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Startups Weekly: #CodeCon, the ‘techlash’ and ill-prepared CEOs

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Hello and welcome back to Startups Weekly, a newsletter published every Saturday that dives into the week’s noteworthy venture capital deals, funds and trends. Before I dive into this week’s topic, let’s catch up a bit. Last week, I wrote about Peloton’s upcoming initial public offering. Before that, I noted the proliferation of billion-dollar companies. 

Remember, you can send me tips, suggestions and feedback to kate.clark@techcrunch.com or on Twitter @KateClarkTweets. If you don’t subscribe to Startups Weekly yet, you can do that here. 

Now I know this newsletter is supposed to be about startups, but we’re shifting our focus to Big Tech today. Bear with me.

I spent the better part of the week in Scottsdale, Ariz. where temperatures outside soared past 100 and temperatures inside were icy cold. Both because Recode + Vox cranked the AC to ungodly levels but also because every panel, it seemed, veered into a debate around the “techlash” and antitrust.

If you aren’t familiar, the Financial Times defines the techlash as “the growing public animosity toward large Silicon Valley platform technology companies.” Code Conference has in the past been an event that underscores innovation in tech. This year, amid growing tensions between tech’s business practices and the greater good, things felt a little different.

The conference began with Peter Kafka grilling YouTube’s CEO Susan Wojcicki. Unfortunately for her, CodeCon took place the week after an enormous controversy struck YouTube. You can read about that here. Wojcicki wasn’t up to the task of addressing the scandal, at least not honestly. She apologized to the LGBTQ community for YouTube’s actions but was unable to confront the larger issue at hand: YouTube has failed to take necessary action toward eliminating hate speech on its platform, much like other social media hubs.

From there, The Verge’s Casey Newton asked Instagram head Adam Mosseri and Facebook vice president of consumer hardware Andrew Bosworth point blank if Facebook should be broken up. Unsurprisingly, neither of the two men are fond of the idea.

“Personally, if we split [Facebook and Instagram] it might make my life easier but I think it’s a terrible idea,” Mosseri, who was named CEO of Instagram last fall, said. “If you split us up, it would just make it exponentially more difficult to keep people safe. There are more people working on safety and integrity issues at Facebook than all the people that work at Instagram.”

Bosworth, who manages VR projects at Facebook, had this to say: “You take Instagram and Facebook apart, you have the same attack surfaces. They now aren’t able to share and combine data … So this isn’t circular logic. This is an economy of scale.”

Wojcicki, when asked whether YouTube should separate from Google, had a less nuanced and frankly shockingly ill-prepared response:

There’s more where that came from, but this newsletter isn’t about big tech! It’s about startups! Here’s all the startup news you missed this week.

IPO Corner

CrowdStrike’s IPO went really well: After pricing its IPO at $34 per share Tuesday evening and raising $612 million in the process (a whole lot more than the planned $378 million), the company’s stock popped 90% Wednesday morning with an initial share price of $63.50. A bona fide success, CrowdStrike boasted an initial market cap of $11.4 billion, nearly four times that of its last private valuation, at market close Wednesday. I chatted with CrowdStrike CEO George Kurtz on listing day. You can read our full conversation here.

Fiverr climbs: The marketplace had a good first day on the NYSE. The company priced its IPO at $21 per share Wednesday night, raising around $111 million. It then started trading Thursday morning at $26 apiece, with shares climbing for most of the day and closing at $39.90 — up 90% from the IPO price. Again, not bad. Read TechCrunch’s Anthony Ha’s conversation with Fiverr CEO Micha Kaufman here.

Get ready for … Slack’s highly-anticipated direct listing next week (June 20). Catch up on direct listings here and learn more about Slack’s journey to the public markets here.

Bird confirmed its acquisition of Scoot

As is usually the case with these things, parties from both Bird and Scoot declined to tell us any details about the deal, so we went and found the details ourselves! First, The Wall Street Journal’s Katie Roof reported the (mostly stock) deal was valued at roughly $25 million. We confirmed with our sources that it was indeed less than $25 million and came after Scoot struggled to raise additional capital from venture capital investors.

Fortnite throws a Houseparty 

While we’re on the subject of M&A, Epic Games, the creator of Fortnite, acquired Houseparty, a video chatting mobile app, this week. The deal comes shortly after Epic Games raised a whopping $1.25 billion. Founded in 2015, Houseparty is a social network that delivers video chat across a number of different platforms, including iOS, Android and macOS. Like Fortnite, the offering tends to skew younger. Specifically, the app caters toward teen users, providing a more private and safer space than other, broader platforms.

Startup Capital

Symphony, a messaging app, gets $165M at a $1.4B valuation
BetterUp raises $103M to fast-track employee development
Neurobehavioral health company BlackThorn pulls in $76M from GV
Against Gravity, maker of the VR hit ‘Rec Room,’ nabs $24M
Simpo secures $4.5M seed round to help drive software adoption

~Extra Crunch~

If you’ve been unsure whether to sign up for TechCrunch’s awesome new subscription service, now is the time. Through next Friday, it’s only $2 a month for two months. Seems like a no-brainer. Sign up here. Here are some of my personal favorite EC pieces of the week:

Silicon Valley’s founder fetish infantilizes public companies

If you enjoy this newsletter, be sure to check out TechCrunch’s venture-focused podcast, Equity. In this week’s episode, available here, Crunchbase News editor-in-chief Alex Wilhelm and I debate dual-class stock, discuss my takeaways from #CodeCon and review the biggest rounds of the week. You can subscribe to Equity here or wherever else you listen to podcasts.

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ChatGPT sets record for fastest-growing user base in history, report says

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Enlarge / A realistic artist’s depiction of an encounter with ChatGPT Plus.

Benj Edwards / Ars Technica / OpenAI

On Wednesday, Reuters reported that AI bot ChatGPT reached an estimated 100 million active monthly users last month, a mere two months from launch, making it the “fastest-growing consumer application in history,” according to a UBS investment bank research note. In comparison, TikTok took nine months to reach 100 million monthly users, and Instagram about 2.5 years, according to UBS researcher Lloyd Walmsley.

“In 20 years following the Internet space, we cannot recall a faster ramp in a consumer internet app,” Reuters quotes Walmsley as writing in the UBS note.

Reuters says the UBS data comes from analytics firm Similar Web, which states that around 13 million unique visitors used ChatGPT every day in January, doubling the number of users in December.

ChatGPT is a conversational large language model (LLM) that can discuss almost any topic at an almost human level. It reads context and answers questions easily, though sometimes not accurately (improving its accuracy is a work in progress). After launching as a free public beta on November 30, the GPT-3 powered AI bot has inspired awe, wonder, and fear in education, computer security, and finance. It’s shaken up the tech industry, prompting a $10 billion investment from Microsoft and causing Google to see its life flash before its eyes.

Also on Wednesday, OpenAI announced ChatGPT Plus, a $20 per month subscription service that will offer users faster response times, preferential access to ChatGPT during peak times, and priority access to new features. It’s an attempt to keep up with the intense demand for ChatGPT that has often seen the site deny users due to overwhelming activity.

Over the past few decades, researchers have noticed that technology adoption rates are quickening, with inventions such as the telephone, television, and the Internet taking shorter periods of time to reach massive numbers of users. Will generative AI tools be next on that list? With the kind of trajectory shown by ChatGPT, it’s entirely possible.

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Netflix stirs fears by using AI-assisted background art in short anime film

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Enlarge / A still image from the short film Dog and Boy,, which uses image synthesis to help generate background artwork.

Netflix

Over the past year, generative AI has kicked off a wave of existential dread over potential machine-fueled job loss not seen since the advent of the industrial revolution. On Tuesday, Netflix reinvigorated that fear when it debuted a short film called Dog and Boy that utilizes AI image synthesis to help generate its background artwork.

Directed by Ryotaro Makihara, the three-minute animated short follows the story of a boy and his robotic dog through cheerful times, although the story soon takes a dramatic turn toward the post-apocalyptic. Along the way, it includes lush backgrounds apparently created as a collaboration between man and machine, credited to “AI (+Human)” in the end credit sequence.

In the announcement tweet, Netflix cited an industry labor shortage as the reason for using the image synthesis technology:

As an experimental effort to help the anime industry, which has a labor shortage, we used image generation technology for the background images of all three-minute video cuts!

Netflix and the production company WIT Studio tapped Japanese AI firm Rinna for assistance with generating the images. They did not announce exactly what type of technology Rinna used to generate the artwork, but the process looks similar to a Stable Diffusion-powered “img2img” process than can take an image and transform it based on a written prompt.

The film is currently available to view for free on YouTube.

Netflix’s official Dog and Boy promotional video.

Almost immediately, Twitter users responded with a torrent of negative replies to Netflix’s tweet announcing the film, such as, “I know a ton of animators looking for work if you guys are struggling to find them (are you looking very hard?).” Several others quoted legendary Studio Ghibli animator Hayao Miyazaki as saying that AI-powered art “is an insult to life itself.”

In a news release, Netflix expressed its hopes that the new technology would assist with future animation productions (translated by Google Translate): “As a studio, Netflix focuses on supporting creators in the creation of works on a daily basis. As the shortage of human resources in the animation industry is seen as an issue, we hope that this initiative will contribute to the realization of a flexible animation production process through appropriate support for creators using the latest technology.”

It also looks like Makihara also wanted to push boundaries in animation by using AI technology as part of the production process. The Netflix release quoted him as saying, “By combining tools and hand-drawn techniques, we can create something unique to humans … I think that the core of the story is ‘drawing a human being.’ I think that it will be possible to secure and return to its roots, which will eventually strengthen the strengths of Japanese animation and expand its possibilities.”

Labor shortage or not, AI assistance may possibly speed up production times and lower production costs, allowing the creation of more animated content than ever before. But will people be happy about it? That remains to be seen.

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Up to 29,000 unpatched QNAP storage devices are sitting ducks to ransomware

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As many as 29,000 network storage devices manufactured by Taiwan-based QNAP are vulnerable to hacks that are easy to carry out and give unauthenticated users on the Internet complete control, a security firm has warned.

The vulnerability, which carries a severity rating of 9.8 out of a possible 10, came to light on Monday, when QNAP issued a patch and urged users to install it. Tracked as CVE-2022-27596, the vulnerability makes it possible for remote hackers to perform a SQL injection, a type of attack that targets web applications that use the Structured Query Language. SQL injection vulnerabilities are exploited by entering specially crafted characters or scripts into the search fields, login fields, or URLs of a buggy website. The injections allow for the modifying, stealing, or deleting of data or the gaining of administrative control over the systems running the vulnerable apps.

QNAP’s advisory on Monday said that network-attached storage devices running QTS versions before 5.0.1.2234 and QuTS Hero versions prior to h5.0.1.2248 were vulnerable. The post also provided instructions for updating to the patched versions.

On Tuesday, security firm Censys reported that data collected from network scan searches showed that as many as 29,000 QNAP devices may not have been patched against CVE-2022-27596. Researchers found that of the 30,520 Internet-connected devices showing what version they were running, only 557, or about 2 percent, were patched. In all, Censys said it detected 67,415 QNAP devices. The 29,000 figure was estimated by applying the 2 percent patch rate to the total number of devices.

“Given that the Deadbolt ransomware is geared to target QNAP NAS devices specifically, it’s very likely that if an exploit is made public, the same criminals will use it to spread the same ransomware again,” Censys researchers wrote. “If the exploit is published and weaponized, it could spell trouble to thousands of QNAP users.”

In an email, a Censys representative said that as of Wednesday, researchers found 30,475 QNAP devices that showed their version numbers (45 fewer than on Tuesday), and that of those, 29,923 are running versions that are vulnerable to CVE-2022-27596.

The mention of Deadbolt refers to a series of hack campaigns over the past year that exploited earlier vulnerabilities in QNAP devices to infect them with ransomware that uses that name. One of the most recent campaign waves occurred in September and exploited CVE-2022-27593, a vulnerability in devices that use a proprietary feature known as Photo Station. The vulnerability was classified as an Externally Controlled Reference to a Resource in Another Sphere.

Tuesday’s Censys report said that devices vulnerable to CVE-2022-27596 were most common in the US, followed by Italy and Taiwan.

Censys also provided the following breakdown:

Country Total Hosts Non-Vulnerable Hosts Vulnerable Hosts
United States 3,271 122 3,149
Italy 3,239 39 3,200
Taiwan 1,951 9 1,942
Germany 1,901 20 1,881
Japan 1,748 34 1,714
France 1,527 69 1,458
Hong Kong 1,425 3 1,422
South Korea 1,313 2 1,311
United Kingdom 1,167 10 1,157
Poland 1,001 17 984

In the past, QNAP has also recommended that users follow all of these steps to lower the chances of getting hacked:

  1. Disable the port forwarding function on the router.
  2. Set up myQNAPcloud on the NAS to enable secure remote access and prevent exposure to the Internet.
  3. Update the NAS firmware to the latest version.
  4. Update all applications on the NAS to their latest versions.
  5. Apply strong passwords for all user accounts on the NAS.
  6. Take snapshots and back up regularly to protect your data.

As reported by Bleeping Computer, QNAP devices over the years have been successfully hacked and infected with other ransomware strains, including Muhstik, eCh0raix/QNAPCrypt, QSnatch, Agelocker, Qlocker, DeadBolt, and Checkmate. Users of these devices should take action now.

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