User blogs

This week’s Amazon public relations push will no doubt go down as one of the odder public-facing strategies in tech. As some of the company’s biggest rivals were getting ready to virtually testify on Capitol Hill, the retail giant’s CEO of worldwide consumer business appeared to suggest that Amazon is not only as progressive as self-declared democratic socialist Bernie Sanders, but also more effective in achieving those leftist policies.

Ahead of the Vermont senator’s visit to Amazon’s Bessemer, Alabama fulfillment center, Dave Clark tweeted, “I welcome [Sanders] to Birmingham and appreciate his push for a progressive workplace. I often say we are the Bernie Sanders of employers, but that’s not quite right because we actually deliver a progressive workplace.”

The statement was unsurprisingly greeted with pushback from labor groups. The Retail, Wholesale and Department Store Union (RWDSU) sent TechCrunch a lengthy response from president Stuart Appelbaum to the odd statement:

How arrogant and tone deaf can Amazon be? Do they really believe that the wage they pay – which is below what workers in nearby unionized warehouses receive and below Alabama’s median wage – gives them the right to mistreat and dehumanize their employees, put their workers’ health and safety in jeopardy, require them to maintain an unbearable pace, which even Amazon itself admits that a quarter of their workforce won’t be able to meet, and to deny working men and women the dignity and respect they deserve.

The organization, which is helping facilitate the Bessemer warehouse’s union voting, goes on to cite high turnover rates and pay cuts amid the pandemic and founder Jeff Bezos’s ballooning wealth. The founder — who is set to step down as CEO some time in Q3 — reportedly added more than $72 billion to his net worth in 2020, as Amazon employees became essential workers amid COVID-19-fueled shutdowns.

For many in the U.S., Amazon’s online delivery service provided a lifeline, as many stores were forced to close over pandemic precautions. The Bessemer facility opened on March 29, just as the first wave was cresting in the U.S. The company was anticipating a potential strain on its resources as record numbers of Americans were suddenly forced to stay home and were otherwise avoiding in-person shopping at all costs.

“Our team at Amazon is thankful for the support we have received from state and community leaders, and we are excited to be a part of the Bessemer community,” Director of Operations Travis Maynard said at the time. “We’re proud to create great jobs in Bessemer with industry-leading pay and benefits that start on day one, in a safe, innovative workplace.”

After several years of negative coverage over its warehouse working conditions, it’s not surprising that the company has become proactively reflexive when it comes to working conditions.

“When New York City became the epicenter [of COVID-19], that’s when the Bessemer facility opened up,” Christian Smalls, a former Amazon worker-turned-critic said at TechCrunch’s Justice event earlier this month. “So the union got a head start on talking to workers. So that’s a gem for anybody or any union that plans on trying to unionize the building — that you have a facility in your community that’s about to open up, when opening, that’s the best time to connect with workers. That’s what happened last year. And as a result, the workers had seen what happened to the workers that were unprotected and they don’t want that. They want better for themselves.”

Next week, the RWDSU will begin tallying votes for what has shaped up to be the largest union push since Amazon’s 1995 founding, much to the company’s chagrin. In recent months, the company has been hoping to throw a wrench in the works. In January, it unsuccessfully appealed a ruling by the National Labor Relations Board (NLRB) that allowed workers to vote by mail, as more than 350,000 COVID-19 cases had been reported in the state since the beginning of the pandemic.

Amazon expressed concerns that mail-in voting would monopolize too much time and resources. “Union avoidance” firm Jackson Lewis suggested that such rules put employers at a disadvantage, “because eligible voters are given several days after receiving their ballots to return them to the NLRB, the impact and momentum of the employer’s voter education campaign is decreased. This does not exist in connection with a manual ballot election, where the employer may educate employees one-on-one until the last moment before they vote.”

The following month, Amazon ran anti-union ads on its streaming subsidiary, Twitch. The spots featured employees discussing why they were planning to vote no, and compelled people to visit Do it Without Dues, which blasted potential union membership fees.

“Amazon feels that it has to go to extremes like this in order to gaslight its workers about the dreadful working conditions at its Bessemer warehouse,” Appelbaum told the press in response to the ads. Twitch pulled the spots, adding that they, “should never have been allowed to run on [the] service.”

BIRMINGHAM, AL – MARCH 05: A truck passes as Congressional delegates visit the Amazon Fulfillment Center after meeting with workers and organizers involved in the Amazon BHM1 facility unionization effort, represented by the Retail, Wholesale, and Department Store Union on March 5, 2021 in Birmingham, Alabama. Workers at Amazon facility currently make $15 an hour, however they feel that their requests for less strict work mandates are not being heard by management. (Photo by Megan Varner/Getty Images)

Workers have continued to be critical of conditions in Amazon’s warehouses, frequently comparing the work to that of robots that have increasingly become their colleagues. Last week, New York Magazine published a piece from a Bessemer picker who describes long and tiring days on the floor.

“It really is not fair for employees to get fired for going to the bathroom,” the worker, Darryl Richardson, tells the magazine. “Sometimes the water in the bathrooms isn’t working on the floor, and you have to go down another flight of stairs to go to the bathroom.”

A number of similar stories have been recounted to the media over the years. Images of workers peeing in water bottles so as to not be docked pay — or worse — for taking a bathroom break have almost certainly become the most visceral.

When Wisconsin Rep. Mark Pocan called out Clark’s Sanders comparisons on Twitter earlier this week, an official account shot back, “We hope you can enact policies that get other employers to offer what we already do.”

Sanders has been a long-time critic of the company. The Vermont senator was one of a handful of progressive politicians who compelled Amazon to raise its minimum wage to $15 an hour, while criticizing massive tax breaks. In 2018, he introduced the Stop Bad Employers by Zeroing Out Subsidies (BEZOS) bill.

“The taxpayers in this country should not be subsidizing a guy who’s worth $150 billion, whose wealth is increasing by $260 million every single day,” Sanders told TechCrunch at the time. “That is insane. He has enough money to pay his workers a living wage. He does not need corporate welfare. And our goal is to see that Bezos pays his workers a living wage.” That November, the company relented, increasing minimum wage to $15 an hour — something that has since become a major talking point for Amazon.

Responding to Pocan’s comments about “union-bust[ing] & mak[ing] workers urinate in water bottles,” the Amazon News Twitter account wrote, “You don’t really believe the peeing in bottles thing, do you? If that were true, nobody would work for us. The truth is that we have over a million incredible employees around the world who are proud of what they do, and have great wages and health care from day one.”

Pocan’s reply was simple: “[Y]es, I do believe your workers. You don’t?”

In addition to past reports of warehouse workers and delivery drivers peeing in bottles, a new report from The Intercept notes that the act is “widespread,” due to workplace pressures. It cites an email from last May that also adds defecation into the mix.

“We’ve noticed an uptick recently of all kinds of unsanitary garbage being left inside bags: used masks, gloves, bottles of urine,” the email titled Amazon Confidential reads. “By scanning the QR code on the bag, we can easily identify the DA who was in possession of the bag last. These behaviors are unacceptable, and will result in Tier 1 Infractions going forward. Please communicate this message to your drivers. I know it may seem obvious, or like something you shouldn’t need to coach, but please be explicit when communicating the message that they CANNOT poop, or leave bottles of urine inside bags.”

Pro-union demonstration signs during a Retail, Wholesale and Department Store Union (RWDSU) held protest outside the Amazon.com Inc. BHM1 Fulfillment Center in Bessemer, Alabama, U.S., on Sunday, Feb. 7, 2021. The campaign in Bessemer to unionize Amazon workers has drawn national attention and is widely considered a once-in-a-generation opportunity to breach the defenses of the worlds largest online retailer, which has managed to keep unions out of its U.S. operations for a quarter-century. Photographer: Elijah Nouvelage/Bloomberg via Getty Images

As misguided or glib as the Amazon Twitter response may seem, it’s clear why the company has gone on the offensive here. “We’re not alone in our support for a higher federal minimum wage,” the accounted noted in the wake of the dustup with Pocan. The company adds that it has been pushing for a federal minimum wage increase following its own.

The push to unionize, meanwhile, has made strange political bedfellows, ranging from Stacey Abrams to Marco Rubio. Breaking with the customary party position, the Republican senator wrote in an op-ed, “Here’s my standard: When the conflict is between working Americans and a company whose leadership has decided to wage culture war against working-class values, the choice is easy — I support the workers. And that’s why I stand with those at Amazon’s Bessemer warehouse today.”

Rubio’s support of unionizing was tied, in part, to concerns over a “‘woke’ human resources fad,” but it’s still fairly uncommon for an event like this to find him on the side of the likes of Joe Biden, who had previously promised to be “the most pro-union president you’ve ever seen.”

Amazon will no doubt be keeping a close eye on Tuesday’s vote count, aware that the results will have a far wider ranging impact than the 6,000 workers currently employed at Bessemer. If unionization fails, the company will tout the results as vindication that its work force is perfectly happily without labor interference. A vote to unionize, on the other hand, could well embolden further unionization efforts across the company.

While new headless commerce platforms are emerging all the time, Swell CEO Eric Ingram told me that it remains “really hard to do something new in e-commerce.”

Specifically, he told me that most headless platforms (which offer back-end infrastructure separate from the front-end shopping experience) allow businesses to build a faster shopping experience, but they’re largely designed for marketplaces where you search, browse and purchase from a traditional product catalog.

“The most interesting ideas in e-commerce aren’t just another catalog,” Ingram said.

Swell, which is announcing that it has raised $3.4 million in seed funding, was designed to offer more flexibility when it comes to the underlying business models. Ingram (who founded the company with Stefan Kende, Dave Loneragan, Joshua Voydik and Mark Regal) described it as the “future-proof backend” for e-commerce companies, which can grow and adapt with them as their business models evolve.

“Typical catalogs” have been built on the platform, he said, but it also supports Spinn‘s marketplace of independent coffee roasters, B2B vacuum pump marketplace Nowvac and ethical direct-to-consumer diamond retailer Great Heights.

In fact, Voydik described Swell as “infinitely flexible.” Among other things, the company says it achieves this flexibility by offering API access to every component, as well as native subscription support and an unlimited number of product attributes.

“Every store on Swell effectively has their own database SaaS platform,” Ingram added.

Overall, he said the platform offers the flexibility that you’d normally get from an open source approach without the technical headaches: “No one wants to maintain their own code base and their own database.”

He continued, “You don’t need to be technical, you don’t need to have developers to leverage this. A lot of our customers are developers, but a lot of them are just regular marketers and ops people who know a bit of development concepts and want to have control over the systems.”

The startup’s new funding was led Jim Andelman of Bonfire Ventures, with participation from Willow Growth Partners, Andreas Klinger of Remote First Capital, Vercel CEO Guillermo Rauch, GitHub CTO Jason Warner and former Salesforce Commerce Cloud CTO Mike Micucci.

Robotic process automation platform UiPath added its name to the list of companies pursuing public-market offerings this morning with the release of its S-1 filing. The document details a quickly growing software company with sharply improving profitability performance. The company also flipped from cash burn to cash generation on both an operating and free-cash-flow basis in its most recent fiscal year.

Companies that produce robotic process automation (RPA) software help enterprises reduce labor costs and errors. Instead of having a human perform repetitive tasks like data entry, processing credit card applications and scheduling cable installation appointments, RPA tools employ software bots instead.

The phrase that matters most when digesting this IPO filing is operating leverage, what Investopedia defines as “the degree to which a firm or project can increase operating income by increasing revenue.” In simpler terms, we can think of operating leverage as how quickly a company can boost profitability by growing its revenue.

The greater a company’s operating leverage, the more profitable it becomes as it grows its top line; in contrast, companies that see their profitability profile erode as their revenue scales have poor operating leverage.

Among early-stage companies in growth mode, losing money is not a sin — after all, startups raise capital to deploy it, often making their near-term financial results a bit wonky from a traditionalist perspective. But for later-stage companies, the ability to demonstrate operating leverage is a great way to indicate future profitability, or at least future cash-flow generation.

So, the UiPath S-1 filing is at once an interesting picture of a company growing quickly while reducing its deficits rapidly, and a look at what a high-growth company can do to show investors that it will, at some point, generate unadjusted net income.

There are caveats, however: UiPath had some particular cost declines in its most recent fiscal year that make its profitability picture a bit rosier than it otherwise might have proven, thanks to the COVID-19 pandemic. This morning, now that we’ve looked at the big numbers, let’s dig in a bit deeper and learn whether UiPath is as strong in operating leverage terms as a casual observer of its filing might guess.

And then we’ll dig into four other things that stuck out from its IPO filing. Into the data!

Operating leverage, cost control and COVID-19

To avoid forcing you to flip between the filing and this piece, here’s UiPath’s income statement for its fiscal years that roughly correlate to calendar 2019 and calendar 2020:

From top-down, it’s clear UiPath is growing rapidly. And we can see that its gross profit grew more quickly than its overall revenue in its most recent 12-month period. As you can imagine, that combination led to rising gross margins at the company, from 82% in its fiscal year ending January 31, 2020, to 89% in its next fiscal year.

That’s super good, frankly; given that UiPath has a number of business lines, including a services effort that doubled in size during its most recent 12 months of operations, you might expect its blended gross margins to fade. They did not.

But it’s the following section, the company’s cost profile, that leads us to our first real takeaway from the UiPath S-1:

UiPath’s operating leverage looks good, even if COVID helped

Every operating expense category at the company fell from the preceding fiscal year to its most recent. That’s an impressive result, and one that is key when it comes to understanding where UiPath’s recent operating leverage came from. But how the declines came to be is just as important to understand.

Benitago Group, a startup looking to build a big portfolio of Amazon brands, is announcing that it has raised $55 million in new funding — most of it in the form of credit lines to fund acquisitions, plus an equity investment.

“We want to take these brands and growth them and run them a lot more efficiently,” said co-founder Santiago Nestares.

Other startups have also raised big rounds to roll up Amazon FBA (Fulfillment by Amazon) businesses, but Nestares told me that Benitago is different because it’s not just focused on “financial arbitrage.” Instead, it has created a detailed, repeatable blueprint to continue growing these business.

Nestares and his co-founder Benedict Dohmen (they each gave the company a few syllables for its name) started Benitago while students at Dartmouth, with the back pain brand Supportiback. The company has subsequently expanded into categories like beauty, maternity and nutrition, but Nestares said they funded that growth with revenue, without raising much outside capital before now.

As a result, team members may not have been experts in, say, orthopedics, but they’ve succeeded because they’re “hyper-focused” on how brands can grow on Amazon, becoming what Nestares described as “Amazon natives.”

The process usually starts with a comprehensive look at the competitive landscape and what customers are saying in their reviews. Then, Nestares said, “We design everything around Amazon, from the feature selection to the way we create the colors in the packaging [to] the way the product fits in an Amazon box.”

The company said that when it acquires brands, the process only takes a few weeks, and that the previous owners retain a financial stake in the brand’s continued growth.

“This isn’t a passive financial play, it’s an an impact growth play,” Nestares added.

Amazon is unlikely to lose its e-commerce dominance anytime soon, but Nestares acknowledged that building Benitago’s business on a single platform is its “biggest risk.” At the same time, he suggested that the risks aren’t the same as, say, those faced by companies who are threatened any time Google changes its search algorithm.

“I think Amazon is different, because Amazon has the same goal as you: To sell to the customer as much as they can,” he said.

Benitago currently operates five brands with more than 100 total products. With the new funding, that number could increase dramatically — Nestares said there are 12 new brands in development, while he’s also hoping to acquire another 25 or more brands by the end of the year.

CoVenture led the equity funding and provided one of the credit lines.

China’s largest question and answer platform Zhihu began trading in New York at $9.5 per share at the lower end of its IPO range, valuing the company at about $5.3 billion.

The aggregate offering size of Zhihu’s IPO and the concurrent private placements is $772.5 million, assuming the underwriters do not exercise their option to purchase additional ADSs. With Zhihu’s sizable flotation, some Silicon Valley executives and investors may start to pay more attention to this ten-year-old company from China that was once simply regarded as the “Quora of China.”

Q&A remains at the core of Zhihu, which means “do you know” in classical Chinese, but the service has become much more than the American counterpart that was founded two years before it.

“I think Quora is a good product, but I think Quora today still equals Quora ten years ago,” said Kai-Fu Lee, whose investment firm Sinovation Ventures is a seed investor in Zhihu and is the company’s largest outside shareholder with a 13% stake.

“Zhihu has already grown up and is on the path to becoming a multifaceted super app centered around knowledge, while Quora is still a question and answer website with an app,” added Lee, an AI expert and an avid Zhihu contributor himself.

Asides from facilitating Q&As, Zhihu has also dabbled in premium content, live videos, e-commerce, online education, among other forms that it believes are ripe for sharing knowledge.

Today, Zhihu generates about 70-80% of its revenues from advertising, according to its prospectus, though other businesses like membership and e-commerce are growing financial contributors, a sign that it’s working to diversify monetization streams.

The willingness of Chinese startups to “reinvent themselves and cannibalize their own success” is what differentiates them from American companies, Lee observed.

“Because they know if they don’t do that, their challenger will, and they are ambitious towards building the super app as a dream. I think American entrepreneurs tend to build something really good and light, partner with other companies and stay in their comfort zone,” said the investor who was the president of Google China in the late 2000s.

“I really think that Silicon Valley and U.S. entrepreneurs should look to China for ideas or inspirations of doing things differently.”

Conflict of interest

From 2019 to 2020, Zhihu’s monthly active users grew from 48 million to 68.5 million, an indication that the platform has thrived beyond the small clientele of Chinese tech elites, investors and academics whom it first attracted. A new mother could be on Zhihu asking for postnatal tips and a Foxconn worker may be on the site sharing her factory stories.

Zhihu’s revenue increased from 670.5 million yuan ($102 million) in 2019 to 1.4 billion yuan in 2020, while its net loss shrank from 1 billion yuan to 517.6 million yuan. It may seem at first that commercialization is at odds with Zhihu’s principle rooted in open user collaboration. Oftentimes, answerers are not economically incentivized but simply participating for leisure. But Zhihu is for-profit from day one and needs income after all.

It’s a always delicate matter to balance a product’s commercial and user interests. The bottom line is to be vigilant and deliberate about the kind of ads or sponsored content allowed on the platform. Restrain could mean smaller advertising revenue, but a medical ad scandal that hit Chinese search giant Baidu back in 2016 showed how easily user trust could be lost. Well-placed and responsible ads, on the other hand, could bring greater returns for both advertisers and the platform.

On the innovative side, not all users have appreciated Zhihu’s new features. Zhihu has recently upped its ante on short videos, which have become the default format through which many Chinese users receive information, thanks to more affordable connectivity and industry forerunners like Douyin and Kuaishou. But some users argue that short videos by nature verge on entertainment and are obtrusive for the more serious, text-focused Zhihu.

Zhihu has other interests to balance. Its shareholders include Tencent, Baidu and Kuaishou, which are “super apps” themselves for their extensive functionalities. They all have traffic deals with Zhihu. For example, Zhihu content is surfaced in the search results on WeChat, which has its own search engine.

While joining hands with giants could drive user growth for a smaller player, dependence on outsiders could also constrain a startup, forcing it to give away significant shares too early and joggle the interests of multiple allies, who could be rivals themselves.

Lee declined to comment on Zhihu’s relationship with any specific partner, but he did indicate that Zhihu doesn’t currently have an “overreliance” on partners and that the firm keeps “natural working business relationships with them.”

“That also speaks to the purity and the ambition of the Zhihu team, that it hopes to maintain more independence by making more friends,” said Lee.