Morning Report

What you need to know one minute before daylight

The Budweiser of Wine, Billboards in Space, and Scandalous Trademarks

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DAYLIGHT

Peter Thiel’s VC firm, Founders Fund, is investing $7 million in a company that wants to be the “Budweiser of wine”: “Today, Bev sells just one kind of canned rosé, although [Alix] Peabody plans to launch more drinks soon. Eventually, that could mean ones that are either low-alcohol or completely free of it. ‘I want to build a product for any type of woman who wants to have fun anytime she wants to,’ she says.

“While Bev is currently sold online and also has distribution throughout Southern California, Peabody will use much of the recent funding round to build out sales teams in Nashville, Austin and New York, as she further pushes Bev into retail. But Founders Fund, she says, has signed on for far more than just a direct-to-consumer alcohol company. She envisions Bev eventually opening up permanent social spaces like The Wing, a female-only social club: ‘What I’m really trying to build is a company that could fight with the likes of Budweiser.’”

STARTUPS

A startup called TuSimple is leading the race to develop self-driving semis: “TuSimple cofounder Xiaodi Hou established this depot [in Tucson] last year to test the company’s self-driving big rigs on paid runs, the next step in commercializing an autonomous system for the $700 billion trucking market. (The trucks currently operate with a safety driver and an engineer on board; Hou wants to start making runs “driver out” next year.) …

“Embark Trucks, Ike, Starsky Robotics and Kodiak Robotics, all based in the San Francisco Bay Area, are racing to develop their own autonomous big rigs, but TuSimple is on the fast track. Hou, a 34-year-old computer scientist, has raised $178 million for the San Diego startup at a $1.1 billion valuation, making it the first self-driving trucking unicorn and giving it more than three times the war chest of Embark, its closest startup rival. The cash pile gives it an edge in expanding its fleet, key to inking more deals with clients such as Phoenix-based Royal Paper. With 15 Peterbilts and Navistars, it has more semis transporting goods for paid customers than any competitor …”

E-COMMERCE

For third-party sellers trying to compete on Amazon, here’s a scary look at the company’s fake review problem: “Amazon likes to think of its marketplace as a merchant meritocracy where the best products get the best reviews by virtue of quality and honest consumer feedback. But the vast size of the platform, coupled with a ferocious competition among sellers to get higher product rankings, has spawned a problem: A proliferation of fake reviews.

“Fake reviews have been an issue for Amazon since its inception, but the problem appears to have intensified in 2015, when Amazon.com began to court Chinese sellers. The decision has led to a flood of new products—a 33 percent increase, by some accounts—sold by hundreds of thousands of new sellers. Rooted in manufacturing hubs like Guangzhou and Shenzhen, they use Amazon’s fulfillment program, FBA, to send large shipments of electronic goods directly to Amazon warehouses in the US.”

RETAIL

The company behind Walmart’s robots thinks it has something more valuable to sell than just technology: “Bossa Nova is a robotics startup founded in 2005. Its current signature device is an autonomous robot that roams up and down store aisles, checking for pricing issues, out-of-stocks, and shelf irregularities. It can do this far more efficiently and regularly than a human taking stock by hand can, providing retailers with valuable real-time data. …

“Customers aren’t buying Bossa Nova’s robots, however. Instead, Bossa Nova itself installs, maintains, and updates the robots in stores, selling the retailers the data they generate as a service. ‘I think as an industry, [retailers] are hungry for data about their store operations,’ [Skaff] said. ‘They keep asking for more and more and more.’”

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SOCIAL MEDIA

So, why, really, did the founders of Instagram, Kevin Systrom and Mike Krieger, leave last year? One reason, according to WIRED’s very deep dive into15 months of fresh hell” at Facebook, was that Mark Zuckerberg was making their lives miserable: “They had been allowed to run their company reasonably independently for six years, but now Zuckerberg was exerting more control and making more requests.

“[Zuckerberg] asked his head of growth, Javier Olivan, to draw up a list of all the ways Facebook supported Insta­gram: running ads for it on the Blue App; including link-backs when someone posted a photo on Insta­gram and then cross-published it in Facebook News Feed; allowing Insta­gram to access a new user’s Facebook connections in order to recommend people to follow. Once he had the list, Zuckerberg conveyed to Insta­gram’s leaders that he was pulling away the supports.

“Systrom soon posted a memo to his entire staff explaining Zuckerberg’s decision to turn off supports for traffic to Insta­gram. He disagreed with the move, but he was committed to the changes and was telling his staff that they had to go along. … The tensions didn’t let up. In the middle of August, Facebook prototyped a location-­tracking service inside of Insta­gram, the kind of privacy intrusion that Insta­gram’s management team had long resisted. … ‘It felt very personal,’ says a senior Insta­gram employee…”

A UK data watchdog is recommending the removal of the iconic (or infamous) Facebook “Like” button: “The UK wants social media to turn off so-called ‘nudge’ techniques, including Facebook’s ‘Like’ button and Snapchat streaks, for under-18s. The recommendations form part of a new 16-rule code of practice for age-appropriate design drafted by the UK’s data watchdog, the Information Commissioner’s Office (ICO). Other suggestions include turning location-tracking off by default for younger users, “robust” age-verification systems, limiting how children’s data is collected, used, and shared, and informing children if parents are monitoring their online activity.”

TECHNOLOGY

Pepsi, in partnership with Russian startup, StartRocket, wants to place an energy drink billboard in space: “[StartRocket is] planning to use miniature satellites to launch advertisements that can be seen in the night sky, and beverage company PepsiCo will be its first client. The advertisement, which will use what are referred to as CubeSats to create artificial constellations, will promote the energy drink Adrenaline Rush in a ‘campaign against stereotypes and unjustified prejudices against gamers.’

“The business plan of the Russian startup has received criticism from different fronts. While some people would hate to see a night sky littered with ads, there are also concerns that artificial constellations will make low-Earth orbit even more crowded, increasing the risk of collisions caused by space junk. As far back as 1993, the idea of space billboards was condemned by the American Astronomical Society, with late astronomer and cosmologist Carl Sagan calling it ‘an abomination.’”

PRICING

This year might finally see podcasters’ revenue come not just from ad-support but from subscription fees: “Podcasters have long struggled to add subscription revenue to their businesses, thanks in part to the challenges of delivering exclusive audio content. But a recent run of announcements, including the launch of Supporting Cast, made it seem like 2019 might be the year that could change. …

“But the arrival of more platforms, and their interest in bundles, may wind up limiting creators’ opportunities to scale their own direct relationships to consumers. Though customers are used to the idea of paying creators for audio…the concept of a premium audio bundle appears to have gotten some traction too: Stitcher Premium, about two years since its launch, is closing in on 100,000 subscribers, who pay either $4.99 per month or $34.99 per year, according to a source.

“‘I believe that it is time for the podcast industry to evolve into a true dual income revenue business,’ said Hernan Lopez, CEO of Wondery, which will have two exclusive shows on Luminary. ‘The more platforms and voices beat the drum that premium content needs to be consumer-supported, the better.’”

ZACK AND GRANT’S DEALS OF THE DAY

Hobart Electronics, a custom transformer manufacturer has been acquired for $19 million by discoverIE, a manufacturer of electrical components.  Based on a revenue of $13 million last year, Hobart received a 1.46 multiple on revenue in the transaction.

Synovia Solutions, developer of GPS-enabled fleet tracking designed to alert parents when children are on their school bus, was acquired by CalAmp for $50 million in cash. In 2018, Synovia posted over $28 million in revenue with approximately 30 percent EBITDA margin.

INTELLECTUAL PROPERTY

On Monday, Los Angeles artist Erik Brunetti went to the US Supreme Court to challenge the US Patent and Trademark Office’s decision not to register the trademark of his clothing line, FUCT.

“For more than a century, the trademark office has been told to deny registration of such marks. But two years ago, the court unanimously decided that a neighboring provision about ‘disparaging’ trademarks was an unconstitutional infringement on the First Amendment. [Representing the government, Malcolm L.] Stewart attempted to convince the justices that the outcome of that case—brought by Simon Tam, founder of an Asian American rock band, the Slants, and advantageous to the Washington Redskins professional football team—did not dictate the result in this one.

“The ‘ban on federal registration of scandalous trademarks is not a restriction on speech but a valid condition on participation in a federal program,’ Stewart said. Brunetti can call his clothing line whatever he wants, but the government does not have to endorse it by providing trademark registration, he said.”

And that’s what’s ahead.

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