Tech Brew Ride Home - Tue. 01/11 – YC Ups The Ante

Episode Date: January 11, 2022

Moxie Marlinspike is stepping down as CEO of Signal, and Brian Acton is stepping up. For now. Y Combinator is getting more generous with the investment it makes in its cohort companies. Carriers aren���t pleased with Apple’s iCloud Private Relay service. And another day, another headline like: the Associated Press is getting into NFTs. Sponsors: do.co/trh Wix.com Links: Moxie Marlinspike has stepped down as CEO of Signal (The Verge) Y Combinator’s New Deal Sparks Fear in Seed Investors (The Information) T-Mobile begins blocking iPhone users from enabling iCloud Private Relay in the US [U] (9to5Mac) Apple Highlights Services in 2021, Recaps Upcoming Features Like IDs on iPhone (MacRumors) The Associated Press is starting its own NFT marketplace for photojournalism (The Verge) Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the TechMeme right home for Tuesday, January 11th, 2020. I'm Brian McCullough. Today, Moxie Marlin Spike is stepping down as CEO of Signal. And Brian Acton is stepping up for now. Why Combinator is getting more generous with the investment it makes in its cohort companies.

Carriers aren't pleased with Apple's ICloud private relay service and another day, another headline like this. The Associated Press is getting into NFTs. Here's what you missed today in the world of tech. Signal CEO, Moxie Marlin Spike, has announced that he is stepping down as the head of Signal. You might remember that we talked about Moxie just yesterday with that big Web3 essay from him from the weekend. But more on that in a second. WhatsApp co-founder Brian Acton will act as the interim CEO of Signal as the search for a permanent replacement begins. Though one wonders if that search might lead to Acton himself, you might remember, Ryan Acton, well, quoting Tony Escieri on Twitter,

you might remember him from the time he told everyone to hashtag delete Facebook and left $150 million in stock options behind because he wanted to rage quit that badly. Quoting the verge. Every day, I'm struck by how boundless signals potential looks, and I want to bring in someone with fresh energy and commitment to make the most of that, Marlon Spike wrote. I now feel very comfortable replacing myself as CEO based on the team we have, end quote. The company has met with several CEO candidates over the last few months, Marlon Spike wrote, but

the search remains ongoing. Founded in 2014, Signal has grown into one of the most trusted and robust apps for encrypted messaging. The service has more than 40 million monthly users and is regularly recommended in security guides. Established as a non-profit, the company is not supported by advertising or app sales, instead relying on donations and a recently launched sustainer program. The app saw a rush of new users in early 2021 in response to a new privacy policy from its competitor WhatsApp, but the success wasn't without controversy. Workers within Signal raise concerns to the verge that the company's refusal to maintain content policies could lead to potential misuse of the service.

Signal's recent efforts to incorporate cryptocurrency payments through mobile coin have only heightened those concerns, end quote. Yeah, I don't think we actually talked about this, but Signal employees have been worrying and have been saying out loud that they're worried that their product could increasingly be used by bad actors or even downright evil actors. But that's been something that's bubbling under the surface recently. And if you read that entire essay that we quoted from yesterday, you'll note that Moxie's experiments in NFTs seem to disappoint him. And also note that if you read the details of those experiments, they very much seemed satirical to me. So I think it's unlikely

that he will jump to a Web 3 startup next. But who knows? As Joseph Men tweet, quote, one of the biggest contributors to user privacy and security in the past decade has earned a break, end quote. The world's most prestigious startup accelerator slash incubator, Y Combinator, has announced a new standard deal, a $125,000 investment for 7% of a startup in their program, and a further $375,000 at terms founders can negotiate with future investors. In the past, you only got that 125k. And in fact, in the way back days, if you were a YC company, you only got 20K. So basically, assuring all YC companies get half a million bucks up front at terms, the startup is free to negotiate is a fairly big deal. Here's why, quoting the information. On Monday, Y Combinators

said that in addition to its usual, $125,000 investment in startups in exchange for 7% equity, the organization would provide another $375,000 at a valuation determined by a company's later investors. The arrangement, which reflects a trend in venture capital toward much bigger checks, should help founders seeking more cash up front. It's also a boon for YC, which will get more equity ownership in nearly 1,000 startups that graduate from its training programs each year. The individuals and institutions that invest in early-stage companies, however, said the new deal could curtail their investments in graduates from the program

because YC is more likely to crowd them out of future deals. Lead seed investors tend to seek at least 10% stakes in startups. With YC getting the right to take additional equity in the financing event following its initial 7% accelerator investment, these early investors say they may find it impossible to get the stakes they want. It's really good for YC, but it's bad for everyone else, including founders, said Seed Investor Shill Monnet, a co-founder of Better Tomorrow Ventures. YC is competition for seed investors, not a partner, end quote. YC's additional 375K comes in the form of an uncapped safe, or simple agreement for future equity, with what it dubs a most favored nation clause.

This phrase means YC can invest the capital on the best possible terms offered in a subsequent phase of investment, typically the seed round, thus increasing its potential for bigger stakes. Simply put, we're giving the company money now, but at terms you'll negotiate with future investors. YC President Jeff Ralston wrote in a blog post on Monday, those terms, while welcomed by some founders, could prompt them to restructure their later rounds because YC is in the mix. Leading seed investors who might normally participate might drop out, some of these investors say. For instance, if a seed firm agreed to invest $1 million at an $8 million valuation, an ordinary investment for an early stage round, it would receive 12.5% of the startup equity, and YC's 375K investment would entitle it to a 4% equity-o

ownership. The founder then faces a decision. Give up 16 and a half percent, more than the equity dilution in a typical seed round, or restructure the round with a different lead investor who is willing to take a smaller percentage of equity, but who may be less willing to spend time with the founder. Some seed investors say they'll just avoid such deals. That could be an additional hit to the business of those firms, which typically raise funds smaller than $100 million. Over the last two years, they have already grappled with an increasingly competitive environment, as deep. pocketed late-stage investors such as Greylock Partners move upstream to bet on companies earlier in their lifetimes. It just makes it more difficult for small seed funds like us to effectively

collaborate with founders without having to over-delute the founder in a pretty serious way, said Eric Bonn, a co-founder of Seed Firm Hustle Fund, which manages a $33.6 million fund. He expects to continue to invest in YC companies, however, end quote. Now, there's a lot of back and forth online about this, as you might imagine, as to whether or not this is actually a better deal for startups in the end. And a lot of folks who are saying it isn't a good deal are being accused of being competitive investors who fear YC is going to crowd folks out of the best seed stage deals. And now that I am technically a professional seed stage investor myself, I sort of feel obligated to give an opinion. But I have to admit, I'm still mentally more of a founder, if I'm.

I'm being honest, and I probably always will be. So I just feel like these are really good terms for founders. So good for YC and good for companies in their program. So let me say this. The ride home fund, as you've seen, can provide a unique platform at a unique stage in a company's life. We write small checks, but our superpower is helping companies announce themselves to the world, crafting their founding legend in their own words. We've actually got a company in our portfolio already that is in this winter's cohort of Y Combinator, and we are helping them prepare for Demo Day as we speak. So I'm confident that people will still take checks from us. I think what I'm really saying was maybe said best by my fellow Brooklyn investor Charlie O'Donnell, who said on Twitter this

morning, quote, find yourself a VC that is willing to have YC's follow-on safe in a seed or pre-seed round with you, regardless of how much of your company they'll be able to own. Brooklyn Bridge Ventures has no ownership targets, we just want to pay a fair market price for the stage you're at, end quote. Ditto for the ride home fund. European carriers are apparently voicing opposition to Apple's private relay service. As T-Mobile and others begin blocking the VPN-like service in the U.S. and parts of Europe, quoting 9 to 5 Mac, Apple says that private relay is a feature designed to give users another layer of privacy when browsing the web. The first relay is sent through a server maintained by Apple, and the second is a third-party operator.

The feature was announced at WWDC last June and initially slated for inclusion in iOS 15. Apple ultimately shipped the feature as a public beta, meaning that it is disabled by default in the newest iOS 15 and MacOS Monterey releases. You can manually enable it by going to settings on your iPhone, tapping your name at the top, choosing ICloud and choosing private relay. T-Mobile was among the carriers in Europe that signed an open letter, expressing concern about the impact of private relay. The carriers wrote that the feature cuts off networks and servers from accessing, quote, vital network data and metadata and could impact operators' ability to efficiently manage telecommunications networks, end quote. In the UK, carriers including T-Mobile, EE and others have already started blocking private relay usage

when connected to cellular data. 9-to-5 Mac has also now confirmed that T-Mobile is extending this policy to the United States. This means that T-Mobile and Sprint users in the United States can no longer use the privacy-preserving ICloud private relay feature when connected to cellular data. An error message in the settings app explains, quote, your cellular plan doesn't support ICloud private relay. With private relay turned off, this network can monitor your internet activity and your IP address is not hidden from known trackers or websites, end quote. The change does not appear to be network wide just yet, but rather it appears T-Mobile is in the process of rolling it out. This means that some users

might still be able to use iCloud private relay when connected to their cellular network, at least for now. The situation could also vary based on your location or plan, end quote. At the time of this writing, Apple has not commented on the situation. But Apple did share this, its 2021 highlights, which reveal that developers have made more than $260 billion via the app store since its inception, up from $200 billion year over year, quoting Mac rumors. App Store customers spent more than ever before between Christmas Eve and New Year's Eve in 2021 with double-digit growth over the same year ago period. Apple did not disclose a specific dollar amount. Customers used 30 million digital tickets in the wallet app for sports games,

concerts, and other events across the U.S. and Canada in 2021. Apple TV Plus has received 763 award nominations and 190 wins since launching, end quote. And also, by the way, Apple announced it has over 745 million active paid subscriptions across all of its services. And another day, another NFT story. The Associated Press is going to launch a photojournalism NFT marketplace built by blockchain tech provider, Zhua. That's XOA on January 31st, with proceeds used to fund its journal.

journalism, quoting the verge. The AP is billing its foray in NFTs as a way for collectors to quote purchase the news agency's award-winning contemporary and historic photojournalism, end quote, and says that the virtual tokens will be released at, quote, broad and inclusive price points, end quote, though it's hard to tell what types of prices resellers will want on the AP marketplace. The news outlet says its system will be built on the environmentally friendly polygon blockchain and that the NFTs will, quote, include a rich set of original metadata to tell buyers when, where, and how the photos were taken. It says its first collection, launching January 31st, will include NFTs featuring photos of, quote, space, climate, war, and other images to spotlight the work

of specific AP photographers, end quote. AP isn't the first journalistic enterprise to use or express interest in NFTs. Courts and the New York Times have sold copies of their articles as NFTs, and Getty Images' CEO Craig Peters said in December, there's, quote, quote, a real opportunity for the company when it comes to NFTs. We probably won't see people debating whether to get a Getty or an AP NFT anytime soon, though, as the former seems to be taking a more wait-and-see approach, with Peter saying that he didn't feel the need to race into the space. So far, though, this does seem like one of the largest NFT-related efforts from a major news source. It doesn't seem like AP is trying to sell its NFTs as a metaverse tie-in, either as part of a

virtual museum or as decorations in an online accounting office, like other media executives in the music industry, may be interested in doing its announcement and FAQ make no mention of the metaverse, outside of mentioning that Jua also works with brands on Metaverse strategies in the About Jua section, and the project seems entirely aimed at collectors who want to, as the press release puts it, seamlessly buy sell and trade official AP digital collectibles through the marketplace, end quote. Buyers will be able to pay for NFTs from the market using either credit cards or Ethereum. AP says Metamask will be the first wallet supported, but there are plans to add support for others. There will be virtual cues to buy NFTs as they're released by AP with

Pulitzer drops containing more limited edition NFTs happening every two weeks. The FAQ says these particular images will, quote, have increased scarcity to preserve their status, end quote. Buyers will be able to resell those NFTs on the site's secondary market. AP says that the proceeds from the NFT's sale will be used to fund its journalistic endeavors. It'll also get revenue whenever they're resold on its marketplace. The FAQ says there's a 10% fee associated with reselling, and Jewish spokesperson Lauren Easton told the verge in an email that the two companies would share that fee. The transaction fees, or gas fees, that Ethereum is infamous for, shouldn't add too much to the price of sales as they're significantly lower on Polygon. Easton also told us that the

photographers will share in all revenue collected but didn't specify what their cut would be, end quote. Since I did have to mention the Ride Home Fund today earlier in the show, quick reminder if you're a startup of any stage and you're looking to have the power of the mutant podcast army behind you, let's talk. Email me at Brian at Ride Homefund.com. And if you just know of a cool startup that you can put me in touch with in a meaningful way, I can and share some of the carry with you for helping me source a deal that I might not have been aware of otherwise. You don't have to be an investor of the fund to do this, or even an accredited investor, or even touch any of your own money. Just angelist makes it very easy. On a deal-by-deal basis,

I check a box and get to decide who I share a little bit of the upside with. So, if that's you, Brian at ridehomefund.com. Talk to you tomorrow.