Messaging app Kik shuts down as company focuses on Kin, its cryptocurrency

Kik Interactive CEO Ted Livingston announced today that the company is shutting down Kik Messenger to focus on its cryptocurrency Kin, the target of a lawsuit filed by the Securities and Exchange Commission. The company’s team will be reduced to 19 people, a reduction that will affect over 100 employees, as it focuses on converting more Kin users into buyers.

“Instead of selling some of our Kin into the limited liquidity that exists today, we made the decision to focus our current resources on the few things that matter most,” Livingston wrote in a blog post, adding that the changes will reduce the company’s burn rate by 85%, enabling it to get through the SEC trial.

Kin launched two years ago, raising nearly $100 million in its ICO, one of the first held by a mainstream tech company.

But in June, the SEC filed a lawsuit against Kik Interactive, claiming the ICO was illegal, as part of the Commission’s wider crackdown on companies it alleges are issuing securities illegally.

The SEC also claimed that the company’s management had predicted Kik Messenger would run out of money by 2017, when it started planning the launch of Kin. Kik Interactive hit back in a court filing last month, saying that the SEC’s claims about its finances were “solely designed for misdirection, thereby prejudicing Kik and portraying it in a negative light.”

One of the core issues in the lawsuit is whether or not Kin is a security. The SEC alleges that it is and that the token sale violated securities laws. Kik Interactive denies Kin is a security.

“After 18 months of working with the SEC the only choice they gave us was to either label Kin a security or fight them in court. Becoming a security would kill the usability of any cryptocurrency and set a dangerous precedent for the industry,” Livingston wrote in today’s blog post. “So with the SEC working to characterize almost all cryptocurrencies as securities we made the decision to step forward and fight.”

Livingston added that since Kin isn’t available on most exchanges, it doesn’t rely on speculative demand. Instead, Kin is used by “millions of people in dozens of independent apps,” with more than two million monthly active users and 600,000 monthly active spenders, he wrote. Kik Interactive’s objective now is to increase those numbers.

To get more people who buy Kin to use the currency, Livingston said the company will focus on three things: enabling the Kin blockchain to support a billion consumers making a dozen transactions a day, with confirmation times of less than a second; increasing adoption and growth for developers who use Kin in their apps; and building a mobile wallet that makes it easier to buy and use Kin.

Readying an IPO, Postmates secures $225M from private equity firm GPI Capital

Postmates, the popular food delivery service, has raised another $225 million at a valuation of $2.4 billion ahead of an imminent initial public offering, the company confirmed to TechCrunch on Thursday.

Private equity firm GPI Capital has led the investment, first reported by Forbes, which brings Postmates total funding to nearly $1 billion. GPI takes non-controlling stakes — between 2% and 20% — in both late-stage private companies and publicly-listed ventures.

After tapping JPMorgan Chase and Bank of America to lead its float, Postmates filed privately with the Securities and Exchange Commission for an IPO earlier this year. Sources familiar with the company’s exit plans say the business intends to publicly unveil its IPO prospectus this month.

To discuss the company’s journey to the public markets and the challenges ahead in the increasingly crowded food delivery space, Postmates co-founder and chief executive officer Bastian Lehmann will join us on stage at TechCrunch Disrupt on Friday October 4th.

As Forbes noted, last-minute financings are critical for companies poised to run out of cash and in need of an infusion prior to hitting the public markets. The motives for Postmates last-minute financing are unclear, however, Postmates will begin trading on the stock market at an interesting time. Though 2019 has proven to be the year of unicorn listings, former Silicon Valley darlings like Uber and Lyft have struggled to stabilize since their multi-billion-dollar debuts.

Meanwhile, activity in the food delivery space has distracted from Postmates prospects. DoorDash, for one, recently purchased another food delivery service, Caviar, from Square in a deal worth $410 million. Uber is said to have considered buying Caviar, which had been looking for a buyer at least since 2016, according to Bloomberg. Postmates, for its part, has long been the subject of M&A rumors.

On-demand food delivery, although undeniably popular, has yet to prove its long-term viability as a money-making business. At the very least, a sizeable check from a private equity firm ensures Postmates has the capital it needs, for the time being, to accelerate growth and double down on its autonomous robotic delivery ambitions.

Founded in 2011, Postmates is also backed by Spark Capital, Founders Fund, Uncork Capital, Slow Ventures, Tiger Global, Blackrock and others.

Readying an IPO, Postmates secures $225M from private equity firm GPI Capital

Postmates, the popular food delivery service, has raised another $225 million at a valuation of $2.4 billion ahead of an imminent initial public offering, the company confirmed to TechCrunch on Thursday.

Private equity firm GPI Capital has led the investment, first reported by Forbes, which brings Postmates total funding to nearly $1 billion. GPI takes non-controlling stakes — between 2% and 20% — in both late-stage private companies and publicly-listed ventures.

After tapping JPMorgan Chase and Bank of America to lead its float, Postmates filed privately with the Securities and Exchange Commission for an IPO earlier this year. Sources familiar with the company’s exit plans say the business intends to publicly unveil its IPO prospectus this month.

To discuss the company’s journey to the public markets and the challenges ahead in the increasingly crowded food delivery space, Postmates co-founder and chief executive officer Bastian Lehmann will join us on stage at TechCrunch Disrupt on Friday October 4th.

As Forbes noted, last-minute financings are critical for companies poised to run out of cash and in need of an infusion prior to hitting the public markets. The motives for Postmates last-minute financing are unclear, however, Postmates will begin trading on the stock market at an interesting time. Though 2019 has proven to be the year of unicorn listings, former Silicon Valley darlings like Uber and Lyft have struggled to stabilize since their multi-billion-dollar debuts.

Meanwhile, activity in the food delivery space has distracted from Postmates prospects. DoorDash, for one, recently purchased another food delivery service, Caviar, from Square in a deal worth $410 million. Uber is said to have considered buying Caviar, which had been looking for a buyer at least since 2016, according to Bloomberg. Postmates, for its part, has long been the subject of M&A rumors.

On-demand food delivery, although undeniably popular, has yet to prove its long-term viability as a money-making business. At the very least, a sizeable check from a private equity firm ensures Postmates has the capital it needs, for the time being, to accelerate growth and double down on its autonomous robotic delivery ambitions.

Founded in 2011, Postmates is also backed by Spark Capital, Founders Fund, Uncork Capital, Slow Ventures, Tiger Global, Blackrock and others.

Cloudflare files for initial public offering

After much speculation and no small amount of controversy, Cloudflare, one of the companies that ensures that websites run smoothly on the internet, has filed for its initial public offering.

The company, which made its debut on TechCrunch’s Battlefield stage back in 2010, has put a placeholder value of the offering at $100 million, but it will likely be worth billions when it finally trades on the market.

Cloudflare is one of a clutch of businesses whose job it is to make web sites run better, faster and with little to no downtime.

Recently the company has been at the center of political debates around some of the customers and company it keeps, including social media networks like 8chan and racist media companies like the Daily Stormer.

Indeed, the company went so far as to cite 8chan as a risk factor in its public offering documents.

As far as money goes, Cloudflare is — like other early-stage technology companies — losing money. But it’s not losing that much money, and its growth is impressive.

As the company notes in its filing with the Securities and Exchange Commission:

We have experienced significant growth, with our revenue increasing from $84.8 million in 2016 to $134.9 million in 2017 and to $192.7 million in 2018, increases of 59% and 43%, respectively. As we continue to invest in our business, we have incurred net losses of $17.3 million, $10.7 million, and $87.2 million for 2016, 2017, and 2018, respectively. For the six months ended June 30, 2018 and 2019, our revenue increased from $87.1 million to $129.2 million, an increase of 48%, and we incurred net losses of $32.5 million and $36.8 million, respectively.

Cloudflare sits at the intersection of government policy and private company operations and its potential risk factors include a discussion about what that could mean for its business.

The company isn’t the first network infrastructure service provider to hit the market. That distinction belongs to Fastly, whose shares likely have not performed as well as investors would have liked.

Screen Shot 2019 08 15 at 10.10.17 AM

Cloudflare has raised roughly $332 million to date from investors, including Franklin Templeton Investments, Fidelity, Union Square Ventures, New Enterprise Associates, Pelion Venture Partners and Venrock. Business Insider reported that the company’s last investment gave Cloudflare a valuation of $3.2 billion.

The company will trade on the New York Stock Exchange under the ticker symbol “NET.” Underwriters on the company’s public offering include Goldman Sachs, Morgan Stanley, JP Morgan, Jefferies, Wells Fargo Securities and RBC Capital Markets.

In a 130-page court filing, Kik claims the SEC’s lawsuit “twists” the facts about its online token

CEO Ted Livingston of Kik

Kik Interactive has hit back at the Securities and Exchange Commission lawsuit that claims a $100 million token sale was illegal. The company, which owns Kik Messenger, filed a 130-page response today in U.S. District Court for the Southern District of New York, alleging that the SEC is “twisting” the facts about its token, called Kin, and asking for an early trial date and dismissal of the complaint.

One of the key issues in the case is if Kin was just an in-app token used to buy games, digital products and other services in Kik Messenger, or if it was meant to be an investment opportunity, as the SEC alleges.

Kik’s general counsel Eileen Lyon said in a press statement that “since Kin is not itself a security, the SEC must show that it was sold in a way that violates the securities laws. The SEC had access to over 50,000 documents and took testimony from nearly 20 witnesses prior to filing its Complaint, yet it is unable to make the case that Kik’s token sale violated the securities laws without bending the facts to distort the record.”

The SEC alleges that the token sale, announced in 2017, came at a time when the company had predicted that it would run out of money after Kik Messenger had been losing money for years, and that it then used proceeds from that sale to build an online marketplace for the app.

In the filing, Kik’s legal team denied that charge, claiming that the SEC’s allegations about its financial condition “is solely designed for misdirection, thereby prejudicing Kik and portraying it in a negative light” and that Kik began working on a cryptocurrency-based model after exploring monetization options that would help it compete against larger techc companies.

They added that “Kik’s Board and Executive Team alike believed that Kin was a bold idea that could solve the monetization challenges faced by all developers (not just Kik) in the existing advertising-based economy, by changing the way people buy and sell digital products and services.”

The SEC also alleges that the sale of digital tokens to U.S. investors was illegal because Kik did not register their offer as required by United States law, even though it claims that Kik marketed Kin as an investment opportunity whose value would increase. In its response, Kik denied that it offered or sold securities, or violated federal securities laws.

In the company’s press statement, Kik CEO Ted Livingston said “The SEC tries to paint a picture that the Kin project was an act of desperation rather than the bold move that it was to win the game, and one that Kakao, Line, Telegram and Facebook have all now followed.”

Congressional testimony reveals some faults in Facebook’s digital currency plans

As Facebook continues to lay the foundation for getting some of the world’s largest payment processing and technology companies a seat at the global monetary policy table, the company faces significant obstacles to enacting its plans from both sides of the Congressional aisle.

In the second of what’s sure to be many (many many many) hearings in front of Congressional committees, David Marcus, the chief executive of Facebook’s new digital payments subsidiary, Calibra, faced hours of questions from Representatives on the House Financial Services Committee about the how and why of Facebook’s digital currency plans.

Facebook’s critics had questions about both sides of the company’s two-pronged approach to transforming the global financial services industry.

Marcus was able to avoid answering some of his toughest questioning by taking advantage of the grey area between Facebook’s role as the chief architect behind Libra (a financial instrument that uses blockchain technology to enable transactions using a digital currency managed by a consortium of private companies) and Calibra (the payments subsidiary that Facebook owns).

Marcus stated in his testimony, Facebook’s plans for Libra are entirely about getting the digital currency that the company is creating recognized by international financial bodies — skirting the oversight of U.S. banking and financial services regulators in favor of Switzerland’s “neutral” approach.

Representatives, rightly, have concerns about each step of the process, so it’s probably best to examine the currency that Facebook is hoping to create with its partners in the Libra Association and the Calibra subsidiary separately.

First, there are significant questions around the Libra Association that Facebook assembled itself, and the regulatory responsibility that Congress and various Federal agencies have to oversee the digital currency that it’s hoping to create.

The structural problems of the Libra Association and its currency

Concerns begin with the independence of the association Facebook selected to be its partners in the cryptocurrency. There are any number of ties between the corporations and investors that are on Libra’s existing governing body and Facebook. The fact that Facebook selected the initial charter members that paid $10 million for the privilege of being co-founders of the currency was not lost on Representatives like Alexandria Ocasio Cortez, the first term representative from New York.

“The membership is open, based on certain criteria,” Marcus said in his testimony responding to a question from Representative Ocasio Cortez about the membership of the Libra Association. “The first 27 members that have joined are companies that have shared that desire to build this network and solve problems.”

Representative Ocasio Cortez responded, “So, we are discussing a currently controlled by an undemocratically selection of largely massive corporations.”

The New York representative wasn’t alone in her criticism of the composition of the Libra Association, questioning whether Facebook would have undue influence over the organization.

Setting aside the independence of the Libra Association, Representatives also had some pertinent questions about the ways in which the currency is structured.

Libra’s currency is set up as a stablecoin whose value is set by the Association and is pegged to a basket of global currencies that provide a hedge against the the currency fluctuating in value as a result of speculative investment. Users pay in a certain amount of currency and receive an amount of Libra that they can spend at participating merchants or companies (a vast network considering that Mastercard, PayPal, and Visa are all participating in the Association).

Given the size of Facebook’s user base (which numbers in the billions), if every user put an average of $100 into the network, the Libra Association would vault into the ranks of the top 20 largest banks in America (assuming $100 billion in assets). That alone would warrant regulatory oversight by any number of Federal agencies, some representatives argued.

They also expressed concern about how the Libra Association and its membership could manipulate currencies and potentially displace the U.S. dollar as the global reserve currency.

“Sovereign currencies should remain sovereign and we do not want to challenge sovereign currencies,” said Marcus in response to a particularly sharp line of questioning. “We just want to augment their capabilities in the way they can be used.”

It’s an engineer’s answer to a question about the social function of currencies. Facebook can use the basket of currency structure to argue that Libra isn’t actually a currency, but instead rests atop of several currencies to provide more stability and access for its users — and make the system function more effectively. But should Libra’s adoption begin to accelerate, the organization behind it would be able to pick currency winners and losers and begin to leverage its holdings to potentially manipulate markets, some representatives feared.

Facebook could destabilize currencies and governments,” said California Rep. Maxine Waters. “Facebook’s entry is troubling because it has already harmed vast numbers of people.”

For some members of the Finance Committee, the structure of the asset-backed currency itself makes it resemble a financial instrument that also demands regulation from government agencies. At varying times they compared the proposed currency to an Exchange Traded Fund (because it relies on a basket of currencies to create value) or an alternative fiat currency itself.

“What exactly is this? Is it fish or fowl? And it seems to me that it’s more of a platypus and it evolves in its different parts,” said Rep. Bill Huizenga, of Michigan.

For Connecticut Rep. Jim Himes, the foreign currency risk that users could be exposed to presents an opportunity for the government to exercise oversight under investment laws passed in 1940. “They will have some degree of volatility,” said Marcus in his testimony.

“This looks to me exactly like an exchange traded fund. Backed by a series of short term instruments in foreign currency… it even has a creation and remittance mechanism,”  says Himes. If that’s true, then the Libra Association would be subject to regulations under the Securities and Exchange Commission.

Marcus says that the instrument behind Libra isn’t an exchange traded fund, because the users that will transact using the cryptocurrency through services like Facebook’s Calibra, aren’t going to be speculating on the currency’s rise in value. However, that logic seems to be slightly faulty given that all of the members of the Libra Association are expected to generate returns from the assets that are held in Libra and invested in the short term basket of currencies.

What’s the matter with Calibra?

If the Libra Association and its mechanism for establishing a stablecoin creates one knot for regulators to untie, then the actual transaction mechanism that Facebook is proposing in the form of the Calibra subsidiary is yet another.

Here again a host of issues raise their head for members of Congress… Some are associated with Facebook’s perennial privacy problems and the history of predatory behavior that reared its head yet again with the company’s $5 billion fine for continuing violations.

MROthers are related to the company’s policy of what conservative critics called “social engineering” which saw Facebook boot some controversial users from its platforms (potentially denying them access to the benefits of Libra). Still another batch of concerns rests on Facebook’s ability to properly implement the know your customer (KYC) regulations that are required of banks and other financial services institutions.

The concern about Facebook’s propensity for de-platforming was topmost in the mind of Wisconsin’s Republican Representative Duffy

“Can Milo Yiannopoulos or Louis Farrakhan use Libra?” Duffy asked. “I bring that up because both of those two individuals have been banned from Facebook.”

Marcus could only respond “I don’t know yet.”

Rep. Duffy compared the potential for Facebook to engage in the same kind of social engineering to grant access to its new payment network as the experiments that China is conducting with its social credit scoring.

“For this system, I think you’re going to see a lot of pushback from both sides,” said Duffy. “I’m also concerned about the data privacy and how we’re going to use that data… How we spend our money is really powerful information and you have access to that too.”

Calibra may face anticompetitive challenges too. Facebook has said that its payment processing app will be the only one that’s directly integrated with the company’s other social networking and communication tools, but that other potential wallets would be interoperable. The exclusive access to Facebook gives Calibra an automatic advantage over other potential payment tools and opens the company up to receive a whole host of transaction information that it would otherwise not be privy to.

And while Facebook is restricting wallet access on its platform to its own digital payments service, it’s giving free rein to developers to build other apps for Libra’s payment platform without vetting them at all.

It’s a situation that could lead to another Cambridge Analytica-style scandal for Facebook and is yet another hole in the company’s oversight.

The appropriate response 

The Libra project is hugely ambitious and its critics have several valid concerns about its execution. Some of the concerns about the risk that it poses are justified and it could, indeed, become a systemic player in the global financial system more quickly than its proponents are willing to accept. All of that doesn’t mean that it should necessarily be thrown out or dismissed because of the potential dangers it poses, some economists argued.

The hard work of governing demands appropriate oversight (which Facebook has been calling out for — although it’s arguably doing it in the jurisdictions that will have the lightest touch over its activities).

No less an expert than the acting International Monetary Fund chair, David Lipton, has said as much in recent discussions over the role that Libra should play (or could play) in the global monetary system.

“Risks include the potential emergence of new monopolies, with implications for how personal data is monetized; the impact on weaker currencies and the expansion of dollarization; the opportunities for illicit activities; threats to financial stability; and the challenges of corporates issuing and thus earning large sums of money — previously the realm of central banks,” Lipton said of Facebook’s proposed digital currency, according to Bloomberg. “So, regulators — and the IMF — will need to step up”

But stepping up does not mean regulating Facebook’s currency out of existence.

“We look back at the the history of technology and innovation, and a conclusion is you never know at the beginning how valuable a technology will be,” Lipton said. “It requires experimentation and adaptation over years and often decades.”

7.7 million LabCorp records stolen in same hack affecting Quest

LabCorp is the latest laboratory testing giant this week to confirm it’s affected by the same third-party data breach.

The Burlington, North Carolina-based medical giant said 7.7 million patients had their personal and financial data stolen by hackers, which hit the payment pages of the American Medical Collection Agency, a third-party vendor that processes payments for LabCorp and other companies.

The admission comes a day after Quest Diagnostics around 11.9 million patients had their data stolen.

In a filing with the Securities and Exchange Commission, LabCorp said the stolen data includes a patient’s name, date of birth, address, phone number, date of service, provider, and balance information.

“AMCA’s affected system also included credit card or bank account information that was provided by the consumer to AMCA,” said the filing. Some 200,000 patients will receive more detailed notices that their financial information was taken.

But LabCorp said no medical data or lab and diagnostic results data was taken.

Like the Quest breach, LabCorp’s data incident dated back to August 1, 2018 until March 30, 2019.

The total number of patients affected by the AMCA payments page breach stands at just shy of 20 million. Given the company provides payment and bill collection services to a broad range of businesses, we may see similar notices dropping in the near future.

SEC expands its war on cryptocurrency companies with a lawsuit against Kik

The Securities and Exchange Commission has sued Kik Interactive for the $100 million token sale the company announced two years ago.

It’s an expansion of legal actions that began last year as the SEC seeks to rein in companies that the regulatory agency thinks issued securities illegally.

In the lawsuit, the SEC claims that Kik conducted an illegal $100 million offering of digital tokens by selling the tokens to U.S. investors without registering their offer and sale as required under U.S. law.

The complaint alleges that Kik had been losing money for years on its online messaging application and that the company’s management predicted it would run out of money in 2017, precisely when it began laying the groundwork for the launch of its digital token, “Kin”.

The creation of an online marketplace selling through the company’s messaging service was financed by the sale of 1 trillion digital tokens to raise $100 million dollars.

Critical to the SEC’s case is the allegation that Kik marketed its Kin tokens as an investment opportunity, telling investors that rising demand would drive up the value of Kin and that Kik would work to boost that demand.

Kik was supposed to do that by building systems like a Kin transaction service, a rewards system for companies that used Kin, and by incorporating the tokens into the company’s existing messaging app. None of those features existed at the time of the offering, the SEC alleges.

The company also said that it would keep three trillion tokens that could trade on secondary markets and would increase in value as other investors speculated on the currency’s success.

“By selling $100 million in securities without registering the offers or sales, we allege that Kik deprived investors of information to which they were legally entitled, and prevented investors from making informed investment decisions,” said Steven Peikin, Co-Director of the SEC’s Division of Enforcement, in a statement.  “Companies do not face a binary choice between innovation and compliance with the federal securities laws.”

At the heart of the case against Kik is the argument over the utility of the currency it offered. If it was simply a means of exchange on the company’s platform that customers used to conduct business between different parties, then the SEC’s argument might seem tenuous.

Andreessen Horowitz general partner Katie Haun laid out the arguments that Kik makes in its defense in a lengthy blog post published last month.

The company responded to the SEC in a Wells notice with a few different argument. The first, that all currencies (and therefore all cryptocurrencies) are exempt for securities laws, is a pretty big swing. This argument will depend on whether or not a court accepts that a currency is by definition legal tender (Kin ain’t that).

Beyond that, Kik needs to be able to prove that it’s not a security by showing it doesn’t fit these three criteria: that it’s an investment of money, that everyone who invested is engage din a common enterprise, and that there’s an expectation of profits that results from its efforts.

Here’s how Haun, a former federal prosecutor and clerk for Supreme Court Justice Anthony Kennedy puts it.

Kik’s best argument seems to be (2), that there’s no common enterprise between them and the Kin purchasers. Courts have held that the mere sale of something, without promising more, doesn’t give rise to a common enterprise. Based on the public information I’ve reviewed, it’s not obvious that Kik was under any contractual obligation to the purchasers other than to deliver the tokens. Once that delivery occurred, Kin holders controlled their tokens and could use them how they pleased — whether to buy items or otherwise. And plenty did. Kik created a marketplace that was open and that was meant to achieve real exchange between participants, so Kik wasn’t necessarily a participant in all transactions. Thus, the SEC may have a hard time demonstrating common enterprise between Kik and token purchasers — unless they can come up with evidence showing that Kik had obligations to purchasers after token delivery.

What about (3), the expectation of profits through the efforts of others? In its Wells response, Kik tells a good story about consumptive uses, given its integration with the messenger platform, which had millions of users at the time of the token sale. Apparently, 20% of Kin purchasers linked their wallets to Kik to buy everything from games to digital products and services. That some participants purchased as little as 9 cents in Kin also seems more consistent with for “use” than for “investment”.

Kik’s defense hinges on who used the company’s cryptocurrency to make purchases through its messaging service versus which of the 10,000 acquirers of Kin currency at the time of the token offering were speculating on the cryptocurrency’s potential rise in value.

Here again, Thaun’s explanation of what Kik needs to prove about the Kin offering is helpful.

But anecdotal evidence about why purchasers bought Kin won’t matter as much as the evidence around what Kik led purchasers to expect. This is because the case law focuses less on what was in a particular purchaser’s mind at the time, and more on what the seller “offered or promised” those purchasers. So the key will be what statements can be attributed to Kik before the sale — a great example of how PR, marketing, and other company building functions really matter when it comes to many crypto projects.

Kik says its primary marketing message focused on Kin’s use rather than on Kin as an investment, which makes sense since the project would only work if people actually used Kin. If that’s true, the SEC will need to contend with some of these facts:

  • 50% of participants in the token sale purchased less than $1000 of Kin, which seems more consistent with a consumptive use vs. investment purpose argument.

  • The way in which Kik structured things encouraged broad participation and discouraged speculation, for example, by capping the amount an individual could purchase to ensure more participants used its network.

  • It delayed its token sale to ensure functionality of the network first, making sure it could be used now vs. just in the future.

  • Since the token sale, the use of Kin has increased.

For it’s part, the SEC has its argument laid out in the statement of its charges.

“Kik told investors they could expect profits from its effort to create a digital ecosystem,” said Robert A. Cohen, Chief of the Enforcement Division’s Cyber Unit, in a statement.  “Future profits based on the efforts of others is a hallmark of a securities offering that must comply with the federal securities laws.”

As the SEC notes, some companies have already settled rather than go to trial. The Commission has previously charged issuers in settled cases alleging violations of these requirements, including Munchee Inc., Gladius Network LLCParagon Coin Inc. and CarrierEQ Inc. d/b/a Airfox, according to a statement from the regulatory agency.

Tesla bumps up its capital raise by $400 million, with Elon Musk taking an additional $15 million

Tesla is going to raise an additional $400 million in its latest sale of stock, with co-founder and chief executive Elon Musk committing to buy an additional $15 million in shares, according to a filing with the Securities and Exchange Commission.

The electric vehicle, energy storage and solar panel manufacturer said it will sell 3.1 million shares at $243 per share. The underwriters are jointly underwritten by Goldman Sachs and Citigroup . At the same time, the company said it would boost its convertible note offering by another $100 million.

Initially, Tesla was going to sell $2.3 billion in stock and warrants, but the new totals boost that number to $2.7 billion, with Elon Musk upping the ante of his own purchase as part of the revised deal.

The company said that Musk would boost his purchase from $10 million to $25 million as part of the sale of stock.

News of the increased share sale, revised just one day after Tesla announced that it would turn to capital markets to raise more cash, comes despite its report of a rocky first quarter, just one week ago.

Zachary Kirkhorn even called it “one of the most complicated quarters” in Tesla’s history.

Tesla lost $702 million in the first quarter of the year, but its challenges and cash constraints haven’t dimmed investor appetite for shares in the stock.

 

Inspection robots are climbing the walls to monitor safety conditions in hazardous locations

Down in Christchurch, New Zealand a team of roboticists at Invert Robotics has commercialized an inspection robot that uses tiny suction cups on a series of treads and a specialty chemical to create a technology that has robots literally climbing the walls.

Meanwhile, a world away in Pittsburgh, Gecko Robotics is tackling much the same problem with high-powered magnets and an inspection robot of its own.

Both companies have recently closed on new financing, with Invert raising $8.8 million from investors including Finistere Ventures and Yamaha Motor Ventures & Laboratory Silicon Valley, and Gecko Robotics wrapping up a $9 million round, which began fundraising last June, according to a filing with the Securities and Exchange Commission.

For the food-focused investment fund, Finistere Ventures, the benefit of a wall-climbing robot is apparent in looking at supply chain issues, according to co-founder and partner Arama Kukutai .

“The immediate value of Invert Robotics across the global food supply chain – from ensuring food and beverages are stored and transported in safe, pathogen-free environments, to avoiding catastrophic failures in agrichemical-industry containers and plants – is undeniably impressive,” Kukutai said in a statement. “However, we see the potential applications as almost limitless.”

Plant inspections in the food, chemicals and aviation industry are dangerous endeavors, and automation can make a significant improvement in how companies address the critical function of quality assurance, according to investors and entrepreneurs.

“There has been virtually no innovation in industrial services technology for decades,” Founders Fund  partner Trae Stephens told TechCrunch in a statement. “Gecko’s robots massively reduce facility shutdown time while gathering critical performance data and preventing potentially fatal accidents. The demand for what they are building is huge.”

While Gecko uses powerful magnets to secure its robots to surfaces, Invert Robotics uses powerful suction to enable its robots to climb the walls.

“If you think of a plunger and how a plunger adheres to a surface… it creates a perfect seal with the surface, you find it very hard to lift the plunger off the surface,” said managing director, Neil Fletcher. “We’ve taken that concept and we’ve made it able to slide along the surface without losing the vacuum. It’s a fine balance between maintaining the vacuum that we’ve created and leaking enough air into the vacuum to allow the unit to slide along and we coat the suction cups with a special chemical that reduces the friction.”

Both agriculture and chemicals represent billion-dollar markets for non-destructive testing, Fletcher said, and the company is already working with companies like Dow Chemical and BASF to assess their processing assets and ensure that they’re fit for use.

Yamaha has a strategic interest in developing these types of robotics systems, which prompted the investment from the firm’s skunkworks and investment shop out of Silicon Valley.

“As part of Yamaha’s long-term vision supporting the development of advanced robots to improve workplace efficiency and safety, Invert Robotics’ technology and its value proposition made a positive impression on our investment committee,” added Craig Boshier, partner and general manager for Yamaha Motor Ventures in Australia and New Zealand. “Importantly, the robotic technology’s adaptability to different environments and industries is well supported by an engaged team. That combination, with proper capitalization, positions Invert Robotics for success in its global market expansion.”

Pittsburgh’s own Gecko Robotics has similar aspirations, and an investor base including Mark Cuban, Founders Fund, The Westly Group, Justin Kan and Y Combinator.

Since 2012, the company has been working on its technology using ultrasound transducers and a high-def camera to scan boiler walls as the company’s robot would scale them.

Given the billions of dollars in demand, and the potential life-saving applications, it’s no wonder investors are clambering to get a piece of the market.