Uber Eats, Grubhub, DoorDash sue NYC for limiting fees the apps can charge restaurants

Food ordering and delivery platforms DoorDash, Caviar, Grubhub, Seamless, Postmates and Uber Eats have banded together to sue the City of New York over a law that would permanently limit the amount of commissions the apps can charge restaurants to use their services.

The Wall Street Journal first reported the news that the companies filed suit in federal court on Thursday evening and are seeking an injunction that would prevent the city from enforcing the legislation, unspecified monetary damages and a jury trial.

Last year, the city council introduced temporary legislation that would prohibit third-party food delivery services from charging restaurants more than 15% per delivery order and more than 5% for marketing and other nondelivery fees in an effort to help ease the strain on an industry struggling from pandemic lockdowns. The companies filing suit against the city claim the limit on fees, which was made  permanent last month under a bill sponsored in June by Queens Councilman Francisco Moya, has already cost them hundreds of millions of dollars.

“Throughout the COVID-19 pandemic, third-party platforms like Plaintiffs have been instrumental in keeping restaurants afloat and food industry workers employed, including by investing millions of dollars in COVID-relief efforts specifically for local restaurants,” the lawsuit reads. “Yet, the City of New York has taken the extraordinary measure of imposing permanent price controls on a private and highly competitive industry—the facilitation of food ordering and delivery through third-party platforms. Those permanent price controls will harm not only Plaintiffs, but also the revitalization of the very local restaurants that the City claims to serve.”

Other cities also instituted similar caps during the pandemic, but most have fizzled out as the pandemic has eased and restaurants have been able to open their dining rooms. San Francisco is among of handful of cities that has also decided to enact a permanent 15% cap, and the app-based companies are suing there, as well. They argue that extending the limits on fees, which can be as high as 30% per order, “bears no relationship to any public-health emergency,” and are unconstitutional because they interfere with negotiated contracts and dictate “the economic terms on which a dynamic industry operates.”

As with the temporary law, any violators of the permanent cap would face up to $1,000 per day in fines per restaurant. The companies said the new law would not only cause them to have to rewrite their contracts with restaurants, but also raise fees for consumers and hurt delivery workers’ ability to make money.

The companies also argue that if the city wants to improve profitability of local restaurants, it could provide tax breaks or grants out of its own pocket instead of hurting the commissions of the delivery services.

“But rather than exercise one of those lawful options, the City chose instead to adopt an irrational law, driven by naked animosity towards third-party platforms,” the companies said, citing a tweet from Moya after he introduced a 10% commission cap bill that said, “NYC local restaurants needed a 10% cap on delivery fees from third party services like GrubHub long before #COVID19 hit us. They damn sure need it now.”

This legislation also comes amid increasing scrutiny over app-based delivery companies that have a reputation for harming both restaurants and gig workers in an effort to keep costs low for consumers. Recently, a California superior court ruled Proposition 22, which would allow these companies to continue classifying its workers as independent contractors, rather than employees, as unconstitutional. This ruling prompted DoorDash workers to protest last week outside the home of CEO Tony Xu demanding better pay and more tip  transparency. Meanwhile in Massachusetts, a similar law to Prop 22 has just gotten the green light to go ahead on the November 2022 ballot.

“Restaurants pay app-based delivery companies for a variety of services through commissions, one of these being delivery services,” said an unnamed courier in the lawsuit against the city. “Capping these commissions means less earnings for people like me. A commission cap could also mean delivery services get more expensive for the customers I deliver to, which ultimately means less orders for me.”

#caviar, #doordash, #drama, #food-delivery-apps, #grubhub, #lawsuit, #nyc, #seamless, #transportation, #uber-eats

Box wins proxy board battle with activist investor Starboard Value

A battle between Box and its majority shareholder Starboard Value over control of the board ended today when the company’s slate of directors easily defeated Starboard’s. It culminated months of maneuvering on both sides as they battled for control of the company.

Box in a somewhat generic statement expressed gratitude for the results: “Box appreciates the support and perspectives we have received from our stockholders throughout this process. The Board and management team will remain focused on continuing to transform Box and executing Box’s strategy to grow profitably and deliver significant value to all Box stockholders,” the company said in a statement released after the vote became official.

Starboard on the other hand, as you might expect, was unhappy with the outcome and didn’t hide that in a letter to shareholders released earlier today.

“We are certainly disappointed by the results of this election, which were heavily skewed by the voting rights tied to the preferred equity financing and the use of stockholder capital to aggressively repurchase shares ahead of the record date from stockholders likely to support change. At this juncture, the future of Box is in the Board’s hands, and there is a significant amount of work left to be done. Many commitments have been made, and we hope that Box will finally be able to follow through on its promises to drive improved results, accountability, governance, and compensation practices,” managing director Peter A. Feld wrote in the letter.

This all began when Starboard Value invested in Box, taking a 7.5% stake, which would eventually grow to 8.8% in the company. With that stake, it became the largest shareholder, but it remained relatively quiet until March of this year. That is when public rumblings began that Starboard was unhappy with the direction of the company, a conflict that could have ultimately resulted in the ouster of founder and CEO Aaron Levie or the sale of Box.

The situation took an interesting turn when Box announced it was taking a $500 million investment from KKR, a move that Starboard took great exception to and made clear in a letter published at the beginning of May that it wanted significant changes to take place. As we wrote at the time:

While they couched the letter in mostly polite language, it’s quite clear Starboard is exasperated with Box. “While we appreciate the dialogue we have had with Box’s management team and Board of Directors (the “Board”) over the past two years, we have grown increasingly frustrated with continued poor results, questionable capital allocation decisions, and subpar shareholder returns,” Starboard wrote in its letter.

Less than a week later Starboard made a move for board seats and the battle was on for control. Box’s position was strengthened by two decent earnings reports prior to the vote; the company took the unusual move of delivering the results early in order to give the voters that information prior to the vote.

The company also made the unusual move of filing a document with the SEC that pushed back against Starboards’s slate of candidates. In the end, Box won the battle. Alan Pelz-Sharpe, founder and principal analyst at Deep Analysis, who has been watching the content management space where Box operates for years, sees this as a victory for Levie and Box.

“It was not a surprise to me that Box won the day. In my opinion, Starboard misread and underestimated the loyalty that Aaron Levie generates. The fact is that to most Box employees and investors, the company is a success story, and they also know that the customer base is pretty engaged and that there is plenty of room for future growth,” he said.

“For Box this vote of confidence will mean that they can (if they want) make some acquisitions and invest more in R&D moving forward, without constantly having an aggressive investor looking over their shoulder,” Pelz-Sharpe added.

It’s hard to know what happens next, but Starboard still maintains its shares for now, and it still has some clout in those numbers. Throughout its ownership tenure, Box has performed better, as the recent earnings results have shown, and the firm says that this remains the ultimate goal.

“As we have repeatedly stated, our only goal has been to help Box perform better and adopt best-in-class practices across operating performance, financial results, governance, and compensation in order to create long-term value for the benefit of all stockholders. We will continue to monitor progress at Box, and we hope to see the Company embrace the changes catalyzed by our involvement and create long-term value,” Starboard’s Feld wrote.

#aaron-levie, #activist-investors, #box, #cloud, #cloud-content-management, #drama, #enterprise, #starboard-value, #tc

Life is Strange: True Colors hands-on preview: Not afraid to make you sad

This preview is based on limited impressions tested on PS5 and made available by Square Enix ahead of the game’s September 10 launch.

With four games released over the past six years (including one mini-spinoff, The Awesome Adventures of Captain Spirit), the Life is Strange series has established a reputation as an unlikely type of narrative adventure. Its YA protagonists, hipster-slanted coming-of-age stories, and proximity to trauma make it part of a specific genre, and the series has proven unexpectedly adept at mostly reinventing itself from entry to entry.

In theory, these underpinnings might suggest a (hear us out) Silent Hill-style problem that the series has so far managed to avoid. But where Konami’s survival horror series punished its protagonists through unique, hellish manifestations reflecting their specific inner demons, Life is Strange‘s supernatural abilities empower its characters. Our protagonists aren’t defined by their tragedies. They could be anything, which allows series developers much more freedom to try new ideas.

Read 7 remaining paragraphs | Comments

#adventure, #coming-of-age, #drama, #gaming-culture, #indie, #life-is-strange, #life-is-strange-true-colors, #narrative, #ps5, #square-enix

Box reports earnings early to give shareholders time to review financials ahead of board vote

Box has been in an ongoing dispute with activist investors Starboard Value over control of the board, an argument that is expected to come to a head on September 9th at the annual shareholder meeting. In an effort to show shareholders that the numbers are continuing to improve under the current leadership, Box took the unusual move of releasing its earning report this morning, two weeks ahead of the expected August 25th report date.

Companies don’t normally report ahead of schedule, but perhaps Box sees the opportunity to do some lobbying, or conversely, to counter any negative lobbying that Starboard may be doing with its fellow investors ahead of the vote.

It’s also worth noting that in spite of the meeting being on September 9th, like a lot of voting these days, people will be sending in votes throughout this month ahead of that day. Box wants to get its latest financial information out there sooner rather than later, to catch those early voters before they cast their ballots.

Fortunately for Box and CEO Aaron Levie, the numbers look decent.

Earnings

It’s not hard to see why Box released its earnings early, as the numbers provide an argument for keeping the company’s current leadership in place.

In the three month period ending July 31, 2021 — the second quarter of Box’s fiscal 2022 — the company generated $214 million in revenue, up 11% on a year-over-year basis. And, as Box is quick to point out, its second consecutive quarter of “accelerating revenue growth.” The company bested its own guidance of $211 to $212 million in revenue for the period.

It matters that Box is showing an ability to accelerate its revenue growth for several reasons. First, because doing so puts wind in the sales of its stock; quickly growing companies are worth more per dollar of revenue than more slowly growing concerns, and accelerating revenue growth over time is investor catnip.

The accelerating pace of growth over the last half year also provides footing for Box’s leadership to argue that their product choices have been sound, directly supporting their positions that they should remain in charge of the company. If they made good product decisions quarters ago, and those choices are leading to accelerating revenue growth, why swap out the CEO?

Box had more quarterly good news apart from its revenue numbers to disclose. It also reported improved GAAP and non-GAAP operating margins — a key measure of profitability — better billings results than it had previously anticipated for the period. Box’s net retention rate also expanded to 106% from 103% in the sequentially-preceding period.

And the company boosted its guidance for its fiscal year from “$845 million to $853 million” to “$856 million to $860 million.”

The counter arguments are somewhat easy to generate, however. Yes, Box’s revenue growth is accelerating, but from an admittedly reduced base; it’s not as hard to accelerate revenue expansion from low numbers as it is from higher base levels. And the company’s net retention is lower than what any business-focused SaaS company would want to report.

Will the good news be enough? Shares of Box are up around 1.5% in today’s regular trading, despite a somewhat mixed overall market. Investors now have to vote with more than just their dollars.

Boardroom context

Starboard bought approximately 7.5% of the company in 2019, and actually stayed fairly quiet for the first year, but at the end of 2020 it started making itself heard with rumors of pressure to sell the company. In what appeared to be a defensive move, Box took a $500 million investment from private equity firm KKR and gave the investor a board seat in April.

The activist investor did not take kindly to that move, writing in a letter to investors in early May, “The only viable explanation for this financing is a shameless and utterly transparent attempt to “buy the vote” and shows complete disregard for proper corporate governance and fiscal discipline.” In that same letter, Starboard made it official that it wanted to take over several board seats outlining a litany of complaints it had about the way the company was being run. It also made clear that it wanted co-founder and CEO Aaron Levie gone or the company sold.

 

Box pushed back that the letter and another on May 10th did not accurately reflect the progress that the company had made. In July, Box took the battle public in an SEC filing detailing the back and forth dance that had been going between Box and Starboard since it bought its stake in the company

So far, the cloud content management company has staved off all attempts to force its hand and sell the company or fire Levie, but this is all going to culminate with the shareholder’s vote. It’s truly a battle for the soul of the company.

If Starboard convinces shareholders to give it several seats on the Box board, it would probably be able to push out Levie, take control of the company and likely sell it to the highest bidder. The early financial report released today, while not exactly stellar, shows a pattern of increasingly good quarters, and that’s what Box is hoping voters will focus on when they fill out their ballots.

#aaron-levie, #activist-investors, #box, #cloud, #cloud-content-management, #drama, #enterprise, #starboard-value

The single vendor requirement ultimately doomed the DoD’s $10B JEDI cloud contract

When the Pentagon killed the JEDI cloud program yesterday, it was the end of a long and bitter road for a project that never seemed to have a chance. The question is why it didn’t work out in the end, and ultimately I think you can blame the DoD’s stubborn adherence to a single vendor requirement, a condition that never made sense to anyone, even the vendor that ostensibly won the deal.

In March 2018, the Pentagon announced a mega $10 billion, decade-long cloud contract to build the next generation of cloud infrastructure for the Department of Defense. It was dubbed JEDI, which aside from the Star Wars reference, was short for Joint Enterprise Defense Infrastructure.

The idea was a 10 year contract with a single vendor that started with an initial two year option. If all was going well, a five year option would kick in and finally a three year option would close things out with earnings of $1 billion a year.

While the total value of the contract had it been completed was quite large, a billion a year for companies the size of Amazon, Oracle or Microsoft is not a ton of money in the scheme of things. It was more about the prestige of winning such a high-profile contract and what it would mean for sales bragging rights. After all, if you passed muster with the DoD, you could probably handle just about anyone’s sensitive data, right?

Regardless, the idea of a single-vendor contract went against conventional wisdom that the cloud gives you the option of working with the best-in-class vendors. Microsoft, the eventual winner of the ill-fated deal acknowledged that the single vendor approach was flawed in an interview in April 2018:

Leigh Madden, who heads up Microsoft’s defense effort, says he believes Microsoft can win such a contract, but it isn’t necessarily the best approach for the DoD. “If the DoD goes with a single award path, we are in it to win, but having said that, it’s counter to what we are seeing across the globe where 80 percent of customers are adopting a multi-cloud solution,” Madden told TechCrunch.

Perhaps it was doomed from the start because of that. Yet even before the requirements were fully known there were complaints that it would favor Amazon, the market share leader in the cloud infrastructure market. Oracle was particularly vocal, taking its complaints directly to the former president before the RFP was even published. It would later file a complaint with the Government Accountability Office and file a couple of lawsuits alleging that the entire process was unfair and designed to favor Amazon. It lost every time — and of course, Amazon wasn’t ultimately the winner.

While there was a lot of drama along the way, in April 2019 the Pentagon named two finalists, and it was probably not too surprising that they were the two cloud infrastructure market leaders: Microsoft and Amazon. Game on.

The former president interjected himself directly in the process in August that year, when he ordered the Defense Secretary to review the matter over concerns that the process favored Amazon, a complaint which to that point had been refuted several times over by the DoD, the Government Accountability Office and the courts. To further complicate matters, a book by former defense secretary Jim Mattis claimed the president told him to “screw Amazon out of the $10 billion contract.” His goal appeared to be to get back at Bezos, who also owns the Washington Post newspaper.

In spite of all these claims that the process favored Amazon, when the winner was finally announced in October 2019, late on a Friday afternoon no less, the winner was not in fact Amazon. Instead, Microsoft won the deal, or at least it seemed that way. It wouldn’t be long before Amazon would dispute the decision in court.

By the time AWS re:Invent hit a couple of months after the announcement, former AWS CEO Andy Jassy was already pushing the idea that the president had unduly influenced the process.

“I think that we ended up with a situation where there was political interference. When you have a sitting president, who has shared openly his disdain for a company, and the leader of that company, it makes it really difficult for government agencies, including the DoD, to make objective decisions without fear of reprisal,” Jassy said at that time.

Then came the litigation. In November the company indicated it would be challenging the decision to choose Microsoft charging that it was was driven by politics and not technical merit. In January 2020, Amazon filed a request with the court that the project should stop until the legal challenges were settled. In February, a federal judge agreed with Amazon and stopped the project. It would never restart.

In April the DoD completed its own internal investigation of the contract procurement process and found no wrong-doing. As I wrote at the time:

While controversy has dogged the $10 billion, decade-long JEDI contract since its earliest days, a report by the DoD’s Inspector General’s Office concluded today that, while there were some funky bits and potential conflicts, overall the contract procurement process was fair and legal and the president did not unduly influence the process in spite of public comments.

Last September the DoD completed a review of the selection process and it once again concluded that Microsoft was the winner, but it didn’t really matter as the litigation was still in motion and the project remained stalled.

The legal wrangling continued into this year, and yesterday The Pentagon finally pulled the plug on the project once and for all, saying it was time to move on as times have changed since 2018 when it announced its vision for JEDI.

The DoD finally came to the conclusion that a single vendor approach wasn’t the best way to go, and not because it could never get the project off the ground, but because it makes more sense from a technology and business perspective to work with multiple vendors and not get locked into any particular one.

“JEDI was developed at a time when the Department’s needs were different and both the CSPs’ (cloud service providers) technology and our cloud conversancy was less mature. In light of new initiatives like JADC2 (the Pentagon’s initiative to build a network of connected sensors) and AI and Data Acceleration (ADA), the evolution of the cloud ecosystem within DoD, and changes in user requirements to leverage multiple cloud environments to execute mission, our landscape has advanced and a new way-ahead is warranted to achieve dominance in both traditional and non-traditional warfighting domains,” said John Sherman, acting DoD Chief Information Officer in a statement.

In other words, the DoD would benefit more from adopting a multi-cloud, multi-vendor approach like pretty much the rest of the world. That said, the department also indicated it would limit the vendor selection to Microsoft and Amazon.

“The Department intends to seek proposals from a limited number of sources, namely the Microsoft Corporation (Microsoft) and Amazon Web Services (AWS), as available market research indicates that these two vendors are the only Cloud Service Providers (CSPs) capable of meeting the Department’s requirements,” the department said in a statement.

That’s not going to sit well with Google, Oracle or IBM, but the department further indicated it would continue to monitor the market to see if other CSPs had the chops to handle their requirements in the future.

In the end, the single vendor requirement contributed greatly to an overly competitive and politically charged atmosphere that resulted in the project never coming to fruition. Now the DoD has to play technology catch-up, having lost three years to the histrionics of the entire JEDI procurement process and that could be the most lamentable part of this long, sordid technology tale.

#amazon, #andy-jassy, #aws, #cloud, #drama, #enterprise, #microsoft, #pentagon-jedi-contract, #tc

Nobody wins as DoD finally pulls the plug on controversial $10B JEDI contract

After several years of fighting and jockeying for position by the biggest cloud infrastructure companies in the world, the Pentagon finally pulled the plug on the controversial winner-take-all $10 billion JEDI contract today. In the end, nobody won.

“With the shifting technology environment, it has become clear that the JEDI cloud contract, which has long been delayed, no longer meets the requirements to fill the DoD’s capability gaps,” a Pentagon spokesperson stated.

The contract procurement process began in 2018 with a call for RFPs for a $10 billion, decade long contract to handle the cloud infrastructure strategy for The Pentagon. Pentagon spokesperson Heather Babb told TechCrunch why they were going with the. single-winner approach: “Single award is advantageous because, among other things, it improves security, improves data accessibility and simplifies the Department’s ability to adopt and use cloud services,” she said at the time.

From the start though, companies objected to the single winner approach, believing that the Pentagon would be better served with a multi-vendor approach. Some companies, particularly Oracle believed the procurement process was designed to favor Amazon.

In the end it came down to a pair of finalists — Amazon and Microsoft — and in the end Microsoft won. But Amazon believed that it had superior technology and only lost the deal because of direct interference by the previous president, who had open disdain for then CEO Jeff Bezos (who is also the owner of the Washington Post newspaper).

Amazon decided to fight the decision in court, and after months of delay, the Pentagon made the decision that it was time to move on. In a blog post, Microsoft took a swipe at Amazon for precipitating the delay.

“The 20 months since DoD selected Microsoft as its JEDI partner highlights issues that warrant the attention of policymakers: when one company can delay, for years, critical technology upgrades for those who defend our nation, the protest process needs reform. Amazon filed its protest in November 2019 and its case was expected to take at least another year to litigate and yield a decision, with potential appeals afterward,” Microsoft wrote in its blog post about the end of the deal.

It seems like a fitting end to a project that felt like it was doomed from the beginning. From the moment the Pentagon announced this contract with the cutesy twist on Star Wars name, the procurement process has taken more twist and turns than a TV soap.

In the end, there was a lot of sound and fury and now a lot of nothing. We move onto whatever cloud procurement process happens next.

Note: We have a request into Amazon for a comment and will update the story when they respond.

#amazon, #cloud, #drama, #enterprise, #jeff-bezos, #microsoft, #pentagon-jedi-contract

Box takes fight with activist investor public in SEC filing

The war between Box’s current leadership and activist shareholder Starboard took a new turn today with a detailed timeline outlining the two groups’ relationship, thanks to an SEC filing and companion press release. Box is pushing back against a slate of board candidates put forth by Starboard, which wants to shake up the company’s leadership and sell it.

The SEC filing details a lengthy series of phone calls, meetings and other communications between the technology company and Starboard, which has held a stake in Box greater than 5% since September of 2019. Since then shares of Box have risen by around $10 per share.

Today’s news is multi-faceted, but we’ve learned more concerning Starboard’s demands that Box sell itself; how strongly the investor wanted co-founder and CEO Aaron Levie to be fired; and that the company’s complaints about a KKR-led investment into Box that it used to repurchase its shares did not match its behavior, in that Starboard asked to participate in the transaction despite its public statements.

Activist investors, a bit like short-sellers, are either groups that you generally like or do not. In this case, however, we can learn quite a lot from the Box filing. Including the sheer amount of time and communication that it takes to manage such an investor from the perspective of one of its public-market investments.

What follows are key excerpts from Box’s SEC filing on the matter, starting with its early stake and early agreement with Starboard:

  • On September 3, 2019, representatives of Starboard contacted Mr. Levie to inform Mr. Levie that Starboard would be filing a
  • Schedule 13D with the SEC reporting a 7.5% ownership stake in the company.
  • On March 9, 2020, Mr. O’Driscoll and Ms. Barsamian had a call with representatives of Starboard to discuss entering into a settlement agreement with Starboard.
  • On March 22, 2020, the company and Starboard entered into an agreement[.]
    Also on March 23, 2020, Starboard reported beneficial ownership of 7.7% of the outstanding Class A common stock.

Then Box reported earnings, which Starboard appeared to praise:

  • On May 27, 2020, the company reported its fiscal first quarter results, noting a 13% increase in year-over-year revenue, a 900 basis point increase in year-over-year GAAP operating margin and a $36.4 million increase in year-over-year cash flow from operations. Peter Feld, a representative of Starboard, and Mr. Levie had an email conversation related to the company’s first quarter results in which Mr. Feld stated “you guys are on a good path…congrats to the team and keep it up.”
  • Also on May 29, 2020, Starboard reported that it had decreased its beneficial ownership to 6.0% of the outstanding Class A common stock.

The same pattern repeated during Box’s next earnings report:

  • On August 27, 2020, Mr. Levie, Mr. Smith and company IR discussed the company’s earnings release with Starboard. Starboard indicated it was pleased with the rate of margin expansion and where the company was heading. In an email exchange between Mr. Feld and Mr. Levie related to the company’s results, Mr. Feld stated that he was “thrilled to see the company breaking out and performing better both on the top and bottom line. Appreciate you guys working with us and accepting the counsel. Not everyone behaves that way and it is greatly appreciated. Shows your comfort as a leader and a willingness to adapt. Very impressive.”

Then Box reported its next quarter’s results, which was followed by a change in message from Starboard (emphasis TechCrunch):

  • On December 1, 2020, the company announced its fiscal third quarter results, noting an 11% increase in year-over-year revenue, an improvement of 2100 basis points in year-over-year GAAP operating margin and a $36 million increase in year-over-year cash flow from operations. The company also provided guidance regarding its fiscal fourth quarter results, noting that its revised revenue guidance was due to “lower professional services bookings than we noted previously, which creates a roughly $2 million headwind” and that the company was being “prudent in our growth expectations given the macroeconomic challenges that our customers are facing.” The revised guidance for revenue was 1.1% below analysts’ consensus estimates of $198.8 million.
  • On December 2, 2020, Box’s common stock declined approximately 9% from its prior close of $18.54 to $16.91. On December 2, 2020 and December 4, 2020, Mr. Levie, Mr. Smith and Box IR discussed the company’s earnings release with representatives of Starboard. Despite the prior support Mr. Feld communicated to the company, Starboard reversed course and demanded that the company explore a sale of the entire company or fire the company’s CEO, or otherwise face a proxy contest from Starboard. Mr. Feld further stated that the company should not turn down an offer from a third party to buy the entire company “in the low twenties” and that Starboard would be a seller at such a price.

Recall that Box shares are now in the mid-$26s. At the time, however, Box shares lost value (emphasis: TechCrunch)

  • On December 16, 2020, two weeks after earnings, the company’s stock price closed at $18.85, which was above where it was trading immediately prior to the announcement of the company’s fiscal third quarter results on December 1, 2020.
  • On January 11, 2021, Starboard disclosed that it had increased its beneficial ownership to 7.9% of the outstanding Class A common stock.
  • On January 15, 2021, Mr. Lazar and Ms. Barsamian had a call with representatives from Starboard. Mr. Feld expressed his view that, while the company’s Convertible Senior Notes were executed on favorable terms, he was not supportive of the transaction. He reiterated his demand that the company sell itself and indicated that if the company did not do so then it must replace its CEO or otherwise face a proxy contest from Starboard to replace the CEO.

Over the next few months, Box bought SignRequest, reported earnings, and engaged external parties to try to help it bolster shareholder value. Then the KKR deal came onto the table:

  • On March 31, 2021, the Strategy Committee met to discuss the status of the strategic review. At such time, the Strategy Committee was in receipt of a proposal from KKR pursuant to which KKR and certain partners would make an investment in the form of convertible preferred stock at an initial yield of 3%, which had been negotiated down from KKR’s proposal of 7% yield in its preliminary indication of interest in early March.

The deal was unanimously approved by Box’s board, and announced on April 8th, 2021. Starboard was not stoked about the transaction, however:

  • Later on April 8, 2021, Ms. Mayer and Mr. Lazar had a call with representatives of Starboard. Mr. Feld expressed Starboard’s strong displeasure with the results of the strategic review. During the conversation, Mr. Feld indicated that he would stop the fight immediately if Mr. Levie were replaced.
  • On April 14, 2021, Ms. Mayer, Mr. Lazar and Ms. Barsamian had a call with Mr. Feld. Despite his prior statements, Mr. Feld now indicated that Starboard was not willing to sell its shares of Class A common stock at $21 or $22 per share. Mr. Feld requested that the company release KKR from its obligation to vote in favor of the company as a gesture of good faith. Mr. Feld reiterated Starboard’s desire to replace Mr. Levie as CEO and indicated that he would like to join the Board of Directors if the company did so. Ms. Mayer offered Mr. Feld the opportunity to execute a non-disclosure agreement to receive more information about the strategic review process, which Mr. Feld immediately declined.

Box was like, all right, but Feld doesn’t get to be on the board:

  • On April 20, 2021, Ms. Mayer and Mr. Lazar had a call with representatives of Starboard. Mr. Feld stated that Starboard would not move forward with its planned director nominations if Starboard were offered the opportunity to participate in the KKR-Led Transaction and Mr. Feld were appointed to the Board of Directors. Mr. Feld reiterated that he was not willing to sign a non-disclosure agreement.
  • On April 27, 2021, Mr. Park had a discussion with Mr. Feld. During this conversation, Mr. Feld reiterated his desire for Starboard to participate as an investor in the KKR-Led Transaction.
  • On April 28, 2021, Ms. Mayer and Mr. Lazar informed Mr. Feld that the Board of Directors was amenable to allowing Starboard to participate in the KKR-Led Transaction but would not appoint Mr. Feld as a director. Mr. Feld indicated that there is no path to a settlement that doesn’t include appointing him to the Board of Directors.

And then Starboard initiated a proxy war.

What to make of all of this? That trying to shake up a company from the position of a minority stake is not impossible, with Starboard able to exercise influence on Box despite having a sub-10% ownership position. And that Box was not willing to put a person on the board that wanted to fire its CEO.

What’s slightly silly about all of this is that the fight is coming at a time when Box is doing better than it has in some time. Its profitability has improved greatly, and in its most recent quarter the company topped expectations and raised its forward financial guidance.

There were times in Box’s history when it may have deserved a whacking for poor performance, but now? It’s slightly weird. Also recall that Starboard has already made quite a lot of money on its Box stake, with the company’s value appreciating sharply since the investor bought in.

Most media coverage is surrounding the public criticism by Starboard of the KKR deal and its private demand to be let into the deal. That dynamic is easily explained: Starboard thought that the deal wouldn’t make it money, but later decided that it could. So it changed its tune; if you are expecting an investor to do anything but try to maximize returns, you are setting yourself up for disappointment.

A person close to the company told TechCrunch that the current situation should be a win-win for everyone involved, but Starboard is not seeing it that way. “If you’re a near term shareholder, [like Starboard] then the path Box has taken has already been better. And if you’re a long term shareholder, Box sees significantly more upside. […] So overwhelmingly, the company believes this is the best path for shareholders and it’s already been proven out to be that,” the person said.

Alan Pelz-Sharpe, founder and principal analyst at the Deep Analysis, who has been watching the content management space for many years, says the battle isn’t much of a surprise given that the two have been at odds pretty much from the start of the relationship.

“Like any activist investor Starboard is interested in a quick increase in shareholder values and a flip. Box is in it for the long run. Further, it seems that Starboard may have mistimed or miscalculated their moves, Box clearly was not as weak as they appeared to believe and Box has been doing well over the past year. Bringing in KKR was the start of a big fight back, and the proposed changes couldn’t make it any clearer that they are fed up with Starboard and ready to fight back hard,” Pelz-Sharpe said.

He added that publicly revealing details of the two companies’ interactions is a bit unusual, but he thinks it was appropriate here.

“Actually naming and shaming, detailing Starboard’s moves and seemingly contradictory statements, is unusual but it may be effective. Starboard won’t back down without a fight, but from an investor relations/PR perspective this looks bad for them and it may well be time to walk away. That being said, I wouldn’t bet on Starboard walking away, as Silicon Valley has a habit of moving forward when they should be walking back from increasingly damaging situations”

What comes next is a vote on Box’s board makeup, which should happen later this summer. Let’s see who wins.

It’s worth noting that we attempted to contact Starboard Value, but as of publication they had not gotten back to us. Box indicated that the press release and SEC filing speak for themselves.

 

 

#aaron-levie, #activist-investors, #box, #cloud, #drama, #enterprise, #starboard-value, #tc

Department of Justice opens investigation into EV startup Lordstown Motors

Lordstown Motors continues to stumble. The beleaguered electric vehicle startup is now being investigated by the Department of Justice, in addition to an ongoing investigation by the Securities and Exchange Commission.

The investigation, first broke by the Wall Street Journal on Friday, is still in its early stages, according to unnamed sources. It is being conducted by the U.S. attorney’s office in Manhattan.

The probe is just the latest series of woes for the startup, which recently said it had to cut production volumes for its debut electric pickup, Endurance, by half – from around 2,200 vehicles to 1,000. Just a few weeks after it made that announcement, there followed news of a corporate shakeup: the resignation of founding CEO Steve Burns and CFO Julio Rodriguez. Burns started the company as an offshoot of his previous startup, Workhorse Group.

Lordstown had a strong start, with investments from General Motors that helped it purchase a 6.2 million square-foot factory from the leading automaker in late 2019. Lordstown made positive headlines last August, when it announced it would go public via a merger with a special purpose acquisition company (SPAC). The deal injected the EV startup with around $675 million in gross proceeds and skyrocketed its market value to $1.6 billion. Less than a year later, Lordstown informed the SEC that it does not have sufficient capital to manufacture Endurance.

Then, in March, the short-seller firm Hindenburg Research released a report disputing the company’s claims that it had booked 100,000 pre-orders for the electric pickup. It wrote that “extensive research reveals that the company’s orders appear largely fictitious and used as a prop to raise capital and confer legitimacy.” The SEC opened its investigation in the wake of these accusations.

The WSJ story is unclear on the scope of the inquiry and Lordstown Motors did not respond to a request for comment by press time. TechCrunch will update the story if it responds.

#automotive, #department-of-justice, #drama, #investigations, #lordstown-motors, #startups, #steve-burns, #tc, #transportation

Busy day at VMware ended yesterday with Ragurham as CEO and COO Poonen exiting

They say for every door that opens another closes and the executive shuffle at VMware is certainly proving that old chestnut true. Four months after Pat Gelsinger stepped down as CEO to return to run Intel, the virtual machine pioneer announced yesterday that long-time exec Raghu Raghuram was taking over that role.

That set in motion another change when COO Sanjay Poonen, whom some had speculated might get the CEO job, announced yesterday afternoon on Twitter that he was leaving the company after 7 years.

Coincidence? We think not.

Holger Mueller, an analyst at Constellation Research says that he was surprised that Poonen didn’t get the job, but perhaps the VMware board valued Raghuram’s product focus more highly. “At 50, he [would have been] a long term solution, and he did a great job on the End User Computing (EUC) side of the product before becoming COO. I guess that it is still not VMware’s core business,” he said.

Regardless, Mueller still liked the choice of Raghuram as CEO, saying that he brought stability and reliability to the position, but he sees him likely as a solid interim solution for several years as the company spins out from Dell and becomes an fully independent organization again.

“Obviously the board wanted to have someone who knows product, and has been there a long time, and is associated with the VMware core success — so that creates relatability [and stability].” He added, “At 57 he is the transitional candidate, and a good choice, a veteran who is happy to run this 2-3 or maybe 5 years and won’t go anywhere [in the interim]. And the board has time to find a long-term solution,” Mueller told me.

Mark Lockwood, lead analyst on VMware at Gartner sees Raghuram as the right man for the job with no reservations, one who will continue to implement the current strategy while putting his own stamp on the position.

“That the VMware board chose someone in Raghu Raghuram who has been the technical strategy executive inside the company for years speaks volumes about the board’s comfort level with the existing strategy trajectory of the company. Mr. Raghuram will most certainly steer the company slightly differently than Mr. Gelsinger did, but at least from the outside, the CEO appointment appears to be a stamp of approval on the company’s broad portfolio,” Lockwood said.

As for Poonen, he says that the writing was on the wall when he didn’t get the promotion. “Although Sanjay Poonen has indeed been a valuable executive for VMware, it was always unlikely that he would remain if not chosen for the CEO role,” Lockwood said.

Stephen Elliot, an analyst at IDC, was also bullish on the Raghuram appointment, saying he brings a broad understanding of the company, and that’s important to VMware right now. “He understands VMware customers, the technologies, M&A, and the importance of execution and its impact on profitable growth. He has been central to almost every successful strategy the company has created, and been a leader for product strategy and execution. He has a very good balance of making tactical and strategic moves to anticipate the value VMware can deliver for customers in a 1-3 year horizon,” Elliot said.

Elliot thinks Poonen will be just fine and will find a landing spot pretty quickly. “He is another very talented executive; he will become a CEO elsewhere, and another company will be very lucky,” he said. He says that it will take time to see if there is any impact from that, but he believes that VMware shouldn’t have trouble attracting other executive talent to fill in any gaps.

For every every executive move, there are choices for replacements, and subsequent fall-out from those choices. We saw a full-fledged example of that yesterday on display at VMware. If these industry experts are right, the company chose stability and reliability and a deep understanding of product. That would seem to be solid enough reasoning on the part of the board, even though Poonen leaving seems to be collateral damage from the decision, and a big loss for the company.

#ceo-appointment, #drama, #enterprise, #personnel, #raghu-raghuram, #sanjay-poonen, #tc, #vmware

Activist investor Starboard Value makes official bid for Box board seats in letter

Last week activist investor Starboard delivered a public letter rebuking the company for what it perceives as under performance. Today the firm, which owns 8% of Box stock, making it the company’s largest stock holder, took it a step further with an official slate of four candidates it will be putting up at the next stockholder’s meeting.

While the company rehashed many of the same complaints as in last week’s letter, this week’s explicitly stated its intent to run its own slate of candidates for the Box board. “Therefore, in accordance with the Company’s governance deadlines and in order to preserve our rights as stockholders, we have delivered a formal notice to Box nominating four highly qualified director candidates (the “Nominees”) for election to the Board at the Annual Meeting,” Starboard wrote in a public letter to Box.

Box responded in a press release that the Board as currently constituted categorically rejects this attempt by Starboard to take over additional seats.

“The Box Board of Directors does not believe the changes to the Board proposed by Starboard are warranted or in the best interests of all stockholders. The Box Board has been consistently responsive to feedback from all of its stockholders, including suggestions from Starboard, and open-minded toward all value enhancing opportunities. Furthermore, Starboard’s statements do not accurately depict the progress Box has made,” the Board wrote in a statement this morning.

Box further points out that the company overhauled the Board last year with three new board members specifically receiving Starboard approval.

What is driving Starboard to take this action? Like any good activist investor it wants a higher stock price and is seeking for more growth from Box. Activist investors often come in and try to extract value by brute force when they perceive the company is under performing. The end game were they successful could involve removing Levie as CEO or more likely selling the company and grabbing its profit on the way out.

Box asserted that “Starboard’s statements do not accurately depict the progress Box has made,” highlighting some of its recent financial performance including “a $127 million increase in free cash flow in fiscal 2021.” The former private-market darling also argued that its fiscal 2021 “revenue growth rate plus free cash flow margin [came to more than] 26%,” which beat its own target of 25% and was “nearly double” what it managed in its fiscal 2020.

This is a good time for a ‘yes, but‘: Yes, but Box’s ability to improve its profitability does not change the fact that its growth rate has been in steady decline for years. And while a company’s growth rate can cover nearly any sin, slowing growth that has already slipped into the single digits doesn’t cut Box much slack. (For reference, in its most recent quarter, the fourth of its fiscal 2021, Box grew just 8% on a year-over-year basis.)

It’s worth noting that the company did promise “accelerated growth and higher operating margins in the years ahead” in its most recent earnings call, but the company’s recent $500 million investment from KKR particularly irked Starboard, which asserts that it was akin to ‘buying the vote.’

“[Box] made several poor capital allocation decisions, including its recent entry into a financing transaction that we believe serves no business purpose and was done in the face of a potential election contest with Starboard at the 2021 Annual Meeting of Stockholders.”

Now it’s becoming a battle over more board seats. Box is putting up Levie, Verisign CFO Dana Evan and Peter Leav, Chief Executive Officer of McAfee and former Chief Executive Officer of BMC.

Starboard nominees include Deborah S. Conrad, former executive at Intel; Peter A. Feld, Starboard’s head of research; John R. McCormack, former CEO of WebSense and Xavier D. Williams, a director of American Virtual Cloud Technologies.

The vote will take place at the Box stockholder’s meeting, which has traditionally been held in late June or early July. To this point, the company has not put out the exact date publicly.

#aaron-levie, #activist-investors, #box, #cloud, #drama, #enterprise, #starboard-value, #tc

Basecamp sees mass employee exodus after CEO bans political discussions

Following a controversial ban on political discussions earlier this week, Basecamp employees are heading for the exits. The company employs around 60 people, and roughly a third of the company appears to have accepted buyouts to leave, many citing new company policies.

On Monday, Basecamp CEO Jason Fried anounced in a blog post that employees would no longer be allowed to openly share their “societal and political discussions” at work.

“Every discussion remotely related to politics, advocacy or society at large quickly spins away from pleasant,” Fried wrote. “You shouldn’t have to wonder if staying out of it means you’re complicit, or wading into it means you’re a target.”

Basecamp’s departures are significant. According to Twitter posts, Basecamp’s head of design, head of marketing and head of customer support will all depart. The company’s iOS team also appears to have quit en masse and many departing employees have been with the company for years.

The no-politics rule at Basecamp follows a similar stance that Coinbase CEO Brian Armstrong staked out late last year. Armstrong also denounced debates around “causes or political candidates” arguing that such discussions distracted from the company’s core work. About 60 members of Coinbase’s 1,200 person staff took buyouts in light of the internal policy change — a ratio that makes the exodus at Basecamp look even more dramatic.

Like Coinbase, Basecamp was immediately criticized for muzzling its employees over important issues, many of which disproportionately impact marginalized employees.

Drawing the line on “political” topics becomes murky very quickly for any non-white or LGBTQ employees, for whom many issues that might be seen as political in nature in some circles — the Black Lives Matter movement, for instance — are inextricably and deeply personal. It’s not a coincidence these grand stands against divisive “politics” at work issue down from white male tech executives.

“If you’re in doubt as to whether your choice of forum or topic for a discussion is appropriate, please ask before posting,” Basecamp CTO David Heinemeier Hansson wrote in his own blog post, echoing Fried.

According to Platformer, Fried’s missive didn’t tell the whole story. Basecamp employees instead said the tension arose from internal conversations about the company itself and its commitment to DEI work, not free-floating arguments about political candidates. Fried’s blog post does mention one particular source of tension in a roundabout way, referencing an employee-led DEI initiative that would be disbanded.

“We make project management, team communication, and email software,” Fried wrote. “We are not a social impact company.”

#basecamp, #brian-armstrong, #ceo, #coinbase, #companies, #cto, #diversity, #drama, #jason-fried, #project-management, #tc

An Oracle EVP took a brass-knuckled approach with a reporter today; now he’s suspended from Twitter

Companies and the reporters who cover them routinely find themselves at odds, particularly when the stories being chased are unflattering or bring unwanted attention to a business’s dealings, or, in the company’s estimation, simply inaccurate.

Many companies fight back, which is why crisis communications is a very big and lucrative business. Still, how a company fights back matters. And according to crisis communications pros who TechCrunch spoke with this afternoon, a new post on Oracle’s corporate blog misses the mark, as did the company’s related follow-up on social media.

In fact, the author of the post, an Oracle executive named Ken Glueck, a 25-year-long veteran of the company, has been temporarily suspended by Twitter, the company told Gizmodo this afternoon, after encouraging his followers to harass a female reporter.

The trouble ties to a series of pieces by the news site The Intercept about how a “network of local resellers helps funnel Oracle technology to the police and military in China,” and Oracle’s response to the pieces.

While it isn’t uncommon for companies to post responses to media stories on their own platforms (as well as to take out ads in mainstream media outlets), the crisis execs with whom we spoke — they asked not to be named as they work with companies like Oracle — had some observations that might be helpful to Oracle in the future.

Rule number one: don’t draw attention unnecessarily to work that you might prefer didn’t exist. Oracle’s newest post doesn’t link back to the new Intercept story that Glueck works to dismantle, but in an earlier post about the first Intercept story that ran in February, Glueck hyperlinks to the story on Oracle’s blog. It’s hard to know what Oracle wants its audience to read more — Glueck’s blog post or that Intercept story, particularly given its intriguing title (“How Oracle Sells Repression in China”).

“How many of Oracle’s customers or employees saw [The Intercept piece] and didn’t give a damn and now he’s drawing attention to it?” noted one exec we’d interviewed today.

Rule number two: Don’t attack reporters; attack (if you must) the outlet. In Glueck’s first diatribe against The Intercept over its February piece, he mentions the outlet 26 times and the author of the piece once. In Glueck’s newest salvo against The Intercept, he refers to its author, reporter Mara Hvistendahl, 22 times — mostly by her first name — and even invites readers of Oracle’s blog to reach out to him, writing in boldface: “If you have any information about Mara or her reporting, write me securely at kglueck AT protonmail.com.”

Though Glueck has since said the call-out was a tongue-in-cheek gesture, it was subsequently removed from the post, possibly owing to its “sinister tone” as observed by one of our experts. “No one likes a bully,” said this comms pro, adding that  “bullying conveys weakness.”

Before

After

 

Rule number three: Know your purpose. By lashing out in what is a plainly derisive tone to The Intercept’s piece, as well as continuing to doubling down on its attack against Hvistendahl on social media afterward, Glueck’s strategy became less and less clear, says one of the crisis specialists we spoke with.

“You can do what Ken did and mock” the reporter, said this person, “but is that going to stop The Intercept from continuing to do stories about Oracle? And what is the reaction of other media? Are they scared off by [what happened today] or are they going to circle the wagons?” (Below: a note from an L.A. Times reporter to Glueck today in response to his call for information about Hvistendahl.)

Rule four: Keep it short. Two of the pros we spoke with today commended Glueck’s writing style, calling it both fluid and funny. Both also observed that his response was far too long. “I just couldn’t get through it,” said one.

Last rule: Find another way if possible. The crisis experts we spoke with said it’s ideal to first work with a reporter, then the reporter’s editor if necessary, and if it comes to it, involve lawyers, of which Oracle surely has plenty. “That’s the chain of appeal if a reporter has gotten a story blatantly wrong,” said one source.

Very possibly, Glueck decided to throw out this rulebook by design. Oracle tends to do things its own way, and Glueck is very much a product of that culture. Indeed, the WSJ wrote a 1,300-word profile about Glueck last year, calling him a “potent weapon” for Oracle.

As for Hvistendahl, she suggests there is another reason Oracle took the route that it did.

In a statement sent to us earlier, she writes that “Ken Glueck has published two lengthy blog posts attacking me and my editor, Ryan Tate. But Oracle has not refuted my central finding, which is that the company marketed its analytics software for use by police in China. Oracle also hasn’t refuted our reporting on Oracle’s sale and marketing of its analytics software to police elsewhere in the world. We found evidence of Oracle selling or marketing analytics software to police in Mexico, Pakistan, Turkey, and the UAE. In Brazil, my colleague Tatiana Dias uncovered police contracts between Oracle and Rio de Janeiro’s notoriously corrupt Civil Police.”

#drama, #oracle, #tc, #twitter

This insurtech alleges its venture backer founded and funded a copycat: a founder’s “nightmare”

Relationships can be messy, including between startup founders and their venture investors. But in a case that takes messy to an extreme, an insurtech company in Santa Monica, Calif. called Sure is alleging that its Series A investor used privileged information to provide to a New York-based startup called Boost that the venture firm incubated and that quickly evolved into a competitor to Sure.

Sure further assets that the venture firm — 29-year-old IA Capital Group of New York — has continued to “harass” Sure over information rights that it is no longer entitled to receive. As for why the firm would bother, Sure’s founder and CEO, Wayne Slavin, suggests that it’s because its growth is outpacing that of Boost. “We’ve grown headcount almost 50% through COVID,” says Slavin. Sure now has annual recurring revenue in the “double digit millions” and is profitable, he adds. Boost, on the other hand, is “losing employees,” he insists. (According to LinkedIn, Boost, founded in 2017, has 30 employees and no job openings; Sure, founded in 2013, has 62 employees and three job openings.)

Andy Lerner, a managing partner with IA Capital who has been with the firm since 1995, disputes Sure’s characterization of events. “It’s very important that we did not invest knowingly in two companies that were direct competitors,” he said earlier today when asked about Sure’s claims.

Alex Maffeo, a former investor with IA Capital Group who sat on Sure’s board before incubating Boost, then leaving venture to become its CEO, said in response to Sure’s claims: “We have no knowledge of the situation between Sure and IA Capital, nor do we receive any information about any of the companies in IA’s portfolio. I haven’t worked at the firm for almost four years now, and Boost has been focused on the same mission to power insurtech startups and other digital distribution partners from the start. We have always and continue to wish Wayne and his team nothing but the best as both of our companies thrive in our respective lanes.”

So what went so awry here? The conflict between the two sides dates back to nearly 2017, when IA Capital led an $8 million Series A round for Sure, writing the company a $2 million check from a fund whose sole limited parter is the insurance giant Prudential.

Lerner says that at the time, Sure was a “mobile insurance distributor,” one that was focused on items in transit, including, “flight insurance, smart phone insurance, baggage insurance.”

Slavin says this is false and asserts that Sure — which sells its software as a service to large companies like Tesla, Intuit, Mastercard, and other customers that subscribe to its software-as-a-service to run their digital insurance programs — had already begun working instead on an embedded insurance API strategy soon after its seed round closed in 2015.

That Boost is also a kind of API platform to be able to sell insurance could be a coincidence, but Slavin doesn’t think so.

On the contary, according to both sides, a rift began to emerge soon after IA Capital, which invests solely in insuretech startups, began working on an internal program called “Project Boost” led by Maffeo.

The original idea, says Slavin, was for this would-be company to offer insurtech companies the capital needed to quickly bring new insurance products to market, and for it to raise $40 million toward this end. When a big round didn’t materialize, IA Capital and Maffeo pivoted and, with seed funding from IA Capital, Maffeo resigned as an investor and joined what became Boost Insurance as CEO.

The problem, says Slavin, is that Boost quickly began to “drift in our lane.”

To Slavin, this was worrisome, given that Maffeo had spent almost a full year on the Sure board and understood its prospects, some of the intricacies of its tech, and what was on its roadmap. It made the only move it could, says Slavin: it decided with its board to invoke a provision of its investment documents with IA Capital that enabled it to stop providing IA Capital with the same level of information to which it was entitled earlier. In fact, in late 2019, it stopped sending IA Capital anything at all.

That hasn’t sat so well with Lerner, who maintains that Sure and Boost “aren’t that similar,” and that, in any case, because “once in a while they overlap,” his firm hopped off the board when Sure closed its Series B round, a $12.5 million financing led by the publicly traded insurance holding company W. R. Berkley.

More, says Lerner, after a “back and forth,” IA Capital agreed to accept a more bare-bones “income statement and balance sheet, so we [could] value and report on Sure to our LPs every quarter. We didn’t ask for any sensitive information or technical information or who its customers are. We basically just wanted financial information to do our audit and value our stake, and Sure said they wanted to send us zero information.”

With some animus on both sides, what happens from here is the biggest question. While Slavin was willing to quietly endure the “nightmare that we’re living and that [IA Capital] just won’t acknowledge,” he says, a surprise letter from IA Capital’s attorneys a few days before Christmas — one that asked for private shareholder information — was going too far, he says. For one thing, earlier this week, he wrote to all of Sure’s shareholders and told them about such these behind-the-scenes wranglings for the first time.

Through Sure’s attorney, Evan Bienstock of Fenwick & West, also told IA Capital that if its own investor, Prudential, wants more information about Sure, Sure is happy to provide it to the insurance giant directly. (Prudential did not respond to a request for comment this afternoon.)

“I probably should have stood up to the bully way sooner,” says Slavin. “But it’s really hard when, as the founder, you know you might need that reference check. You might need that gatekeeper to help you along, even though they’re not necessarily looking out for the interests of the company and the interests of the other shareholders.”

Lerner meanwhile suggests it’s all been a big misunderstanding. Asked why IA Capital hasn’t responded to Sure following its response to the firm’s information request, Lerner said today that IA Capital was “preparing a response to that just two days ago,” and it remains unfinished.

He added that IA Capital wants to “have a great relationship with [Sure]. We regret that there’s a dispute. We just want them to send us the minimal information so we can audit and do our report to our LPs in the future.”

Said Lerner: “I think we’re reasonable, and we wanted to work things out. They’re an insuretech that seems to be doing well, and we’re a large insuretech VC, and we could certainly be helpful to them.”

Asked whether IA Capital couldn’t simply sell its shares to existing shareholders, or let Sure buy them back in order to resolve the situation, Lerner claimed his venture firm would be willing to sell its shares, but he said it would first “need some information to evaluate what’s a fair price.”

Yet Slavin, who says Sure has bumped up against Boost twice to win recent deals, says he doesn’t see how that happens at this point. Too much damage has been done. Besides, he says, “Andy can discern revenue run rates from a financial statement; he can figure out how big our contracts are based on what he’s asking.”

And so it drags on for all parties.

Sure has raised $23.1 million in funding to date, including from Menlo Ventures and ff Venture Capital.

Boost has meanwhile raised $17 million, including from Coatue, Greycroft, and Tusk Venture Partners.

Slavin says that IA Capital owns less than 5% of Sure. Lerner today declined to say how much of Boost that IA Capital owns.

#drama, #insuretech, #sure, #tc, #venture-capital

VMware files suit against former exec for moving to rival company

Earlier this month, when Nutanix announced it was hiring former VMware COO Rajiv Ramaswami as CEO, it looked like a good match. What’s more, it pulled a key player from a market rival. Well, it seems VMware took exception to losing the executive, and filed a lawsuit against him yesterday for breach of contract.

The company is claiming that Ramaswami had inside knowledge of the key plans of his former company and that he should have told them that he was interviewing for a job at a rival organization.

Rajiv Ramaswami failed to honor his fiduciary and contractual obligations to VMware. For at least two months before resigning from the company, at the same time he was working with senior leadership to shape VMware’s key strategic vision and direction, Mr. Ramaswami also was secretly meeting with at least the CEO, CFO, and apparently the entire Board of Directors of Nutanix, Inc. to become Nutanix’s Chief Executive Officer. He joined Nutanix as its CEO only two days after leaving VMware,” the company wrote in a statement.

As you can imagine, Nutanix didn’t agree, countering in a statement of its own that, “VMware’s lawsuit seeks to make interviewing for a new job wrongful. We view VMware’s misguided action as a response to losing a deeply valued and respected member of its leadership team. Mr. Ramaswami and Nutanix have gone above and beyond to be proactive and cooperative with VMware throughout the transition.”

At the time of the hiring, analyst Holger Mueller from Constellation Research noted that the two companies were primary competitors and hiring Ramawami was was a big win for Nutanix. “So hiring Ramaswami brings both an expert for multi-cloud to the Nutanix helm, as well as weakening a key competitor from a talent perspective,” he told me earlier this month.

It’s unclear what the end game would be in this type of legal action, but it does complicate matters for Nutanix as it transitions to a new chief executive. Ramaswami took over from co-founder Dheeraj Pandey, who announced plans to leave the post last summer.

The lawsuit was filed Monday in Superior Court of the State of California, County of Santa Clara.

#cloud, #drama, #enterprise, #lawsuit, #nutanix, #personnel, #rajiv-ramaswami, #vmware

Nervous? Here, watch Philadelphia count votes on a live stream, that should help

No matter whom you support for President, it’s a nerve-wracking morning as many states come down to mere tens of thousands of votes. And perhaps no state looms larger than Pennsylvania, where a larger number of votes are yet to be counted.

But if you are currently torturing yourself by reading an endless stream of tweets that do little other than spike your anxiety, TechCrunch has some balm for you this morning.

Behold, a live stream of democracy in action. Here are votes being tallied in Philadelphia, courtesy of Philadelphia City Commissioners:

See how un-Twitter-like it is? It’s calm, patient, and results-oriented. The above video is what you write on your yearly self-assessment. It’s the inverse of social media.

In more serious terms, a few states live-streamed parts of the counting process, perhaps to bolster confidence in the system. Jefferson County, Kentucky, as Quartz noted did some streaming. Arizona requires live video recordings of vote counting according to the Copper Courier, and King County in Washington still has its streams up, despite little action.

Democracy: Now even more live than before.

#2020-endless-screaming, #drama, #tc

Good and bad board members (and what to do about them)

Ryan Caldbeck, co-founder and former CEO of consumer-brands-focused crowdfunding site CircleUp, recently published an email he’d written to a former director on the board of the company.

According to Caldbeck, he wrote the letter after CircleUp had bought out the investor’s firm because he wanted to provide constructive feedback, given that this individual’s “involvement was incredibly difficult for all of CircleUp and our board,” as he explained to this person, whose identity was shielded.

The saga begged questions about what happens behind the scenes at startups and about board composition specifically. But Caldbeck’s situation may be more anomalous than not, suggest some veterans of the industry who have common sense advice around how to avoid problematic board members and how to deal with them if they can’t be avoided.

First, and most obviously, get to know a potential board member as well as possible because who winds up as a director with your company can be a “life-changing decision” in both good and terrible ways, says Joel Peterson, a professor at Stanford’s business school, a former chairman of JetBlue Airways and the founding partner of Peterson Partners, a Salt Lake City-based firm that invests directly in startups and has stakes in many venture funds.

Peterson’s advice is to “interview investors just as they’re interviewing you,” including not only to get a sense for whether someone is knowledgeable and shares your same values but also to get a sense for how much time they have for your company. In his view, venture capitalists are “often the worst board members while angel investors are often really good because they really care about the entrepreneur and have a more hands-on connection with them while they’re developing the business.”

#circleup, #drama, #entrepreneurship, #joel-peterson, #ryan-caldbeck, #startups, #tc, #venture-capital

The $10B JEDI contract is locked, loaded, and still completely stuck

The other day I took a moment to count the number of stories we’ve done on TechCrunch on the DoD’s $10 billion, decade-long, winner-take-all, JEDI cloud contract. This marks the 30th time we’ve written about this deal over the last two years, and it comes after a busy week last week in JEDI cloud contract news.

That we’re still writing about this is fairly odd if you consider the winner was announced last October when the DoD chose Microsoft, but there is no end in sight to the on-going drama that is this procurement process.

Government contracts don’t typically catch our attention at TechCrunch, but this one felt different early on. There was the size and scope of the deal of course. There was the cute play on the Star Wars theme. There was Oracle acting like a batter complaining to the umpire before the first pitch was thrown. There was the fact that everyone thought Amazon would win until it didn’t.

There was a lot going on. In fact, there’s still a lot going on with this story.

Oracle doth protest too much

Let’s start with Oracle, which dispatched CEO Safra Catz to the White House in April 2018 even before the RFP had been written. She was setting the stage to complain that the deal was going to be set up to favor Amazon, something that Oracle alleged until the day Microsoft was picked the winner.

Catz had been on the Trump transition team and so had the ear of the president. While the president certainly interjected himself in this process, it’s not known how much influence that particular meeting might have had. Suffice to say that it was only the first volley in Oracle’s long war against the JEDI contract procurement process.

It would include official complaints with the Government Accountability Office and a federal lawsuit worth not coincidentally $10 billion. It would claim the contract favored Amazon. It would argue that the one-vendor approach wasn’t proper. It would suggest that because the DoD had some former Amazon employees helping write the RFP, that it somehow favored Amazon. The GAO and two court cases found otherwise, ruling against Oracle every single time.

It’s worth noting that the Court of Appeals ruling last week indicated that Oracle didn’t even meet some of the basic contractual requirements, all the while complaining about the process itself from the start.

Amazon continues to press protests

Nobody was more surprised that Amazon lost the deal than Amazon itself. It still believes to this day that it is technically superior to Microsoft and that it can offer the DoD the best approach. The DoD doesn’t agree. On Friday, it reaffirmed its choice of Microsoft. But that is not the end of this, not by a long shot.

Amazon has maintained since the decision was made last October that the decision-making process had been tainted by presidential interference in the process. They believe that because of the president’s personal dislike of Amazon CEO Jeff Bezos, who also owns the Washington Post, he inserted himself in the process to prevent Bezos’ company from winning that deal.

In January, Amazon filed a motion to stop work on the project until this could all be sorted out. In February, a judge halted work on the project until Amazon’s complaints could be heard by the court. It is September and that order is still in place.

In a blog post on Friday, Amazon reiterated its case, which is based on presidential interference and what it believes is technical superiority. “In February, the Court of Federal Claims stopped performance on JEDI. The Court determined AWS’s protest had merit, and that Microsoft’s proposal likely failed to meet a key solicitation requirement and was likely deficient and ineligible for award. Our protest detailed how pervasive these errors were (impacting all six technical evaluation factors), and the Judge stopped the DoD from moving forward because the very first issue she reviewed demonstrated serious flaws,” Amazon wrote in the post.

Microsoft for the win?

Microsoft on the other hand went quietly about its business throughout this process. It announced Azure Stack, a kind of portable cloud that would work well as a field operations computer system. It beefed up its government security credentials.

Even though Microsoft didn’t agree with the one-vendor approach indicating that the government would benefit more from the multi-vendor approach many of its customers were taking, it made clear if those were the rules, it was in it to win it — and win it did, much to the surprise of everyone, especially Amazon.

Yet here we are, almost a year later and in spite of the fact that the DoD found once again, after further review, that Microsoft is still the winner, the contract remains in limbo. Until that pending court case is resolved, we will continue to watch and wait and wonder if this will ever be truly over, and the JEDI cloud contract will actually be implemented.

#amazon, #cloud, #drama, #enterprise, #government, #jeff-bezos, #microsoft, #oracle, #pentagon-jedi-contract, #safra-catz

DoD reaffirms Microsoft has won JEDI cloud contract, but Amazon legal complaints still pending

We have seen a lot of action this week as the DoD tries to finally determine the final winner of the $10 billion, decade long DoD JEDI cloud contract. Today, the DoD released a statement that after reviewing the proposals from finalists Microsoft and Amazon again, it reiterated that Microsoft was the winner of the contract.

“The Department has completed its comprehensive re-evaluation of the JEDI Cloud proposals and determined that Microsoft’s proposal continues to represent the best value to the Government. The JEDI Cloud contract is a firm-fixed-price, indefinite-delivery/indefinite-quantity contract that will make a full range of cloud computing services available to the DoD,” The DoD said in a statement.

This comes on the heels of yesterday’s Court of Appeals decision denying Oracle’s argument that the procurement process was flawed and that there was a conflict of interest because a former Amazon employee helped write the requirements for the RFP.

While the DoD has determined that it believes that Microsoft should still get the contract, after selecting them last October,  that doesn’t mean that this is the end of the line for this long-running saga. In fact, a federal judge halted work on the project in February pending a hearing on an on-going protest from Amazon, which believes it should have won based on merit, and the fact it believes the president interfered with the procurement process to prevent Jeff Bezos, who owns the Washington Post from getting the lucrative contract.

The DoD confirmed that the project could not begin until the legal wrangling was settled. “While contract performance will not begin immediately due to the Preliminary Injunction Order issued by the Court of Federal Claims on February 13, 2020, DoD is eager to begin delivering this capability to our men and women in uniform,” the DoD reported in a statement.

A Microsoft spokesperson said the company was ready to get to work on the project as soon as it got the OK to proceed. “We appreciate that after careful review, the DoD confirmed that we offered the right technology and the best value. We’re ready to get to work and make sure that those who serve our country have access to this much needed technology,” a Microsoft spokesperson told TechCrunch.

While it takes us one step closer to the end of the road for this long-running drama, it won’t be over until the court rules on Amazon’s arguments.

Note: We sent a request for comment to Amazon, and will update the story if we hear back from them.

#amazon, #cloud, #drama, #enterprise, #government, #microsoft, #pentagon-jedi-contract

Oracle loses $10B JEDI cloud contract appeal yet again

Oracle was never fond of the JEDI cloud contract process, that massive $10 billion, decade-long Department of Defense cloud contract that went to a single vendor. It was forever arguing to anyone who would listen that that process was faulty and favored Amazon.

Yesterday it lost another round in court when the U.S. Court of Appeals rejected the database giant’s argument that the procurement process was flawed because it went to a single vendor. It also didn’t buy that there was a conflict of interest because a former Amazon employee was involved in writing the DoD’s request for proposal criteria.

On the latter point, the court wrote, “The court addressed the question whether the contracting officer had properly assessed the impact of the conflicts on the procurement and found that she had.”

Further, the court found that Oracle’s case didn’t have merit in some cases because it failed to meet certain basic contractual criteria. In other cases, it didn’t find that the DoD violated any specific procurement rules with this bidding process.

This represents the third time the company has tried to appeal the process in some way, four if you include direct executive intervention with the president. In fact, even before the RFP had been released in April 2018, CEO Safra Catz brought complaints to the president that the bid favored Amazon.

In November 2018, the Government Accountability Office (GAO) denied Oracle’s protest that it favored Amazon or any of the other points in their complaint. The following month, the company filed a $10 billion lawsuit in federal court, which was denied last August. Yesterday’s ruling is on the appeal of that decision.

It’s worth noting that for all its complaints that the deal favored Amazon, Microsoft actually won the bid. Even with that determination, the deal remains tied up in litigation as Amazon has filed multiple complaints, alleging that the president interfered with the deal and that they should have won on merit.

As with all things related to this contract, the drama has never stopped.

#amazon, #cloud, #drama, #enterprise, #microsoft, #oracle, #pentagon-jedi-contract, #tc

Apple ordered to not block Epic Games’ Unreal Engine, but Fortnite to stay off App Store

A district court denied Epic Games’ motion to temporarily restore Fortnite game to the iOS App Store, but also ordered Apple to not block the gaming giant’s ability to provide and distribute Unreal Engine on the iPhone-maker’s ecosystem in a mixed-ruling delivered Monday evening.

U.S. District Court Judge Yvonne Gonzalez Rogers said Apple can’t retaliate against Epic Games by blocking the gaming firm’s developer accounts or restrict developers on Apple platforms from accessing the widely-used Unreal Engine. 

“The record shows potential significant damage to both the Unreal Engine platform itself, and to the gaming industry generally, including on both third-party developers and gamers,” she said.

But the ruling was not a complete win for Epic Games, which had also requested the sleeper hit title Fortnite to be restored on the iOS App Store. Rogers said the game will remain off the App Store unless Epic Games attempted to bring it back in accordance with App Store guidelines.

The Monday ruling caps — for now — the high-stake public battle between giants Apple and Epic Games over the fundamental rules of iPhone’s App Store. Epic broke Apple’s and Google’s app stores guidelines earlier this month when it provided Fortnite users on iOS and Android the ability to pay it directly. Apple and Google require developers on their platforms to use their respective payment processing systems and comply to parting with a commission — which for games, is a 30% of the transaction amount.

Epic’s move prompted Apple to remove Fortnite, perhaps the best selling mobile game to date, from its App Store. Anticipating what Apple might do, minutes after Fortnite was pulled from the App Store, Epic Games filed a lawsuit against Apple and kickstarted one of the weirdest — or boldest (depending on who you ask) — marketing campaign.

The following day, Apple informed Epic Games that, based on its breaches of the App Store guidelines and the developer program license agreement, it would be revoking all developer tools, which would preclude updates for other programs, including the Unreal Engine by August 28. Epic Games later filed a motion for an injunction against Apple.

More to follow…

#app-store, #apple, #apps, #drama, #epic-games, #fortnite

If Oracle buys TikTok I’ll go to Danny’s house and eat his annoying Stanford sweatshirt

Hey everyone, how are you? Are you doing well? Great. Or, condolences, depending.

Anyway, last week the Equity crew was discussing bankers, and how they love to talk up stuff.

The topic matters as there is a big impending transaction out there in the world, namely the shotgun sale of TikTok. And all sorts of folks are nattering about who might just be interested in making a bid for the Facebook competitor.

Danny did a blog about the situation. He said that TikTok is possibly worth “tens of billions of dollars,” but only if the social giant can “find a number of deep-pocketed buyers who are willing to bid the price up.” In short if only Microsoft rocks up with checkbook, TikTok could go on the cheap given that there would be precisely no one to counter-bid.

Danny then made an interesting point. What might a grievance of bankers do when they want to sell an asset, say, not for $5 billion, but for $10 billion? Astroturf some FOMO by adding more chatter and names to the mix, of course: (bolding: TechCrunch):

So what do the investment bankers at the heart of the deal do? They run the deal around to every corporate development department in the country, and they leak the information to reporters to try to drum up FOMO in other departments, all in the hope that a board member somewhere starts asking, “Hey, why aren’t we taking a deep look at this?” Heck, I’m sure even Oracle  is taking a look — they have data centers and “synergy” potential, and its CEO Safra Catz is a major Trump supporter as well, and could navigate the coming policy shenanigans.

And then later on CNBC reported that “Oracle is in talks to acquire TikTok’s U.S. operations, challenging Microsoft” according to a source. And the FT wrote a piece entitled “Oracle enters race to buy TikTok’s US operations.”

So it’s time to put our little theory to the test with a wager. If Oracle buys TikTok then I, Alex Wilhelm, will convince my partner to let me take a train to New York, where I will eat Danny’s annoying Stanford sweatshirt that he always wears when we record the podcast.

Here’s Danny wearing it earlier today:

Photo via Danny “I Hate You” Crichton, and his lovely partner.

If Oracle does not buy TikTok, then, well, nothing. Good job Microsoft, we guess. But here’s a marker in the sand.

And just to be clear, this is nothing against Alex Sherman (whom I like and read) or the CNBC tech crew (which is is stacked with great folks). The FT was also great, back when I could read it.

The wager is good until TikTok gets the boot or sells to someone. Let’s go.

#drama, #oracle, #tiktok

SAP decision to spin out Qualtrics 20 months after spending $8B surprises industry watchers

When SAP announced it was spinning out Qualtrics on Sunday, a company it bought less than two years ago for an eye-popping $8 billion, it was enough to make your head spin. At the time, then CEO Bill McDermott saw it as a way to bridge the company’s core operational with customer data, while acquiring a cloud company that could help generate recurring revenue for the ERP giant, and maybe give it a dose of innovation along the way.

But Sunday night the company announced it was spinning out the acquisition, giving its $8 billion baby independence, and essentially handing the company back to founder Ryan Smith, who will become the largest individual shareholder when this all over.

It’s not every day you see founders pull in a windfall like $8 billion, get sucked into the belly of the large corporate beast and come out the other side just 20 months later with the cash, independence and CEO as the largest individual stockholder.

While SAP will own a majority of the stock, much like Dell owns a majority of VMware, the company will operate independently and have its own board. It can acquire other firms and make decisions separately from SAP.

We spoke to a few industry analysts to find out what they think about all this, and while the reasoning behind the move involves a lot of complex pieces, it could be as simple as the deal was done under the previous CEO, and the new one was ready to move on from it.

Bold step

It’s certainly unusual for a company like SAP to spend this kind of money, and then turn around so quickly and spin it off. In fact, Brent Leary, principal analyst at CRM Essentials, says that this was a move he didn’t see coming, and it could be related to that fat purchase price. “To me it could mean that SAP didn’t see the synergies of the acquisition panning out as they had envisioned and are looking to recoup some of their investment,” Leary told TechCrunch.

Holger Mueller, an analyst with Constellation Research agreed with Leary’s assessment, but doesn’t think that means the deal failed. “SAP doesn’t lose anything in regards to their […] data and experience vision, as they still retain [controlling interest in Qualtrics] . It also opens the opportunity for Qualtrics to partner with other ERP vendors [and broaden its overall market],” he said.

Jeanne Bliss, founder and president at CustomerBLISS, a company that helps clients deliver better customer experiences sees this as a positive step forward for Qualtrics. “This spin off enables Qualtrics to focus on its core business and prove its ability to provide essential technology executives are searching for to enable speed of decision making, innovation and customization,” she said.

Show me the money

Patrick Moorhead, founder and principal analyst at Moor Insight & Strategy sees the two companies moving towards a VMware/Dell model where SAP removes the direct link between them, which could then make them more attractive to a broader range of customers than perhaps they would have been as part of the SAP family. “The big play here is all financial. With tech stocks up so high, SAP isn’t seeing the value in its stock. I am expecting a VMware kind of alignment with a strategic collaboration agreement,” he said.

Ultimately though, he says the the move reflects a cultural failure on the part of SAP. It simply couldn’t find a way to co-exist with a younger, more nimble company like Qualtrics. “I believe SAP spinning out Qualtrics is a sign that its close connection to create symbiotic value has failed. The original charter was to bring it in to modernize SAP but apparently the “not invented here” attitudes kicked in and doomed integration,” Moorhead said.

That symbiotic connection would have involved McDermott’s vision of combining operational and customer data, but Leary also suggested that since the deal happened under previous the CEO, that perhaps new CEO Christian Klein wants to start with a clean slate and this simply wasn’t his deal.

Qualtrics for the win

In the end, Qualtrics got all that money, gets to IPO after all, and returns to being an independent company selling to a larger potential customer base. All of the analysts we spoke to agreed the news is a win for Qualtrics itself.

Leary says the motivation for the original deal was to give SAP a company that could sell beyond its existing customer base. “It seems like that was the impetus for the acquisition, and the fact that SAP is spinning it off as an IPO 20 months after acquiring Qualtrics gives me the impression that things didn’t come together as expected,” he said.

Mueller also sees nothing but postivies Qualtrics. “It’s a win […] for Qualtrics, which can now deliver what they wanted [from the start], and it’s a win for customers as Qualtrics can run as fast as they want,” he said.

Regardless, the company moves on, and the Qualtrics IPO moves forward, and it’s almost as though Qualtrics gets a do-over with $8 billion in its pocket for its trouble.

#bill-mcdermott, #christian-klein, #cloud, #customer-experience, #drama, #enterprise, #erp, #fundings-exits, #ma, #mergers-and-acquisitions, #qualtrics, #ryan-smith, #sap, #tc

Carta’s former marketing VP is suing over gender discrimination after spearheading report on pay inequality

Emily Kramer joined the Silicon Valley company Carta to build up the company’s brand. Now, the company’s former VP of marketing is looking to shine a light on Carta for another reason: in a new lawsuit against Carta, which makes equity management software, Kramer accuses the eight-year-old outfit of gender discrimination, retaliation, wrongful termination, and of violating the California Equal Pay Act.

Carta declined an interview request today, saying through a spokesperson that it isn’t commenting because the suit is a “pending legal matter.”  But we spoke earlier this afternoon with Kramer, who has separately outlined her side of the story in detail in a Medium post, where she accuses the company of both unfair labor practices and of being disingenuous in its stated “commitment to transparency and equality in equity.”

The equality piece is certainly the bigger of the two issues, by Kramer’s own telling. She says she learned that she was underpaid when, in the summer of  2018, roughly six months after she joined Carta, it partnered with the women-led investment collective #ANGELS to produce a report that highlighted ownership of venture-backed companies’ equity by gender.

The suspicion driving the report  — and later proved out by its findings — is that as with salary, where women continue to earn less than their male peers, they are also given less equity ownership in the startups for which they work. Kramer, who says she spearheaded the effort, posted the report, which included internal analysis that showed that Carta too, was allocating less equity to women than men.

In response, says the report, 40% of the women at Carta received an equity fix, compared to 32% of the men.

Perhaps unsurprisingly, it was through this same report that Kramer, the only female executive at Carta at the time, says she discovered she was herself underpaid by $50,000 relative to her peers, and that her original equity grant was one-third of the same amount of shares paid to comparable employees, who she says were all men.

Indeed, at the crux of her suit against Carta is that equity grant. While on the heels of the report, the company bumped up her pay by $50,000 and provided her nearly 300,000 more stock options in addition to the 150,000 options she was originally provided, it declined to backdate or accelerate the options to account for the previous six months of her tenure.

That might not seem like such a big deal. But given Carta’s ever-soaring valuation — it was marked at half a billion dollars when Kramer joined the company and it was more recently assigned a $3 billion valuation by its investors — that’s tantamount to a “significant” amount money, Kramer tells us. And she wasn’t about to leave it on the table.

The disparity wasn’t a complete shock to Kramer, who’d previously worked in marketing at Ticketfly, Asana, and Astro Technology (acquired by Slack) . According to her lawsuit, filed by attorney Sharon Vinick, Kramer emailed Carta’s founder and CEO, Henry Ward, when she was initially offered the job, noting that the equity offered was “lower than my expectations.”

According to Kramer, Ward told her that any more equity would be “unfair,” as compensation at her level was uniform for all employees. He also said Carta planned a company-wide review of its salaries and stock options later in the year, and that if it revealed that she was being underpaid, her compensation would be adjusted.

Clearly, Ward and Kramer have different views on whether or not that ultimately happened.

In our call with Kramer, she said still believes in the company’s mission to make equity more understandable for its users and that “therefore I believe it’s a solid product.”

She declined to say whether she has exercised any of her shares, but she said that Carta gives its employees a longer window to do this than many other startups. (How much time is is based in part on their tenure with the company, she’d added.)

Kramer also said that she hopes the company can “live up to”  how it markets itself externally, as an ally of women who are paid less for the same amount of work.

Kramer says her experience inside of Carta — which still has an exclusively male board of directors —  was not of a company that values women as much as men. She alleges that not only was she the only woman who reported directly to Ward during her tenure,  but that two other VP-level execs who joined at roughly the same that she did were promoted to C-level positions despite having “less, and less relevant” work experience in their respective fields whereas her efforts to be promoted went nowhere. (Asked if there were other VP-level male colleagues who were also not promoted during the same period, Vinick said that no one at the time had a comparable role to Kramer, who grew to oversee 27 other people.)

Kramer adds that she stopped being included in meetings where a marketing head would normally be included, fundraising meetings among them, and believes that her efforts to remedy what she perceived as a “sexist culture” within the male-dominated company were at the root of all of these developments.

Eventually, Kramer says, she felt she was forced to resign after a meeting with Ward turned heated and he said Kramer was in violation of the company’s “no asshole policy.” When she wrote him two days later to resign, he wrote back within eight minutes, accepting her resignation and suggesting that both might learn from their experience working together.

Vinick, Kramer’s attorney, tells us Carta is being sued for emotional, punitive, and economic distress and says that now that her law firm has filed the suit, Carta will be served officially with the complaint within another week or two, at which point the discovery process can begin.

Carta does not ask its employees to sign arbitration clauses in their employment agreements, so unless it settles with Kramer or a judge finds some reason to dismiss the case, which seems unlikely, it could eventually head to trial.

In the meantime, the decision to sue is a big gamble for Kramer, but Vinick says she is proud of her client. “Standing up to these situations is an extraordinarily difficult and potentially career-limiting move to take,” but will ultimately help “shine a light on the problem of this equity gap.”

Carta has raised more than $600 million from investors to date, including Andreessen Horowitz, Lightspeed Ventures, and Goldman Sachs.

In April, as it was sealing it up its newest round of funding, it also conducted its first major layoff, parting ways with 161 employees. At the time, Business Insider spoke with eight former employees and one investor who described Carta as a “quickly changing company with huge vision but little focus, where hiring and hypergrowth” had become its core priorities.

#andreessen-horowitz, #asana, #carta, #diversity, #drama, #goldman-sachs, #henry-ward, #lawsuit, #lightspeed-venture-partners, #personnel, #secondaries, #tc, #venture-capital

Alternative assets are becoming mainstream

The way we invest is changing. Technology makes investing easy and more accessible than ever. Meanwhile, Millennials and Gen Z are gravitating away from public equity investments.

These changes have led to the rise of alternative assets. People are increasingly looking for new and innovative ways to approach investing. But are alternative assets truly the new frontier of modern investing?

What is an alternative asset?

As the name suggests, alternative assets are an alternative to traditional assets, like stock, bonds and cash. The term usually describes unconventional investments. That can include anything from a Honus Wagner baseball card to bottles of fine wine. However, it can also apply to more familiar investments, like real estate and private mortgages.

Simply put: alternative assets are the things that probably wouldn’t come up when you meet with your financial advisor. They are not easily categorizable, which makes them more difficult to manage. Often, people invest in alternative assets because of a passion for the asset rather than the immediate ROI.

What makes alternative assets an attractive investment?

Investors will go wherever there is money to be made. That includes alternative assets. In addition to higher potential returns, alternative assets have distinct characteristics from traditional assets. Here are a couple of factors to consider when looking at alternative assets:

Portfolio Diversification

#blockchain, #case, #coinbase, #column, #cryptocurrency, #drama, #ecommerce, #extra-crunch, #finance, #fundrise, #investment, #jobs-act, #market-analysis, #nike, #private-equity, #real-estate, #startups, #stockx

Microsoft and AWS exchange poisoned pen blog posts in latest Pentagon JEDI contract spat

Microsoft and Amazon are at it again as the fight for the Defense Department JEDI contract continues. In a recent series of increasingly acerbic pronouncements, the two companies continue their ongoing spat over the $10 billion, decade-long JEDI contract spoils.

As you may recall (or not), last fall in a surprise move, the DoD selected Microsoft as the winning vendor in the JEDI winner-take-all cloud infrastructure sweepstakes. The presumed winner was always AWS, but when the answer finally came down, it was not them.

To make a very long story short, AWS took exception to the decision and went to court to fight it. Later it was granted a stay of JEDI activities between Microsoft and the DoD, which as you can imagine did not please Microsoft . Since then, the two companies have been battling in PR pronouncements and blog posts trying to get the upper hand in the war for public opinion.

That fight took a hard turn this week when the two companies really went at it in dueling blog posts after Amazon filed its latest protest.

First there was Microsoft with PR exec Frank Shaw taking exception to AWS’s machinations, claiming the company just wants a do-over:

This latest filing – filed with the DoD this time – is another example of Amazon trying to bog down JEDI in complaints, litigation and other delays designed to force a do-over to rescue its failed bid.

Amazon’s Drew Herdner countered in a blog post published this morning:

Recently, Microsoft has published multiple self-righteous and pontificating blog posts that amount to nothing more than misleading noise intended to distract those following the protest.

The bottom line is that Microsoft believes it won the contract fair and square with a more competitive bid, while Amazon believes it should have won on technical superiority, and that there was political interference from the president because he doesn’t like Amazon CEO Jeff Bezos, who also owns the Washington Post.

If you’ve been following this story from the beginning (as I have), you know it has taken a series of twists and turns. It’s had lawsuits, complaints, drama and intrigue. The president has inserted himself into it too. There have been accusations of conflicts of interest. There have been investigations, lawsuits, and more investigations.

Government procurement tends to be pretty bland, but from the start when the DoD chose to use the cutesy Star Wars-driven acronym for this project, it has been anything but. Now it’s come down to two of the world’s largest tech companies exchanging angry blog posts. Sooner or later this is going to end right?

#amazon, #cloud, #drama, #enterprise, #government, #jeff-bezos, #microsoft, #pentagon-jedi-contract, #tc

Zoom retracts statement that it has 300M daily active users

Zoom is not having a good month. As it scales to meet pandemic demand, it has been beset by security issues, which it has had to explain and fix. Today, The Verge reported that the company just changed a blog post, which had previously listed 300 million daily active users (DAUs) to active participants. The company says that figure was misrepresented by an employee.

According to a company spokesperson, CEO Eric Yuan reported 300 million Zoom participants per day in a webinar earlier this month. The company claims an employee then wrote a blog post interpreting that statement as DAUs and published it in the blog post the next day.

Daily active users or DAUs is a standard industry metric measuring the number of unique users per day. Participants, on the other hand, can participate in multiple meetings per day, something that most of us are doing as we work more from home and try to stay connected with work and family. The second number is likely to be much higher and give an inflated sense of how well the company is doing.

When the error was discovered, the company says that it changed the information, but didn’t leave a note initially that the data point had been changed, or make any kind of public statement, even though the incorrect 300 million DAU number was picked up and widely reported (including by this publication).

“We want to be clear: this was first announced in our April 22 webinar as 300 million daily participants by our CEO Eric Yuan. In a follow-up blog post on April 22 recapping this webinar, in addition to referring to participants as ‘participants,’ we also inadvertently referred to them as ‘users’ and ‘people.’ When we realized this error on April 23, we corrected the wording to ‘participants.’ This was a genuine oversight on our part,” the company stated.

In a follow-up to explain why they hadn’t updated the note or released a public statement regarding the error, the company said they had since added a footnote after it was pointed out to them that this was a problem.

“We updated the blog with a footnote and we have updated inaccuracies in the past as we did in the April 1 blog, but for this one in particular it was an oversight which we now have corrected,” a company spokesperson told TechCrunch.

Here is the text of the correction:

#cloud, #collaboration-tools, #drama, #eric-yuan, #tc, #video-conferencing, #zoom

Verizon should make an Epic acquisition

To: Hans (Mr. Vestberg? Boss?)

RE: An Epic opportunity

We wanted to jot down this memo to pitch a deal that could remake Verizon’s fortunes in the media business.

Every major carrier and internet provider has staked out a huge piece of real estate in the entertainment world with the exception of Verizon (the parent of TechCrunch’s parent company). Over the past few years, the world of entertainment has been turned upside down by the $71.3 billion acquisition of 21st Century Fox by Disney; and before that it was the $84 billion deal that brought Time Warner and its assets under the AT&T umbrella.

New players like Netflix, Amazon, and Apple opened a window into the wide world of moneymaking that awaited winning entertainment platforms based in technology — or adjacent to technology platforms. And let’s not get started on YouTube which created whole new genres of entertainment and an entirely new celebrity-making machine.

Verizon has made a couple of bids in the content space for dollars and eyeballs. There was the costly $1 billion go90 bet — Quibi knows it’s hard out there for a mobile first network play. And only slices of the Verizon Media Group (the company formerly known as Oath, which was formerly known as Yahoo-AOL) are even focused on entertainment — it’s mostly news, over here.

Even in the current wildly disruptive environment, there is a chance for Verizon to craft a new narrative for itself in the entertainment space. As you no doubt know, the advancement by acquisition game is a tough one to play cleverly. Integration has costs that go beyond money and focus is key in times like these. But there is one bet that we just can’t shake might be the perfect one for Verizon to make: Epic Games.

Epic is already in the market looking for cash at a valuation above $15 billion, which, given what folks have spent for other (bigger but no less buzzy properties) would be a steal.

Why Epic Games? Well, it’s the company behind Fortnite, the game that every parent has learned to love (when their kids are playing it) and hate (when their kids are playing it too much). The game is more than a simple novelty, however, it’s a messenger, a gathering place and a language of communion for the next generation of mobile customers. You know, the kid who may think of Verizon the way that I thought of IBM back when I was their age: Big, important, but something that sits in the background and does, well, whatever.

Microsoft bought Minecraft recently, and somehow hasn’t screwed that up. Fortnite is like Minecraft, but for older kids! And (we think) it’s bigger!. Bigger kids are also the type that spend bigger money. Future Verizon customers, I reckon.

This isn’t to say that Verizon Media Group isn’t doing well. We actually have been, lately (yeah!), but if we stacked Fortnite next to all our other work, we’d be hot shit. Everyone loves hot shit! Travis Scott just did a concert in Fortnite, what if he had just done one in Fortnite, Powered By Verizon?

We know that Verizon’s down with what the streamer kids are up to these days, because you just partnered with Faze Clan on a benefit event. 

Damn!

Not only that, but think about all the network demand that Verizon could create by making Epic Games’ Fortnite ubiquitous. Hans, boss, Mr. Vestberg, sir… Verizon could POWER THE METAVERSE. And the metaverse is gonna need a lot of 5G infrastructure we’d imagine.

We haven’t even talked about the fact that Epic’s game engine is still a thing too. That’s another potential source of value! 

Anyway, thanks for all that you do and for borrowing another $3.5 billion recently to boost our aggregate corporate liquidity. Let’s do it again, but like 8 times that much, and buy ourselves some Fortnite skins. Like, all of them.

Yours,

Shiebs and Alex

  1. please don’t fire us

#drama, #tc

And then there was one: Co-CEO Jennifer Morgan to depart SAP

In a surprising move, SAP ended its co-CEO experiment yesterday when the company announced Jennifer Morgan will be exiting stage left on April 30th, leaving Christian Klein as the lone CEO.

The pair took over at the end of last year when Bill McDermott left the company to become CEO at ServiceNow, and it looked like SAP was following Oracle’s model of co-CEOs, which had Safra Catz and Mark Hurd sharing the job for several years before Hurd passed away last year.

SAP indicated that Morgan and the board came to a mutual decision, and that it felt that it would be better moving forward with a single person at the helm. The company made it sound like going with a single CEO was always in the plans, and they were just speeding up the time table, but it feels like it might have been a bit more of a board decision and a bit less Morgan, as these things tend to go.

“More than ever, the current environment requires companies to take swift, determined action which is best supported by a very clear leadership structure. Therefore, the decision to transfer from Co-CEO to sole CEO model was taken earlier than planned to ensure strong, unambiguous steering in times of an unprecedented crisis,” the company wrote in a statement announcing the change.

The move also means that the company is moving away from having a woman at the helm, something that’s unfortunately still rare in tech. Why the company decided to move on from the shared role isn’t clear, beyond using the current economic situation as cover. Neither is it clear why they chose to go with Klein over Morgan, but it seems awfully soon to be making a move like this when the two took over so recently.

#christian-klein, #co-ceos, #drama, #enterprise, #jennifer-morgan, #personnel, #sap, #tc

Activist investor Starboard Value taking three Box board seats as involvement deepens

When activist investors Starboard Value took a 7.5% stake in Box last September, there was reasonable speculation that it would begin to try and push an agenda, as activist investors tend to do. While the firm has been quiet to this point, today Box announced that Starboard was adding three members to the 9 member Box board.

At the same time, two long-time Box investors and allies, Rory O’Driscoll from Scale Venture Partners and Josh Stein from DFJ, will be retiring from the board and not seeking re-election at the annual stockholder’s meeting in June.

O’Driscoll involvement with the company dates back a decade, and Stein has been with the company for 14 years and has been a big supporter from almost the beginning of the company.

For starters, Jack Lazar, whose credentials including being chief financial officer at GoPro and Atheros Communications, is joining the board immediately. A second new board member from a list to be agreed upon by Box and Starboard will also be joining immediately.

Finally, a third member will be selected by the newly constituted board in June, giving Starboard three friendly votes and the ability to push the Box agenda in a significant way.

While this was obviously influenced by Starboard’s activist approach, a person close to the situation stressed that it was a highly collaborative effort between the two organizations, and also indicated that there was general agreement that it was time to bring in new perspectives to the board. The end goal for all concerned is to raise the stock value, and do this against the current bleak economic backdrop.

At the time it announced it was taking a stake in Box, Starboard telegraphed that it could be doing something like this. Here’s what it had to say in its filing at the time:

“Depending on various factors including, without limitation, the Issuer’s financial position and investment strategy, the price levels of the Shares, conditions in the securities markets and general economic and industry conditions, the Reporting Persons may in the future take such actions with respect to their investment in the Issuer as they deem appropriate including, without limitation, engaging in communications with management and the Board of Directors of the Issuer, engaging in discussions with stockholders of the Issuer or other third parties about the Issuer and the [Starboard’s] investment, including potential business combinations or dispositions involving the Issuer or certain of its businesses, making recommendations or proposals to the Issuer concerning changes to the capitalization, ownership structure, board structure (including board composition), potential business combinations or dispositions involving the Issuer or certain of its businesses, or suggestions for improving the Issuer’s financial and/or operational performance, purchasing additional Shares, selling some or all of their Shares, engaging in short selling of or any hedging or similar transaction with respect to the Shares…”

Box CEO Aaron Levie appeared at TechCrunch Sessions: Enterprise, the week this news about Starboard broke, and he was careful in how he discussed a possible relationship with the firm. “Well, I think in their statement actually they really just identified that they think there’s upside in the stock. It’s still very early in the conversations and process, but again we’re super collaborative in these types of situations. We want to work with all of our investors, and I think that’ll be the same here,” Levie told us at the time.

Now the company has no choice but to work more collaboratively with Starboard as it takes a much more meaningful role on the company board. What impact this will have in the long run is hard to say, but surely significant changes are likely on the way.

#aaron-levie, #activist-investors, #box, #cloud, #drama, #enterprise, #finance, #saas, #starboard-value, #tc