Airbnb’s WeWork problem

Airbnb may be another overvalued “unicorn,” but it’s no WeWork.

The Information this morning reported new Airbnb financials — indicating a massive increase in operating losses — that immediately call Airbnb’s future into question. Precisely, Airbnb lost $306 million on operations on $839 million in revenue, namely as a result of marketing spend, in the first quarter of 2019. In total, Airbnb invested $367 million in sales and marketing, representing a 58% increase year-over-year, in Q1. The company is gearing up for a major liquidity event next year and is making a concerted effort to rake in new customers, as any soon-to-be-public business would.

Given WeWork’s sudden demise, coupled with Uber and Lyft’s lukewarm performances on the stock markets, many have wondered how Wall Street will respond to Airbnb’s eventual IPO prospectus. Will money managers have an appetite for another over-valued Silicon Valley darling? Or will the market compete like mad for shares in the massive home-sharing marketplace?

But Airbnb, again, is no WeWork, and I wager Wall Street will have a much friendlier approach to its offering. For one, Airbnb’s co-founder and chief executive officer Brian Chesky isn’t dropping $60 million on private jets — I don’t think. CEO behaviors aside, Airbnb has more capital in the bank than it has raised in its entire 11-year history, which is a whole lot of money. This is all according to a source who is familiar with Airbnb’s financials and shared this detail with TechCrunch following The Information’s Thursday morning report. As for Airbnb, the company told TechCrunch, “we can’t comment on the figures, but 2019 is a big investment year in support of our hosts and guests.”

Airbnb’s CEO Brian Chesky speaks at TechCrunch Disrupt SF 2014

Airbnb has attracted more than $3.5 billion in equity funding at a $31 billion valuation and has even more locked away in its bank account. Additionally, Airbnb has an untouched $1 billion credit line, the source said. Presumably, the referenced credit line is the 2016 $1 billion debt financing from JPMorgan, CitiGroup, Morgan Stanley and others.

Moreover, Airbnb has been “cumulatively” free cash flow positive for some time, meaning that it’s seen more money coming in than going out during recent quarters, according to our source. It has been reported that Airbnb surpassed $1 billion in revenue in the second quarter of 2019 and in the third quarter of 2018, but we’re guessing the business did not top $1 billion in Q4 of 2018 or Q1 of 2019 because it if had, that information would probably have been “leaked.”

Finally, Airbnb has been profitable on an EBITDA (earnings before interest, taxes, depreciation and amortization) basis for two consecutive years, the company announced in January. Gross bookings, meanwhile, are growing, as is Airbnb’s business offering and its experiences product.

Why does any of this matter, you ask?

Source: Nike has picked up Russell Wilson’s Tally/TraceMe in a rare acquisition

Nike has long been synonymous with premium sneakers and other sports gear, but now it seems that the company could be extending its brand into another area — digital media — thanks to the rumored acquisition of a Seattle-based startup.

TechCrunch has learned from a source that the multibillion-dollar sports giant has acquired TraceMe, which originally built an app to let fans engage with sports stars and other celebrities before later pivoting into a service called Tally, a platform aimed at sports teams, broadcasters and venues to help fans engage around sporting events.

TraceMe was originally founded by Russell Wilson, the champion quarterback of the Seattle Seahawks, who was the executive chairman of the startup. The company had raised at least $9 million from investors that included the Seattle-based Madrona Venture Group and Bezos Expeditions (Amazon CEO Jeff Bezos’ fund), as well as YouTube co-founder Chad Hurley and others, and it was last valued, in 2017, at $60 million.

Our source said the deal closed in recent weeks and that “it was a good outcome” for the company and investors. It involved both IP — the main interest, the source said, was in TraceMe’s tech rather than Tally’s — and the team.

Indeed, at least eight of them, including TraceMe’s CEO Jason LeeKeenan, an ex-Hulu executive, are now listing Nike as their place of employment. LeeKeenan describes his new role as the head of Nike Seattle. Others on the team now have taken roles that include software engineers, head of product and product designers.

No one at TraceMe and Nike that we contacted has responded to our requests for comment, but just a little while ago GeekWire (which likely had the same tip we did) published a post noting that it had a source that confirmed the deal.

The athletic footwear giant Nike is no stranger to the world of technology: it has been a longtime collaborator with the likes of Apple to develop apps for its devices and has been an early mover on the concept of bringing and integrating cutting-edge (yes, possibly gimmicky) tech into its footwear and other gear. And that’s before you consider Nike as an e-commerce force.

But while the dalliance between sports, tech and fashion is well established, this deal opens up a different frontier for the company. It’s very rare for Nike to make an acquisition, but it makes sense that if it were going to do some M&A, it would be in the area of digital media and picking up engineers to execute on a wider vision in that area.

The company is best known, of course, for its shoes and related sporty clothes, which it has for a long time created in co-branding with the biggest sports stars and has more recently started to extend to a wider circle of celebrities and hot brands in a spirit of sporty street style. These have included the likes of so-cool Supreme, Travis Scott and seemingly tentative forays into music culture.

Nike overshadows all other sports shoe brands in size, with its current market cap at nearly $117 billion, more than twice that of its closest competitor, Adidas . But Adidas has been stealing a march when it comes to partnerships with a wide network of celebrities (even if Drake prefers checks over stripes).

While it isn’t clear yet how and if Nike will be using the startup’s existing services, you could see how a deal like this could help Nike start to think about how it might leverage the collaborations and endorsements it already has in place into experiences beyond shoes, advertising and athletic performance. In this age of Instagram and influencers playing a massive role in shifting consumer sentiment (and dollars), this could give Nike a shot at building its own media platform, independent of these, on its own terms.

This is a bigger trend that we’re seeing across a lot of digital media. Consider how companies like Spotify have extended beyond simple music streaming, investing in building tools to help artists on its platform with marketing and expanding their brands: selling shoes means selling a concept, and that concept needs to have a foothold in a digital experience. 

Get ready to see more looping videos on Spotify, as Canvas launches into beta

Spotify is opening up its Canvas feature to more artists, the company announced this morning, which means you’ll see a lot more of those looping videos on the app starting soon. The feature has been in limited testing before today with select artists. When available, you don’t just see the album artwork behind the player controls — you see a moving, visual experience that plays in a short loop.

So far, Canvas has had mixed reviewers from Spotify users. Some find the looping imagery distracting while others simply prefer seeing the album art. Some people seem to like the feature. But others only like it with certain content and artists.

The challenge is in designing a video loop that works well. That means it shouldn’t be an attempt to try to lip sync to a part of a song. It shouldn’t include intense flashing graphics or text, nor should it distract people from being able to see the player controls and track information.

Screen Shot 2019 10 10 at 12.07.54 PM

Spotify also suggests trying to tell a full story in the loop rather than just drastically trimming a music video down to the time allotted (3- or 8-second clips). Other recommended Canvas experiences are those that help develop the artists’ persona across their profile and tracks, or those that are updated frequently. Billie Eilish, for example, uses the feature to share animated versions of fan art.

Since launching, Canvas has been seen by millions of users, Spotify says. But the company seems to acknowledge the impact varies, based on how the Canvas is designed. When it works, it can “significantly increase” track streams, shares, and artists page visits. But Spotify didn’t say what happens when the feature fails to engage fans.

However, based on social media discussions about the feature and how-to guides detailing how to turn the thing off, it would seem that some users choose to opt out of the experience entirely.

Today, Spotify says Canvas will no longer be limited to select artists, as it’s opening more broadly to artists in an expanded beta. With the beta, Spotify hopes artists will treat Canvas as a critical part of their release strategy, and will continue to use it across their catalog.

“It’s a way to get noticed and build a vision — and an excellent way to share more of who you are with your listeners, hopefully turning them into fans,” the company writes in an announcement. “The goal is for you to have richer ways to express yourself and to allow listeners to engage with you and your music even more deeply. We’re continuing to work on additional features, as well as more tools and metrics to help you better understand how your art is reaching your audience,” the company says.

It’s hard not to comment on the timing of this launch. At the end of September, Google announced that YouTube Music would not be preinstalled on new Android devices, taking the place of Google Play Music. With YouTube Music, streamers gain access to a visually immersive experience where they can watch the music videos, not just listen to the audio, if they prefer.

Spotify, however, has traditionally been a place to listen — not to watch. That’s not to say there aren’t music videos on Spotify, they’re just not well highlighted by the app nor a core part of the Spotify experience.

The company says it’s now sending artists their invites to join the beta. Those who haven’t received the invite can instead make a request to be added here.

 

Spotify gains Siri support on iOS 13, arrives on Apple TV

In a long-awaited move, Spotify announced this morning its iOS 13 app would now offer Siri support and its streaming music service would also become available on Apple TV. That means you can now request your favorite music or podcasts using Siri voice commands, by preferencing the command with “Hey Siri, play…,” followed by the audio you want, and concluding the command with “on Spotify.”

The Siri support had been spotted earlier while in beta testing, but the company hadn’t confirmed when it would be publicly available.

According to Spotify, the Siri support will also work over Apple AirPods, on CarPlay, and via AirPlay on Apple HomePod.

In addition, the Spotify iOS app update will include support for iPhone’s new data-saver mode, which aids when bandwidth is an issue.

Spotify is also today launching on Apple TV, joining other Spotify apps for TV platforms, including Roku, Android TV, Samsung Tizen, and Amazon Fire TV.

The app updates are still rolling out, so you may need to wait to take advantage of the Apple TV support and other new features.

The lack of Siri support for Spotify was not the streaming music service’s fault — it wasn’t until iOS 13 that such support even became an option. With the new mobile operating system launched in September, Apple finally opened up its SiriKit framework to third-party apps, allowing end-users to better control their apps using voice commands. That includes audio playback on music services like Spotify, as well as the ability to like and dislike tracks, skip or go to the next song, and get track information.

Pandora, Google Maps and Waze were among the first to adopt Siri integration when it became available in iOS 13 — a clear indication that some of Apple’s chief rivals have been ready and willing to launch Siri support as soon as it was possible.

Though the integration with Siri will be useful for end-users and beneficial to Spotify’s business, it may also weaken the streaming company’s antitrust claims against Apple.

Spotify has long stated that Apple engages in anti-competitive business practices when it comes to its app platform, which is designed to favor its own apps and services, like Apple Music, it says. Among its chief complaints was the inability of third-party apps to work with Siri, which gave Apple’s own apps a favored position. Spotify also strongly believes the 30% revenue share required by the App Store hampers its growth potential.

The streamer filed an antitrust complaint against Apple in the European Union in March. And now, U.S. lawmakers have reached out to Spotify to request information as a part of an antitrust probe here in the states, reports claim. 

Despite its new ability to integrate with Siri in iOS 13, Spotify could argue that it’s still not enough. Users will have to say “on Spotify” to take advantage of the new functionality, instead of being able to set their default music app to Spotify, which would be easier. It could also point out that the support is only available to iOS 13 devices, not the entire iOS market.

Along with the Apple-related news, Spotify today also announced support for Google Nest Home Max, Sonos Move, Sonos One SL, Samsung Galaxy Fold, and preinstallation on Michael Kors Acess, Diesel and Emporio Armani Wear OS smartwatches.

 

As Sinai Ventures returns first fund, partner Jordan Fudge talks new LA focus

At age 27, Jordan Fudge is quietly making a splash in the VC world.

Fudge is the managing partner of Sinai Ventures, a multi-stage VC fund that manages $100 million and has more than 80 portfolio companies including Ro, Drivetime, Kapwing, and Luminary. His 2017 investment in Pinterest — a secondary shares deal from his prior firm that was rolled into Sinai when he spun out — will have returned the value of Sinai’s Fund I by itself once the lockup on shares expires next week.

Fudge and co-founder Eric Reiner, a Northwestern University classmate, hired staff in New York and San Francisco when Sinai launched in early 2018. Today, they’re centralizing the team in Los Angeles for its next fund, a bet on the rising momentum of the local startup ecosystem and their vision to be the city’s leading Series A and B firm.

Fudge and Reiner have intentionally stayed off the radar thus far, wanting to prove themselves first through a track record of investments.

Kwaku EDITS V2

Jordan Fudge. Image via Sinai Ventures

A part-time film financier who also serves on the board of LGBT advocacy non-profit GLAAD, Fudge describes himself as an atypical VC firm founder, an edge he’s using to carve out his niche in a crowded VC landscape.

I spoke with Fudge to learn more about his strategy at Sinai and what led to him founding the firm. Here’s the transcript (edited for length and clarity):

Eric Peckham: Tell me the origin story here. How did Sinai Ventures get seeded?

Jordan Fudge: I was working for Eagle Advisors, a multi-billion dollar family office for one of the founders of SAP, focused on the tech sector across public markets, crypto, and eventually VC deals. Two years in, I pitched them on spinning out to focus on VC and they seeded Sinai with the private investments like Compass and Pinterest I had done already, plus a fresh fund to invest out of on my own. It was $100 million combined.

Spotify now lets you add podcasts to playlists

Spotify this morning announced a new feature that will allow users to add their podcasts to playlists. With the addition, users can create their own custom playlists of their favorite podcasts, or even those that combine music and audio — similar to Spotify’s own newly-launched “Your Daily Drive.”

With “Your Daily Drive,” Spotify put its personalization engine to work to combine both music and news from select sources. But with the ability to now build your own podcast-filled playlists, you won’t have to rely on Spotify’s curation as much.

Instead, you can build your own podcast playlists by tapping the three-dot menu to the right of the podcast episode and then “Add to playlist.” You can either choose to add it a playlist you’ve already created, or you can build a new one from scratch. You can continue to add more content to this playlist, including music, if you prefer.

The company says this functionality is something users have regularly requested since the integration of podcasts to its streaming music service. However, it’s not necessarily the easiest way to tune into the latest episodes of your favorite programs as it involves manual curation.

Many podcasts release new episodes every week or so — and don’t want to get stuck constantly building playlists for those. Instead, the feature makes more sense for curating a set of podcasts around a theme, or preparing yourself to binge your way through a few programs on a long commute or road trip, for example.

Spotify says today there are over 3 billion user-generated music playlists on its service, so it believes that its users will embrace this new curation ability, as well.

Once a podcast playlist has been created, it can be shared with friends or the public, just like music playlists can be. This could make for an interesting marketing tool for podcasters, who could put together playlists of their best episodes or those with high-profile guest stars, for example, as a way to introduce newcomers to their shows. But it could also serve as a way for friends to recommend their favorite shows to others, by putting together a list of their all-time favorite episodes.

For those interested in tracking news and entertainment, they could build playlists of podcast episodes from different sources all focused on the same topic. For instance, a playlist offering everyone’s reviews of the new iPhone.

The podcast playlist feature, for now, is mobile-only. On desktop, you can only stream the playlists you made, but can’t build them yet, Spotify says.

 

Tesla V10.0 car software update adds Smart Summon, Netflix/YouTube, Spotify, karaoke and more

Tesla is rolling out a new software update that adds a slew of new features to its cars. These include the new ‘Smart Summon’ feature which will allow cars equipped with the optional $5,000 full-self driving package to automatically drive themselves from a parking spot to collect you in a parking spot.

This is one of the most advanced semi self-driving features that Tesla has yet released to the general public, and the company still says you should use it only in lots and when you have a clear view of your car. The company also notes that you’re ultimately responsible for the vehicle, so definitely be aware of what’s going on with the car and its surroundings if you’re planning to use this one – and you can stop the car remotely should you feel the need to. Smart Summon has been out in a limited preview beta for some customers, but now it’s going to be rolling out to all vehicles that have purchased the FSD option

Other new features included in this update include the much-requested native Spotify support, which is available to all Spotify Premium account-holders across all markets where it’s available. That should go a long way towards satisfying Tesla owners who have been less than satisfied with playing audio via Bluetooth from this extremely popular streaming music option. In China, Tesla is also rolling out Ximalaya, a podcast and audiobook streaming service.

Tesla Theater Mode, also new in version 10.0, connects your infotainment system to your Netflix, YouTube and Hulu/Hulu+ (including Live TV if you’re subscribed to that feature) accounts, giving you access to streaming video from all these platforms while the car is safely in park. In China, the automaker is also adding IQiyi and Tencent Video, and it says it’ll be adding more options globally “over time” to supplement these offerings. The new Theater Mode will also provide access to Tesla vehicle tutorials for owners to watch in-car, again only while parked.

A lot of these updates focus on entertainment options, including the new “Car-aoke” mode, which, as you might have guessed, adds an in-car karaoke experience that includes a “massive” library of music and lyrics, Tesla says, with multiple languages supported. Singing along on road-trips has long gotten by with low-tech options only, but official support might encourage more amateur James Cordens.

Last but not least for new entertainment features, there’s the launch of the Cuphead port on Tesla Arcade, the in-car gaming software Tesla launched earlier this year. Cuphead is a cult smash hit indie game, with an iconic art style reminiscent of early Disney animation, and this is definitely a nod to Tesla’s core geek audience (and probably a treat for the Musk man himself). Again, this is only available while parked in case you were worried about distracted driving.

Tesla also added some new navigation features that suggest interesting restaurants and sightseeing opportunities along your way, w which could result in some more interesting spontaneous adventures. There’s also a new file system tweak that separates videos captured by the car’s camera when in Dashcam and Sentry Mode to make it easier for users to find them, and they’ll be auto-deleted when there’s a need to free up storage.

This is a big ol’ update packed with new features, and it’s going to be rolling out over-the-air to vehicles beginning this week. As mentioned a couple of places above, you might see some slight differences region to region but Tesla says you can also check out the updates in-store at its showrooms if you want a sneak preview.

Tesla V10.0 car software update adds Smart Summon, Netflix/YouTube, Spotify, karaoke and more

Tesla is rolling out a new software update that adds a slew of new features to its cars. These include the new ‘Smart Summon’ feature which will allow cars equipped with the optional $5,000 full-self driving package to automatically drive themselves from a parking spot to collect you in a parking spot.

This is one of the most advanced semi self-driving features that Tesla has yet released to the general public, and the company still says you should use it only in lots and when you have a clear view of your car. The company also notes that you’re ultimately responsible for the vehicle, so definitely be aware of what’s going on with the car and its surroundings if you’re planning to use this one – and you can stop the car remotely should you feel the need to. Smart Summon has been out in a limited preview beta for some customers, but now it’s going to be rolling out to all vehicles that have purchased the FSD option

Other new features included in this update include the much-requested native Spotify support, which is available to all Spotify Premium account-holders across all markets where it’s available. That should go a long way towards satisfying Tesla owners who have been less than satisfied with playing audio via Bluetooth from this extremely popular streaming music option. In China, Tesla is also rolling out Ximalaya, a podcast and audiobook streaming service.

Tesla Theater Mode, also new in version 10.0, connects your infotainment system to your Netflix, YouTube and Hulu/Hulu+ (including Live TV if you’re subscribed to that feature) accounts, giving you access to streaming video from all these platforms while the car is safely in park. In China, the automaker is also adding IQiyi and Tencent Video, and it says it’ll be adding more options globally “over time” to supplement these offerings. The new Theater Mode will also provide access to Tesla vehicle tutorials for owners to watch in-car, again only while parked.

A lot of these updates focus on entertainment options, including the new “Car-aoke” mode, which, as you might have guessed, adds an in-car karaoke experience that includes a “massive” library of music and lyrics, Tesla says, with multiple languages supported. Singing along on road-trips has long gotten by with low-tech options only, but official support might encourage more amateur James Cordens.

Last but not least for new entertainment features, there’s the launch of the Cuphead port on Tesla Arcade, the in-car gaming software Tesla launched earlier this year. Cuphead is a cult smash hit indie game, with an iconic art style reminiscent of early Disney animation, and this is definitely a nod to Tesla’s core geek audience (and probably a treat for the Musk man himself). Again, this is only available while parked in case you were worried about distracted driving.

Tesla also added some new navigation features that suggest interesting restaurants and sightseeing opportunities along your way, w which could result in some more interesting spontaneous adventures. There’s also a new file system tweak that separates videos captured by the car’s camera when in Dashcam and Sentry Mode to make it easier for users to find them, and they’ll be auto-deleted when there’s a need to free up storage.

This is a big ol’ update packed with new features, and it’s going to be rolling out over-the-air to vehicles beginning this week. As mentioned a couple of places above, you might see some slight differences region to region but Tesla says you can also check out the updates in-store at its showrooms if you want a sneak preview.

Europe shows the way in online privacy

After passively watching for many years as tech giants developed dominant market positions that threaten consumer privacy and stifle competition, American antitrust regulators seem to have finally grasped what’s happening and decided to take action. 

This increasing scrutiny, which tacitly acknowledges that Europe’s more proactive regulators were perhaps right all along, is helping unleash a wave of tech startups at the expense of big tech. By holding industry titans accountable over the privacy and use of our data, regulators are encouraging long overdue disruption of everything from back-end infrastructure to consumer services.

Over the past decade, Facebook, Google, Amazon and others have tightened their grip on their respective domains by buying up hundreds of smaller rivals, with little U.S. government opposition. But as their dominance has grown, and as egregious privacy violations and mishaps proliferate, regulators can no longer look the other way.

In recent months, American regulators have announced a flurry of new antitrust investigations into big technology companies. The Federal Trade Commission has voted to fine Facebook $5 billion for misusing consumer data, the U.S. House Judiciary Committee is probing the tech industry for antitrust violations and 50 attorneys general announced an antitrust probe into Google. U.S. officials are even considering establishing a digital watchdog agency.

It’s hard to understand why it took so long, though perhaps U.S. officials were loath to target domestic companies that were driving huge economic growth and creating millions of new jobs. In contrast, their counterparts across the pond have been on an antitrust tear under the watch of European Union antitrust commissioner (and now also EVP of digital affairs) Margrethe Vestager.

Now that regulators from both Europe and the United States are pursuing antitrust probes, they have exposed areas where startups can innovate. 

Startups take on big tech

Your guide to WeWork’s CEO shuffle

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

This week Kate and Alex were back at TechCrunch’s San Francisco HQ to huddle over the weeks’ biggest news story: WeWork’s infamous CEO exiting his role. Adam Neumann is now merely the non-executive chairman of The We Company, a firm that he helped found and led the public story for over the last half-decade.

His exit comes after a number of revelations made his tenure at the highly-valued WeWork appear chaotic and self-dealing. After WeWork’s valuation tumbled as it raced towards a financially-critical IPO, something had to give. The firm tried to ameliorate investors with changes (read: improvements) to its corporate governance but that wasn’t enough. Snakes don’t rot from the tail, and WeWork needed new leadership, which it got the form of co-CEOs.

WeWork is now led by Sebastian Gunningham and Artie Minson, seasoned executives with stints at Amazon and Time Warner Cable, respectively. They’ve been charged with leading the company into an era of maturity, cost-cutting and maybe even profitability! But probably not. Anyway, we think there are a whole lot of parallels to draw between Uber and WeWork, as we’ve made clear in the past.

Kate and Alex also touched on corporate governance, especially regarding super-voting stock. The TL;DR: private company boards look and operate much differently than public company boards. More often than not, startup boards are made up of venture capitalists focused on protecting their equity and future returns. It’s a dog-eat-dog world, folks.

Wapping, it seems likely that WeWork will look to secure new cash in the short-term as it buttons up its business, divests or kills off non-performing assets (remember this?), and looks to temper both its growth-rate and losses. If that will be enough to allow the company to float in 2020 (2019 seems unlikely) isn’t clear.

Icarus.

We’re back Friday morning with our regular episode and a guest. Stay tuned!

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