Technology

CEO ouster, looming layoffs and devaluation turn WeWork into cautionary tale

Major layoffs are all but inevitable at high-flying real estate startup WeWork after Adam Neumann succumbed to pressure today to step down as CEO and take the role instead of non-executive chairman of the company he cofounded nine years ago.

Two well-placed sources tell us that the scope is likely to be massive, and includes some of of its newest business divisions, which these same sources anticipate will be jettisoned to get the companyfocus back on its core business. One of these sources speculates that over time, up to half of WeWork15,000 employees — 9,000 of whom have been brought on in the last two years — could be laid off to shore up the unprofitable companyexpenses. The sentiment echoes a new piece in The Information that reports a &group of executives from WeWorkparent company and bankers& have discussed laying off as many as 5,000 employees—a third of its workforce.

Neumann won&t have as much say in the matter, either. As part of his departure from the role, he has agreed to further reduce the power of his supervoting shares from an original 20 votes for every one vote that a regular investor in WeWork would receive to just three, reports Bloomberg. His wife, Rebekah, a cofounder who is thought by insiders to have played a heavy role in the companyoriginal — and highly atypical — IPO prospectus, is also leaving the business.

Itrather breathtaking, the speed with which the couple was just elbowed aside. Still, some others involved in the company look poised to get a far worse deal. The Japanese conglomerate SoftBank currently stands to lose billions of dollars on its investment in the company — if it doesn&t wind up writing down nearly the entire investment. Even an aggressive ratchet clause won&t do much to protect SoftBank if WeWorkshares eventually sink on the public market.

It would seem an extreme correction to a culture that had become, well, anything but restrained. Italso far from clear that it would have the intended effect of attracting public shareholders to the company, whose wheels began to come off when SoftBank first plugged $4.4 billion into WeWork roughly two years ago, according to our sources. (Roughly $6 billion more would follow.) As says one of these individuals, who has known Neumann for many years, &Adam already had a healthy ego. What the f_ck do you think is going to happen when hegiven billions of dollars?&

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Trump impeachment could derail administrationmaneuvers in tech

Speaker of the House Nancy Pelosi announced official impeachment proceedings against President Trump today, and while the approaching political fracas may not be directly tech-related, it could have serious effects on several efforts at the federal level to rein in or otherwise influence the tech industry.

Impeachment does not mean the government stops doing what it needs to do, of course. But it does immediately become one of the highest priority items on the White Housealready crowded to-do list. Itmore than possible that with impeachment work, the smoldering conflict in Saudi Arabia, immigration and ICE issues, and innumerable other issues and legal challenges, something like social media regulation may simply not be important enough to actively pursue.

The Trump administration has a complicated relationship with the tech industry. Many would say that it was the savvy leveraging of social media that helped the man get elected. And Trump has embraced Twitter so closely as to make it effectively the main instrument of his office. But he has also repeatedly lashed out against companies like Facebook and Google for a variety of reasons, often having to do with a perceived bias against him or conservatives in general.

This summer, for example: In July the president said there &may or may not be National Security concerns with regard to Google and their relationship with China.& Then the next week he suggested Google had taken &very illegal& actions, specifically that they &suppressed negative stories on Hillary Clinton, and boosted negative stories on Donald Ttump [sic].& Shortly after that, he accused Google of having &manipulated from 2.6 million to 16 million votes& in favor of Clinton in the 2016 election, saying &Google should be sued.&

This is only a handful of examples, from a period of weeks. While these events individually appear to have occurred spontaneously in response to what the president was watching or being told at the time (for instance in the last case, Fox News had mentioned the report minutes earlier), they amount to a semi-organized collection of actions that in aggregate may have eventually been called policy.

The multi-state investigation of potential antitrust violations by Google does not seem to in fact have been instigated by the White House, though the FTC and Department of Justice investigations were likely spurred by the Executive in some form or another.

But Trump has also found himself at least notionally on the side of Big Tech elsewhere; for instance, on the question of privacy and user protection laws. States like Illinois have had highly robust laws in place for years that have proven a thorn in many a companyside. With California enacting its own, the industry decided that enough was enough, and has been calling loudly for federal intervention. The logic is that a federal law on the matter of, say, selling personally identifiable information to advertisers, would be more lenient and preempt state laws. And they are right not to expect anything of the scale or rigor of GDPR.

While some of these machines are already in motion, the White House has yet to set others on their way — for example a puzzling rumored order that would have put the FCC in charge of regulating social media. Tech companies are likely breathing a sigh of relief at the thought that Trumpattention will be elsewhere as impeachment proceedings begin and blend into the 2020 election.

Tech will remain at the center of many national debates and actions, but impeachment may very well have pushed these troublesome but ultimately not urgent efforts from the back burner and onto the floor.

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NBCU is again going after Gen Z and millennials with the launch of a new digital news brand and soon-to-arrive streaming network, called LX — short for &Local X.& Local, because the focus is on local news and &X& because…well, it sounds cool? (NBCU says itfor LX&exponential abilities,& if you want the official reasoning.)

The service will be run by NBCU42-station group, NBCUniversal Owned Television Stations, which will next year begin delivering LXprogramming as both an over-the-air and streaming network.

The company says the news programming on LX will feature &visually rich,& longer-form content — which is a switch from NBCother, earlier efforts in targeting the younger demographic.

For instance, NBCnew streaming news network, NBC News Now, launched in May, delivers hourly live updates called &Briefly&s& as one of its key features. NBC also invested in a Snapchat news show, &Stay Tuned,& where it delivers a selection of top stories in just a few minutes.

LX is a different sort of news-telling experience — one thatmore akin to a news magazine, rather than a traditional local newscast.

Its &Visual Storytellers,& as the reporters are called, will work within their own communities — including LA, Boston, Dallas, Miami and New York — to offer local stories and background on complex issues, says NBCU.

Among the group of storytellers are LAChase Cain, formerly of Hulu, who will use 360-degree videos as part of his storytelling efforts; Ngozi Ekeledo, previously a reporter for the Big Ten Network in Chicago, now in Boston; a two-time Emmy winner whose background is in local TV news, Clark Fouraker, in Dallas; plus Bianca Graula, a bilingual journalist who will focus on Miami stories; and former Vice News Tonight reporter Alexa Liautaud, in New York.

The programming launched on Monday with stories about climate change, urban farming, a surfing program for black women in California and a young female Asian chef and James Beard nominee who launched a successful restaurant without experience or training.

Currently, the content is airing on YouTube atNBCLX,onLX.comand across social media platforms (@NBCLX.)

In April 2020, LX will debut as an over-the-air streaming network with live programming included, too. That means local newscasts will be added into the mix of coverage.

And the network will feature fewer and shorter ad breaks at that time, the company says.

More broadly, the service aims to attract an audience of younger people who no longer watch television in the traditional sense. Todaycord cutters and &cord nevers& often get their news from social media, podcasts, apps and other digital-first sources.

Thata challenge for a news division focused on local TV.

&Our younger audiences want stories that are relatable. They want to feel a connection with the people delivering the news to them. They want more context about whathappening in their neighborhoods. LX will deliver this and more,& said Valari Staab, president, NBCUniversal Owned Television Stations, in a statement. &Our team has been working hard to create a place that younger audiences can go to watch stories that are about them, and get the background about complex issues happening in their own backyard but still walk away feeling inspired about the power we all have to affect positive changes for our communities,& she added.

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VC firm Target Global has just announced itexpanding its European network by adding a local office in Barcelona, Spain — building on its existing presence in Berlin and London, plus Tel Aviv and Moscow.

The firm has €700 million under management and a broad investment range that covers SaaS, marketplaces, fintech and insurtech, as well as a big focus on mobility.

TechCrunch sat down with general partner Shmuel Chafets and investor director Lina Chong, who will be heading the firmpush into Spain, to talk about its decision to set up shop in Barcelona — discussing how they see the local and national ecosystem, as well as picking their brains on wider investments trends and regulation in Europe.

Want to know what it takes to get a meeting with Target Global and factors they weigh when they&re deciding whether to cut a check or not? Read on…

The interview has been lightly edited for clarity.

TechCrunch: Why choose Barcelona and why now? Why not Spaincapital, Madrid — or even a city like Paris?

Shmuel Chafets: First of all have you been outside!?

I started coming to Barcelona four or five years ago just to see things and we had some angel investments here and it feels to me today — or when Lina and I started getting more serious about Barcelona it seemed to us that Barcelona has the attributes of Berlin eight or nine years ago. When I at least started coming to Berlin and Lina moved to Berlin, it has the same attributes. It looks like itjust about to happen

I think it has a few factors. The first one is that ita great place to live and you can&t ignore that. In Europe, if you&re a team and you&re an international team there are very few places that you can live in. So London is the original ex-pat city of Europe and it still is amazing but very, very expensive. Berlin is the second one. And I think a lot of Berlinearly success was fuelled by people who were not necessary German and definitely not Berliners coming and starting a company there.

Ita good place to live, italso a cheap place to live, and ita cheap place to do business. Salaries here are quite low but the quality of living is quite high and that makes it very good for startups. Particularly when you need young people, developers, creative people to move. Itan easy place to convince people to move to.

It doesn&t have a dominant industry. And that is very similar to Berlin — Berlin is not where Germany economically is, and that means that the smartest people around want to go in for startups. Thatthe best employment option. There is no banking industry sucking people in with high salaries. And also driving costs up. It is in its culture a very creative city, a very open, very creative city and that I think is also very important.

And lastly, there are these early success stories that fuel the idea of entrepreneurship and also fuel financial entrepreneurship. So one of the interesting things about entrepreneurship is that people who start need to know where it ends or where itgoing to. And the early success stories — first of all they make the smartest kid graduating — who has a McKinsey job offer and a Goldman Sachs job offer and a startup idea — he needs to know that the startup idea has a future. That therea future in being an entrepreneur and he needs to look up to people around him. Itnot enough to know that Mark Zuckerberg dropped out — thatfine but thatvery far and very large.

GettyImages 1147541590

Image via Getty Images / Pol Albarrán

But to look at Carlos [Pierre, founder and CEO] from Badi and say okay therea guy, hea few years older than me, he started a company, hedoing very well — this is the path that I want to take.

Also, there are more and more mentors. People who&ve done it before. And they can help you figure things out. You have to be able to call someone up and say hey lethave breakfast and explain how they do it.

And theremore money — for seed. Because you look at a lot of people starting funds, and we were just talking on the way about the Ticketbis guys. They&re starting a fund. And thata great example of one of these early success stories and now they&re putting it back into the ecosystem and helping it grow.

Rocket Internet did a lot of that in Germany. They had early exits and then they went and plowed it all back into the ecosystem in their own particular way. People like [serial entrepreneur] Lukasz Gadowski — who we work with a lot. He built Spreadshirts… [then later] he founded Delivery Hero. So through Team Europe. So people who were early, early entrepreneurs — and then in the second wave helped build an ecosystem. So I think there are more and more people like that that we see here.

That usually fuels the ecosystem. Also as companies here start to scale and as more of these European startups start to build hubs here theremore experience. You can find people who&ve been through a couple of rounds.

And the last thing which is not about Barcelona itabout Spain in general. Therea decent local domestic market and there is a natural second market in South America. And actually in the US too — because Spanish is the second most commonly spoken language in America so when you start a company here you have that second market built-in. Which is very important — you can scale it.

Latin America is a fascinating market right now, a fascinating time. So in a way, ita way for us to make a side bet on Latin America in a way without going out of Europe and insetting far. My first boss told me never to do business in a place where thereno direct flight from where I live and I adhere to that. If things go belly up you don&t want to be stuck in transfer in some airport sitting there waiting for a transfer.

TechCrunch: So in a way being in a second city — this isn&t Madrid, Spaincapital — is a more interesting proposition for startups because thereless competition for talent?

Chong: Ita bit of an underdog here. There are not these big dominant industries. Itnot cosmopolitan like how Madrid is perceived. Therea lot of creativity, a lot of people who are more entrepreneurial in spirit.

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BlaBlaCar to acquire online bus ticketing platform Busfor

BlaBlaCar, the marketplace that matches people for long-distance ridesharing between cities, has announced plans to acquire Busfor, the leading bus ticketing platform in Russia and Ukraine.

&This is the biggest acquisition in BlaBlaCar history and Busfor is the regionleading bus distribution company, with over 150 employees. Connecting our significant online demand with Busforsupply will help travelers and bus operators alike, so we&re incredibly excited to be joining forces,& BlaBlaCar co-founder and CEO Nicolas Brusson told me.

BlaBlaCar isn&t disclosing terms of the deal.

This is yet another move in buses for BlaBlaCar. But this is a different move when you compare it to the acquisition of Ouibus in France. BlaBlaBus, BlaBlaCarbus service, currently operates in France, Belgium, the Netherlands, Germany and Italy.

This time, the company is buying a ticketing platform that partners with 7,000 bus carriers and generates $4 billion in ticket sales per year. It doesn&t plan to operate as a bus carrier in Russia, Ukraine and Poland directly. Blablacar says that it has 25 million members in the region out of 80 million registered users in total.

&Busfor will retain its own brand, product offering and consumer app, but we will be integrating its supply of bus journeys into the BlaBlaCar platform to help bus carriers and stations grow their customer bases while also creating the best user experience for travelers,& Brusson said.

But buses are still an offline industry in those countries. BlaBlaCar says that online booking currently represents 10% of all tickets. Therestill a lot of room for growth.

Eventually, BlaBlaCar wants to become a carpooling and bus company, with buses for trips from one main city to another main city, and carpooling rides for trips between smaller cities.

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Hola Barcelona. Target Global, a pan-European VC firm with €700 million under management and a broad investment canvas spanning SaaS, marketplaces, fintech, insurtech and mobility, is opening an office in the Catalan capital.

Investor director, Lina Chong, will lead the expansion into Spain, having relocated to Barcelona from the fundBerlin headquarters. They&re setting up in a co-working space on Avenue Diagonal in the center of the city.

Target Global backs early and growth stages startups, as well as doing some seed investing. The firms tells us itexpecting to do between one and three deals per year out of the Barcelona office, envisaging the same mix of investments in terms of early and growth stage.

&We&ve been seeing decent deals in both stages. Definitely. Across Spain,& says Chong. &There is just more — by numbers — way more early stage seed than A. I think thatjust the maturity of the ecosystem here.&

Dialling up a local presence across Europe means Target Global can pitch founders on being able to connect talent and expertise across key regional startup hubs, while also plugging into a wider international network. (It also has offices in London, Tel Aviv and Moscow.)

From a VC perspective opening local offices is of course about deal flow. Being on the ground to take more meetings widens the pipe, increasing the chance of an early shot at the next high growth business.

Thatimportant because Europestartups have many more options for early stage funding than in years past, and founders are getting smarter about choosing their investors. Boots on the ground means more time for all important relationship building.

Target Global describes itself as something of a startup — it was founded in 2012 — which means itcompeting for deals with VCs that have more established brands and networks. Becoming a familiar face in the room looks like a solid strategy to growth hack its own network.

&We are a global or a pan-European fund but for an entrepreneur here we want them to feel that we&re local; we understand the ecosystem; that we have deep rooted connections; that we&re committed; that we show up,& general partner Shmuel Chafets tells TechCrunch.

&Itall a function of time and effort. Just being here and having breakfast with people, lunch with people and helping out even the people we don&t invest. You get more connected and then you start to see more deal flow.&

This is the second local office itopened in Europe this year, after adding a London base in April — making it a flattering pick for Barcelona. Plenty of other European hubs are being passed over in the cityfavor this time, be it Madrid, Lisbon, Paris or Stockholm.

Chafets says the firm looked at five or six other cities but settled on Barcelona for now, though he won&t rule out opening more offices in future. &Never say never,& he quips.

Having been a regular visitor to Barcelona for a number of years he talks enthusiastically about the creative energy motivating entrepreneurs — saying the cityecosystem reminds him of how Berlin felt a few years ago. &It looks like itjust about to happen,& he reckons.

&From what I&ve seen Barcelona is sort of strong in creative. Ita very creative city. Italways pretty strong in mobile, historically. It had more mobile successes… SaaS, particular smb SaaS, is pretty good here. I think it would be harder to find enterprise sales companies and companies building these very deep tech stuff right now. But definitely in the marketplace, smb SaaS space, mobile space you see great stuff here.

&That ties into the creativity, because ita product driven environment — not a tech driven environment. I think Berlin is a very operationally driven environment, Tel Aviv is a very tech driven environment, this is a very product driven environment — which actually complements well our other hubs.&

&Theresome pent-up energy here,& agrees Chong, who says they&ve already come across a &surprising& amount of deal flow. &Again itvery similar to Berlin where therea lot of willingness and therea lot of dreaming but therenot a lot going on. So I think the younger people here they&re creating that.&

Target Global has been testing the water prior to formalizing its commitment to Barcelona, and has four local portfolio companies which itploughed around €20M into over the past 12 months.

Its biggest regional investment to date is in business trip booking SaaS, TravelPerk. Italso backed flatmate matching platform Badi; online doctor booking platform, Doc Planner (which relocated from Warsaw, Poland after merging with local startup Doctoralia); and medical chat app MediQuo.

From a wider perspective, Barcelonatech ecosystem has been gathering momentum for years, helped by the annual presence of the worldbiggest mobile tradeshow (MWC) — as well as more specific pull factors for startups such as a relatively low cost of living and an attractive Mediterranean location.

&Ita great place to live and you can&t ignore that,& says Chafets. &In Europe if you&re a team and you&re an international team there are very few places you can live.&

This combination means Barcelona is now home to a growing number of high growth startups, including Target Globalportfolio firm TravelPerk — as well as the likes of on-demand delivery platform Glovo; and RedPoints, which sells a SaaS to brands for detecting and acting against the sale of fake goods online, to name two other notable examples.

Other local startups grabbing attention and investment in recent years include 21Buttons, Holded, Housfy, Typeform and Verse. While hyper local mobile marketplace startup Wallapop — which was ona growth tear in an earlier wave of ecoystem growth — remains the go-to classified app on every localphone (though it merged with a US rival back in 2015).

The city even has its own youthful scooter startup (Reby) which has refused to be put off by some tough regulations controlling rentals — and has recently been applying AI to try to make like a good citizen by automatically detect poor parking.

Mobility is a major area of focus for Target Global — which last yearannounced a dedicated fund (with an initial raise of $100M) for startups working to disrupt transportation. Although, when it comes to stand-up e-scooters the firm is already invested in Berlin-based Circso will presumably be looking to spend elsewhere on that front.

&Barcelona is the perfect city for scooters,& says Chafets. &Scooters can really change the way the city works. Italso small and has relatively good public transportation from outwards in — but they need to be regulated. You need to really make sure that [they aren&t a misused nuisance].&

He notes that European regulators have been relatively quick to spot the risks of shared mobility, and close off the antisocial expansionist playbook that played out in some US cities during the first wave of scooter startups — when people trolled Bird by hanging scooters in trees (or, well, worse) — but he sees that as good news for building a sustainable future for alternative mobility.

&Ita great challenge and it will be a huge money maker — thatwhere we want to be right, multiple trillion dollar businesses!&

Away from disruptive developments on the ground in Barcelona and the other local tech hubs that Target Global is intending to explore from its new base in Catalonia, it also views Spain as a low risk gateway to opportunities on the other side of the Atlantic.

&Therea decent local domestic market and there is a natural second market in South America,& says Chafets. &Actually in the US too — because Spanish is the second most commonly spoken language in America so when you start a company here you have that second market built in. Which is very important — you can scale it.&

&Latin America is a fascinating market right now, ita fascinating time,& he adds. &So in a way ita way for us to make a side bet on Latin America without going out of Europe and investing far.&

We&ll share a full interview with Chafets and Chong on Extra Crunch.

Target Global is firming up its bet on Barcelonaentrepreneurs

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