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Google’s parent firm Alphabet is done exploring the idea of using giant balloons to beam high-speed internet in remote parts of the world.
The firm said on Thursday evening that it was winding down Loon, a nine-year-old project and a two-and-a-half-year-old spin off firm, after failing to find a sustainable business model and willing partners.
The demise of Loon comes a year after Android-maker ended Google Station, its other major connectivity effort to bring internet to the next billion users. Through Station, Google provided internet connectivity at over 400 railway stations in India and sought to replicate the model in other public places in more nations.
That said, Alphabet’s move is still surprising. Just last year, Loon had secured approval from the government of Kenya to launch first balloons to provide commercial connectivity services — something it did successfully achieve months later, giving an impression that things were moving in the right direction.
On its website, Loon stated its mission as: “Loon is focused on bringing connectivity to unserved and underserved communities around the world. We are in discussions with telecommunications companies and governments worldwide to provide a solution to help extend internet connectivity to these underserved areas.”
Perhaps the growing interest of SpaceX and Amazon in this space influenced Alphabet’s decision — if not, the two firms are going to have to answer some difficult feasibility questions of their own in the future.
“We talk a lot about connecting the next billion users, but the reality is Loon has been chasing the hardest problem of all in connectivity — the last billion users,” said Alastair Westgarth, chief executive of Loon, in a blog post.
“The communities in areas too difficult or remote to reach, or the areas where delivering service with existing technologies is just too expensive for everyday people. While we’ve found a number of willing partners along the way, we haven’t found a way to get the costs low enough to build a long-term, sustainable business. Developing radical new technology is inherently risky, but that doesn’t make breaking this news any easier.”
The blog post, which makes no mention of what will happen to Loon’s existing operations in Kenya or the people who worked at the firm, characterised Loon’s connectivity effort as success.
“The Loon team is proud to have catalyzed an ecosystem of organizations working on providing connectivity from the stratosphere. The world needs a layered approach to connectivity — terrestrial, stratospheric, and space-based — because each layer is suited to different parts of the problem. In this area, Loon has made a number of important technical contributions,” wrote Westgarth.
Scores of firms including Google and Facebook have visibly scaled down several of their connectivity efforts in recent years after many nations they targeted such as India solved their internet problems on their own. In recent years, it has also become clear that subsidizing internet access to hundreds of millions of potential users is perhaps not the most sustainable way to acquire customers.
Source: https://techcrunch.com/2021/01/21/google-alphabet-is-shutting-down-loon-internet/
Hims & Hers, a San Francisco-based telehealth startup that sells sexual wellness and other health products and services to millennials, began trading publicly today on the NYSE after completing a reverse merger with the blank-check company Oaktree Acquisition Corp.
Its shares slipped a bit, ending the day down 5% from where they started, but the company, which was founded in 2017 and now claims nearly 300,000 paying subscribers for its various offerings, has never been focused on a splashy headline about its first-day performance, co-founder and CEO Andrew Dudum told us earlier today.
On the contrary, Dudum says that while Hims might have once imagined a traditional IPO, it decided to go the special purpose acquisition company (SPAC) route because of their pricing mechanisms and because it was approached by a SPAC led by renowned money manager Howard Marks, the founder of the global alternative investment firm Oaktree Capital Management. (“We fell in love with the Oaktree team and the capital market experience and deep resources they have.”)
We talked with Dudum about that SPAC’s structure; the lockups involved now that Hims’ shares are trading; and how much of the business still centers around one of its first offerings, which was a generic version of erectile dysfunction pills. Our conversation has been edited lightly for length and clarity.
TC: You’re a Bay Area-based company selling to a mostly U.S. audience. How are you thinking about expanding that footprint geographically?
AD: We do have a small operation selling in the U.K.; we’re getting our feet wet in that market and building out a team and infrastructure and fulfillment. If you look at the regulatory landscape, there’s a huge amount of room [to grow] in Europe, Australia, Canada, the Middle East and Asia, and so in that order, we’ll start to [move into those markets].
TC: What is your average customer cost?
AD: It has come down from $200 when we first launched, to roughly $100 last year, and we make, on average, close to $300 in the first couple of years in terms of a patient’s lifetime value.
TC: How quickly do customers churn?
AD: We break down lifetime value projections by quarter cohorts, and quarter over quarter, year over year, we’re monetizing each of these cohorts better, with high-margin profiles.
As of last quarter, the business was growing 90% year-over-year, with 76% gross margins and greater cash efficiency, and that’s because as we provide more offerings, there is more cross-purchasing. Also, word of mouth is becoming more of a dynamic, with more than 50% of the traffic to the site free at this point because we have built a brand with a young demographic.
TC: When are you projecting that you’ll turn profitable?
AD: We’ve reduced our annual burn and increased our margin efficiency and organic growth, so on a quarterly basis, we think in the next couple of years is a real possibility.
Image Credits: Hims & Hers
TC: Hims’ first wellness offerings included pills for male pattern hair loss and erectile dysfunction. How much revenue does that ED business account for?
AD: What we’ve disclosed is that roughly half [of our revenue] is that sexual health category — which includes [medicines for] generic erectile dysfunction, birth control, STDs, UTIs and premature ejaculation. The other half is predominately dermatology, including hair care [to address hair loss] and acne, and we’ve more recently moved into primary care and behavioral health.
TC: For retail investors, how do you differentiate the business from that of your rival Ro, which heavily promotes its ED products?
AD: There are a number of core differences between us and public and private players. First is our real focus on diversifying our offerings. With our focus on sexual health, dermatology, primary care and behavioral health, it’s in our DNA to quickly expand into new businesses.
We also think we’re different from most [rivals] in that we really invest time in building deep relationships with [those who represent] the future of healthcare markets — people in their teens, 20s and 30s. This demographic has a different set of tech expectations and consumer expectations than people in their 40s, 50s and 60s, and if we want to build for the future, that means building for the largest body of payers in the future.
Traditional healthcare companies monetize only the sick, but optimizing around that demographic precludes you from understanding what the next generation really needs and wants. I’ve never seen such a divergence between a patient population and legacy experience, and that’s a real advantage to us as a business.
TC: Hims just went public through a SPAC in a deal that gives the company around $280 million in cash — $205 million of that from Oaktree’s blank-check company and another $75 million through a private placement deal. How much runway does that give you?
AD: The company doesn’t burn a tremendous amount — between $10 million and $20 million a year — so a relatively long runway if we keep operating the business as is. But it does allow us to expand and grow into new businesses, too, including into big categories like sleep, infertility, diabetes and other chronic conditions.
TC: What about acquisitions?
AD: We’ll keep an eye open for strategic opportunities and consolidation opportunities. More than a dozen businesses a month come to us to be consolidated into the brand, but generally speaking, we’ve had the belief that so much is in front of us that we don’t want to be distracted.
TC: Is there a lockup period for anyone?
AD: There’s a traditional lockup for executives and employees and the board.
TC: Did your SPAC sponsors get a board seat?
AD: No.
TC: How much do they now own of the company, and can they sell?
AD: Oaktree owns a couple percent and [the syndicate they brought to do the private placement] [owns] 12%. But the very reason we went with them was the quality of the team and the organization . . . and they have the added incentive for the next year or two from a compensation standpoint for the company to succeed and to prove [out their thesis that Hims is a smart investment].
TC: Do you think the traditional IPO process is broken?
AD: The traditional IPO market hasn’t changed. It takes 12 to 18 months of preparation, which is a crazy amount of time for management to be distracted, then there’s this one-day PIPE that gives institutions a tremendous amount of money instantaneously. Maybe it makes for a good CNBC headline, but at tremendous cost to the company. It’s atrocious. If you were a founder or employee and getting diluted twice as much as you have to be, you’d be really upset. It’s no surprise to me that founders like myself are looking at other modalities with better pricing and better structures.
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.
This week we — Natasha and Danny and Alex and Grace — had more than a little to noodle over, but not so much that we blocked out a second episode. We try to stick to our current format, but, may do more shows in the future. Have a thought about that? equitypod@techcrunch.com is your friend and we are listening.
Now! We took a broad approach this week, so there is a little of something for everything down below. Enjoy!
- Hims is going to SPAC itself onto the public markets, which should prove interesting for other D2C startups eyeing the same move.
- The final quarter of 2020 and the full year brought an ocean of capital to bear on U.S. startups, something that we delighted in chewing on. Fintech is also hot as all heck.
- Plaid is building a fintech accelerator, which we thought was cool.
- An edtech startup based in Nigeria raised a $7.5 million Series A on the back of a really neat distribution model. The march of live, tech-powered tutoring lives on!
- TripActions raised a pallet of new capital despite having had a somewhat rough 2020 due to the pandemic. It’s a fascinating wager, and one that we will track as it earns out.
- There was lots of news in the movement space, including Microsoft helping put $2 billion into self-driving startup Cruise, electric vehicle startup Rivian raising $2.65 billion from Amazon and others, and Bolt Mobility expanding to new markets.
- Danny’s GPS story.
- Wattpad exits for $600 million, leading to Alex detailing his love of science fiction.
- a16z is doubling-down on its in-house media project, and Forbes is building out a paid newsletter service that we think is very neat.
Like we said, it’s a lot, but all of it worth getting into before the weekend. Hugs from the team, we are back early Monday.
Equity drops every Monday at 7:00 a.m. PST and Thursday afternoon as fast as we can get it out, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.
A new report suggests there’s a pricey Apple VR headset in the works, Facebook’s Oversight Board will examine one of the social network’s most consequential decisions and we review the Samsung Galaxy S21 Ultra. This is your Daily Crunch for January 21, 2021.
The big story: Apple might be working on a VR headset
Apple is developing a standalone virtual reality headset that could debut in 2022, according to Bloomberg.
The headset is supposed to include a processor more powerful than the M1 chip currently included in the MacBook Air and 13-inch MacBook Pro. And it would cost more than most competing products (so possibly in the $1,000 range or more).
It sounds, in other words, like this is meant to be a specialist product, perhaps paving the way for a more mass-market device later.
The tech giants
Facebook’s Oversight Board will review the decision to suspend Trump — Facebook VP Nick Clegg called the circumstances around Trump’s suspension an “unprecedented set of events which called for unprecedented action.”
Samsung Galaxy S21 Ultra review: Camera refinements are nice, but the price drop’s the thing — The updates are mostly iterative for an already solid handset, but we won’t say “no” to a $200 price drop.
YouTube launches hashtag landing pages to all users — The company has been quietly working on a new feature that allows users to discover content using hashtags.
Startups, funding and venture capital
TripActions raises $155M at $5B valuation as corporate travel recovers from pandemic lows — The company became something of a poster-child for the impact of COVID-19 on certain startup categories.
Omnipresent raises $15.8M Series A for its platform to employ remote-workers globally — Omnipresent says it ensures the process of remote-hiring costs a fraction of what it normally would.
Soci raises $80M for its localized marketing platform — National and global companies like Ace Hardware, Anytime Fitness, The Hertz Corporation and Nekter Juice Bar use Soci to coordinate marketing across individual stores.
Advice and analysis from Extra Crunch
Eight VCs agree: Behavioral support and remote visits make digital health a strong bet for 2021 — In 2020, more of us saw our doctor on video than ever before.
Hot IPOs hang onto gains as investors keep betting on tech — Lemonade is a great example.
Decrypted: With more SolarWinds fallout, Biden picks his cybersecurity team — In this week’s Decrypted, we look at the ongoing fallout from the SolarWinds breach and who the incoming president wants to lead the path to recovery.
(Extra Crunch is our membership program, which helps founders and startup teams get ahead. You can sign up here.)
Everything else
The biggest step the Biden administration took on climate yesterday wasn’t rejoining the Paris Agreement — Instead, it was a move to get to the basics of monitoring and accounting, of metrics and dashboards.
How Bitcoin is helping middle-class users survive the pandemic — People like Saeed, an Iranian immigrant to France, see cryptocurrency as a necessity.
MIT aims to speed up robot movements to match robot thoughts using custom chips — The method results in custom computer chips that can offer hardware acceleration as a means to faster response times.
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 3pm Pacific, you can subscribe here.
Source: https://techcrunch.com/2021/01/21/daily-crunch-apple-might-be-working-on-a-vr-headset/
A couple of months ago at CNBC’s Transform conference, IBM CEO Arvind Krishna painted a picture of a company in the midst of a transformation. He said that he wanted to take advantage of IBM’s $34 billion 2018 Red Hat acquisition to help customers manage a growing hybrid cloud world, while using artificial intelligence to drive efficiency.
It seems like a sound enough approach. But instead of the new strategy acting as a big growth engine, IBM’s earnings today showed that its cloud and cognitive software revenues were down 4.5% to $6.8 billion. Meanwhile cognitive applications — where you find AI incomes — were flat.
If Krishna was looking for a silver lining, perhaps he could take solace in the fact that Red Hat itself performed well, with revenue up 18% compared to the year-ago period, according to the company. But overall the company’s revenue declined for the fourth straight quarter, leaving the executive in much the same position as his predecessor Ginni Rometty, who led IBM during 22 straight quarters of revenue losses.
Krishna laid out his strategy in November, telling CNBC, “The Red Hat acquisition gave us the technology base on which to build a hybrid cloud technology platform based on open-source, and based on giving choice to our clients as they embark on this journey.” So far the approach is simply not generating the growth Krishna expected.
The company is also in the midst of spinning out its legacy managed infrastructure services division, which, as Krishna said in the same November interview, should allow Big Blue to concentrate more on its new strategy. “With the success of that acquisition now giving us the fuel, we can then take the next step, and the larger step, of taking the managed infrastructure services out. So the rest of the company can be absolutely focused on hybrid cloud and artificial intelligence,” he said.
While it’s certainly too soon to say his transformation strategy has failed, the results aren’t there yet, and IBM’s falling top line has to be as frustrating to Krishna as it was to Rometty. If you guide the company toward more modern technologies and away from the legacy ones, at some point you should start seeing results, but so far that has not been the case for either leader.
Krishna continued to build on this vision at the end of last year by buying some additional pieces like cloud applications performance monitoring company Instana and hybrid cloud consulting firm Nordcloud. He did so to build a broader portfolio of hybrid cloud services to make IBM more of a one-stop shop for these services.
As retired NFL football coach Bill Parcells used to say, referring to his poorly performing teams, “you are what your record says you are.” Right now IBM’s record continues to trend in the wrong direction. While it’s making some gains with Red Hat leading the way, it’s simply not enough to offset the losses, and something needs to change.
