Of all the venture capital funding invested in 2021, around one in every five dollars went to fintech. But this boom now seems behind us, as global fintech funding activity returned to pre-2021 levels.

Worse, fintech didn’t escape the recent waves of tech layoffs, with high-profile companies like Brex, Chime and Stripe making headlines for this disheartening reason over the last few weeks.

And yet, fintech startups are still getting founded and funded this year. Of the 223 companies in Y Combinator’s summer 2022 batch, 79 fell more or less into the fintech category.

Why are founders and investors still placing bets in fintech, and where? To find out more, we reached out to fintech-focused VC firm Fiat Ventures.

Fiat co-founders Alex Harris, Drew Glover, and Marcos Fernandez also run its sister arm, Fiat Growth, a growth consultancy working with fintech and insurtech clients. This enables them to comment not only on sector trends from an investor perspective, but also to share practical advice.

One of their key recommendations is for fintech startups to lean into customer acquisition channels whose cost is less variable or seasonal than others, but our exchange covered a wider range of topics, from financial inclusion to offline channels and more. Read on:

Editor’s note: This interview has been edited for length and clarity. Many of the linked companies are portfolio companies of Fiat Ventures or clients of Fiat Growth.

TC: What makes you say that “fintech acquisition funnels are too complicated”?

Alex Harris: Fintech products by nature have complicated acquisition funnels and enrollment flows. Some complications are unavoidable in a highly regulated environment, but superfluous complications can arise when rigorous testing is not applied and funnels include unnecessary bloat.

Even the smallest detail can generate friction. For example, in the know-your-customer (KYC) process, many fintechs will ask a customer for their entire Social Security Number. In most cases, for non-credit products, only the last four digits of the SSN are needed for identification purposes. While only a five-digit difference, this can have a meaningful impact on conversion rates that can save large sums of money at scale.

Data is certainly king, but there is a time and place for data collection and personalization. Too often, a well-intentioned data team will ask personalization and demographics questions directly in an enrollment process. However, these questions can most often come in a post-enrollment survey or periodically throughout the lifecycle of a customer. Even post-enrollment, these questions need to be thought out. We regularly see data collected for the sake of collecting it, without actionable insights derived from them.

On affinity-focused fintechs, the future of BNPL, and more by Anna Heim originally published on TechCrunch

https://techcrunch.com/2022/11/28/on-affinity-focused-fintechs-the-future-of-bnpl-and-more/

When it comes to performance issues, it’s hard to know where the problem lies. This is especially true when your monitoring dashboard shows an all-clear, yet you’re still hearing slow app complaints from your users. In these cases, there’s a good chance those problems could be related to an internet connection issue.

These kinds of issues are harder to track down because they vary so greatly and depend on a lot of factors that are mostly out of your control. Amazon wants to make it easier to track these kinds of issues on apps running on AWS infrastructure with a new service called Amazon CloudWorks Internet Monitor. It’s announcing the new service this week at AWS re:Invent.

As the name implies, it’s part of the CloudWorks monitoring tool, and it looks at internet connections around the world to find trouble spots.

“Internet Monitor uses the connectivity data that we capture from our global networking footprint to calculate a baseline of performance and availability for internet traffic,” Amazon’s Sébastien Stormacq wrote in a blog post announcing the new service.

The idea is to let you monitor problems related to internet connection problems with applications running on AWS infrastructure resources. Most major monitoring tools allow you to track various types of network traffic, but this one takes advantage of the same data AWS uses to monitor its own uptime, so presumably it’s pretty solid for those AWS-centric applications

You simply create a monitor and add some internet resources, and you can monitor from there when you’re getting performance complaints that you can’t pinpoint. Among other data, you can see a health score based on the quality of the connections on the resources you’ve added to your monitor.

The new service is available in public preview starting today across 20 regions. It’s free in public beta, but it’s worth noting that you could still be charged for log data the service is collecting as part of its monitoring process.

Amazon CloudWorks Internet Monitor lets you track connection-related performance issues by Ron Miller originally published on TechCrunch

https://techcrunch.com/2022/11/28/amazon-cloudworks-internet-monitor-lets-you-track-connection-related-performance-issues/

FrankieOne founders Simon Costello and Aaron Chipper

FrankieOne, a Melbourne-based startup that provides an API platform for identity verification and fraud detection, said it has added $23 million AUD (about $15.4 million USD) in a Series A+, taking its Series A’s total to $45 million AUD (about $30 million USD). FrankieOne says this is the largest amount of VC funding raised by an Australian regtech so far.

The funding included a group of returning investors, including led backers AirTree Ventures and Greycroft, and participants Reinventure (financial services company Westpac’s venture arm), Tidal Ventures and Apex Capital Partners, which are all also existing investors. New strategic investors include Binance Labs and Kraken Ventures.

Founded in 2019 by serial fintech entrepreneurs Simon Costello and Aaron Chipper, FrankieOne connects banking, fintech, crypto and gaming companies to hundreds of data sources and works with 170 financial institutions around the world. The startup says it has seen 4x revenue growth over the last 12 months and its customers now include Westpac, Shopify, Afterpay, Binance, Zipmex and Pointsbet. Its team doubled over the past year, and it opened a new office in San Francisco.

Costello told TechCrunch that FrankieOne grew out of a neobank venture he also founded with Chipper called Frankie. Costello and Chipper wanted Frankie to differentiate from the rest of the industry with the best onboarding experience, using the top identity and fraud prevention tools available, but “this process proved to be unnecessarily complicated, requiring multiple integrations and it was clear we would need to create our own risk-based onboarding,” Costello said. They realized other fintech companies also had the same problems.

As a result, FrankieOne was created to streamline processes around regulation and compliance. It now provides a single API that connects third-party vendors with over 350 data sources in 48 countries.

Costello explained that most fintechs, banks and crypto companies deal with shortfalls in match rates, coverage or ability to scale because they connect to a single vendor for their identity needs. This means their tech stacks also need constant maintenance.

FrankieOne solves this problem by connecting to hundreds of data sources from multiple vendor partners, which means their clients no longer have to rely on a single vendor. Its API’s connected vendors include established financial services companies like Equifax, Experian and Socure and fast-growth startups such as Sardine AI.

“What sets FrankieOne apart is it allows its customers to switch on vendors, create dynamic workflows, add in further fraud signals and add new markets, ensuring our customers can respond quickly to changing regulations and updated business requirements, without taking on any additional work burden,” Costello said.

FrankieOne’s customers are usually mid- to large-sized organizations in highly regulated industries that need to adapt to complex policies that frequently change, he added.

As an example of how FrankieOne has been used by its clients, Costello pointed to sports betting app Pointsbet, which previously used a single provider for customer onboarding, but dealt with high numbers of prospective users who couldn’t be verified in real time. This resulted in customer drop-offs, or further manual work to verify their details. Since working with FrankieOne, Pointsbet has been able to increase customers onboarding by 14%.

When Westpac began digitizing more of their financial services, they still used separate legacy systems and, as a result, needed to increase their pass rates to reduce drop-offs. They integrated FrankieOne’s platform for their KYC (know your customer) feature on their new BaaS (banking-as-a-service). This increased pass rates significantly, so the firm added FrankieOne across its entire group.

The latest round of funding will allow FrankieOne to scale more quickly, and expand in North America, Europe and the Asia Pacific. Costello said it will also enable FrankieOne to make a significant investment into its ecosystem of vendors, data sources and fraud capabilities, enabling it to grow its customer base.

AirTree and Greycroft return to lead Australian regtech FrankieOne’s Series A+ by Catherine Shu originally published on TechCrunch

https://techcrunch.com/2022/11/28/frankieone-series-a-plus/

Convertible instruments, whether in the form of convertible notes, simple agreements for future equity (SAFEs) or otherwise, have long been used in the startup world to avoid a fundamental issue: the extreme difficulty associated with valuing early-stage companies. But what happens when the very mechanisms designed to address this problem become a part of it?

Valuation caps, for instance, are now employed in most early-stage convertible instruments. By imposing a ceiling on the price at which a convertible instrument converts to future stock ownership, valuation caps were intended to protect early-stage investors from extreme, unexpected growth (and, consequently, equity positions deemed excessively small by such investors).

However, valuation caps are increasingly being used as a proxy for the value of the company at the time of the investment — creating the very problem they were designed to help avoid, while adding unnecessary complexity for inexperienced founders and investors.

It isn’t surprising that founders and investors struggle to resist the lure to discuss present value when using valuation caps, despite efforts to push back against that use. This is especially true in contexts where the valuation cap “ceiling” expressly values the investment in a pre-conversion exit event (e.g., both the old pre-money valuation cap SAFEs and the newer post-money valuation cap SAFEs made available by Y Combinator).

Fortunately, there’s a better approach: the interim rate of return method.

The problem with early-stage valuations, or the crystal ball

Before we get to the solution, it’s useful to provide additional context on the problem — namely, why it’s so difficult to thoughtfully and rationally negotiate the value of early-stage companies.

Some will say that such valuations are difficult because early-stage companies don’t have meaningful (if any) revenue, have limited assets or are just an idea. Yet, while these arguments identify real issues, they miss what may be the most important one: Investors at the earliest stages are investing in a possible ownership structure that will typically only fully exist in the future upon completion of the founders’ vesting schedules.

Let’s say you’re an early-stage investor writing a $500,000 check for a startup at a stated pre-money valuation of $4.5 million, where 100% of the existing equity is held by a single founder and subject to a 4-year vesting schedule that just started.

On its face, that would entitle you to a 10% ownership in the company (i.e., the post-money value would be $5 million, with your capital representing 10% of the value). But your stake and the pre-money valuation at which you effectively invested depends on how much of the founder’s vesting schedule is actually completed, as shown by the following table:

Interim rate of return: A better approach to valuing early-stage startups by Ram Iyer originally published on TechCrunch

https://techcrunch.com/2022/11/28/interim-rate-of-return-a-better-approach-to-valuing-early-stage-startups/

Cofactr co-founders Matthew Haber (l) and Phil Gulley (r). Image Credits: Cofactr (opens in a new window)

The investment round was led by Bain Capital Ventures with participation from Y Combinator, Broom Ventures, Cathexis Ventures, Sweet Spot Capital, Pioneer Fund, Seed River, Litani Ventures, Correlation Ventures and a few angel investors.

“The big players on the cap table are Bain Capital Ventures (BCV) and Y Combinator. YC helped us focus on finding and providing the things that people really loved about Cofactr and set us up to meet Ajay Agarwal at BCV, which immediately felt like a match. The BCV team understood the opportunities that can come out of a business that integrates hardware, logistics and software into a single solution, as well as the challenges that come with building in many areas simultaneously,” says Gulley.

Cofactr is a logistics and supply chain tech company that provides scalable warehousing and procurement for electronics manufacturers. The company today announced it raised a $6 million round of seed funding, to “lead the next generation of agile hardware materials management.” The company raised on a SAFE note with a $25 million cap. We spoke to the company’s team to learn more about its vision of the future.

Cofactr addresses a suite of challenges for electronics producers through pre-manufacturing, third-party logistics services and supply chain automation. By providing these products as a unified strategic solution, the goal is to enable hardware manufacturers the ability to get to production volume without investing in the specialized facilities or headcount historically needed to manage electronic components.

“Both Phil [Gulley, the company’s CRO and co-founder] and I are driven by the desire to solve problems. Before Cofactr, we were working on the engineering and solutions side of hardware with our previous company, BeSide Digital, starting off in the entertainment industry and growing to support companies like Zoox, Google and CrowdStrike across product and custom hardware for marketing,” said Matthew Haber, co-founder and CEO of Cofactr in an interview with TechCrunch. “A challenge we had, and saw reflected in the processes of our clients, was that building and scaling hardware felt incredibly laborious in comparison to software. After we sold BeSide, electronic supply chain and logistics was the biggest and most personal problem we could address.”

The company told me that the journey to Cofactr’s current state wasn’t entirely linear. The company initially built and ran a contract manufacturer for circuit board assembly, but realized that wasn’t the right context to tackle these problems. From there, the company evolved to build electronics-specific third-party logistics and procurement automation.

“Having worked in hardware and software we had the opportunity to experience both ecosystems and knew how easy things could be when technology bridges gaps between ideas and scale,” said Gulley. “That was the insight that Cofactr was born out of. It’s the company we wished existed when we were on the engineering side of the table.”

The investment round was led by Bain Capital Ventures with participation from Y Combinator, Broom Ventures, Cathexis Ventures, Sweet Spot Capital, Pioneer Fund, Seed River, Litani Ventures, Correlation Ventures and a few angel investors.

“The big players on the cap table are Bain Capital Ventures (BCV) and Y Combinator. YC helped us focus on finding and providing the things that people really loved about Cofactr and set us up to meet Ajay Agarwal at BCV, which immediately felt like a match. The BCV team understood the opportunities that can come out of a business that integrates hardware, logistics and software into a single solution, as well as the challenges that come with building in many areas simultaneously,” says Gulley.

The investors, in turn, see a future where the Cofactr team can put a dent in how electronics are manufactured.

“When we first met Cofactr founders, I was really impressed with their understanding of the challenges of electronic component procurement. We’ve never seen anything similar to the integrated software and logistics system they’ve built. It combines cloud procurement software, a network of suppliers and a turn-key logistics platform that handles shipping, customs management, counterfeit insurance, inventory, kitting and shipping management,” says Agarwal, partner at BCV, in an interview with TechCrunch. “With the Cofactr platform, hardware manufacturers can find electronic components, check pricing, order parts, handle replenishment and send parts to their partner manufacturers. Behind the scenes, Cofactr handles everything including the acquisition of the parts, storage and management of the inventory, control checks to ensure the inventory is not counterfeit and regular shipments of components to manufacturers.”

Cofactr appears to represent a continuation of BCV’s focus on logistics and supply chain. The investor has backed companies such as Kiva Systems (robotic fulfillment sold to Amazon); FourKites (supply chain visibility — which raised $30 million back in August); ShipBob (cloud fulfillment for e-commerce brands); TruckSmarter (mobile app to allow freight drivers to find and book their next load) and now Cofactr. In addition, it made an investment in Flux, which operates in a similar space, last year.

Of course, the pandemic, in particular, exposed many cracks in the supply chain. Ford, for example, warned its investors that it had to eat an additional $1 billion of costs in Q3 this year, largely due to supply chain challenges, and GM saw a 40% drop in profits in Q2 this year. It ain’t pretty out there, but that’s the fertile ground in which supply chain startups get to sow their opportunities.

“Electronics components were particularly hard to come by. That meant a lot of challenges for hardware companies, whether they’re building dishwashers, robots or smart speakers. In a handful of industries, we think there is an opportunity to create a vertically integrated software and logistics solution,” Agarwal explains. “A good example of this is ShipBob and what they built for mid-market e-commerce brands. Cofactr is doing this for procurement of electronic components, with a complete software-and-logistics solution for hardware manufacturers.”

The ultimate goal for Cofactr is to make hardware not-so-hard, the founders quip.

“There is starting to be a real groundswell of startups attacking the hardware engineering space, but we all have to interconnect and work together in the same way that software development tools do. You’ll be seeing more collaboration between Cofactr, other startups and well-established organizations that serve hardware,” says Gulley. “Fast-forward a few years and we see Cofactr as the cloud solution for pre-manufacturing infrastructure. Our vision feels something like the hardware manufacturing version of AWS; on-demand, cloud-based solutions for physical manufacturing. Today, companies can take a software product from MVP to massive scale without crippling infrastructure investments. In a decade, the same will be true for building hardware products and we believe that Cofactr will be a core enabler of that transformation.”

All of this makes a lot of sense in the context of the U.S. wanting to build a more reliable and resilient on-shore manufacturing capacity. The CHIPS act is making some real waves in the semiconductor industry, and there’s been a fair chunk of investment in logistics and electronics manufacturing in the past year. Last month, Makersite raised $18 million and Altana picked up $100 million.

Logistics and procurement on autopilot is the future Cofactr wants to live in by Haje Jan Kamps originally published on TechCrunch

https://techcrunch.com/2022/11/28/cofactr-seed-round/

Right on time for its annual post-Thanksgiving re:Invent festivities in Las Vegas, AWS last night announced its “AWS Digital Sovereignty Pledge” — and before you click away, let me just point out that this is definitely more important than the prosaic name implies. As nations across the globe introduce legislation that governs how and where businesses can keep data on their local users, the large clouds either have to offer attractive solutions or run the risk of having their customers move to local clouds. Microsoft, with Purview, and Google, with Dataplex, also offer data governance tools, but none of them have gone quite as far as AWS in making digital sovereignty a core pillar of their cloud strategy.

Matt Garman, AWS’s senior vice president of Sales, Marketing and Global Services, notes that giving customers control over their data has always been a priority for AWS, but with constantly shifting and evolving legal requirements, managing all of this has become increasingly complex.

“In many places around the world, like in Europe, digital sovereignty policies are evolving rapidly. Customers are facing an incredible amount of complexity, and over the last 18 months, many have told us they are concerned that they will have to choose between the full power of AWS and a feature-limited sovereign cloud solution that could hamper their ability to innovate, transform, and grow. We firmly believe that customers shouldn’t have to make this choice,” he writes.

The idea of this pledge then is to tell these customers that AWS is fully committed to building out its set of sovereignty controls and features in its cloud. Some of these features are already here, including in AWS Control Tower, while others are obviously still in development. With re:Invent around the corner and this announcement preceding it, chances are we will hear a bit more about this later this week (or next year — AWS PR works in mysterious ways).

While the tools are still a work in progress, though, the pledge is not. The ideas here are straightforward, with AWS pledging to ensure that customers always have full control over the location of their data in AWS, with verifiable control over how it is accessed and the ability to encrypt it everywhere, be that in transit, at rest or in memory.

AWS also promises to make its cloud resilient against network disruptions and natural disasters. But that’s nothing new, of course, and in a way, neither are most of the other promises the company makes in this pledge. But it’s the fact that AWS spells all of this out that demonstrates that the company sees this as an opportunity to differentiate itself from the other cloud providers as it vies for lucrative public sector contracts. But it also clearly sees it as a threat, as these customers increasingly look to local cloud solutions that can help them navigate these data sovereignty challenges.

AWS announces Digital Sovereignty Pledge by Frederic Lardinois originally published on TechCrunch

https://techcrunch.com/2022/11/28/aws-announces-digital-sovereignty-pledge/

To celebrate Cyber Monday, TechCrunch+ is having a sale! Until November 30th, take 25% off a subscription to secure access to all our work. 

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You may have noticed more TechCrunch+ material on TechCrunch proper in the last few quarters. That’s thanks to our recently expanded staff. TechCrunch+ is obsessed with venture capital, climate, crypto, and reporting on who gets to build new companies.

We’re working to cover the startup market from a host of perspectives. Our goal is to better understand, to quote something dear to my heart, the numbers and nuance behind the headlines.

We have big plans for 2023, including more reporters, more reporting, and more repartee. TechCrunch+ is a big tent — and one that we want to expand even further. So take advantage of our biggest sale of the year! We’re already hard at work to ensure you stay super informed about startups, tech, and venture.

Hugs, and happy holidays from myself and the TechCrunch+ crew,

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Say hello to the TechCrunch+ Cyber Monday sale! by Alex Wilhelm originally published on TechCrunch

https://techcrunch.com/2022/11/28/say-hello-to-the-techcrunch-cyber-monday-sale/

You wouldn’t drive a car or fly a plane if the only controls you had available were on/off switches for left and right or up and down, and yet that’s pretty much what gamers are stuck with when they control their virtual avatars with their keyboards. U.K. startup Peratech wants to change that with a new range of “force feedback” keyboards that are starting to turn up in Lenovo notebook computers. I spoke with the company’s CEO to learn more.

“We just launched a force-sensing keyboard. It’s not just the keys; it’s a user experience. We created a user interface that is both an application and a game bar widget so that new users can have out-of-the-box simplicity, and serious gamers get advanced controls to take the mechanics of using the keyboard,” explains Jon Stark, CEO at Peratech. “With our keyboards you have a tactile feedback loop. The keyboard knows how hard you press, and you can change that pressure profile. Say you want to have really progressive acceleration at first because you tend to hit the gas too hard when you go around corners: The profile is configurable, and influencers can configure and deliver those profiles to people, creating engagement with other followers. It goes beyond just delivering force and delivering a great user experience: I’m talking about community-based user-experience content that drives engagement and simplicity.”

The force feedback tech can be found in Lenovo’s Legion 7i and 7 gaming notebooks, which launched over the summer. To me, Lenovo isn’t necessarily the first brand that pops to mind when I think “gaming laptops,” but as a company, Peratech had a connection they could work to make these keyboards show up out in the real world.

“We have had a long relationship with Lenovo, and they really wanted to do something with the Legion to elevate it and innovate. It isn’t just for games; as we expand to a full notebook, other opportunities appeared. It works with video editing really well, for example,” says Stark, and he uses scrubbing through a video timeline as an example. “Imagine that as you scrub slower, might want want to zoom in at the same time. Imagine being able to do that just with one button and control that speed with your finger. And as you’re moving faster and pressing harder it zooms out. We are making controls where expert users would be really good with two hands, jumping back and forth to a mouse. We’re taking that cognitive load of doing all those activities and putting them into users’ hands where they can really focus on the content.”

The team hopes that its keyboard becomes another tool in the gamers’ tool belt for increased immersion and enjoyment when gaming.

“If you have a steering wheel that is basically for F1 or Forza, you have all the controls of an F1 car, but you also have all the complexity of an F1. It is immersive. But if you then go to play Call of Duty or GTA or Witcher, you have to unplug all of that and grab a joystick. And if you’re moving from flying to walking or driving to walking — it’s kind of impossible, and something like a steering wheel makes you sort of a one-game player,” Stark points out. “The other thing to note is that you can’t use these controllers on a plane. You can’t use them on a bus. You can’t use them in a coffee shop. And so for those who are buying a notebook, that makes a really big difference.”

The laptop keyboards have 400 or so levels of pressure, which the company claims gives users a large amount of fine control. The keyboards use a thin-film layer that sits within the mechanical key structure. Between 25 and 300 microns thick, the company claims its tech can be built into pretty much every keyboard out there.

“Whar we do is we take the signal [from the keyboard] and we drive that through our force control processor. Here, we condition the signal so it’s really easy for the computer electronics to use. We also use Windows-native driver. So it’s not like the PC feels it’s being hacked or you need this specialty API. We’re using keyboard, joystick, mouse, trackpad, track stick and other drivers to be able to give that experience through a keyboard: We disaggregate the input from the way you actually use an on/off switch on a keyboard,” says Stark. “So we offer a better keyboard experience.” 

The company’s tech can be described as software-enabled hardware, or hardware-enabled software, depending on the level of integration it has with a keyboard manufacturer. Peratech told me a story of how it was able to design a redesign for an existing keyboard design in CAD in just four days.

“There are a couple of different [microcontroller] chips that you could use. Depending on the architecture of the computer, you can use the embedded controller on the main board, and we have applications of both with Lenovo,” explains Stark. “You do need to have an ADC that captures the data, and then we have some processing that needs to happen, where we process the signal. And that’s what gives you the full dynamic range that you’re looking for.”

The company’s keyboard line is a pivot from its tech originally developed for smartphones, designed to add force feedback to smartphone screens. Obviously, the company is hoping the tech will catch on and show up in more applications in the near future; the team was tight-lipped on exactly where and when we might see it turn up next, but it suggested there might be automotive and smart home applications in the pipeline. For now, the Lenovo laptops are the easiest place to try it out — look for the “Force Sensor Technology” to see whether Peratech’s technology lives in its innards somewhere.

This startup is bringing precision control for gamers to the humble keyboard by Haje Jan Kamps originally published on TechCrunch

https://techcrunch.com/2022/11/28/peratech-force-feedback/

Twitter’s crowdsourced fact-checking system, Community Notes, just received an update that the company claims will help to identify more “low quality” fact checks — meaning, the notes written by Twitter users that are appended to tweets to provide further clarification and context. As a result, more of the contributors who write these unhelpful annotations will lose their writing ability, Twitter said, requiring those users to earn back their “contributor” status.

The algorithm change involves scoring notes where contributors explain why a tweet shouldn’t be deemed misleading. Twitter had earlier paused scoring these types of notes because the rating data was “noisy,” the company said in a series of tweets posted on Friday night. However, it found these notes could still be low quality and “annoying to contributors,” so it’s now resuming scoring these notes, aided by other recent changes that help it to identify the different types of notes. This latest update will better identify and lock out more contributors who aren’t writing helpful content, Twitter said.

The company itself is not determining the note quality, to be clear. Twitter VP of Product, Keith Coleman, clarified in a tweet that “low-quality” notes are rated as such if a “wide range of people” — including those who typically disagree with one another — all agree a particular note is not helpful.

“This prevents one-sided outcomes,” he explained.

The update follows a series of advertiser exits from Twitter as new Twitter owner Elon Musk promotes community-based moderation as the future of the platform. Given Twitter makes the majority of its money from ads, it’s unclear how long Twitter will be able to sustain itself with the reductions in revenue. Musk, too, is clearly concerned — even today publicly shaming Apple for its decision to pause adverting by asking if they “hate free speech in America,” he tweeted. The FT also reported Musk has been calling brands’ CEOs about their cuts ad spending.

Birdwatch, as Twitter’s crowdsourced fact-check system was previously called, rebranded to “Community Notes” shortly after Musk took ownership of Twitter, and is something the new CEO sees as key to the future of Twitter’s moderation. Musk has been highly critical of Twitter’s former content moderation efforts, which he saw as an overreach. Teams engaged in content moderation were also a sizable part of Twitter’s massive layoffs earlier this month, and were again cut in mid-November when Twitter eliminated a large number of contractor positions.

Community Notes takes a different approach to content moderation by putting much of those efforts in the hands of Twitter’s user base. The system is not as simple as having content upvoted or downvoted for accuracy — an algorithm that could easily be gamed if brigades of like-minded contributors teamed up to promote their own viewpoints. Instead, Community Notes uses a “bridging” algorithm that attempts to find consensus among people who don’t usually share the same views.

To become a contributor, users must first prove they’re capable of writing helpful “notes” by correctly assessing other notes as either Helpful or Not Helpful, which earns them points. Users start with a rating impact score of zero and have to reach at least a 5 to become a contributor, Twitter previously explained. After reaching contributor status, users must then continue to add quality contributions or they will have their contributor status removed.

The original idea behind Community Notes was to create a system that would add a layer of fact-checking and context to tweets that don’t necessarily violate Twitter’s rules. But in the Musk era, Community Notes may play an even larger role as Twitter now employs far fewer moderators following its layoffs.

Despite being designed to look for consensus, as more Twitter users flee to other platforms — like Mastodon, CounterSocial, Hive, Post, Tumblr and others — Twitter may lose access to potential contributors willing to do this kind of work. In that case, the “crowd” may not represent the voice of the wider public — much like how Wikipedia is open to editing by all, but most of it is ultimately written by only 1% of editors. In addition, if Twitter’s user base overall begins to largely lean to one side more than another — more conservative than liberal, e.g. — a bridging algorithm could become less useful in representing a true consensus.

Just ahead of the U.S. midterms (and Musk’s acquisition of Twitter, as it turned out), Community Notes, then called Birdwatch, expanded in the U.S., allowing its notes to become visible to all U.S. users.

The company said at the time it would add around 1,000 more contributors per week, on top of its 15,000 pilot testers. It’s not clear how many people actually write Community Notes now, how often, or when the system will be open for sign-up to all of Twitter’s global users — and Twitter no longer has a comms team to field such questions.

In more recent days, Musk has been touting this community fact-check system to advertisers who are concerned about the potential for increased misinformation, disinformation, and other toxic content on the platform in light of Musk’s “free speech” agenda. In a call with advertisers on Nov. 9, the exec referred to Community Notes as “epic” and a “gamechanger,” and something that would ultimately help improve the accuracy of what’s said on Twitter. Musk himself has been corrected by the community fact-check system, though he also often just deletes tweets rather than face the repercussions of being wrong.

Many advertisers, however, don’t seem convinced that crowdsourced moderation will make Twitter a safe place to promote their brands.

Several big advertisers have already pulled out, including General Mills, Audi and Pfizer, as well as automakers like General Motors. (Though the latter is more concerned about advertising on a site owned by a direct competitor, as Musk is also Tesla’s CEO). A report last week by The Washington Post also found that more than a third of Twitter’s top 100 clients had not advertised on the platform in the past two weeks — an indication that brands likely need more assurances of platform safety than something like Community Notes can provide.

Twitter says crowdsourced fact-checking system updated to better address ‘low quality’ contributions by Sarah Perez originally published on TechCrunch

https://techcrunch.com/2022/11/28/twitter-says-crowdsourced-fact-checking-system-updated-to-better-address-low-quality-contributions/

Founded in 2017, Bionaut Labs arrived out of stealth in March 2021, with plans to commercialize longstanding research around drug delivery robots. The Los Angeles-based startup today followed up its initial $20 million funding announcement with a $43.2 million Series B, bringing its total raise up to – you guessed it — $63.2 million. This round was led by Khosla Ventures and featured new investors, Deep Insight, OurCrowd, PSPRS, Sixty Degree Capital, Dolby Family Ventures, GISEV Family Ventures, What if Ventures, Tintah Grace and Gaingels.

If you’ve followed the robots space, you’re likely familiar with the research that gone into these tiny, remote controlled medical robots. Bionaut’s own work now has a couple of deadlines in place, including 2023 pre-clinical studies, followed by clinical trials with human patients the follow years.

“There has been a dearth of innovation around treatments for conditions that cause tremendous suffering, in large part because past failures have discouraged even the best of researchers,” CEO and cofounder Michael Shpigelmacher says in a release. “Bionaut Labs remains committed to finding new ways to treat these devastating diseases, which are long overdue for a breakthrough.”

The startup’s magnetically driven robots of the same name are designed to deliver treatments to the midbrain – a more direct application than standard systemically delivered (intravenously, orally, etc.) drugs. The firm has its eyes on a number of extremely debilitating conditions, including Parkinson’s disease and Huntington’s disease.

This round of funding, meanwhile, will be focused on treatments for malignant glioma brain tumors and Dandy-Walker Syndrome. The money will also go toward advancing R&D on its technology and hitting the aforementioned milestones.

Shpigelmacher and cofounder Aviad Maizels were both previously involved with PrimeSense, the Israeli-based 3D imagining firm behind Microsoft Kinect. That firm was acquired by Apple in 2013 and ultimately served as the foundation for its Face ID tech.

Bionaut Labs gets $43.2M for its tiny drug delivery robots by Brian Heater originally published on TechCrunch

https://techcrunch.com/2022/11/28/bionaut-labs-gets-43-2m-for-its-tiny-drug-delivery-robots/