Wednesday, 2 February 2022

How the conflict in Ukraine threatens US cybersecurity

The TechCrunch Global Affairs Project examines the increasingly intertwined relationship between the tech sector and global politics.

As Russian troops stand poised to yet again invade Ukraine, much attention has been focused in recent days on how to avoid escalation of the conflict. Recent (and likely ongoing) escalations in cyberattacks on Ukraine suggest that this conflict will be unfortunately severe in the digital domain. And unlike a ground invasion, the U.S. government has warned that the digital conflict zone may expand to include the United States, as well. Years of Russian cyber probing and “preparing the environment” could well culminate in significant and potentially destructive attacks against private-sector American interests in the coming weeks and months.

If this level of vulnerability feels intolerable, good — it should. But how did we get here? And what are the moves needed to avoid disaster? To start, it’s critical to understand how President Vladimir Putin has experimented with 21st Century technical methods to contribute to achieving his longstanding vision for Russia.

Past as cyber prologue

Russia’s motives are conventional enough. In April 2005, Putin called the fall of the Soviet Union “the greatest geopolitical catastrophe of the century” and “a genuine tragedy…for the Russian people.” This core belief has guided many of Russia’s actions since. Today, the drums of war are unfortunately beating loudly in Europe, as Putin seeks to forcibly return more of Russia’s periphery back under formal control and push back on perceived Western encroachment.

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While there are a number of factors driving why Russia has chosen now as the time to increase its aggression against Ukraine — and assert itself in Europe more broadly — its asymmetric capabilities in areas like cyber certainly give it a broader set of tools to shape the outcomes in its favor.

Russia’s geopolitical position — with a waning population base and woeful economic situation — drives its leadership to find ways to reassert itself on the global stage. Russian leaders know they can’t compete conventionally, so they turn to more easily accessible and, as it turns out, immensely powerful and effective asymmetric tools. Their disinformation campaigns have done much to contribute to the pre-existing societal fissures here in the United States, exacerbating our fracturing politics in keeping with standard Russian intelligence practices. Indeed Russian leadership likely sees an opportunity with the West as distracted by the COVID pandemic and internal turmoil that it sometimes helps sow.

But Putin’s long embrace of asymmetrical methods means Russia has been preparing for this moment for years. There is a familiarity to these activities: old means and tools from the Soviet era that have taken on a new face through the manipulation of twenty-first-century digital tools and vulnerabilities. And in recent years, it has used Ukraine, Libya, the Central African Republic, Syria, and other contested spaces as “testing grounds” for its information operations and damaging cyber capabilities.

The bear gets prickly

Today, Russian actors have deployed a vast array of techniques for “active measures” to confuse, sow doubt, and delegitimize basic democratic institutions. The mercenaries and clandestine agents Russia is deploying into Ukraine have honed their skills in hybrid battlespaces abroad, using a mix of deception and kinetic action, deftly mixed with deniable influence operations and offensive cyber actions.

In cyberspace, Russia has graduated from its then-unprecedented 2007 cyberattack on Estonia and later NotPetya-style cyber attacks, which targeted Ukrainian utilities, ministries, banks, and journalists, which spilled over into one of the most costly cyberattacks in history to date. Russian intelligence services have been found hacking into U.S. critical infrastructure systems for some time now as well—yet, to date, without significant kinetic or deleterious impact or actions (unlike in Ukraine and elsewhere as detailed in books like Andy Greenberg’s Sandworm). They’ve tested the reactions of the United States and its Allies, learned what they can get away with, and are pressing ever further as NATO countries debate what to do about Ukraine.

In sum, Russia has done its reconnaissance and likely pre-placed tools it may want to use against countries like the United States on a rainy day. That day may soon arrive.

When war in Europe hits American networks

As Russia ramps up its aggression against Ukraine, the United States has threatened a “devastating” economic response as part of the escalatory ladder (how nations methodically raise the stakes in the hopes of deterring an adversary in a conflict) toward an ever-increasingly more dangerous and likely violent resolution. What often goes unsaid is that Russian cyber capabilities are attempts at their own form of deterrence. Those preparatory activities Russia has engaged in over the years, as noted above, would allow those cyber eggs to hatch — and the consequences to come home to roost here in America.

The U.S. government has explicitly and broadly warned that Russia may attack American private industry in response to those potentially severe U.S. sanctions. It is highly unlikely, knowing the sophistication of Russian actors in this space, that these attacks would be brazen, or even immediate. While they can be sloppy and imprecise at times (see NotPetya), their capabilities will likely allow them to meddle with our critical infrastructure and private industry via supply-chain attacks and other indirect and difficult-to-attribute means. In the interim, companies and service providers could face significant damage and deleterious downtime. If the past has been a nuisance, the near term portends potentially much greater negative economic impact as Putin and his oligarchs continue to press their longstanding agenda.

Hope remains that Russia will not continue to ramp up its aggression, and will indeed find off-ramps, avoiding these various scenarios. We should all hope that none of this will ever unfold. It is prudent however, indeed overdue at this point, that industry ensure that it takes the appropriate steps to protect itself from what we must now consider a potentially highly likely attack – doubling down on multi-factor authentication, segmenting networks, maintaining backups, gaming out crisis response plans, and closing off access to only those with real need. What is happening with Ukraine seems a world apart, but with a few clicks, the impact may end up right here at home.

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Texas Parent Demands School District Ban Michelle Obama's Book

A Texas parent is demanding that that a school district near Houston remove copies of a book about former First Lady Michelle Obama because it promotes "reverse racism."

NBC News reported this week that hundreds of books are being banned in schools in "an unprecedented effort by parents and conservative politicians in Texas to ban books dealing with race, sexuality and gender from schools."

An NBC News records request determined that at least one parent in Katy asked to ban a book about the former first lady.

"Another parent in Katy, a Houston suburb, asked the district to remove a children’s biography of Michelle Obama, arguing that it promotes “reverse racism” against white people, according to the records obtained by NBC News," the report said. "A parent in the Dallas suburb of Prosper wanted the school district to ban a children’s picture book about the life of Black Olympian Wilma Rudolph, because it mentions racism that Rudolph faced growing up in Tennessee in the 1940s. In the affluent Eanes Independent School District in Austin, a parent proposed replacing four books about racism, including 'How to Be an Antiracist,' by Ibram X. Kendi, with copies of the Bible."

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Tuesday, 1 February 2022

Reddit co-founder Alexis Ohanian’s 776 closes new $500M venture fund

Seven Seven Six, better known as 776, announced today that it has closed on $500 million across two vehicles for its second fund.

The raise was “oversubscribed,” with $300 million going toward funding startups at their “earliest possible” stage and $200 million allocated for backing companies at their growth stages — or once they start to break out, according to 776 founder Alexis Ohanian.

Notably, 776 only closed on its first $150 million — also oversubscribed — fund just a year ago. It now has $750 million worth of assets under management.

We saw significant markups from our early investments in Fund I and ended up needing to raise this second fund sooner than expected,” Ohanian told TechCrunch in an email interview. “Good problems to have!”

Today, the 776 portfolio includes over 38 companies that have cumulatively raised more than $800 million in follow-on capital. Interestingly, the firm “almost always” leads the rounds it participates in, according to Ohanian. 

Companies within the 776 portfolio include Alt, an alternative asset trading platform; Pipe, a global trading platform that makes recurring revenue streams tradable for their annual value; Axie Infinity, a web3 play-to-earn online gaming universe that witnessed over 200x growth in the last year; and Metafy, a video game education platform providing one-on-one access to champion-level gaming coaches. Pipe was valued at $2 billion at the time of its last raise and Axie Infinity at $3 billion last October.

Ohanian, who also co-founded Reddit and Initialized Capital, told The Wall Street Journal that 776 plans to invest “primarily in crypto startups” out of its new fund and that 40% of its current portfolio is made up of crypto-related companies. Crypto investments are already seeing a good start to 2022 building off record hype in 2021.

When asked to confirm the crypto focus, Ohanian told TechCrunch that 776 follows “the lead of the smartest founders we meet.”

So if they keep building in Web3, we’ll keep funding them,” Ohanian said. “We’re also seeing a strong push into climate tech, space tech, food tech and still good old-fashioned SaaS businesses.”

As for how 776 sources its deals, the investor said that for now, it’s a “really old-fashioned” process in which leads mostly come via email or text and then end up in Cerebro, the operating system his firm developed.

That will improve this year with some more product to widen our top-of-funnel,” Ohanian said.

Cerebro is its first product and is designed to give founders a way to search 776’s network of 44,000 contracts and request an introduction “with one click.”

The thinking behind the technology was simple. 

“We have a great network that returns our emails and it’s not a good task for a human brain to be asked ‘hey do you know someone at twitter? Do you know a machine learning engineer?’” said Ohanian. “It’s much better to query a database anytime you want to.”

All of 776’s work lives there and that too is by design, he said. 

“This creates transparency and accountability – not only within our team, but also with our founders and investors,” Ohanian told TechCrunch. “The goal is to scale the most valuable and most productizable parts of our work first, so that when we spend time with our founders it’s the kind of work only humans can do well (empathy, strategy, creativity).”

When launching 776’s first fund, the firm said explicitly that it sought a diverse investor base, of which 50% identified as female and 15% as Black or Indigenous people. 

So how’s it doing?

The firm invites all its LPs to participate in a biannual, in-depth demographic survey. The most recent survey revealed that 51% of 776’s LPs identify as female, 13% as Black or Indigenous people and 10% as Latino/a/e. 

It does not have explicit founder diversity goals.

To up its game in being a resource for founders, Ohanian said 776 has started providing “actual receipts,” or monthly accountability reviews, for the work it does for its founders.

“It’s the exhaust from our engine,” he said. 



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Psaki Crushes Ted Cruz' Complaints About Black Lady Justice Pick

Kristen Welker of MSNBC used Ted Cruz' despicable comments targeting President Biden for promising an African-American female to be nominated Supreme Court to quiz Jen Psaki on Tuesday.

It did not go well.

Cruz, who's trying to win back MAGA voters, said Biden's choice was "offensive" and "insulting." I want to thank Ms. Welker for repeating and amplifying his vile remarks.

Psaki reminded the press corps that the former guy declared he would nominate a woman for the Supreme Court and nobody gave it a second thought.

"Not only were there no complaints for choosing a nominee from a specific demographic from the same corners (Republicans) but there was widespread praise of now-Justice Barrett on those grounds," Psaki reminded everyone.

Then Biden's White House press secretary threw Ted Cruz's own words back in his face.

"He had no objection to Donald Trump promising he'd nominate a woman in 2020, no objection at all. " she said. "In fact, he praised her on these grounds, the nominee, during the confirmation hearing, Sen. Cruz said, 'I think you're an amazing role model for little girls. What advice would you give little girls?'"

What's got Republicans' panties in a bunch: President Biden dared to put the word "Black" in his campaign promise to nominate a female justice to the high court.

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Docker makes comeback with over $50M in ARR two years into restructuring

It’s surely been a turbulent couple of years for Docker, the open source containerization company that launched in 2013, but it seems to have found its financial footing again. Today, it announced that over the last fiscal year, annual recurring revenue (ARR) has jumped 4x to over $50 million.

That’s quite a comeback for a company that faced great turmoil starting in 2019, when then-CEO Steve Singh stepped down and was replaced briefly by Rob Bearden. Shortly thereafter, it sold its enterprise business, its primary source of revenue, before eventually promoting longtime exec Scott Johnston to CEO.

At that time, it also took on new funding going back almost to square one, actually taking on the investment as a Series A company. It simultaneously implemented a new developer-centered strategy while dropping from 400 employees down to just 60. A few months later, the first wave of the pandemic hit. It was not an easy time, according to Johnston, who had to steer the company through this instability.

“November 2019 was a time [fraught] with risk and uncertainty but we believed in the tailwinds of the market, we believed in the developers’ love of our product, and that we could come together as a team, focus on the developer, deliver great products and build a legitimate business,” Johnston told me.

Docker had a couple of things going for it, even with that uncertainty. It had widespread brand recognition among developers and was synonymous with containerization, a way to package and deliver software as individual services in the cloud, rather than one monolithic application.

It also has a bunch of open source pieces that can act as the top of the funnel for eventual sales activity, with the goal of turning some of the users of the free products into paying customers. That appears to have happened with increasing frequency over the last year, judging from the company’s ARR growth over that period.

The goal in the early days of the restructuring was to capture that developer momentum around the brand and deliver them the free open source products, then expand into the paid products over time for a certain percentage of them. This was a very different approach from what they took when they were selling Docker Enterprise and were generally selling to IT, rather than developers or their managers.

That product-led growth approach worked from a commercial perspective when the managers began buying related commercial tools. “So when the developer has a great experience using the free product, and as they and their organizations scale their use of the products, then there’s features that managers value that they are willing to pay for.”

He added, “What you’re seeing with the financial performance that we described in our blog post that’s driven purely from those large organizations that realize these productivity benefits … and are willing to pay for the management security tools to enable organization-wide adoption.”

Docker was founded in 2013 before restructuring in 2019. At the time it sold its enterprise business to Mirantis, the company took on a $35 million Series A investment from Benchmark Capital and Insight Partners. They also nabbed a $23 million Series B last March.

At the time of the restructuring, I wrote: “Whether this approach can work is still unclear, but Johnston sees this as the way forward. Time will tell if the strategy is successful or not.”

With over $50 million in ARR, the jury may still be out, but it’s certainly headed in the right direction with results I reckon most investors would be happy with. Now they have to continue building on this momentum.



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Whose Your Landlord raises $2.1M for its rental review and data service

Whose Your Landlord,1 or WYL, announced a $2.1 million seed round today led by Black Operator Ventures, better known as BlackOps Ventures. TechCrunch readers will already be aware of BlackOps’ fund, which we covered at launch last December. The goal behind the $13 million capital pool was to invest in Black founders. The WYL round indicates that the fund is living up to its plan.

TechCrunch spoke with Ofo Ezeugwu, founder and CEO of WYL, about his company and its new investment. Per Ezeugwu, WYL was founded back in 2015 and raised $1.1 million over a roughly seven-year period. Launched with a focus on collecting renter notes concerning landlord and building quality, the company has evolved to include a SaaS service for what WYL calls “home providers,” or the folks who own buildings and other rental units.

Image Credits: WYL. Ofo Ezeugwu.

In simple terms, WYL collects renter feedback, which is easy to find and digest on its website. For rental owners with a good number of units, they can pay for the collected information, allowing landlords to track how they are performing with their customers, how many of their current tenants intend to stay, and so forth.

The startup charges building owners $2 per unit, per month for its software, a figure that Ezeugwu said can be discounted for larger contract volumes. The startup has plans to expand its feature set, naturally, allowing it to charge more in time. An example the CEO provided during our chat was using natural language processing (NLP) to find trends in written reviews, which could help companies with hundreds of units better parse incoming feedback.

Before it launched its software product, WYL generated revenue through brand partnerships with companies like Allstate and others that sell to folks who rent. Presumably, the company can continue that work to supplement its software incomes, though we anticipate that WYL will become a majority software business in time — if it isn’t already — from a revenue perspective.

The idea of underestimated founders is bandied about in startup land pretty often. And yet if we rifled through the latest few hundred funding rounds, you might wind up wondering if anything has changed at all.

Black Ops co-founder James Norman told TechCrunch about his own fundraising journey for his company, Pilot.ly, when explaining the impetus behind his venture group. In Norman’s view, Black founders are underinvested in, which means that his firm may have access to deal flow that competing venture firms are overlooking and that the founders he wanted to invest in are “the biggest arbitrage opportunity to tech.”

Now flush with its largest investment to date and a software product in-market — after running pilots for the SaaS offering last year, WYL has onboarded 7,000 units, the CEO said — the startup intends to hire and keep building. Let’s see how quickly it can scale its software incomes. If that goes according to plan, it shouldn’t have to wait another seven years for external investor interest to manifest in the form of a seven-figure check.

  1. The startup uses the “possessive form of the word ‘who’,” it writes on its website, because it wants its “community [to have] ownership of their living situations by putting housing in their hands.” Sharing that clarification in case some of you were about to send me emails about the grammar I used!


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TechCrunch+ roundup: 3 customer experiments, Citrix-Tibco merger, building fundraising momentum

Stating the obvious: customer discovery is essential for startups that hope to achieve product-market fit.

Unfortunately, most of us are not skilled when it comes to talking to strangers. Each member of a startup’s founding team was hired for a specific reason, but customer outreach rarely leads the list.

Early-stage startups that hope to refine their value proposition and triangulate target users cannot afford to sit back and wait for customer intelligence to roll in.

Instead, founders need to conduct their own product and marketing experiments using robust methodology that produces actionable insights. If that sounds like extra effort, it shouldn’t: it’s an essential aspect of your job.


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Elise King, program director of Human Ventures’ entrepreneur-in-residence program, interviewed three founders from her company’s portfolio to learn more about the tactics they used to acquire data:

  • Pre-MVP/customer discovery phase: Tiny Organics
  • Mid-MVP phase: Tabu
  • After product is in-market: Teal

“The overarching theme seems to be this: Listen to your demographic, learn from their experiences in order to find a way to truly service them, and don’t be afraid to pivot if needed,” advises King.

Product experiments are easy to manage, but they’re most effective when multiple team members are involved. Instead of having one person share their findings with the company, rope as many stakeholders into the process as possible.

I managed customer listening sessions at one startup that were so fruitful, our product managers, designers and engineers started attending. The direct interactions they had with early users helped us make smarter choices and fueled growth.

Go talk to some strangers: what might you learn from your earliest, most loyal customers?

Thanks very much for reading; I hope you have a great week.

Walter Thompson
Senior Editor, TechCrunch+
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Will the Citrix-Tibco merger create enterprise magic? Vista clearly thinks so

Citrix signage at the company's headquarters in Santa Clara, California, U.S., on Wednesday, Jan. 19, 2022. Elliott Investment Management and Vista Equity Partners are in advanced talks to buy software-maker Citrix Systems Inc., according to people familiar with the matter. Photographer: David Paul Morris/Bloomberg via Getty Images

Image Credits: Bloomberg (opens in a new window) / Getty Images

Most companies find it difficult to adapt to changing environments, but for legacy enterprise giants like Citrix Systems and Tibco, change is a mountain that keeps getting taller.

Where some see problems, though, others see opportunity: Vista Equity Partners and Elliot Management are betting that merging Citrix and Tibco to create an enterprise giant with leading products will help open cross-selling opportunities and market share, Ron Miller and Alex Wilhelm report.

“Both companies are now on make-it-or-break path, [but at least they are] no longer lingering on the doldrums of slow innovation,” said Holger Mueller, an analyst at Constellation Research.

How to build and maintain momentum in your fundraising process

pink bowling ball rolling toward pins in bowling alley

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Capturing investors’ attention isn’t enough when you’re raising money — often, you have to convince them your funding process is efficient and that you’re talking to other investors.

Momentum is key to building this level of interest, writes Nathan Beckord, CEO of Foundersuite.com, and that energy will propel your entire fundraising process.

After opening with a “great hack for asking for email introductions,” Beckord shares five hustle tips for maintaining and capitalizing on momentum that will maximize investor interest and appeal.

Bullish or bearish? What to expect for Europe VC activity in 2022

European venture capital had a stellar 2021, recording investments of €102.9 billion, up 120% from 2020.

Ample capital, great quality startups, and healthy deal flow are a few factors that will drive the European startup market to even greater heights, Nalin Patel, EMEA VC Analyst at PitchBook, and Christoph Janz, co-founder at Point Nine Capital, told Anna Heim and Alex Wilhelm.

However, a slow-down is also likely, as changing exit expectations linked to public market declines may trickle down to early-stage venture investment in Europe, Janz said.

“There’s institutional momentum in the market via funds that VCs have already raised, and FOMO won’t die out overnight. On the other hand, public markets are jitter-inducing and exits are on hold,” Alex and Anna wrote.

To cool down China’s overheated robotics industry, go back to the basics

Robotics and software may be lumped in together when we talk about tech, but the investment philosophies for each are wildly different.

So while China sees a bubble of rapid investments in robotics startups whose valuations are rising even faster, software investors must work to understand the robotics industry, its financial needs, and timelines before they jump in, says He Huang, partner at Northern Light Venture Capital.

“Investors and companies need to go back to business basics and resist the industry’s typical impatience for exits on both sides of the negotiation table.”

Joe Rogan, economics, and why capitalism is making people blame the CCP

Streaming platforms love exclusive content — at this stage in the industry’s development, these deals are the only things that distinguishes one company from the next.

In 2020, Spotify licensed Joe Rogan’s iconoclastic podcast for more than $100 million.

But today, hundreds of scientists and doctors say Rogan is using his perch to spread COVID-19 misinformation, and the resulting furor has led several musicians to pull their work from the platform.

“This put Spotify in a pickle,” writes Alex Wilhelm in The Exchange.

“The company wants to have both a commodity music business and an exclusive podcasting business. But instead, its exclusive podcasting strategy was undercutting its core value proposition and revenue driver, namely offering most recorded music for a regular fee.”



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