Startups Weekly: SoftBank’s second act

Hello and welcome back to Startups Weekly, a weekend newsletter that dives into the week’s noteworthy startups and venture capital news. Before I jump into today’s topic, let’s catch up a bit. Last week, I noted some challenges plaguing mental health tech startups. Before that, I wrote about Zoom and Superhuman’s PR disasters.

Remember, you can send me tips, suggestions and feedback to kate.clark@techcrunch.com or on Twitter @KateClarkTweets. If you don’t subscribe to Startups Weekly yet, you can do that here.

Anyway, onto the subject on everyone’s mind this week: SoftBank’s second Vision Fund.

Well into the evening on Thursday, SoftBank announced a target of $108 billion for the Vision Fund 2. Yes, you read that correctly, $108 billion. SoftBank indeed plans to raise even more capital for its sophomore vehicle than it did for the record-breaking debut vision fund of $98 billion, which was majority-backed by the government funds of Saudi Arabia and Abu Dhabi, as well as Apple, Foxconn and several other limited partners.

Its upcoming fund, to which SoftBank itself has committed $38 billion, has attracted investment from the National Investment Corporation of National Bank of Kazakhstan, Apple, Foxconn, Goldman Sachs, Microsoft and more. Microsoft, a new LP for SoftBank, reportedly hopped on board with the Japanese telecom giant as part of a grand scheme to convince the massive fund’s portfolio companies to transition to Microsoft Azure, the company’s cloud platform that competes with Amazon Web Services. Here’s more on that and some analysis from TechCrunch editor Jonathan Shieber.

News of the second Vision Fund comes as somewhat of a surprise. We’d heard SoftBank was having some trouble landing commitments for the effort. Why? Well, because SoftBank’s investments have included a wide-range of upstarts, including some uncertain bets. Brandless, a company into which SoftBank injected a lot of money, has struggled in recent months, for example. Wag is said to be going downhill fast. And WeWork, backed with billions from SoftBank, still has a lot to prove.

Here’s everything else we know about The Vision Fund 2:

• It’s focused on the “AI revolution through investment in market-leading, tech-enabled growth companies.”
• The full list of investors also includes seven Japanese financial institutions: Mizuho Bank, Sumitomo Mitsui Banking Corporation, MUFG Bank, The Dai-ichi Life Insurance Company, Sumitomo Mitsui Trust Bank, SMBC Nikko Securities and Daiwa Securities Group. Also, international banking services provider Standard Chartered Bank, as well as “major participants from Taiwan.”
• The $108 billion figure is based on memoranda of understandings (MOUs), or agreements for future investment from the aforementioned entities. That means SoftBank hasn’t yet collected all this capital, aside from the $38 billion it plans to invest itself in the new Vision Fund.
• Saudi and Abu Dhabi sovereign wealth funds are not listed as investors in the new fund.
• SoftBank is expected to begin deploying capital fund from Fund 2 immediately, and a first close is expected in two months, per The Financial Times.
• We’ll keep you updated on the Vision Fund 2’s investments, fundraising efforts and more as we learn about them.

On to other news…

IPO Corner

WeWork is planning a September listing

The company made headlines again this week after word slipped it was accelerating its IPO plans and targeting a September listing. We don’t know much about its IPO plans yet as we are still waiting on the co-working business to unveil its S-1 filing. Whether WeWork can match or exceed its current private market valuation of $47 billion is unlikely. I expect it will pull an Uber and struggle, for quite some time, to earn a market cap larger than what VCs imagined it was worth months earlier.

Robinhood had a wild week

The consumer financial app made headlines twice this week. The first time because it raised a whopping $323 million at a $7.6 billion valuation. That is a whole lot of money for a business that just raised a similarly sized monster round one year ago. In fact, it left us wondering, why the hell is Robinhood worth $7.6 billion? Then, in a major security faux pas, the company revealed it has been storing user passwords in plaintext. So, go change your Robinhood password and don’t trust any business to value your security. Sigh.

Another day, another huge fintech round

While we’re on the subject on fintech, TechCrunch editor Danny Crichton noted this week the rise of mega-rounds in the fintech space. This week, it was personalized banking app MoneyLion, which raised $100 million at a near unicorn valuation. Last week, it was N26, which raised another $170 million on top of its $300 million round earlier this year. Brex raised another $100 million last month on top of its $125 million Series C from late last year. Meanwhile, companies like payments platform Stripe, savings and investment platform Raisin, traveler lender Uplift, mortgage backers Blend and Better and savings depositor Acorns have also raised massive new rounds this year. Naturally, VC investment in fintech is poised to reach record levels this year, according to PitchBook.

Uber’s changing board

Arianna Huffington, the CEO of Thrive Global, stepped down from Uber’s board of directors this week, a team she had been apart of since 2016. She addressed the news in a tweet, explaining that there were no disagreements between her and the company, rather, she was busy and had other things to focus on. Fair. Benchmark’s Matt Cohler also stepped down from the board this week, which leads us to believe the ride-hailing giant’s advisors are in a period of transition. If you remember, Uber’s first employee and longtime board member Ryan Graves stepped down from the board in May, just after the company’s IPO. 

Today I told my fellow @Uber board members that given @Thrive's growth, I will no longer be able to give my board duties the attention they deserve, so I will be stepping down. I look forward to watching Uber go from strength to strength! Here is the email I sent to the board: pic.twitter.com/sck0CPLwAV

— Arianna Huffington (@ariannahuff) July 24, 2019

Startup Capital

Unity, now valued at $6B, raising up to $525M
Bird is raising a Sequoia-led Series D at $2.5B valuation
SMB payroll startup Gusto raises $200M Series D
Elon Musk’s Boring Company snags $120M
a16z values camping business HipCamp at $127M
An inside look at the startup behind Ashton Kutcher’s weird tweets
Dataplor raises $2M to digitize small businesses in Latin America

Extra Crunch

While we’re on the subject of amazing TechCrunch #content, it’s probably time for a reminder for all of you to sign up for Extra Crunch. For a low price, you can learn more about the startups and venture capital ecosystem through exclusive deep dives, Q&As, newsletters, resources and recommendations and fundamental startup how-to guides. Here are some of my current favorite EC posts:

1. What types of startups are the most profitable?
2. The roles tools play in employee engagement
3. What to watch for in a VC term sheet

#Equitypod

If you enjoy this newsletter, be sure to check out TechCrunch’s venture-focused podcast, Equity. In this week’s episode, available here, Equity co-host Alex Wilhelm, TechCrunch editor Danny Crichton and I unpack Robinhood’s valuation and argue about scooter startups. Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple Podcasts, Overcast and Spotify.

That’s all, folks.

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Siri recordings “regularly” sent to Apple contractors for analysis, claims whistleblower

Apple has joined the dubious company of Google and Amazon in secretly sharing audio recordings of its users with contractors, confirming the practice to The Guardian after a whistleblower brought it to the outlet. The person said that Siri queries are routinely sent to human listeners for closer analysis, something not disclosed in Apple’s privacy policy.

The recordings are reportedly not associated with an Apple ID, but can be several seconds long, include content of a personal nature, and are paired with other revealing data, like location, app data, and contact details.

Like the other companies, Apple says this data is collected and analyzed by humans to improve its services, and that all analysis is done in a secure facility by workers bound by confidentiality agreements. And like the other companies, Apple failed to say that it does this until forced to.

Apple told The Guardian that less than one percent of daily queries are sent, cold comfort when the company is also constantly talking up the volume of Siri queries. Hundreds of millions of devices use the feature regularly, making a conservative estimate of a fraction of one percent rise quickly into the hundreds of thousands.

This “small portion” of Siri requests is apparently randomly chosen, and as the whistleblower notes, it includes “countless instances of recordings featuring private discussions between doctors and patients, business deals, seemingly criminal dealings, sexual encounters and so on.”

Some of these activations of Siri will have been accidental, which is one of the things listeners are trained to listen for and identify. Accidentally recorded queries can be many seconds long and contain a great deal of personal information, even if it is not directly tied to a digital identity.

Google is investigating the source of voice data leak, plans to update its privacy policies

Only in the last month has it come out that Google sends clips to be analyzed in like wise, and that Amazon, which we knew recorded Alexa queries, retains that audio indefinitely.

Apple’s privacy policy states regarding non-personal information (which Siri queries would fall under):

We may collect and store details of how you use our services, including search queries. This information may be used to improve the relevancy of results provided by our services. Except in limited instances to ensure quality of our services over the Internet, such information will not be associated with your IP address.

It’s conceivable that the phrase “search queries” is inclusive of recordings of search queries. And it does say that it shares some data with third parties. But nowhere is it stated simply that questions you ask your phone may be recorded and shared with a stranger. Nor is there any way for users to opt out of this practice.

Given Apple’s focus on privacy and transparency, this seems like a major, and obviously a deliberate, oversight. I’ve contacted Apple for more details and will update this post when I hear back.

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Lessons from the hardware capital of the world

A week is obviously not enough time to truly understand a market as massive and fascinating as China. Hell, it’s not really even enough time to adjust to the 12 hour time difference from New York. That said, each of the three visits I’ve taken to the country in the past two years has yielded some useful insights into my role as hardware editor here at TechCrunch.

Late last week, I got back from an eight-day trip to Shenzhen in the Guangdong Province of South China and nearby Hong Kong. In some respects, the cities are worlds apart, though a newly opened high-speed rail system has reduced the trip to 30 minutes. Customs issues aside, it’s the height of convenience. Though for political and cultural reasons I’ll not get into here, some have bemoaned the access it’s provided.

This particular visit was sort of a scouting trip. In November, TechCrunch will be hosting its first Hardware Battlefield event in a couple of years. Previous events had been held at CES for reasons of easy access to young startups. This time out, however, we’ve opted to go straight to the source.

The birthplace of hardware

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Daily Crunch: Yep, Apple is buying Intel’s modem business

The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 9am Pacific, you can subscribe here.

1. Apple acquiring most of Intel’s smartphone modem business in $1B deal

Apple has entered into a deal to acquire a majority of Intel’s modem business, including Intel IP, equipment, leases and employees — it’s bringing over 2,200 new roles and 17,000 wireless technology patents.

The deal confirms earlier rumors that Apple would acquire the business in order to permanently uncouple itself from Qualcomm, the source of much contention for both parties over the last several years.

2. SoftBank announces AI-focused second $108 billion Vision Fund with LPs including Microsoft, Apple and Foxconn

Worth noting: The second Vision Fund’s list of expected limited partners does not currently include any participants from the Saudi Arabia government.

3. Twitter Q2 beats on sales of $841M and EPS of $0.20, new metric of mDAUs up to 139M

The U.S. continues to be Twitter’s revenue engine, the company said. It accounted for $455 million of its sales, up 24%, while international revenue was $386 million, up just 12%.

(Photo by Cheriss May/NurPhoto via Getty Images)

4. Trump threatens Apple with tariffs, Google with investigation on Twitter

The president of the United States called out two of the nation’s largest tech firms in a pair of tweets this morning.

5. Google says it doubled Pixel sales year-over-year

It looks like the mid-range Pixel 3a is the hit Google surely hoped it would be. The news came as part of the solid earnings that parent company Alphabet reported yesterday.

6. SpaceX succeeds with first untethered StarHopper low altitude ‘hop’ test

StarHopper is a scaled-down test vehicle designed to help SpaceX run crucial preparation trials for the new Raptor engine ahead of building its full-scale Starship reusable spacecraft.

7. Africa’s ride-hail markets are hot spots for startups and VC

The big players such as Uber and Bolt are competing in Kampala and Nairobi — where, in addition to car service, they offer rickshaw taxis. Meanwhile, many ride-hail companies in Africa are adapting unique product solutions to local transit needs. (Extra Crunch membership required.)

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Trump threatens Apple with tariffs, Google with investigation on Twitter

The president of the United States called out two of the nation’s largest tech firms in a pair of tweets this morning. Google was the first target. The statement follows weeks of suggested investigations of the tech giant over a supposed relationship with China.

There may or may not be National Security concerns with regard to Google and their relationship with China. If there is a problem, we will find out about it. I sincerely hope there is not!!!

— Donald J. Trump (@realDonaldTrump) July 26, 2019

“There may or may not be National Security concerns with regard to Google and their relationship with China,” Trump tweeted at two minutes after 10AM ET. “If there is a problem, we will find out about it. I sincerely hope there is not!!!”

The ambiguous suggestion appears to be a direct response to statements earlier this month from entrepreneur and Trump advisor Peter Thiel, who suggested that the company may have been infiltrated by Chinese government agents.

“Billionaire Tech Investor Peter Thiel believes Google should be investigated for treason. He accuses Google of working with the Chinese Government.” @foxandfriends A great and brilliant guy who knows this subject better than anyone! The Trump Administration will take a look!

— Donald J. Trump (@realDonaldTrump) July 16, 2019

“A great and brilliant guy who knows this subject better than anyone!” The president tweeted on July 16, addressing a suggestion that it “should be investigated for treason.” He added, “The Trump Administration will take a look!”

Google firmly denied the claim, telling the press at the time, “As we have said before, we do not work with the Chinese military.”

Six minutes after taking on Google this morning, it was Apple’s turn. This time, Trump addressed ongoing concerns around the averse impact his tariffs would have on U.S. tech companies.

Apple will not be given Tariff wavers, or relief, for Mac Pro parts that are made in China. Make them in the USA, no Tariffs!

— Donald J. Trump (@realDonaldTrump) July 26, 2019

“Apple will not be given Tariff wavers, or relief, for Mac Pro parts that are made in China,” he tweeted. “Make them in the USA, no Tariffs!”

The statement appears to be a response to reports from late-June that Apple would be moving production of the long-awaited high-end desktop overseas. It had reportedly targeted a plant outside of Shanghai for production after using a Texas plant to help produce earlier models.

A closer look at Apple’s reinvented Mac Pro

“We’re proud to support manufacturing facilities in 30 US states and last year we spent $60 billion with over 9,000 suppliers across the US,” Apple responded to that report. “Our investment and innovation supports 2 million American jobs. Final assembly is only one part of the manufacturing process.”

Tim Cook met with Trump to argue his case when tariffs were first announced. Since then, the president has taken to Twitter in an attempt to clarify his position with exclamation marks and hashtags. “Apple prices may increase because of the massive Tariffs we may be imposing on China – but there is an easy solution where there would be ZERO tax, and indeed a tax incentive,” he wrote in September. “Make your products in the United States instead of China. Start building new plants now. Exciting! #MAGA”

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Apple could release the Apple Card during the first half of August

According to a new report from Bloomberg, the launch of the Apple Card is imminent. Customers based in the U.S. should be able to order the new credit card at some point during the first half of August.

Rumor has it that the most recent update of iOS contains everything needed for the Apple Card. The company can flip a server-side switch in order to launch the card.

Bloomberg also reported a few weeks ago that Apple’s retail employees have been able to sign up to the Apple Card and test it before the official release date.

As a reminder, Apple has partnered with Goldman Sachs on a credit card for U.S. customers. Goldman Sachs manages the banking infrastructure while Apple controls the user experience. You’ll be able to sign up directly from the Wallet app on your iPhone. You can then use your Apple Card with Apple Pay, but you also receive a plastic card that works on the Mastercard network.

In addition to a list of your most recent transactions, you can see a breakdown of your purchases by category. There’s no monthly fee and no foreign transaction fee with the Apple Card. And you get 1% back when you pay with your card, 2% if you pay using Apple Pay and 3% if it’s an Apple purchase.

Cash back is credited directly on your Apple Cash card. You can pay for things using this balance through Apple Pay, make a payment on your Apple Card or transfer it to your bank account.

When it comes to security, you won’t find any credit card number on the card. Instead, when you want to pay for something on a website that doesn’t support Apple Pay, you get a virtual card number in the Wallet app.

The Apple Card was originally announced back in March. At the time, the company said that it would be available this summer.

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SoftBank announces AI-focused second $108 billion Vision Fund with LPs including Microsoft, Apple and Foxconn

SoftBank Group announced today that it will launch its second Vision Fund with participation from Apple, Foxconn, Microsoft and other tech companies and investors. Called the Vision Fund 2, the fund will focus on AI-based technology. SoftBank said the fund’s capital has reached about $108 billion, based on memoranda of understandings. SoftBank Group’s own investment in the fund will be $38 billion.

It is worth noting that the second Vision Fund’s list of expected limited partners does not currently include any participants from the Saudi Arabia government (the first Vision Fund’s close ties to people, including Crown Prince Mohammed bin Salman, who have been implicated in the murder of journalist Jamal Khashoggi, has understandably been a major source of concern for investors, companies and human rights observers).

But SoftBank Group also said is still in discussions with other participants and that the total amount of the fund is expected to increase. The full list of participants who have signed MOUs so far are: “Apple, Foxconn Technology Group, Microsoft Corporation, Mizuho Bank, Ltd., Sumitomo Mitsui Banking Corporation, MUFG Bank, Ltd., The Dai-ichi Life Insurance Company, Limited, Sumitomo Mitsui Trust Bank, Limited, SMBC Nikko Securities Inc., Daiwa Securities Group Inc., National Investment Corporation of National Bank of Kazakhstan, Standard Chartered Bank, and major participants from Taiwan.”

SoftBank’s intention to launch Vision Fund 2 was first reported earlier this week by the Wall Street Journal. The new fund is expected to decrease SoftBank’s reliance on Saudi Arabian investment and also potentially change the relationship between startups, corporate giants like Microsoft and investors.

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