Combinator). “We’d like to find more curious, creative people who are doing exciting work in emerging fields and give them an opportunity to start building their network. “

VentureCrush FG.  Pando Daily wrote: “VentureCrushFG takes no equity, there is no co-working space, and no demo day. The application process is not advertised. Most applicants come from referrals.” “VentureCrushFG[‘s]…stellar reputation among founders and investors is due, in part, to the success of its most high-flying companies.” “If anything, it’s more of a community than an accelerator, a way to keep a strong network of alumni, mentors and investors connected. Between one and two hundred techies are part of the group, including founders, execs, 40 to 50 VCs and a few dozen angel investors.””

We Company Creator Awards. “This global competition is open to entrepreneurs, performers, startups, and nonprofits-anyone who embodies our mantra, Create Your Life’s Work.”

World Summit Awards for Young Innovators. “WSA Young Innovators is a special recognition for young social entrepreneurs under 30 years of age, using ICTs to take action on the United Nations Sustainable Development Goals (UN SDGs). Together with the WSA winners of each year, they are honored as outstanding digital innovation with social impact.”

You may also want to look at product-based crowdfunding, e.g., Indiegogo*. Other traditional options for non-dilutive financing include grants, loans, SBIR, STTR, vouchers and tax credits, include:

You’re eligible for the many accelerators, as well as specifically the impact accelerators. See Conveners Impact Accelerator Selection Tool. Some specific accelerators:

There are many VCs who have a stated focus on social impact; for full lists see Impact Capital Managers and InvestorFlow. Oliver Libby, Managing Partner, H/L Ventures, notes, “it is important to remember that impact funders occupy the same spectrum of returns as regular investors.  From 100% loss capital (e.g. a grant) to shooting for massive returns (some impact VCs), an entrepreneur can unlock everything in between, including first-loss capital, impact bonds, patient capital from program-related investments and families, and more.  The market is also coming to understand that high impact can sometimes come with high returns too.”   

Rachel Butler, President, Cavendish Impact Foundation (where I’m an advisor), mentioned fiscal sponsorship as an option. “It’s an arrangement where an entity in need of funding (and it can be a for-profit, social enterprise) teams up with a 501(c)(3) that has an aligned mission, and money can be raised through the 501(c)(3) and used to support a specific project being done by the social enterprise.

So, for example, if the 501(c)(3) has in its mission to support improving education, and a for-profit social enterprise is developing an app to help improve access to better education for people in underserved communities, the 501(c)(3) could support that specific project. The 501(c)(3) does have to maintain discretion about how they use the funds (as a safeguard to just having it be an arrangement for funneling philanthropic funds), and there are some other stipulations, but otherwise it’s pretty straightforward.  The ‘Project’ can actually do the fundraising, as an agent of the 501(c)(3), and have the money directed to the 501(c)(3). The project is usually something that has a fairly short timeframe with measurable milestones that indicate progress. The 501(c)(3) also takes an administrative fee for their role in the collaboration.“

Bill Warren, CEO of Peeps Democracy, Inc., wrote, “another type of funding source for a social impact entrepreneur to think about is startup challenges/competitions at her/his alma mater. For example, Duke sponsors a $10,000 annual prize for students, faculty, or alumni working on a startup in the clean energy space. These prizes can be a great source of non-dilutive funding for early-stage ventures and also offer free exposure to academic thought-leaders and other alumni, who might support your startup via mentorship or investment. “

Emily Rasmussen, founder & CEO of Grapevine.org, suggests turning philanthropic donations into for-profit investments using Donor Advised Funds (DAFs), which are like Health Savings Accounts for charitable giving. You make a tax deductible donation into a DAF account, get an immediate tax deduction, and then donate your funds out to charities over time. In the meantime, your funds are invested to help grow your fund, just like an endowment. With some 501(c)(3) DAF sponsors (e.g Impact Assets), after making  a tax-deductible donation into their DAF account, donors can then advise the sponsor to invest their charitable assets into a specific social enterprise deal. These deals are sourced by the donor investor and any future returns go back into the DAF account and are available for future impact investments or charitable donations.

Lastly, I suggest reviewing these links on fundraising:

* I’m an investor in this company.

Thanks to Emily Campbell, Esq., of The Campbell Firm PLLC for helpful input; she has advised me on some legal matters in the past.

How Carl Pope helped drive a $500 million pledge to push the U.S. “Beyond Carbon” (Part 2)

Billionaire businessman and philanthropist Michael Bloomberg recently pledged to rapidly spend $500 million in a bid to push the U.S. “Beyond Carbon,” aiming to end this country’s use of coal and natural gas power in a generation or less.

In another recent piece, I featured an in-depth interview with Carl Pope, the veteran environmental leader who has essentially been the inspirational force behind Bloomberg’s evolution. The former New York City Mayor had never given a major gift to environmental causes as of a decade or so ago, until Pope “convinced” him to get involved.

Carl Mike Option 1

My previous piece was an attempt to understand the ethical vision influencing Bloomberg’s work, by looking at Pope’s personal story and the history of the environmental movement he has helped to shape. Below, Pope joins me again to look at the details of Bloomberg’s “Beyond Carbon” plan, including how he was able to persuade Bloomberg to take it on, and some areas of controversy that could arise as the $500 million is distributed.

Greg Epstein: You and Michael Bloomberg met around a decade ago or so, right?

Carl Pope: About 12 years ago, actually. 2007.

Epstein: Bloomberg had never given a major gift to an environmental group before he met you, and, as he writes in the book, you “convinced him” to get massively involved, to the tune now of many hundreds of millions of dollars. What do you think it is about you, the way that you approach things, or the work you do that made the two of you, in this relatively unlikely partnership, work so well?

Pope: We both like big ideas, and we both like to pursue them very pragmatically. We set very high expectations for what we want to get, and we’re willing to take necessarily small steps to get there. That’s one thing.

The second thing is, my original environmental frame was air pollution, [which] I worked on the first seven or eight years I was an environmentalist. Mike is a big public health advocate. So the fact that I was talking about saving people’s lives made a lot of sense to him.

Epstein: He talked about how you ‘showed him the numbers,’ back in 2011, on just how deadly coal actually is.

Pope: Yeah, that was the deal sealer.

Epstein: Interpersonally, what the interactions between you and him like?

Pope: We’re both public figures who are actually somewhat introspective, and so it works.

Epstein: I’ve read the “Beyond Carbon” plans as they’re presented by the Bloomberg organization. They do seem quite promising as far as broad, sweeping PR statements go.

But whether or not they will work is all in the details, right? You’re a detail-oriented person, as you just mentioned, so, what are some of the practical steps the plan calls for that you think deserve the most attention, beyond the headlines?

Pope: In A Climate of Hope, Mike and I articulated an approach to climate in which we gave our reasons for thinking that most climate leadership is going to come not from national governments but from businesses, cities, provinces, civic organizations, from the bottom up.

In letter to Congress, Apple sends strongest denial over ‘spy chip’ story

Apple has doubled down on its repudiation of Bloomberg’s report last week that claimed its systems had been compromised by Chinese spies.

The blockbuster story cited more than a dozen sources claiming that China installed tiny chips on motherboards built by Supermicro, which companies across the U.S. tech industry — including Amazon and Apple — have used to power servers in their datacenters. Bloomberg’s report also claimed that the chip can reportedly compromise data on the server, allowing China to spy on some of the world’s most powerful tech companies.

Now, in a letter to Congress, Apple’s vice president of information security George Stathakopoulos sent the company’s strongest denial to date.

“Apple has never found malicious chips, ‘hardware manipulations’ or vulnerabilities purposely planted in any server,” he said. “We never alerted the FBI to any security concerns like those described in the article, nor has the FBI ever contacted us about such an investigation.”

It follows a statement by both the U.K. National Cyber Security Center and U.S. Homeland Security stating that they had “no reason to doubt” statements by Apple, Amazon and Supermicro denying the claims.

Stathakopoulos added that Apple “repeatedly asked them to share specific details about the alleged malicious chips that they seemed certain existed, they were unwilling or unable to provide anything more than vague secondhand accounts.”

Apple’s statement is far stronger than its earlier remarks. A key detail missing in the Bloomberg story is that its many sources, albeit anonymous, provided the reporters with a first hand account of the alleged spy chips.

Without any evidence that the chips exist beyond eyewitness accounts and sources, Bloomberg’s story remains on shaky grounds.

Bloomberg Media Group’s chief product officer sees big opportunities in audio

Julia Beizer joined Bloomberg Media Group as its first chief product officer in January — and since then, she said, “Audio has been a big part of my world.”

Specifically, Beizer’s team has been releasing products for different smart speakers, including Apple’s HomePod, Amazon’s Echo Show and, most recently, Google Home, with the launch of the First Word news briefing for both Google Home and the Google Assistant app. Bloomberg has also turned its video news network TicToc (initially created for Twitter) into an audio podcast. And by leveraging Amazon Polly for text-to-audio conversion, the company now offers audio versions of every article on the Bloomberg website and app.

Beizer joined Bloomberg from The Huffington Post (which, like TechCrunch, is owned by Verizon’s digital subsidiary Oath). She pointed out that these new initiatives represent a range of different approaches to audio news, from the “beautiful, bespoke, handcrafted audio projects” that you can create via podcasts, to an automated solution like text-to-speech that allows Bloomberg to offer audio in a more scalable way.

“What that really represents is utility,” said Beizer, “We want to fit into our consumers’ lives in different ways.”

She added that since text-to-speech launched at the beginning of May, her team has found that “the people who use it, use it a lot,” listening to two to three articles per session on average.

And beyond the success of individual products, Beizer suggested that these audio initiatives represent a new “culture of experimentation.”

“Newsrooms historically thought a lot about what we have to offer to the world,” Beizer said. “That’s a mindset that’s really built for the world when people had morning newspaper habits or watched the 6pm newscast every night. For us to be relevant in consumers’ lives, we have to adapt to how they are consuming media.”

That means trying out new things, and it also means shutting them down if they’re not working.

“I often say: Launching things is my favorite thing to do, and killing things is my second favorite thing to do,” she said. So it’s possible that some of these audio products won’t exist in a year, though she also argued, “Audio writ large — specific initiatives aside — is something I believe is a trend that isn’t go away.”

Not that Beizer is spending all her time on audio. She acknowledged that the “pivot to video” has become a punchline in digital media, but she said that as she looks ahead, she still wants to find new ways to repackage and promote Bloomberg’s TV content for an online audience. She also said that the site’s new paywall represents “a huge opportunity.”

“We’re completely rethinking how we deliver our content — we want it to be essential to users’ lives,” she said. “That ties directly into subscription. I’ve worked in subscription before, and it gives you real clarity about your user and your audience.”

Subscription hell

Another week, another paywall. This time, it’s Bloomberg, which announced that it would be adding a comprehensive paywall to its news service and television channel (except TicToc, its media partnership with Twitter). A paywall was hardly a surprise, but what was surprising was the price: the standard subscription is $35 a month (up from $0 a month), or $40 a month including access to online and print editions of Businessweek.

And people say avocado toast is expensive.

That’s not the only subscription coming up though. Now Facebook is considering adding an ad-free subscription option. These rumors have come and gone in the past, with no sign of change in the company’s resolute focus on advertising as its core business model. Post-Cambridge Analytica and post-GDPR though, it seems the company’s position is more malleable, and could be following the plan laid out by my colleague Josh Constine recently. He pegged the potential price at $11 a month, given the company’s revenue per user.

I’m an emphatic champion of subscription models, particularly in media. Subscriptions align incentives in a way that advertising can never do, while also avoiding the morass of privacy and ethics that plague ad targeting. Subscription revenues are also more reliable than ad dollars, making it easier to budget and improve operational efficiency for an organization.

Incentive alignment is one thing, and my wallet is another. All of these subscriptions are starting to add up. These days, my media subscriptions are hovering around $80 a month, and I don’t even have TV. Storage costs for Google, Apple, and Dropbox are another $13 a month. Cable and cell service are another $200 a month combined. Software subscriptions are probably about $20 a month (although so many are annualized its hard to keep track of them). Amazon Prime and a few others total in around $25 a month.

Worse, subscriptions aren’t getting any cheaper. Amazon Prime just increased its price to $120 a year, Netflix increased its popular middle-tier plan to $11 a month late last year, and YouTube increased its TV pricing to $40 a month last month. Add in new paywalls, and the burden of subscriptions is rising far faster than consumer incomes.

I’m frustrated with this hell. I’m frustrated that the web’s promise of instant and free access to the world’s information appears to be dying. I’m frustrated that subscription usually means just putting formerly free content behind a paywall. I’m frustrated that the price for subscriptions seems wildly high compared to the ad dollars that the fees substitute for. And I’m frustrated that subscription pricing rarely seems to account for other subscriptions I have, even when content libraries are similar.

Subscriptions can be a great tool, but everyone seems to be doing them wrong. We need to transform our thinking here if we are to move on from the manacles of the ad networks.

Before we dive in though, let’s be clear: the web needs a business model. We didn’t need paywalls on the early web because we focused on plain text from other users. Plain text is easier to produce, lowering the friction for people to contribute, and it’s also cheaper to store and transmit, lowering the cost of bandwidth.

Today’s consumers though have significantly higher standards than the original users of the web. Consumers want immersive experiences, well-designed pages with fonts, graphics, photos, and videos coming together into a compelling format. That “quality” costs enormous sums in engineering and design talent, not to mention massively increasing bandwidth and storage costs.

Take my colleague Connie Loizos’ article from yesterday reporting on a new venture fund. The text itself is about 3.5 kilobytes uncompressed, but the total payload of the page if nothing is cached is more than 10 MB, or more than 3000x the data usage of the actual text itself. This pattern has become so common that it has been called the website obesity crisis. Yet, all of our research shows people want high-definition images with their stories, instant loading of articles on the site, and interactivity. Those features have to be paid somehow, begetting us the advertising and subscription models we see today.

The other cost is content production itself. Volunteers just haven’t produced the information we are seeking. Wikipedia is an extraordinary resource, but its depth falters when we start looking for information about our local communities, or news, or individuals who aren’t famous. The reality is that information gathering is hard work, and in a capitalist system, we need to compensate people to do it. My colleagues and I are passionate about startups and technology, but we need to eat to publish.

While an open, free, and democratized web is ideal, these two challenges demonstrate that a business model had to be attached to make it function. Advertising is one such model, with massive privacy violations required to optimize it. The other approach is charging for access.

Unfortunately, subscription seems to be an area filled with product engineers and marketers led by brain-dead executives. The default choice of Bloomberg this week and so many other publications is to simply put formerly free content behind a paywall. No consumer wants to pay for something they formerly got for free, and yet we repeatedly see examples of subscriptions designed this way.

I don’t know when media started hiring IRS accountants, but subscriptions should be seen as an upgrade, not a tax. A subscription should provide new features, content, and capabilities that didn’t exist before while maintaining the former product that consumers have enjoyed for years.

Take MoviePass for instance. Consumers can continue to watch movies as they always have in the past, but now they have a new subscription option to watch potentially more movies for a set price. Among my friends, MoviePass has completely changed the way they think of films. Instead of just seeing one blockbuster every month, they are heading to an art house film because “we’ve essentially already paid for it, so why not try it?” The pricing is clearly too cheap, but that shouldn’t distract from a product that offered a completely new experience from a subscription.

The hell is even worse though. We not only get paywalls where none existed before, but the prices of those subscriptions are always vastly more expensive than consumers ever wanted. It’s not just Bloomberg and media — it’s software too. I used to write everything in Ulysses, a syncing Markdown editor for OS X and iOS. I paid $70 to buy the apps, but then the company switched to a $40 a year annual subscription, and as the dozens of angry reviews and comments illustrate, that price is vastly out of proportion from the cost of providing the software (which I might add, is entirely hosted on iCloud infrastructure).

For product marketers, the default mentality is to extract a lot of value from the 1% of readers or users that are going to convert to paid. Subscriptions are always positioned as all-or-nothing, with limited metering or tiering, to try to force the conversion. To my mind though, the question is not how to get 1% of readers to pay an exorbitant price, but how to get say 20% of your readers to pay you a cheaper price. It’s not about exclusion, but about participation.

One way we could fix that situation would be to allow subscriptions to combine together more cheaply. We are starting to see this too: Spotify, Hulu, and Scribd appear to be investigating a deal in which consumers can get a joint subscription from these services for a lower rate. Setapp is a set of more than one hundred OS X apps that come bundled for about $10 a month.

I’d love to see more of these partnerships, because they are much more fair to the consumer and ultimately allow smaller subscription companies to compete with the likes of Google, Amazon, Apple, and others. Cross-marketing lowers subscriber acquisition costs, and those savings should ultimately stream down to the consumer.

Subscription hell is real, but that doesn’t mean the business model is flawed. Rather, we need to completely transform our thinking around these models, including the marketing behind them and the features that they offer. We also need to consider consumers and their wallets more holistically, since no one buys a subscription in a vacuum. For too long, paywall playbooks have just been copied rather than innovated upon. It’s time for product leaders to step up and build a better future.

A year after its launch, Tech:NYC has become a force in New York politics

 It’s been a little over a year since Fred Wilson and Tim Armstrong appeared onstage at Disrupt in New York to launch Tech:NYC. The two titans of New York City’s tech scene were angling to create a new organization that would speak out for the interests of the tech industry in both city and state government while planting a flag for New York’s place at the forefront of… Read More

Uber’s WeChat drama exposes the unique challenges of winning in China

Image credit: Reuters / Kim Kyung Hoon

Uber’s latest complaint is kind of hilarious, but at the same time understandable considering the alien and oftentimes confusing market that is China. It’s hard to forget the huge amount of resources the ride-hailing company is throwing at its attempt to conquer it, frequently making headlines.

In a nutshell, Uber believes it is the victim of — albeit indirectly, though not exactly discretely — anti-competitive behavior from its single biggest rival and market incumbent in the country, the ubiquitous Didi Kuaidi.

Indirectly because, in this case, Didi hasn’t actually done anything wrong per se. Instead, one of Didi’s biggest investors, Tencent, seems to have blocked Uber from its WeChat app and the 600 million active users that go along with it.

For those outside Asia and China not entirely familiar with WeChat, Andreessen Horowitz Partner Connie Chan perhaps most succinctly described the importance of Tencent’s WeChat app in her excellent analysis:

“Along with its basic communication features,” Chan wrote in a blog post, “WeChat users in China can access services to hail a taxi, order food delivery, buy movie tickets, play casual games, check in for a flight, send money to friends, access fitness tracker data, book a doctor appointment, get banking statements, pay the water bill, find geo-targeted coupons, recognize music, search for a book at the local library, meet strangers around you, follow celebrity news, read magazine articles, and even donate to charity… all in a single, integrated app.”

That’s why WeChat has become such a big deal both at home and — more as a case study of where Western apps like Facebook Messenger will head — abroad.

In an interview with Bloomberg published today, Uber’s senior vice president for business, Emil Michael, said the company is facing “a deterioration in the competitive environment” in China. He pointed to a chain of events that started with the disappearance of its customer support profile on WeChat in the cities of Hangzhou and then Beijing (on March 16 and 17, respectively).

And while Bloomberg, citing local media reports in China, said that Tencent accused Uber of violating WeChat policy and technical glitches, the real reason is likely to be far more… sinister? But hey, what’s going to be the upshot? For now, while the ride-hailing space in the country (indeed globally) — and the legislation around it — is going through its initial growing pains, it seems extremely unlikely that the Chinese courts would seek to intervene on an anti-trust basis against Tencent or Didi.

After all, China’s government appears to be in quite the protectionist mode at present, made worse by its home stock market woes and moves to depreciate its currency in what many see as an attempt to keep itself competitive and spur a slowing economy.

But here’s the reason I said in the very first sentence that the complaint is kind of hilarious, and the crux of why this whole thing has blown up to become such a big issue for Uber: The US company is clearly relying a little too heavily on a Chinese-controlled platform, which, for all intents and purposes, is as good as owned by its direct competitor. It’s allowed itself to get into a situation where it’s not OK for it to be “banned” on WeChat.

That’s kind of a sucky state of affairs. And while Didi might not so easily get away with it in a country like the U.S., the reality is that Uber is fighting a war on enemy territory.

Being banned on WeChat is increasingly going to be a headache for any company — foreign or local — that wants to benefit from that powerful and almost unparalleled channel into 600-plus million tech-savvy Chinese consumers, many of whom have credit cards linked to their account.

But if Uber wants to have a real shot at stealing market share from Didi in China — and I don’t see why it shouldn’t have a real shot based on its current projections and the endless money that it’s throwing at the problem — it will clearly have to move away from any kind of strategies, reliance or expectation of good will from a defensive competitor that controls powerful gateways to local consumers.

Especially when that competitor is a homegrown answer from a country as notoriously difficult for foreign tech companies to navigate and win in as China.

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