This shouldn't surprise readers of this blog, but there is a nice analysis of the problems Unicorns have with the funding rounds with guaranteed payouts to certain funders (ratchet, prefs etc) on "abovethecrowd
" blog - "dirty deals" made by "shark investors"
One is that they “unpack” or “explode” at some point in the future. You can no longer simply look at the cap table and estimate your return. Once you have accepted a dirty offering, the payout at each potential future valuation requires a complex analysis, where the return for the Shark is calculated first, and then the remains are shared by everyone else. The second reason they are a massive problem is that their complexity will render future financings all but impossible.
Any investor asked to follow a dirty offering will look at the complexity of the previous offering and likely opt out. This severely heightens the risk of either running out of money or a complete recapitalization that wipes out previous shareholders (founder, employees, and investors alike). So, while it may seem innocuous to take such a round, and while it will solve your short term emotional biases and concerns, you may be putting your whole company in a much riskier position without even knowing it.
As the blog points out, later-stage investors may be tempted to become Sharks themselves and start including "dirty deal" into their own term sheets. They will need to embrace a Shark culture, and be comfortable knowing that they are adverse to and in conflict with the founders, employees, and other investors on the capitalization chart. This is filed under "No Shit, Shylock" in Broadstuff Towers...
Troubled waters lie ahead for many of the Unicorns.....clearly these deals have inflated the Unibubble, but it looks like they will also be a major reason it bursts.
(Update - this article
by Sarah Lacy notes the author of the above is an early stage VC, and thus one of those being scraped by the "dirty deals" I assume. Now while one feels a tad sorry for him, he must have known (i) the VC game, (ii) the potential burn rates of these businesses trying to colonise industries with neglibible costs of entry and (iii) that they have been in the Bubbletime for c 3 years - heck, we did
, this is not hard!
Now who would have predicted this - Sarah Perez at TC
Microsoft’s newly launched A.I.-powered bot called Tay, which was responding to tweets and chats on GroupMe and Kik, has already been shut down due to concerns with its inability to recognize when it was making offensive or racist statements. Of course, the bot wasn’t coded to be racist, but it “learns” from those it interacts with. And naturally, given that this is the Internet, one of the first things online users taught Tay was how to be racist, and how to spout back ill-informed or inflammatory political opinions.
The clue is Sarah's line "Given that this is the Internet" - it was an 800lb Gorilla "Given"
Cue a million human internet trolls thinking today "hey, with one of those I am unstoppable 24 x 7"
The problem AI has is that it potentially promises everything and the Hypesters run with that as fact, but in truth today's early AI systems are more like intelligences with Savants syndrome - there's one thing they are taught to do very well, but are completely clueless at anything else. Deep Mind can beat Lee Se Dol at Go, but it can't do any of the other things Lee can do (and it burns 50,000 times more energy in not doing it....). Tay can "learn" (aka parrot) what people tell it but cannot distinguish between deep truths and inflammatory statements.
Oh - one last thing - Tay is modelled on a teenage girl. Sheeesh.
To be fair this is not Tay's fault per se, that you have to lay at the hands of its "parents" - how did they not see this one coming (and, when it started, who was watching its first faltering steps on its first day out playing in the traffic?). Anyone who has been around the internet for more than a few months (or even days - Boaty McBoatface
anyone) would have seen that this was a not improbable risk.
PS There is a deeper story here, about the reliance on machine intelligences before they are ready, and the damage they can do without anyone knowing. The thing about complex systems is it's often very hard to find out when they are not working properly, malfunction is often not obvious - so it is necessary to watch them very closely, not let them off to roam on the Interwebz like Tay.
Over 10 years it's essentially moved from people laughing at it, through enormous hype, to people incraesingly attacking it. If Gandhi is correct, next step is it wins.
We have long opined
its a system of extremely high potential, but suffers from an "interesting" management culture, with all the turmoil making it hard to focus on execution and any long term plays, so it is consistently under-achieving. One of teh pities in our view is that its seen as a "social network". It's not - its a lightweight universal comms system.
There's an interview with co founder and current CEO Jack Dorsey on Bloomberg
, these snippets are interesting re "where the value is":
- I think more and more people are seeing it as, "I can just see what's happening in the world. I can see what's happening about any event."
- There's a whole discussion around virtual reality and augmented reality, and Twitter has been augmenting reality for 10 years.
- We can even get predictive about what's going to happen. "Here's what's going to happen in the world. Here's what's happening right now. Here's what's going to happen in the world."
As to Twitter vs. Facebook, I think the best differentiation I've heard was from Caroline Criado-Perez
on BBC Newsnight tonight, it was something like this - Facebook is your safe home village where you're preaching to the converted and no one argues with you too much. Twitter is where you meet people who disagree with you, that can be scary, but its also where you reach out and communicate with many, many people and that is invaluable.
We've been following the path of Boston Dynamics over the last decade or so
, and here is the next step in the saga - Google, having bought in haste, has divested it fairly quickly. How come? Bloomberg thinks its about time to market
Executives at Google parent Alphabet Inc., absorbed with making sure all the various companies under its corporate umbrella have plans to generate real revenue, concluded that Boston Dynamics isn’t likely to produce a marketable product in the next few years and have put the unit up for sale, according to two people familiar with the company’s plans.
Hmmm...further down the article is something I've seen a lot of over the years - senior exec with a view does deal, rest of top management wasn't really bought in, senior exec leaves, acquired company strangled or sold:
The deals were spearheaded by Andy Rubin, former chief of the Android division, and brought about 300 robotics engineers into Google. Rubin left the company in October 2014. Over the following year, the robot initiative, dubbed Replicant, was plagued by leadership changes, failures to collaborate between companies and an unsuccessful effort to recruit a new leader.
..in February, Google’s public-relations team expressed discomfort that Alphabet would be associated with a push into humanoid robotics.
Walking robots are a scary narrative when you're trying to persuade the world you're good guys with cute electronic cars, perhaps?
This is astounding - Wirecutter
We ran an automated Wi-Fi Web-browsing session in Safari on an iPhone 6s, cycling through a set list of websites for two hours with no ad blockers; then we ran the same test with the 1Blocker ad blocker installed. Without the ad blocker, the test used 18 percent of the phone’s battery, but with the ad blocker, it used only 9 percent—so viewing ads doubled the impact of Web browsing on the phone’s battery! We ran a similar test on a 2015 Moto X Pure using the Ghostery Privacy Browser and got results that were even more dramatic: With no ad blocker, a two-hour browsing session in Chrome used 22 percent of the phone’s battery, whereas the Ghostery ad-blocking browser (which uses the same browser engine as Chrome) consumed only 8 percent.
That's between a 50% and 67% saving in battery life from using an Adblocker. In technology terms that's a 2 year Moore's Law improvement in battery life (better in fact, as betteries are inproving at a slower rate than chipsets). Or to put it another way, Ads remove much of the advances in battery life over the last few years (and bandwidth too, but that's not for today)
As a comparison Wirecutter also measured the drain of (i) continuous bright screen and (ii) watching a movie continuously...:
Running on bright screen vs minimum brightness
....using the Geekbench utility’s battery-intensive routines for an hour, an iPhone 6s used 54 percent less battery—12 percent of a full charge versus 26 percent—with the screen brightness at minimum compared with maximum brightness. A Moto X Pure Edition Android phone used 30 percent less (21 percent of a full charge versus 30 percent
Watching a movie
...on Netflix with the volume and screen brightness both set at 50 percent. On an iPhone 6s Plus, streaming over Wi-Fi for an hour consumed 5 percent of a full battery; LTE streaming used 11 percent. On a Moto X Pure, Wi-Fi used 11 percent of a full battery, and LTE used 13 percent.
So per hour, they found the extra
drain was, for the iPhone and Moto X respectively:
No Adblocker for an hour of browsing - 4.5% and 14%
Bright screen on all the time vs low - 14% and 9%
Movie watching over Wifi at 50% brightness - 5% and 11% respectively
So on the iPhone for example, the difference Adblocking makes per hour is roughly the energy required to watch a movie, or using the phone set for using at minimum brightness vs medium brightness.
More pressure on the Mobile Ad industry - the presure from bandwidth and load time frustration is already increasing Adblocker adoption, this is yet another turn in the sorry tale.
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