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Slack’s hidden origins, cybersecurity, fintech, plus Africa’s startup growth

Posted by on Jun 1, 2019 in Anthemis Group, Bugcrowd, slack, The Extra Crunch Daily | 0 comments

The Slack Origin Story

Slack is one of the most iconic enterprise companies to come out of Silicon Valley. Part of the reason is the mythos surrounding the startup’s founding as a games company and later pivot into workplace communication. But what’s the story behind the story of the high-flying company? Who supported the company every step of the way?

Our venture capital reporter Kate Clark has the history and background on Slack, soon to be trading as WORK on the NYSE.

“We realized, wow, this is hugely a productive way of working and I think all of us agreed we wouldn’t work without a system like this again and maybe other people would like it,” Butterfield said in a recent video released by Slack ahead of its June 20 direct listing on the New York Stock Exchange.

So the team reimagined their future and looked to their investors for support.

Accel, sources tell TechCrunch, remained committed. Andreessen Horowitz, however, had a more complicated response. According to sources familiar with the matter, a16z was highly skeptical of Butterfield and whether he could succeed in the enterprise space. When Tiny Speck went out to raise its first round of capital as an enterprise software upstart in what would technically be its Series C, a16z hesitated.

A source close to Slack told TechCrunch that a16z put the company “through the ringer,” telling Butterfield that enterprise “wasn’t in his DNA.” A16z denies these accounts citing their close relationship with Butterfield and the business in 2019. Admittedly, it’s unclear how much capital a16z may or may not have funneled to Slack at the Series C but given it currently owns nearly 10 percent less of Slack than Accel, a fellow early investor, its likely to have cut back its capital commitments around the time of Tiny Speck’s pivot.

Feedback on product and editorial?

It’s been about 15 weeks since we launched Extra Crunch. Since then, we have covered everything from deep dives into Patreon and Niantic (Unity is coming right up – I’ve been editing the drafts) to growth tactics and how to raise venture capital really, really fast, to building out a Verified Experts list of top startup professionals.


Source: The Tech Crunch

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Zoom, housing affordability, Mailchimp, Yext, and Uber

Posted by on May 15, 2019 in housing, Luckin Coffee, Lyft, Mailchimp, The Extra Crunch Daily, Uber, yext, zoom | 0 comments

Conference call with CEO Eric Yuan of newly-IPOd Zoom

Since we first started Extra Crunch three months ago (my, time flies), we’ve been offering members live conference calls with our reporters. This week, we are trying something new and bringing a guest aboard.

TechCrunch’s SF-based startup and venture capital reporter Kate Clark is going to talk today with Eric Yuan, who founded video conferencing startup Zoom that just went public last month, making Yuan a very happy man.

Come armed with your questions or send them in to Arman Tabatabai. Instructions for joining the call will be mailed to members about an hour in advance, so check your inboxes.

Housing affordability market map

Dan Wu, a regtech and legaltech evangelist, published a great series of market maps on the housing affordability space this week on Extra Crunch, covering more than 200+ companies and organizations. He looks at spaces as diverse as property management, land acquisition, group developers, and new financial asset classes.


Source: The Tech Crunch

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EC-exclusive interview with Tim Cook, Slacklash, and tech inclusion

Posted by on May 11, 2019 in Amazon Web Services, app developers, Chanda Prescod-Weinstein, Deezer, Geoff Cook, Google, Groupon, IBM, Kate Clark, kidbox, Matthew Panzarino, Microsoft, om malik, San Francisco, The Extra Crunch Daily, Tim Cook, Travis Kalanick, True Ventures, Uber, WeWork | 0 comments

An EC-exclusive interview with Apple CEO Tim Cook

TechCrunch editor-in-chief Matthew Panzarino traveled to Florida this week to talk with Tim Cook about Apple’s developer education initiatives and also meet with high school developer Liam Rosenfeld of Lyman High School. Apple wants to attract the next set of app developers like Liam into the Xcode world, and the company is building a more ambitious strategy to do so going forward:

But that conversation with Liam does bring up some questions, and I ask Cook whether the thinks that there are more viable pathways to coding, especially for people with non-standard education or backgrounds.

“I don’t think a four year degree is necessary to be proficient at coding,” says Cook. “I think that’s an old, traditional view. What we found out is that if we can get coding in in the early grades and have a progression of difficulty over the tenure of somebody’s high school years, by the time you graduate kids like Liam, as an example of this, they’re already writing apps that could be put on the App Store.”

Against the Slacklash

TechCrunch columnist Jon Evans often writes on developer tools and productivity (see, for example, his Extra Crunch overview of the headless CMS space). Now, he sets his sights on Slack, and finds the product … much better and more productive than many would have you believe, and offers tips for maximizing its value:


Source: The Tech Crunch

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How far are you willing to go for growth?

Posted by on Mar 1, 2019 in Banking, Finance, Government, infrastructure, money laundering, New York City, Policy, Revolut, The Extra Crunch Daily | 0 comments

There is a deep dilemma facing startup founders that I think just isn’t brought to light often enough. On one hand, almost all (and I do mean almost all) founders are reasonably ethical people. They can be over-optimistic, they can over-promise, they can be inexperienced around management, but at their core, they want to improve the world, build something new, and yes, make (a lot) of money while doing it.

Yet, if you really want to grow fast — so fast that you can go from piddling startup to $1.7 billion-valued banking unicorn in less than four years — then there are only so many ways to do that ethically. Or even legally, given that the laws around industries like banking aren’t designed for high growth, but rather sedentary expansion.

Here’s a lesson that I think founders internalize very, very early: growth solves all problems. And it is absolutely, 100 percent true. Growth absolutely solves all problems. Want to make your next fundraise a cinch? If you grow 5x or 7x year-over-year, watch as dozens of venture firms squabble to get access to that cap table. Want to hire faster and attract better talent? Growing at top speed is an easy way to lock in those people.

And if you think the board acts as a guard rail, you have never seen the giddy excitement of a VC who is seeing their yacht / Napa vineyard / Atherton estate being financed before their very eyes. Boards don’t ask tough questions in periods of high growth, they double down: “do everything to keep this rocket ship shooting for the stratosphere.”

In these situations, it is nearly impossible to balance growth and ethics. You can’t just say, “turn on the money laundering thing again and we will accept 5x instead of 7x” or whatever. The whole organism of the startup has been geared for growth. Hell, even the people not working for the company (but want to) are geared for growth. Every salary bump, equity distribution, performance evaluation, feedback, KPI and firing is predicated on growth.

Sometimes you get away with it, and sometimes you don’t. Uber got away with it, Zenefits did not.

So where does Revolut sit, which I’ve been foreshadowing here? By now, you might have come across the three-part story arc of Revolut, a digital banking service based in London. In part one, Revolut is a fintech darling founded in July 2015 that has since raised $336 million in venture capital within four years at a $1.7 billion valuation, according to Crunchbase.

Insane growth, huge market, real product. It’s the best first act for a startup one can possibly hope for.

Then the bad news started hitting hard this week. In act two, we get this Wired exposé by Emiliano Mellino that discusses the atrocious working conditions of the company along with deeply questionable employee interview tactics:

She did a 30-minute job interview over Google Hangouts with the London-based head of business development, Andrius Biceika, and was immediately told she had passed to the next round, which would involve a small test. “The surprise came when I received the task and it asked me to get the company as many clients as possible, with each one depositing €10 into the app,” says Laura.

And using fear to goad performance:

Last spring, CEO Nikolay Storonsky sent an announcement to all staff through the company’s Slack messaging service, saying that any members of staff “with performance rating [sic] ‘significantly below expectations’ will be fired without any negotiation after the review”.

Around this time, CEO Nikolay Storonsky gave an interview to Business Insider where he said Revolut’s philosophy was to “get shit done”, a slogan that is emblazoned on the company’s London office walls in bright neon lights. In an echo to what was going on in these calls, Storonsky would go on to say in the interview that the company attracted people that want to grow and “growing is always through pain”.

Well, there is more growth to come, because act three is going to bring a very painful episode for the company. My colleague Jon Russell noted that Revolut’s CFO has resigned in the wake of a Daily Telegraph investigation showing that Revolut had switched off the anti-money-laundering safeguards at the company, because, well, it got in the way of growth.

Let’s be clear: We all love a rapidly growing startup. We all want to invest in or join a winner. But what are we willing to forego to get it? Are we willing to push ethical boundaries? Are we willing to use dark patterns to force those numbers higher? Are we willing to break the law and potentially go to prison? Our love of growth often knows no bounds.

In context, I’m sure Revolut’s decision came easily, but of course, for disinterested observers, the idea that you would switch off the AML system at a banking startup just looks like complete stupidity. Yet, I am not sure I am ready to blame the employees of Revolut (or its leaders, frankly) before I place the blame on a culture that demands extreme growth and dislikes it when the consequences come to bear. You can’t get extreme growth without something breaking. We need to decide which value is more important for us.

Extra Crunch ethics series

Not sure we are going to be able to answer all the questions posed by Revolut, but Extra Crunch will be hosting a series of dialogues around tech ethics in the coming weeks that will try to parse some of the tough challenges that come from technology and startups these days. Stay tuned.

Why fundamental self-interest causes U.S. infrastructure to fall flat on its face

Simon McGill via Getty Images

Written by Arman Tabatabai

Yesterday, DJ Gribbin, a fellow at Brookings and a senior U.S. government infrastructure official, published an op-ed in which he attributes the U.S.’ infrastructure struggles largely to 1) a misunderstanding of federal fund availability, 2) the fragmentation and variability of local infrastructure needs and 3) misaligned incentives for local politicians and contractors.

Local politicians push heavily for the federal government to cover a portion of their bill, advertising the money as free to their constituents. In reality, investing federal funds is a zero-sum game that requires either more taxation, higher debt or pulling money from elsewhere. What results are the competitive bid and bureaucratic review processes we discussed earlier this week that ultimately lead to gamesmanship and misinformation.

The federal-local coordination has grown more difficult as projects have become more localized with region-specific needs and benefits, compared to national projects of old like the highway system. Now, executing local developments depends on coordination between federal, state and local governments, leading to the political pissing contests we all know and love.

In Gribbin’s mind, the biggest flaw in the U.S.’ approach to infrastructure — also raised in our conversation with infrastructure expert Phil Plotch — is the misaligned incentive system that encourages bad behavior from all parties.

The complexity of approval and funding processes causes local politicians to either delay projects as they lobby for federal funding or to “overpromise and underdeliver” on costs and benefits to push a project through.

Similarly, competitive RFP bidding used to reduce cost estimates encourages contractors to similarly overpromise, leading to plan revisions, construction issues and delays that seem to be inevitable for every major project. Clearly more needs to be done to align the incentives of each of these players.

Software and infrastructure

JayLazarin via Getty Images

Written by Arman Tabatabai

New York City rail operators grew frustrated this week with the contractors hired to install a new safety system. Fumbled management and failed execution on what was thought to be a simple tech integration have caused multi-year delays, potentially pushing completion past the deadline set by the Federal Railroad Administration for railroads across the country to upgrade their safety systems.

Only about one-tenth of the mandated rails had successfully upgraded their system as of last year as local agencies continue to struggle with designing software and hardware platforms compatible with other trains that may use their lines. That pattern is also found in New York. From The Wall Street Journal article:

The projects have suffered a series of setbacks because of understaffing by the contractors as well as software and hardware failures. Those failures include the recall of antennas that were installed on more than 1,000 rail cars and that were later found to be defective.

“It was a novice error and we did not believe we had hired novices,” MTA board member Susan Metzger said.

The New York project mimics issues plaguing projects throughout the U.S., where contractors use the “overpromise, underdeliver” strategy to win competitive bids. Add in software incompetence and you get the mess that New York is facing now.

DC commutes suck more than in NYC and SF, even before Amazon materializes

Richard Sharrocks via Getty Images

Written by Arman Tabatabai

According to a new data set from Bloomberg, the cost of commuting into Washington, D.C. is higher than any other metro in the U.S. Though density is clearly a factor here, workers in the greater D.C. area face the longest commute time in the country at nearly 80 minutes on average. Bloomberg then derived a “score” for the opportunity cost of commutes based on average annual incomes and average total annual commuting hours per worker, weighted based for other externalities such as how early or late average departures were.

D.C. is in the midst of seriously expanding its Metrorail system but, unsurprisingly, the project has gone far from smoothly. Bloomberg’s findings stress the need for an improved transit system in the region, but based on precedent and progress to date it’s unclear if and when the full expansion will be complete and at what ungodly cost.

We’re planning on diving deeper into D.C.’s Metrorail expansion project as we read The Great Society Subway by Zachary Schrag, which just arrived at Extra Crunch HQ this week.

Obsessions

  • We have a bit of a theme around emerging markets, macroeconomics and the next set of users to join the internet.
  • More discussion of megaprojects, infrastructure, and “why can’t we build things?”

Thanks

To every member of Extra Crunch: thank you. You allow us to get off the ad-laden media churn conveyor belt and spend quality time on amazing ideas, people and companies. If I can ever be of assistance, hit reply, or send an email to danny@techcrunch.com.

This newsletter is written with the assistance of Arman Tabatabai from New York.


Source: The Tech Crunch

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India’s entrepreneurial future

Posted by on Feb 26, 2019 in Asia, Government, Policy, The Extra Crunch Daily | 0 comments

Few countries have more entrepreneurial potential than India. It’s home not just to the wave of IT offshoring firms of the 1990s and early 2000s, but also to some of the most interesting unicorn tech startups in the world, including Freshworks, Paytm, Oyo and of course Flipkart, which sold to Walmart last year for $16 billion.

India though is also at something of an economic crossroads. Unlike China, which as we discussed yesterday faces a conflict between open entrepreneurship and strict party control in its next stage of development, India must build up its indigenous startups while also opening up to the global economy.

That economic balancing act will be tough. As James Crabtree, a long-time writer of the Financial Times based in Mumbai, argues in his book The Billionaire Raj, India faces a triple threat of “inequality and the new super-rich, crony capitalism, and the travails of the industrial economy” as it seeks to move the country into middle-income status.

Crabtree, who built up access among India’s traditional business elite over many years, sees a nation that is starving for more government capacity. India has transitioned in a few short decades from a moribund economy languishing under a sclerotic and byzantine bureaucratic model (sometimes referred to as the “license raj”) into an increasingly open and competitive market for goods and services.

Yet, success outside of a scant few industries — namely IT services — has been undergirded by political access and the trading of favors. Crabtree chronicles a whole crop of entrepreneurs from across the country in industries as far afield as mining to liquor to aircraft to show the constant intermixing of Indian business and Indian politics.

That crony capitalism is at the heart of what he dubs today’s “billionaire raj” — a government that isn’t for the ultra-rich so much as it lacks any capacity whatsoever to stand up to its worst excesses and corruption. The book is one part travelogue, one part analysis, and one part biographical bookshelf that together paint a complicated portrait of India’s growth ambitions and challenges to scale.

Given where India’s fortunes have been made the past few decades, the book mostly ignores the tech industry, save for fleeting mentions scattered about. But I asked Crabtree in an interview last week where he saw the country headed, and how technology might underpin that.

“People thought that India was going to become the next hot market for Silicon Valley tech money after China, but it doesn’t look like that will be the case,” he explained. Unlike China, which created friction in market entry for foreign tech companies, India has been reasonably open. “The biggest search engine in India is Google, the biggest social network is Facebook,” he noted. “They don’t make much money in India, but they have spectacular user growth.”

“When I lived in Mumbai, there was a big tech investment wave in the after wave of the Alibaba IPO,” he explained. “There were these great hopes that India would follow the sort of hockey stick growth” seen in China. Yet, the country’s demographics don’t back that up. “India has a tiny middle class — 10-20 million” using a reasonable definition of the term “middle class.” That group is simply not large enough to support the valuation dreams underpinning some of India’s most-discussed unicorns. “Growing users is really easy, but growing revenues is just much more challenging,” he said.

The challenge ahead for India is that a form of economic nationalism is increasingly popular in Delhi. We have covered a bit of this change around data localization / sovereignty, but it is certainly much wider than those policies. “I think there is a slow but steady trend toward closure that is partly to do with India’s domestic politics” and partly due to international climate, Crabtree explained. The thinking is that, “China has produced Alibaba, Tencent, and Baidu [… but] India hasn’t produced any major global stars yet.”

Fueling that rift is a sense that foreign tech giants “don’t pay much in the way of tax, they are not Indian companies” and that they “haven’t behaved particularly well.” Crabtree was referring specifically to Facebook’s Free Basics program, which became deeply controversial in the country, although those feelings are not limited to just Facebook.

India has a massive election coming up in just a few weeks, which will decide whether current Indian prime minister Narendra Modi stays in power. Beyond just policy, Crabtree sees a major challenge for all foreign tech companies, but particularly those operating social networks. “The stakes are very high for how social media manages the stresses and strains of a competitive and potentially nasty Indian political campaign,” he said. “If they are blamed for something that went wrong… this would be immensely damaging.”

India has the potential to be the single largest democratic free market economy in the world. But it needs to simultaneously cut down on its corruption, create jobs for millions of new entrants to the labor economy every year, stand up a new generation of digital-first behemoths, all the while balancing the needs of an incredibly diverse and cacophonous democracy buffeted by global markets and tastes. That’s ultimately a tall order, but if India wants to migrate from a “billionaire raj” to an “entrepreneur raj,” it will have to do all of that — at once.

Talking about borders: Talent-friendly immigration driving tech north of the border

Roberto Machado Noa/LightRocket via Getty Images

Written by Arman Tabatabai

Yesterday, we talked about the growing difficulty of the H-1B visa application and approval process in the US, and how it threatens America’s long-term entrepreneurial edge. In a prime example of the connection between immigration policy and technology leadership — the FT put out a deep-dive analysis on the rapidly growing Toronto tech and startup scene, with much of the expansion attributable to Canada’s talent-friendly immigration policies.

Canada applies the “give grads a visa with their diploma” approach many have preached for in the US, providing multi-year work visas to foreign students upon graduation. And while the US continues to make the individual application process more difficult, Canada has streamlined its process. Applications for highly-skilled workers, as well as their families, are processed within just a couple weeks.

While there are clearly several intertwined factors behind the growth of Toronto as a tech hub, talent is certainly one of them, with the city having added nearly 100,000 jobs in a five-year period. Toronto offers a case-in-point precedent of how cities can use immigration to gain a technological edge, and why the United States’ misdirected crackdown is undermining its own.

Intel cancels agreement with China chipmaker in fight for next generation chip dominance

Photo via Intel Corporation

Written by Arman Tabatabai

Intel continues to shift its strategy as it tries to improve its position for next-generation chip leadership. At the MWC conference in Barcelona, Intel announced that it was terminating a multi-year partnership with one of China’s premier state-backed mobile chipmakers, Unisoc. As part of the original agreement announced roughly a year ago‚ Intel would share its new 5G modem chips with Unisoc to help Intel increase its lagging market share in China, while providing Unisoc technological know-how needed for it to compete with more-advanced competitor offerings.

Like many breakups, the two sides are saying the decision was mutual and not a result of the political tension between the US and Chinese governments. However, the Nikkei Asian Review reports that insiders say the US’ recent harsh tone with Chinese tech and semiconductor companies definitely played a role in the decision.

As we discussed yesterday, Intel has a lot of catching up to do after years of complacency and will now have to find a different avenue to make up ground in the Chinese market. Unisoc is also certainly feeling the pain of the lost knowledge transfer, as market share can disappear quickly in a highly competitive industry where IP is often the secret sauce. The cancellation of what seemed to be a mutually beneficial deal reinforces the fact that the fight for next-generation semiconductor dominance is just as much political as it is financial, if not more so.

Other news from around the world

Facebook’s censors are struggling at work

Casey Newton at The Verge offered us a deep-dive into the horrific working conditions and post-traumatic stress of working as a censor for Facebook and its contractors. While artificial intelligence and advances around computer vision may allow more of this to be automated in the future, Newton brings up a key question: what are we doing right now to help the working-class workers who keep social networks safe for users?

Could corporate VC unlock the Japanese startup market?

Pavel Alpeyev at Bloomberg has a deep-dive highlighting the rapid expansion of Japanese corporate venture capital. The trend is permeating the country’s largest companies across all industries, with the number of Japanese corporate venture arms increasing by more than 8x since 2015. The Japanese market has traditionally been viewed as an unfriendly environment for startups, but the growing availability of capital and support from Japan’s all-powerful incumbent corporations makes building a company seem more feasible. ~ Written by Arman Tabatabai

Mobile usage gender gap reinforces the social obligation for big tech

Leading mobile companies from around the world have been aggressively competing for ownership of emerging market populations. In a recent analysis, Yomi Kazeem at Quartz Africa highlighted the tremendous gender gap that exists in emerging market mobile usage — with female use up to 30% lower in some cases — which represents a significant untapped user base that Quartz estimates could generate $140 billion in revenue over the next five years. We plan on revisiting the topic of how incumbent tech will unlock growth in the future as we dive into Payal Arora’s book The Next Billion Users: Digital Life Beyond the West. ~ Written by Arman Tabatabai

Obsessions

  • We have a bit of a theme around emerging markets, macroeconomics, and the next set of users to join the internet.
  • More discussion of megaprojects, infrastructure, and “why can’t we build things”

Thanks

To every member of Extra Crunch: thank you. You allow us to get off the ad-laden media churn conveyor belt and spend quality time on amazing ideas, people, and companies. If I can ever be of assistance, hit reply, or send an email to danny@techcrunch.com.

This newsletter is written with the assistance of Arman Tabatabai from New York


Source: The Tech Crunch

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With China tariffs delayed, Beijing faces startup dilemma

Posted by on Feb 25, 2019 in Asia, China, data localization, Government, H-1B, immigration, India, Intel, Policy, robert swan, taiwan, Tencent, The Extra Crunch Daily, video games | 0 comments

China is facing a challenging juxtaposition in the coming years: can the government remain in control of business and media while also opening up the country to the knowledge economy?

China has uplifted more humans in a shorter period of time than any other country in the history of the planet. That mesmerizing growth engine, though, is starting to face an intense slog. Economic growth has slowed considerably, and while there are vagaries to these indicators, it is clear that China needs to rebuild its economy as it migrates from industrials into services.

The future (of course) is all the buzzwords that linger in Silicon Valley coffee shops: innovation, startups, and entrepreneurship, mixed in with some Chinese flavors like indigenous technology development. China has designs to be the world-leader in semiconductors and artificial intelligence. To get there though, it needs to create the intellectual environment to push the frontiers of science and technology.

That’s the debate happening right now. On one side, you have this discussion from the New York Times’ Asia business columnist Li Yuan from this weekend. Chinese entrepreneurs are supposedly fleeing the country and seeking safer waters as the government clamps down on dissent and further censors China’s already narrow internet.

Few are predicting a crash, but worries over China’s long-term prospects are growing. Pessimism is so high, in fact, that some businesspeople are comparing China’s potential future to another country where the government seized control of the economy and didn’t ease up: Venezuela.

Only one-third of China’s rich people say they are very confident in the country’s economic prospects, according to a recent survey of 465 wealthy individuals by Hurun, a Shanghai-based research firm. Two years ago, nearly two-thirds said they were very confident. Those who have no confidence at all rose to 14 percent, more than double the level of 2018. Nearly half said they were considering migrating to a foreign country or had already started the process.

Minxin Pei, a well-known writer on China’s business environment and politics, was quoted by Yuan as saying:

“It’s clear to the private businesspeople that the moment the government doesn’t need them, it’ll slaughter them like pigs. This is not a government that respects the law. It can change on a dime.”

China’s government furiously denied the article’s contention, arguing in its international-focused mouthpiece that:

Because some Western media’s always tend to smear or even subvert China’s political system. Take Chen Tianyong’s story. With ulterior motives, the New York Times tells stories of certain Chinese individuals and then exaggerates the fact, thus declaring that there are serious problems in China’s economy and political system. This is their consistent practice and some foreign people who do not understand China will fall into the Western media’s trap. Chinese people always need to be on the alert for such ill-intentioned articles.

(Really, it’s fun to read the Global Times in the morning, in the way that taking a New York City subway at 8:15am on Monday morning is fun).

Yet, for all the entrepreneurs supposedly leaving, business opportunities remain robust. China’s government announced a huge economic development plan to create a “Greater Bay Area” region around Guangdong, Hong Kong, Macau and others to compete directly with California’s Bay Area (The Lesser Bay Area: Even Better Without High-Speed Rail!™). The goal is to build upon the region’s manufacturing prowess and increasingly turn it into a source for technology innovation. If the blueprint’s economic goals are achieved, the region would rival the United Kingdom in economic size.

But that’s a big “if.”

Few areas of the economy show the tension between openness and control better than the video game industry. China has once again stopped approving licenses for games in the country last week, after a brief session of approvals following last year’s nine-month long hiatus. Tencent, which produces some of the country’s most popular games, has lost nearly a quarter of its value in the meantime, even while it puts new streaming rules into effect to try to please the government.

China has incredible potential to lead in technology (and frankly beat the United States) if it can figure out how to open its economy, perhaps not to foreign competition, but at least to its own talent. Yuan quotes several entrepreneurs saying that Trump’s trade war with China may be the country’s last hope for a more open environment. Trump’s delay implementing tariffs on China this weekend, though, highlights the danger of relying on external forces to push domestic change. Only the Chinese can rebuild China’s economy.

Across the strait, Taiwan’s Silicon Valley is fizzling

Photo by keel via Getty Images

Becoming the next Silicon Valley is every government’s dream, although few seem capable of putting all the pieces together to make it happen. Take Taiwan, which has made innovation a key watchword as it attempts to survive in the penumbra of China’s overwhelming economy.

It’s Silicon Valley plans are fizzling from lack of action and a stagnant economy according to a translated article in the Taiwan Gazette:

But according to a member of the opposition Chinese Nationalist Party (KMT), the Agency’s goal is hindered by cumbersome business regulations and restrictive visas and work permits.

“Although [the government was] targeted to issue 2200 visas, the Plan so far has disbursed a mere two,” said Jason Hsu, a KMT legislator with experience in Taiwan’s innovation sector.

Hsu said the government has not succeeded in attracting any global entrepreneurs to the island since the plan was implemented. The Agency has been slow to implement the Asia Silicon Valley plan, prioritizing other aspects, or simply failing to match action with words.

Compounding Taiwan’s global talent crunch is competition from China and the US, with graduates moving house to take advantage of higher wages and better employment opportunities.

You can’t build an innovative economy if the talent can’t or won’t show up.

U.S. slowing H-1B visas

Image by Blue Diamond Gallery used under Creative Commons

Meanwhile, the United States has plenty of talent that wants to show up of course, but increasingly wants to prevent at least some of them from staying in the country.

We previously talked about how the Trump administration was attempting to simplify some elements of the H-1B process. Now, USCIS has released new data that shows a decline in the approval rate for H-1B visa applications. In 4Q18 only 75% of H1-B applications were approved, compared to 83% and 92% in 2017 and 2016 respectively.

The application process itself has also gotten more intensive, with reviewing agencies requesting additional evidence from roughly 60% of corporate applicants in the fourth quarter of 2018, compared to 46% and 28% in 2017 and 2016, respectively. The Wall Street Journal noted that Apple, Microsoft and others had a 99% approval rate, while Capgemini was much lower at 60%.

Maybe some of these applications are marginal, and protecting the wages of American workers is a fair compromise. More transparency here would be very helpful. But if the United States wants to maintain its technological edge, it needs smart and talented workers to congregate here. These new rates do not bode well.

Intel investing heavily to regain lost ground in the battle for chip supremacy

Photo via Intel Corporation

Written by Arman Tabatabai

At a press event last week, Intel’s newly appointed CEO Bob Swan reiterated the company’s strategy of investing heavily in growth markets outside of its core competencies. The company has taken heat for racking up its R&D bills, but Swan insisted that the chip giant needs to spend that money after struggling in recent years to keep up with the industry’s transition to new technologies.

Intel invested nearly $30 billion last year in R&D with a focus on memory, 5G, and graphical processing units (GPUs), which are seen as the best option for artificial intelligence, machine learning, and any use case needing strong parallelized processing capabilities. The FT quoted Swan as saying :

…“If we want to play in a much larger market we’re going to continue to invest more in R&D, there’s no question about that,” he said. “We don’t want to get too penny wise and pound-foolish so we don’t invest for the future.”

Traditional brand names chipmakers have lost dominant share by investing heavily in whatever was driving profits at the time, while ignoring emerging tech that has become the primary source of growth. Intel is now paying for their failure to move sooner.

Are India’s nationalist policies creating a closed internet?

Photo by MONEY SHARMA/AFP/Getty Images

Written by Arman Tabatabai

India is facing a similar dilemma to China on how open it wants to make its economy.

India’s government announced draft policies that will dictate operational requirements for ecommerce, social, and messaging companies. Following the country’s heightened focus around data localization, which we have discussed before, the set of proposals announced over the weekend would require internet companies to maintain locally-housed data centers and servers, impose a legal framework for regulating the movement of user data across borders, provide the government with access to company data stored abroad upon request, and force ecommerce websites or apps operating in India to have a locally registered business entity.

At the same time, the government also announced plans to institute policies that would require social networking and messaging platforms to swiftly remove content deemed “unlawful” or threatening to the “sovereignty and integrity of India.”

While the Indian government is trying to take a hardline approach to avoid the misconduct that has followed the expansion of big tech, they’re also putting further pressure on companies that already face a tougher, more expensive operating environment behind India’s “national champion” policy push as we’ve harped on before.

As India continues to move towards nationalist policies that make it difficult for companies to compete, a Chinese-style closed and censored internet increasingly seems likely.

Obsessions

  • We’re excited since Little Brown & Co just announced a retrospective from Netflix co-founder and original CEO, Marc Randolph, coming this fall and entitled “That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea.”
  • Lots of other book coverage coming this week including Billonnaire Raj by James Crabtree, The Next Factory of the World by Irene Yuan Sun, and The Next Billion Users by Payal Arora.
  • More discussion of megaprojects, infrastructure, and “why can’t we build things”

Thanks

To every member of Extra Crunch: thank you. You allow us to get off the ad-laden media churn conveyor belt and spend quality time on amazing ideas, people, and companies. If I can ever be of assistance, hit reply, or send an email to danny@techcrunch.com.

This newsletter is written with the assistance of Arman Tabatabai from New York


Source: The Tech Crunch

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