Elon Musk defends tweets in SEC’s contempt proceedings

Tesla CEO Elon Musk argued Friday that his Twitter use did not violate a settlement agreement with the U.S. Securities and Exchange Commission and that the agency’s request to have him held in contempt is based on a “radical interpretation” of the order, according to court papers filed in Manhattan federal court.

The SEC has asked a judge to hold Musk in contempt for violating a settlement agreement reached last year over Musk’s now infamous “funding secured” tweet. Under that agreement, Musk is supposed to get approval from Tesla’s board before communicating potentially material information to investors.

Musk contends he didn’t violate the agreement and that the problem lies in the SEC’s interpretation, which he describes as “virtually wrong at every level.” The filing also reveals new details about the settlement negotiations, notably that the SEC sent Musk a draft agreement that would have required him to obtain pre-approval for all public statements related to Tesla, in any format.

Musk and Tesla never agreed to those terms. Instead, Musk says the agreement requires him to comply with Tesla own policy, which would require pre-approval for “written communications that contain, or reasonably could contain, information material to the company or its shareholders.”

The barbs traded via court filings are the latest in an escalating fight between the billionaire entrepreneur and SEC that began last August when Musk tweeted that he had “funding secured” for a private takeover of the company at $420 per share.  The SEC filed a complaint in federal district court in September alleging that Musk lied.

Musk and Tesla settled with the SEC last year without admitting wrongdoing. Tesla agreed to pay a $20 million fine; Musk had to agree to step down as Tesla chairman for a period of at least three years; the company had to appoint two independent directors to the board; and Tesla was also told to put in place a way to monitor Musk’s statements to the public about the company, including via Twitter.

But the fight was re-ignited last month after Musk sent a tweet on February 19 that Tesla would produce “around” 500,000 cars this year, correcting himself hours later to clarify that he meant the company would be producing at an annualized rate of 500,000 vehicles by year end.

The SEC argued that the tweet sent by Musk violated their agreement. Musk has said the tweet was “immaterial” and complied with the settlement.

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What’s the cost of buying users from Facebook and 13 other ad networks?

Google Search, Google Shopping, Facebook, Instagram, YouTube, Quora, Snapchat, LinkedIn & more

This post reveals the cost of acquiring a customer on every ad channel my agency has tested. The ad channels include Facebook, Instagram, YouTube, Quora, Google Search, Google Shopping, Snapchat, LinkedIn and others. Using this data, you can reduce your costs by identifying which channels are a likely fit for your own product. Then you can focus on testing just those channels to start. I’m pulling data from my agency’s experience testing 15+ ad channels and running thousands of ads for dozens of Y Combinator startups.

This post leaves you with a prioritized to-do list of which channels might work for your product, and reference points for how much you can expect to pay if you get those channels to work.

Which ad channels should I use?

We focus on three criteria when assessing ad channels:

  • Profit — You want to earn at least as much as the cost of acquiring a customer. For example, it’s uncommon to acquire an American customer through Facebook for less than $30 USD. So, your profit per customer should be at least $30 to break even. (In reality, it should likely be 3x more to account for meaningful profit and ad channel volatility.)
  • Volume — If your audience doesn’t exist in significant quantities on a given ad channel, it’s likely not worth your time to experiment with it yet. Especially given your effective audience volume is probably smaller than you think: It’s not just a matter of how many people use the channel, but how many who use it also want your product today and can justify its cost.
  • Targeting — The best-fitting ad channels are those that let you narrowly target your desired audience. If they can’t do this, you’ll be forced to target broadly, which wastes dollars on the wrong eyeballs. This means your customer acquisition cost (CAC) is more likely to exceed your profit margin.

In short, to succeed with ad channels, your product should earn sufficient profit and have a sufficiently large targetable audience.

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Equity Shot: Pinterest and Zoom file to go public

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

What a Friday. This afternoon (mere hours after we released our regularly scheduled episode no less!), both Pinterest and Zoom dropped their public S-1 filings. So we rolled up our proverbial sleeves and ran through the numbers. If you want to follow along, the Pinterest S-1 is here, and the Zoom document is here.

Got it? Great. Pinterest’s long-awaited IPO filing paints a picture of a company cutting its losses while expanding its revenue. That’s the correct direction for both its top and bottom lines.

As Kate points out, it’s not in the same league as Lyft when it comes to scale, but it’s still quite large.

More than big enough to go public, whether it’s big enough to meet, let alone surpass its final private valuation ($12.3 billion) isn’t clear yet. Peeking through the numbers, Pinterest has been improving margins and accelerating growth, a surprisingly winsome brace of metrics for the decacorn.

Pinterest has raised a boatload of venture capital, about $1.5 billion since it was founded in 2010. Its IPO filing lists both early and late-stage investors, like Bessemer Venture Partners, FirstMark Capital, Andreessen Horowitz, Fidelity and Valiant Capital Partners as key stakeholders. Interestingly, it doesn’t state the percent ownership of each of these entities, which isn’t something we’ve ever seen before.

Next, Zoom’s S-1 filing was more dark horse entrance than Katy Perry album drop, but the firm has a history of rapid growth (over 100 percent, yearly) and more recently, profit. Yes, the enterprise-facing video conferencing unicorn actually makes money!

In 2019, the year in which the market is bated on Uber’s debut, profit almost feels out of place. We know Zoom’s CEO Eric Yuan, which helps. As Kate explains, this isn’t his first time as a founder. Nor is it his first major success. Yuan sold his last company, WebEx, for $3.2 billion to Cisco years ago then vowed never to sell Zoom (he wasn’t thrilled with how that WebEx acquisition turned out).

Should we have been that surprised to see a VC-backed tech company post a profit — no. But that tells you a little something about this bubble we live in, doesn’t it?

Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple PodcastsOvercast, Pocket Casts, Downcast and all the casts.

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Our 9 favorite startups from Y Combinator W19 Demo Day 2

Heathcare kiosks, a home-cooked food marketplace, and a way for startups to earn interest on their funding topped our list of high-potential companies from Y Combinator’s Winter 2019 Demo Day 2. 88 startups launched on stage at the lauded accelerator, though some of the best skipped the stage as they’d already raised tons of money.

Be sure to check out our write-ups of all 85 startups from day 1 plus our top picks, as well as the full set from day 2. But now, after asking investors and conferring with the TechCrunch team, here are our 9 favorites from day 2.

Two months ago, California passed the first law in the country legalizing the sale of home cooked food. Shef creates a marketplace where home chefs can find nearby customers. Shef’s meals cost around $6.50 compared to $20 per meal for traditional food delivery, and the startup takes a 22 percent cut of every transaction. It’s been growing 50 percent week over week thanks to deals with large property management companies that offer the marketplace as a perk to their residents. Shef wants to be the Airbnb of home cooked food.

Why we picked Shef: Deregulation creates gold rush opportunities and Shef was quick to seize this one, getting started just days after the law passed. Food delivery is a massive megatrend but high costs make it unaffordable or a luxury for many. If a parent is already cooking meals for their whole family, it takes minimal effort to produce a few extra portions to sell to the neighbors at accessible rates.

This startup automates the collection process of unpaid construction invoices. Construction companies are often forced to pay for their own jobs when customers are late on payments. According to Handle, there are $104 billion in unpaid construction invoices every year. Handle launched six weeks ago and is currently collecting $22,800 in monthly revenue. The founders previously launched an Andreessen Horowitz-backed company called Tenfold.

Why we picked Handle: Construction might seem like an unsexy vertical, but it’s massive and rife with inefficiencies this startup tackles. Handle helps contractors demand payments, instantly file liens that ensure they’re compensated for work or materials, or exchange unpaid invoices for cash. Even modest fees could add up quickly given how much money moves through the industry. And there are surely secondary business models to explore using all the data Handle collects on the construction market.

This pediatric telemedicine company provides medical care instantly to families. Blueberry provides constant contact, the ability to talk to a pediatrician 24/7 and at-home testing kits for a total of $15 per month. They’ve just completed a paid consumer pilot and say they were able to resolve 84 percent of issues without in-person care. They’ve partnered with insurance providers to reduce ER visits.

Why we picked Blueberry: Questionable emergency room visits are a nightmare for parents, a huge source of unnecessary costs, and a drain on resources for needy patients. Parents already spend so much time and money trying to keep their kids safe that this is a no-brainer subscription. And the urgent and emotional pull of pediatrics is a smart wedge into telemedicine for all demographics.

Led by a team of YC alums behind Raven, an AI startup acquired by Baidu in 2017, rct studio is a creative studio for immersive and interactive film. The platform provides a real time “text to render “engine (so the text “A man sits on a sofa” would generate 3D imagery of a man sitting on a sofa) that supports mainstream 3D engines like Unity and Unreal, as well as a creative tool for film professionals to craft immersive and open-ended entertainment experiences called Morpheus Engine.

Why we picked rct studio: Netflix’s Bandersnatch was just the start of mainstream interactive film. With strong technology, an innovative application, and proven talent, rct could become a critical tool for creating this kind of media. And even if the tech falls short of producing polished media, it could be used for storyboards and mockups.

Provides “Apple level” treasury services to startups. Startups are raising a lot of money with no way to manage it, says Interprime. They want to help these businesses by managing these big investments by helping them earn interest on their funding while retaining liquidity. They take a .25 percent advisory fee for all the investment they oversee. So far, they have $10 million in investment capital they are servicing.

Why we picked Interprime: The explosion of early stage startup funding evidenced by Y Combinator itself has created new banking opportunities. Silicon Valley Bank is ripe for competition and Interprime’s focus on startups could unlock new financial services. With Interprime’s YC affiliation, it has access to tons of potential customers.

Nabis is tackling the cannabis shipping and logistics business, working with suppliers to ship out goods to retailers reliably. It’s illegal for FedEx to ship weed so Nabis has swooped in and is helping ship and connect while taking cuts of the proceeds, a price the suppliers are willing to pay due to their 98 percent on-time shipping record.

Why we picked Nabis: Quirky regulation creates efficiency gaps in the marijuana business where incumbents can’t participate since they’re not allowed to handle the flower. As more states legalize and cannabis finds its way into more products, moving goods from farm to processor to retailer could spawn a big market for Nabis with a legal moat. It’s already working with many top marijuana brands, and could sell them additional services around business intelligence and distribution.

This startup measures weather damage for insurance companies. WeatherCheck has secured $4.7 million in annual bookings in the five months since it launched to help insurance carriers reduce their overall claims expense. To use the service, insurers upload data about their properties. WeatherCheck then monitors the weather and sends notifications to insurance companies, if, for example, a property has been damaged by hail.

Why we picked WeatherCheck: Extreme weather is only getting worse due to climate change. With 10.7 million US properties impacted by hail damage in 2017, WeatherCheck has found a smart initial market from which to expand. It’s easy to imagine the startup working on flood, earthquake, tornado, and wildfire claims too. Insurance is a fierce market, and old-school providers could get a leg up with WeatherCheck’s tech.

Upsolve wants to help low-income individuals file for bankruptcy more easily. The non-profit service gets referral fees from pointing non low-income families to bankruptcy lawyers and is able to offer the service for free. The company says that medical bills, layoffs and predatory loans can leave low-income families in dire situations and that in the last 6 months, their non-profit has alleviated customers from $24 million in debt.

Why we picked Upsolve: Financial hardship is rampant. With the potential for another recession and automation threatening jobs, many families could be at risk for bankruptcy. But the process is so stigmatized that some people avoid it at all costs. Upsolve could democratize access to this financial strategy while inserting itself into a lucrative transaction type.

This startup makes health kiosks for India, meant to be installed in train stations. Co-founder Joginder Tanikella says that there are 600,000 preventable deaths in India as many in the region don’t get regular doctor checkups. “But everyone takes trains,” he says. Their in-station kiosk measures 21 health parameters. The company made $28,000 in revenue last month. Charging $1 per test, Tanikella says each machine pays for itself within 3 months. In the future, the kiosks will allow them to sell insurance and refer users to doctors.

Why we picked Pulse: Telemedicine can’t do everything, but plenty of people around the world can’t make it in to a full-fledged doctor’s office. Pulse creates a mid-point where hardware sensors can measure body fat, blood pressure, pulse, and bone strength to improve accuracy for diagnosing diabetes, osteoarthritis, cardiac problems, and more. Pulse’s companion app could spark additional revenue streams, and there’s clearly a much bigger market for this than just India.

Honorable Mentions

-Allo, a marketplace where parents can exchange babysitting and errand-running

-Shiok, a lab-grown shrimp substitute

-WithFriends, a subscription platform for small retail businesses

More Y Combinator coverage from TechCrunch:

Additional reporting by Kate Clark, Lucas Matney, and Greg Kumparak

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This is how much money Pinterest execs made last year

Silicon Valley is known for its massive wealth. When these companies file to go public, we all finally get to know how much money these executives take home each year, and the millions they’ll take home after the IPO.

In Pinterest’s S-1, which it filed earlier today, we see that co-founder and CEO Ben Silbermann earned a salary of $197,100. But that’s actually nothing compared to Pinterest CFO Todd Morgenfeld, who earned a base salary of $360,500 with stock awards worth $22,028,696.

It’s still unclear just how much money the execs will make once Pinterest goes public. That’s because Pinterest did not break down stock ownership.

Meanwhile, fellow IPO-bound startup Lyft paid CEO Logan Green a salary of $401,529 and COO Jon McNeill $419,231 last year. At the high end, Green’s stake is worth nearly $523 million, while co-founder John Zimmer’s stake is worth north of $346 million.

Check out our full coverage of Pinterest’s S-1 below.

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