fortune--2020-05-19--Billionaire tech entrepreneur Tom Siebel: The pandemic will “clear the silliness out of the market”

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Last week, I spent some time chatting with Tom Siebel, the billionaire entrepreneur who runs C3.ai, which sells big data analytics and A.I. software to some of the world’s largest businesses. It counts Royal Dutch Shell, Bank of America, 3M and the U.S. Air Force among its customers.
Siebel is known for being outspoken and, in our wide-ranging discussion about today’s state of A.I., he didn’t disappoint.
On pandemic data:
“No one here has any idea what they are talking about,” Siebel says of the U.S. response to Covid-19. And he includes many of the world’s leading epidemiologists and infectious disease researchers among “no one.” The problem, he says, is that the coronavirus response has become so politicized and polarized that it is impossible to find an objective analysis of the data.
Siebel enlisted C3.ai in creating the world’s largest Covid-19 “data lake”—essentially a giant compendium of datasets. The lake, hosted on AWS, contains 22 big datasets, including the Allen Institute for Artificial Intelligence’s set of papers that my colleague Jonathan Vanian highlighted in this newsletter a few weeks ago as well as data from the World Health Organization, World Bank, U.S. Census Bureau and Johns Hopkins University.
Unlike some similar attempts at pooling coronavirus data, C3.ai created what is called a “unified, federated” dataset. Using automated tools it originally developed to handle the massive datasets of customers, C3.ai spent about four weeks doing the hard work of making sure all 22 datasets were readable by machine, cleaned up and combined into a single knowledge graph that is searchable, with queries pulling data from across the entire lake.
The data lake, which C3.ai is making freely available to researchers, is already being used by teams at MIT and the Federal Emergency Management Agency to analyze supplies of protective equipment and coronavirus tests in different regions, and by researchers at Arizona State University to look at media coverage of the pandemic and its effect on social psychology.
Siebel says he hopes it will bring some ground truth to discussions of the pandemic. “So the next time someone says something they will know what the hell they are talking about instead of listening to this, candidly, idle speculation,” he says.
On the coronavirus wreaking havoc on A.I. models:
Siebel says this might be true for a few systems—like those trying to predict purchasing behavior based on historical data—but he is convinced Covid-19 is massively accelerating digital transformation, including the adoption of machine learning. (Jonathan and I have previously discussed the issue in this newsletter.)
Take the oil majors, many of whom are his customers. “They have two choices: They can reinvent themselves and figure out how to make money at $26 per barrel oil or go out of business, it is that simple.” He says C3.ai has seen its “pipeline of opportunities” quadruple compared to the same period last year, and he predicts it will triple again by next year.
At the same time, Siebel sees a big shakeout coming for A.I. startups—many of which, he says, are not real businesses. He predicts eight out of ten will go bust. “You clear the silliness out of the market,” he says. “All the Masa Sons are gone.” (Siebel is no fan of SoftBank CEO Masayoshi Son’s $100 billion Vision Fund, which he says was the “poster boy” for irrational excess in tech investing over the past five years. Vision Fund recently posted a loss of $18 billion in the year to March.)
On working with the Department of Defense and Big Oil:
Unlike some A.I. engineers and executives, Siebel has no issue working with Big Oil or the Pentagon. Many oil companies are trying to go green, he says, and machine learning can help them transition.
As for the military, he says it is the height of hypocrisy for any Google engineers and executives, “many of whom are my friends” but who owe “their big homes in Atherton” to the development of the Internet and GPS satellites, both of which the U.S. Department of Defense created and funded, to refuse to work with the military.
“We are proud to work with the governments that stand for democracy and individual liberty and happy to work with energy companies,” he says, and he doesn’t mince words. “If someone is not OK with that, fine, go work with Google or Facebook, and consort with the Chinese and manipulate 13-year-old girls into being anorexic and suicidal.”
Siebel is known for his wariness over doing business in China, citing concerns over “state-sanctioned IP theft.” Google has made multiple attempts to gain footing in China, including through its controversial Project Dragonfly. (And yes, frequent Facebook use has been linked to eating disorders in young women—though the company is cracking down on related content.)
On A.I. ethics:
Siebel thinks it is hypocritical for companies like Google and Facebook to tout any adherence to A.I. ethics. These companies, he says, use machine learning to monetize people’s personal information and, through social media, feed addictive behavior and mental-health issues. He notes their platforms have been used for political disinformation and election meddling. What’s ethical about that?
And on government regulation:
“I think if governments do not get involved in regulating A.I., we will be very sorry, because we are going to have to live there,” he says. “I am not a big government guy at all. But there is a role for government here.”
And with that, here’s the rest of this week’s A.I. news.
Jeremy Kahn
jeremy.kahn@fortune.com
@jeremyakahn
A.I. IN THE NEWS
Layoffs at Cruise as the self-driving car industry faces a reckoning. Self-driving company Cruise Automation, which is majority owned by General Motors, is laying off around 160 employees, or 8% of its workforce, Bloomberg reports. The San Francisco company has had to push back its timeline for putting its self-driving cars on public roads—which it originally said it would do by 2019—several times. The New York Times has a long, sobering look at the way the coronavirus is creating a serious shakeout among self-driving car startups, with only handful likely to survive.
Nvidia rolls out its most powerful chip yet. The chip giant has unveiled a potent new graphics processing unit designed to speed up the time it takes to run A.I. operations. Nvidia's new A100 packs 54 billion transistors on a single chip and runs some A.I. workloads 20 times faster than the company's previous top-of-the-line GPUs. Nvidia's GPUs, which are also used for graphics-intensive animation and computer gaming applications, have been mainstays of machine learning and A.I. workloads but they face increasing competition from A.I.-specific chips. My Fortune colleague Aaron Pressman has the story here.
More chip news. TSMC will open a chip factory in the U.S. Taiwan Semiconductor Manufacturing, one of the world's Big Three chipmakers, announced it will spend $12 billion to build a chipmaking plant in the U.S. The factory, which TSMC says will each month produce 20,000 wafers embedded with its latest, smallest, 5-nanometer transistors, has about a fifth the capacity of its newest factory in Taiwan. The announcement comes as the Trump administration has voiced increasing concerns about the resilience of technology supply chains and their dependence on China. The Wall Street Journal has the story.
And yet more chip news...Sony says it has created an image sensor with built-in A.I. The Japanese electronics titan says it created an image-sensing module, composed of a sensor, a logic processor and memory, all on a single chip, with built-in A.I. firmware that enables the sensor to run computer vision applications without having to actually output an image, according to Bloomberg News. Sony says this will make image processing much faster and more secure. A few days after debuting the chip, Sony said it had signed a deal with Microsoft to start rolling the new A.I.-capable chip out to customers in "retail and logistics businesses" where it could be used to optimize "warehouse and factory automation, quantifying the flow of customers through stores and making cars smarter about their drivers and environment," according to a second Bloomberg story.
Facebook uses more A.I. to combat hate speech and Covid-19 misinformation and launches a meme-detection challenge. The social media giant touted a number of advances in its use of artificial intelligence to help police content. I reported on these developments for Fortune here. The innovations include one of the largest pre-trained language models ever deployed to date. Facebook has also made freely available a dataset of 10,000 hateful memes for researchers to use to train algorithms to automatically detect. The company is running a competition with a $100,000 prize pool to encourage people to work on the problem. So far, the company's own best effort, an algorithm that trains on both images and language simultaneously, scores 63% accuracy compared to 85% for a human reviewer.
EYE ON A.I. TALENT
Google has hired Paritosh Desai to work on improving the ads served up through its "Discover" and Gmail applications, according to a post on Desai's LinkedIn page. Desai had been senior vice president, chief data and analytics officer at Target.
Hewlett Packard Enterprise has appointed Kumar Sreekanti as chief technology officer and head of software, according to a company blog post. He replaces Mark Potter, who is retiring.
Bank of America has hired Diane Daley as head of its enterprise data governance group, where she will be responsible for helping to shape policies governing the bank's use of A.I., according to a Business Insider story. Daley had been a managing director and head of finance and risk infrastructure at Citigroup.
Italian artificial intelligence company Axyon AI has appointed Francesca Campanelli to the new role of chief commercial officer, according to a story in Funds Europe. Campanelli had been head of product development at Quaestio Capital Management.
EYE ON A.I. RESEARCH
How about a nice game of chess?
The Defense Advanced Research Projects Agency (DARPA) is running a competition, called Gamebreaker, to find an A.I. system capable of analyzing a number of different open-world video games. It wants that A.I. to be able to suggest the best ways to upset the balance between two competing players of equal skill—changing the design of the game so that even if two opponents have equal footing, one is much more likely to win. The agency says it wants to develop this game-design A.I. in order to apply to new war-fighting simulations that DARPA is also currently developing to train military officers with.
DARPA announced Gamebreaker back in February, but last week it put out a press release announcing the nine teams participating and the games they will be working on. The companies include a number of large defense contractors, such as BAE Systems, Lockheed Martin and Northrop Grumman, some of them in partnership with academics from MIT, Purdue and UC Santa Barbara. There are also small defense contractors and video game companies involved. A lot of the teams have chosen to work on StarCraft II, which, although set in a science-fiction world, has obvious parallels with real-world war-fighting games. (And where DeepMind has already had success using reinforcement learning to create an A.I. system that can play better than most humans.) Some of the other games being analyzed include FreeCiv, the car-racing game TORCS, and the complex real-time war game Command: Modern Operations.
“We received many incredibly rich proposals from a diverse base of universities and small and large companies,” said Lt. Col. Dan “Animal” Javorsek, the Gamebreaker program manager in DARPA’s Strategic Technology Office. “Since the teams aren’t competing against each other, we’re looking forward to a collaborative effort as performers develop their A.I.s across an array of games.”
FORTUNE ON A.I.
Nvidia introduces new graphics chips aimed at speeding A.I. apps—by Aaron Pressman
Microsoft and FedEx team up to make deliveries more predictable—by Jonathan Vanian
Facebook makes strides using A.I. to automatically find hate speech and COVID-19 misinformation—by Jeremy Kahn
Honeywell lasers in on tech—by Robert Hackett
Europe’s plan to save the sacred summer vacation depends on contact-tracing apps—but there’s a problem—by David Meyer
Will 5G remake the post-coronavirus world? It already has, say the CEOs of Cisco and Qualcomm—by Clifton Leaf
How Uber is swerving to survive post-pandemic—by Adam Lashinsky
Some of these stories require a subscription to access. Thank you for supporting our journalism.
BRAIN FOOD
Will Covid-19 make us more or less comfortable with A.I.?
It is pretty clear at this point that the pandemic is likely to accelerate digital transformation plans for many businesses, and increase reliance on automation, A.I. and robotics. But are consumers and customers ready?
In partnership with Survey Monkey, virtual-assistant software company Interactions LLC recently surveyed 1,000 Americans and found that, for the most part, Covid-19 has made people more accepting of chatbots and robots.
45% of consumers said they would prefer to have their inquiry handled by an A.I. system if it is faster than waiting for a human.
Nearly 40% of those surveyed said they were now more comfortable with the idea of a robot delivering an online order.
And 33% said they were now more comfortable with the idea of robots working in groceries to stock shelves or clean the store.
That's about the same number of people who said they were now also more comfortable with the idea of an A.I. system helping doctors or nurses.
But these issues remain divisive, and the pandemic has made a sizable minority less comfortable with A.I.-driven tech.
23% of people said the pandemic had made them less comfortable with the idea of delivery robots.
25% said they would not place an online order if they knew a robot would be delivering it instead of a person.
About a quarter of people also said that the pandemic had made them less comfortable with the idea of riding in a self-driving car.
"As the coronavirus continues to have a radical impact on business and society, it’s ushered in a fresh urgency for technological progress,” Jim Freeze, chief marketing officer at Interactions, said. “It’s well understood that A.I. can play a powerful role in operations. At the same time, it’s crucial that consumer comfort is kept front and center as organizations navigate the new normal.”
What, if anything, will companies do to make sure they are serving that substantial minority as they push automated tech forward? Will they keep some human-powered systems in place for those uncomfortable with the virtual alternatives? Or will they abandon those customers altogether?


fortune--2020-05-19--Walmart’s online sales surge during the pandemic, bolstering its place as a strong No. 2 to Amazon

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Walmart’s years of investing billions in integrating stores and e-commerce have paid off handsomely during this pandemic.
The retailer’s online sales in the U.S. rose 74% in the first quarter, as customers stocked up on essentials like food and cleaning products and items like toys, electronics, and home furnishings, attracted by the option of being able to drive up to a store to collect an order rather than venture in—or to simply order items on Amazon.
The news sent shares in Walmart, the No. 1 company on the Fortune 500, up 2% on Tuesday. They have risen 24% since the first U.S. lockdowns started in early March and are near all-time highs. Walmart also operates a large international business and the Sam’s Club warehouse chain.
The Walmart U.S. online surge lifted overall comparable sales, which also includes sales at stores open at least one year, 10%, Walmart’s best performance in almost 20 years. It was better than the 8.6% Wall Street estimate compiled by Consensus Metrix. The U.S. generates 60% of the company’s global sales.
And it solidified Walmart’s place in shoppers’ minds as a viable alternative to Amazon for online purchases, all the more since Amazon had some struggles early on with lagging delivery times. Walmart’s network of 4,600 stores has always been its not-so-secret weapon against Amazon.
“Their investments and the commitment they’ve made to online are paying off. They’re a very strong No. 2 player to Amazon,” says Brian Yarbrough, an analyst with Edward Jones.
Shoppers did stock up in March, buying more on every trip, but making fewer trips: Average spending per trip was up 16.5%, but the number of transactions was down 5.6%. The only thing dampening its performance: out-of-stocks on items like toilet paper, Clorox wipes, office furniture, and meat. Walmart chief executive Doug McMillon said the company is “working intensely to improve in-stocks for high-demand items and adjust order volumes” and expects “the environment to stay quite volatile in the coming months.”
What was even more important for Walmart in having strong digital sales was that, like other retailers such as Costco, Home Depot, and Target, Walmart had to limit traffic at physical stores as part of its virus spread mitigation. Indeed, in-store sales slowed during the first half of April but ramped back up mid-month as government stimulus money reached consumers, Walmart said.
The company also said it was shutting down Jet.com, the online retailer it bought in 2016 for $3.3 billion and whose value lay in reenergizing Walmart’s e-commerce operations and in bringing in a strong digital team.
While Walmart, like many other retailers, is still grappling with out-of-stock items, analysts think this big test is one that Walmart has passed with flying colors and indicates the company is likely to largely hang on to these gains.
“We would expect Walmart to leverage these experiences and look to retain new customers as well as continue to deepen and broaden all customer relationships,” wrote Moody’s Walmart analyst Charlie O’Shea.
What’s more, O’Shea said, despite the pressure on margins, given the higher costs inherent in e-commerce, the results at least showed Walmart “was able to largely handle this growth surge within its existing capability.” And the e-commerce loss was narrower than a year earlier.
That capability was indeed tested as Walmart’s shoppers stocked up: Its online pickup and delivery business increased fourfold during some periods of the March peak period, executives said on a call with Wall Street analysts.
Walmart is facing in Amazon a ferocious rival that keeps innovating, and Walmart too has new initiatives to counter that: It is rolling out a subscription-based grocery delivery offering and, in some markets, is offering two-hour home delivery service—two weapons to help it fight in the next chapter of the online wars.
More immediately, though, Walmart still has to contend with an unstable economy, which is enduring “significant uncertainty” owing to the pandemic: More than 36 million Americans have filed for unemployment benefits in the past few weeks alone. So Walmart, despite being one of retail’s biggest winners, withdrew its full-year financial forecasts because of all the question marks surrounding the U.S.’s economic future.


fortune--2020-05-19--As reopening becomes polarized, businesses need to use common-ground language

If aliens had descended on the United States anytime over the past couple of months and turned to multiple news outlets to try to decipher what was really going on with this COVID-19 pandemic—bear with me here—they would have been utterly confused. What they would have seen on CNN is very different from what they would have seen on Fox News, especially in recent days, as stories of a supposed “Obamagate” scandal have overtaken virus coverage on the latter news outlet.
Even the words most commonly used in coverage of the virus is markedly different in liberal-leaning versus conservative-leaning outlets, according to an analysis done by Pluralytics, a formerly in-stealth startup that uses artificial intelligence to assess natural language. The Minneapolis-based company’s cofounder and chief executive officer knows a thing or two about the power of words, especially in the political realm—she is the former CEO of Public Radio International, which provides daily programming for more than 850 public radio stations.
“I have had a front-row seat to watch the growing polarization in America,” says Alisa Miller, who left PRI to start Pluralytics late last year.
Miller’s vision for Pluralytics is to serve brands looking to better connect with values-conscious consumers, turning the A.I.-based technology into a tool that can analyze and recommend words that will better connect with the masses. (She says that 70% of millennials make “values-based” purchasing decisions.) But starting with the news business was a natural fit for the media exec turned entrepreneur.
“When we saw how polarized the COVID-19 conversation was becoming, we wanted to look at media coverage and see what we could learn,” says Miller. “Media language sets the tone for how people use language more broadly.”
Here’s how the analysis worked: Over the course of two days in early April, Pluralytics’ A.I. engine ingested and analyzed articles from five publications that are considered conservative-leaning and five that are considered liberal-leaning. Miller says these definitions were made by looking at the self-described political affiliations of people who read the respective outlets. In all, more than 600,000 words used to talk about COVID-19 were studied. The findings: Well, let’s just say that Americans really are living in two different worlds.
For example, conservative-leaning publications were 30 times more likely to mention the word “terrorism” in the context of the virus, and nearly 20 times more likely to mention the word “malaria.” (Conversations about hydroxychloroquine, the antimalarial drug whose efficacy has been questioned by the Food and Drug Administration and medical experts, have been popular in some conservative circles.) On the liberal-leaning side, the words “women,” “culture,” and “vaccine” were four to five times more likely to come up in stories about the virus, as was the word “testing.”
In general, the Pluralytics study found that at least within this two-day period in early April, conservative-leaning outlets were more likely to focus on themes of security and the economy, while liberal-leaning sites veered more toward health and community. “It speaks to the different languages emerging on this issue, depending on your worldview,” says Miller.
Still, there was some common ground to be found. Miller says that both sides used words like “stimulus,” “jobs,” and “schools” with somewhat similar frequency.
“People [on both sides] want results, and they want to understand what’s essential,” says Miller.
Finding that common-ground language will be even more challenging now, with the nation’s attention shifting to reopening, a polarizing and politicized topic. And being attentive to the power of words isn’t just a focus for the news media. As more and more companies communicate their plans for resuming business to both external and internal audiences, they will have to think about how they word their messaging without enraging or ignoring large percentages of the population.
“If they’re not only doing the thing that one side opposes, but also speaking in a way that angers that side, they risk even more criticism,” says Christopher Bryan, an assistant professor of behavioral science at the University of Chicago Booth School of Business and an adviser to Pluralytics. According to Bryan, identifying and steering clear of word “land mines” can go a long way. “You can make the same substantive statement [without using words seen as explosive to one side or another],” says Bryan.
To be sure, while A.I.-powered tools like Pluralytics can help identify and suggest less divisive or more optimal language, they don’t do anything to address the underlying problems that have led to the polarization of our news business and of our politics. That thorny complexity is something the aliens will undoubtedly take even longer to comprehend.


fortune--2020-05-19--What will Uber look like after the coronavirus?

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While it didn’t have Alphabet’s cash pile or profitability, Uber’s R&D engine groomed itself in the image of other tech giants. It made starry bets on flying taxis and autonomous driving. It wanted to be the Amazon of transportation, moving rapidly into freight.
In the middle of a global lockdown that has decimated its central ride-sharing business, Uber is jettisoning just about everything except its rides and deliveries lines, per my colleague, Danielle Abril.
On Monday, Uber announced plans to lay off another 3,000 employees while closing or consolidating 40 offices, adding to some 3,700 layoffs that came earlier this month. It also said it would wind down its internal incubator, its AI Labs, and Uber Works, a project aimed to help temporary workers find jobs.
“We have decided to refocus our efforts on our core,” CEO Dara Khosrowshahi said in a letter to employees on Monday, adding ominously: “We need to fundamentally change the way we operate.”
Uber is not expecting a rapid return to its passenger business. Companies are looking to China, where the coronavirus hit first, for signs of how economic activity reinvigorates. But early behavioral metrics there suggest commuters are eschewing ride-hailing for their own cars, and airport runs, representing 15% of Uber’s revenue, are even less in vogue.
Should further cuts be needed, analysts believe Uber’s flying taxi, freight, self-driving units may be among those to go. The last has a large target on its back, given its $499 million loss last year.
An espresso shot to the IPO market: The world’s no. 2 packaged coffee maker, JDE Peet’s BV, is pressing ahead with an initial public offering as global markets show some signs of stability. Behind brands including Peet’s Coffee, Douwe Egberts and Jacobs, JDE Peet’s plans to raise at least £700 million ($764 million) in Amsterdam, becoming one of the few companies willing to test the waters.
Its owner, JAB Holdings, is known for investments in storefront-heavy companies such as Krispy Kreme and Panera Bread. But 79% of JDE Peet’s coffee business is for home consumption, and folks tend to drink coffee regardless of a recession.
Correction: Yesterday’s term sheet miswrote General Catalyst as the $870 million investor in Jio. The investor was General Atlantic.
Lucinda Shen
Twitter: @shenlucinda
Email: lucinda.shen@fortune.com
VENTURE DEALS
- JD MRO, a subsidiary of JD.com that delivers industrial maintenance, repair and operations products and services, raised $230 million in Series A funding. GGV Capital led the round. Read more.
- Contentsquare, a New York-based customer experience analytics platform, raised $190 million in Series D funding. BlackRock’s Private Equity Partners team led the round, and was joined by investors including Bpifrance, Eurazeo Growth, Canaan, GPE Hermes, Highland Europe, H14 and KKR.
- Rallybio, a New Haven, Conn.-based biopharmaceutical company focused identifying severe and rare disorders, raised $145 million in Series B funding. Pivotal bioVenture Partners led the round, and was joined by investors including Viking Global Investors, TPG’s The Rise Fund, F-Prime Capital, Tekla Capital Management, Solasta Ventures, Fairview Capital, and Mitsui & Co. Global Investment.
- Cyberbit, a Ra’Anana, Israel-based provider of cyber security training and simulation platforms, raised $70 million from Charlesbank Capital Partners. Part of the stake was purchased from Elbit Systems.
- GO1.com, a San Francisco-based learning hub for workforces, raised $40 million in Series C funding. Madrona Venture Group and SEEK led the round, and were joined by investors including Salesforce Ventures, M12, and Our Innovation Fund.
- Holmusk, a Singapore-based data science and health technology company, raised $21.5 million in Series A funding. Optum Ventures and Health Catalyst Capital led the round, and were joined by existing investor Heritas Capital.
- Arculus, the Ingolstadt, Germany-based startup seeking to create more flexible assembly lines, raised €16 million in Series A funding. Atomico led the round, and was joined by investors including Visionaries Club and previous investor La Famiglia. Read more.
- Source Defense, a New York and Israel-based web security firm, raised $10.5 million in Series A+ funding. Capital One Ventures invested, and was joined by investors including JVP, Allegis Cyber, Global Brain, and NightDragon.
- ChromaCode, a Carlsbad, Calif.-based company using data science in molecular testing, raised $10 million in Series C extension funding from Adjuvant Capital.
- United Dwelling, a Culver City, Calif.-based startup addressing affordable housing, raised $10 million in Series B funding. Alpha Edison led the round, and was joined by investors including Lightspeed Venture Partners.
- Beeline, a providence, R.I.-based digital home loan lender, raised $7.6 million in seed funding. The investors were not named.
- Electric, a platform aiming to put IT departments in the cloud, raised $7 million in continuing Series B funding. 01 Advisors and the Slack Fund participated. Read more.
- Smarterly, a London-based fintech startup that allows employees to invest directly through their payroll, raised £7 million. Major Oak led the round. Read more.
- Lingxi, a Beijing-based startup that applies machine intelligence to financial services, raised $6.2 million in Series A funding co-led by ByteDance and Rocket Internet. Read more.
- Urban Jungle, a London-based insurance startup, raised £2.5 million ($3.1 million) in funding. Eka Ventures led the round.
PRIVATE EQUITY
- Newlight Partners plan to invest up to $150 million in Zing Health, a Chicago-based physician-led Medicare Advantage HMO plan designed for Medicare-eligible beneficiaries.
- Copley Equity Partners made a majority investment in Tourmaline Partners, a Stamford, Conn.-based outsourced trading solutions firm. Financial terms weren't disclosed.
- Tanknology, backed by Hamilton Robinson Capital Partners, acquired Compliance Testing & Technology, a Cedarburg, Wis.-based environmental compliance services company. Financial terms weren't disclosed.
OTHERS
- Sony Corp (NYSE: SNE) plans to buy the remaining stake in Sony Financial, which offers life insurance, auto insurance and banking products, that it doesn’t own for about ¥400 billion ($3.7 billion). Read more.
- Prometheus Group, backed by Genstar, will acquire VIZIYA, an Ontario-based developer of enterprise asset management software, from Quarterhill Inc. (TSX: QTRH). Financial terms weren't disclosed.
- Guild is acquiring Entangled, a San Francisco-based venture studio. Financial terms weren't disclosed.
- Sunrise Communications Group and Salt Mobile launched a $3.1 billion broadband joint venture on Tuesday targeting Swiss households. Read more.
- FTI Consulting (NYSE: FCN) agreed to acquire certain assets of Delta Partners, a Dubai-based telecom, media & technology focused strategy consulting and investment banking firm. Financial terms weren't disclosed.
BANKRUPTCIES, HANGUPS, AND BREAKUPS
- Comcar Industries, a Florida-based trucking company, filed for bankruptcy protection. Pimco backs the firm. Read more.
- Centric Brands (Nasdaq: CTRC), a branded apparel maker, filed for bankruptcy protection with plans to go private. Blackstone Group, Ares Management, and HPS Investment Partners will own stakes in the restructured company. Read more.
- Advent International delayed plans for the $1.9 billion take-private acquisition of and Forescout Technologies, a cybersecurity company. The two are renegotiating the timing and terms of the deal. Read more.
- Energean Oil & Gas (LON: ENOG) plans to renegotiate its acquisition of Italian-based Edison SpA’s upstream portfolio after plans to immediately sell on Edison’s North Sea assets to Neptune Energy fell through. Read more.
- Thai Airways International, Thailand’s flag carrier, filed for bankruptcy protection. Read more.
- Pier 1 Imports, the Fort Worth, Texas-based home goods retailer, is shutting down. The company had filed for chapter 11 bankruptcy before the coronavirus.
IPOS
- Vroom, a New York-based online used car marketplace, filed to raise $100 million. It posted revenue of $1.2 billion and losses of $275.7 million in 2019. L Catterton, General Catalyst, and T. Rowe Price back the firm. It plans to list on the Nasdaq as “VRM.” Read more.
- Applied Molecular Transport, a South San Francisco-based biotech developing oral therapies for inflammatory diseases, filed to raise $100 million. EPIQ Capaital Group (25.9% pre-offering) and Founders Fund (20.7%) back the firm. It plans to list on the Nasdaq as “AMTI.” Read more.
EXITS
- Thyssenkrupp, a German industrial giant, is seeking partners for its steel and warship divisions. Read more.
F+FS
- Cowen (NASDAQ:COWN) closed Cowen Healthcare Investments III with $493 million in committed capital.
PEOPLE
- Kevin Mayer, a top Walt Disney Company’s streaming executive, resigned on Monday to become the chief executive of TikTok, Bytedance-backed app for making and sharing short videos.
- Grain Management appointed Ricardo J. Rodriguez as a principal.


fortune--2020-05-19--How Instagram became an engine of e-commerce

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It is a classic tension in business: pleasing users versus making money. You’d think it would be simple. But countless enterprises compromise depending on who’s writing the check. If users aren’t always the ones paying bill, as is the case in ad-based media businesses, the commercial urge easily can lead greedy and short-term-oriented managers astray.
In her illuminating feature in the new issue of Fortune, “Confessions of an Instagram Addict,” Kristen Bellstrom explains how well the Facebook unit has walked the line so far. Begun as a photo-sharing site with no revenue whatever, Instagram under Mark Zuckerberg’s ownership has had to stay true to its aesthetic roots while bringing in cash.
As Bellstrom tells it, using her own devoted usage as an example, Instagram largely has succeeded. Its ads sparkle and show off the brands that place them. Its user-generated content has become an e-commerce engine in its own right. And together with Google’s YouTube, Instagram has created an all-new and lucrative class of influencers who’ve built their wealth on the app’s success.
Perhaps most surprisingly, Instagram has done all this without being too closely associated with Facebook. That’s quite a feat considering Facebook’s tarnished reputation and that Instagram’s technology and selling tools are intertwined with its parent.
Want more Instagram? The Wall Street Journal favorably reviewed Sarah Frier’s new book, No Filter. Want more Facebook? I highly recommend this New York Times feature about Zuckerberg’s consolidation of power. As an inside-baseball aside, the story is even more impressive because The Journal beat The Times on the topic, and The Times did it anyway and advanced the story admirably.
***
I erred yesterday when I wrote that only public companies appear in the Fortune 500. In fact, 29 companies that report their finances to some governmental authority are on the list. These include mutual insurance companies that file with state regulatory bodies and privately owned companies with publicly traded debt that report to the U.S. Securities and Exchange Commission.
Adam Lashinsky
@adamlashinsky
adam.lashinsky@fortune.com
This edition of Data Sheet was curated by Aaron Pressman.
NEWSWORTHY
Weight watchers. As you might have noticed in Adam's big feature on Uber that we linked to in yesterday's newsletter, the newly public company is under a lot of pressure to trim down and cut costs to reach profitability. The latest development arrived on Monday, as Uber CEO Dara Khosrowshahi said he'd have to layoff another 3,000 workers, following the 3,700 a few weeks ago. Together, the cuts trim Uber's workforce by 25%.
Zone diet. Even though pretty much every other streaming service includes old TV shows and movies, Apple initially said it was going to offer just original programming on Apple TV+. Well, slow user growth may have prompted a change. Bloomberg reports Apple is now licensing older content. I'd certainly like to relive my youth with old shows of Get Smart, Space 1999, and Laverne and Shirley, if you're taking requests, Tim Cook.
Paleo diet. The "crypto wars," as Steven Levy called the 1990s debate over regulating strong encryption apps, have never ended. Exhibit next: The FBI cracked the security of the iPhone used by the shooter in the December attack at the Naval Air Station in Pensacola, Florida. And despite not needing Apple's help, the agency immediately attacked the company for not helping. Apple shot back that the government was looking for an excuse to weaken encryption for everyone.
New Atkins diet revolution. Amazon acquisition rumors are another unending category of news, it seems. The latest is that the e-commerce giant might buy some or all of bankrupt retailer J.C. Penney. I think the logic is that JCP owns dozens of desirable distribution centers that Amazon could use for its network, but your analysis may vary.
Raw food diet. Yesterday brought news of SoftBank's huge losses and founder Masayoshi Son's weird metaphor of his unicorn startups falling into and flying over the "Valley of Coronavirus." Today, we bring you the company's graphics that illustrate this. A taste:
FOOD FOR THOUGHT
Extensive leaks indicate that a massive DoJ antitrust case against Google is only weeks away. Such a case would put the search giant in the same situation as the dominant tech companies of earlier eras, like Microsoft, Intel, and IBM. Yale University economics professor and former Justice Department chief economist Fiona Scott Morton is out with a new 41-page paper (PDF) she calls a road map for charging Google with monopolizing the digital ad market.
The obvious end state of this monopolization strategy is a world in which, with the exception of ad spend directed to Facebook, Amazon, and other closed systems, Google collects for itself the vast majority of the total digital ad spend in two ways. Google extracts approximately 40% of the total ad spend through its intermediation services, part of which would otherwise go to publishers and advertisers. Google limits the use of its data and designs its fees and auction to reduce payments to publishers while keeping ad prices high. It further reduces publisher revenue by steering consumers to its own supply of search and display and then selling that inventory directly. Google also disadvantages third-party publishers by appropriating information about those publishers’ audiences and using that information for its own gain, including by serving ads on other sites (and making a profit) using the insights Google gained serving ads on the original publishers’ sites.
ON THE MOVE
With all the troubles at SoftBank, it might not be a surprise that Alibaba co-founder Jack Ma has left its board of directors...Another non-surprising departure but surprising landing comes to us from the House of Mouse. Disney’s head of streaming, Kevin Mayer, is jumping to TikTok as CEO...Twitter added former Google A.I. boss Fei-Fei Li to its board of directors...Speaking of SoftBank, SoftBank-backed subscription car service Fair.com hired Bradley Stewart as CEO. Stewart had run aviation startup XOJet previously...Joshua Builder, Rent the Runway's CTO and head of product, has left the company.
IN CASE YOU MISSED IT
Amazon was built for the pandemic—and will likely emerge from it stronger than ever By Brian Dumaine
ViacomCBS: Why Shari Redstone sees ‘significant growth’ ahead By Aric Jenkins
Women run 37 Fortune 500 companies, a record high By Emma Hinchliffe
Microsoft and FedEx team up to make deliveries more predictable By Jonathan Vanian
German intelligence can no longer freely spy on the world’s Internet traffic, top court rules By David Meyer
J.K. Rowling was drinking old-fashioneds and asked Twitter to explain Bitcoin. Here’s what happened next By Jeff John Roberts
(Some of these stories require a subscription to access. There is a 50% discount for our loyal readers if you use this link to sign up. Thank you for supporting our journalism.)
BEFORE YOU GO
Ranjan Roy's blog isn't meant to be humorous, exactly. It's typically about the economics and strategies of startups, such as his post back in March on how low interest rates worldwide were fueling investment in high risk offerings. But this week's post is sort of a Jonathan Swift or Kurt Vonnegut short story come to life. I won't spoil it beyond giving you the title. Doordash and Pizza Arbitrage: There is such a thing as a free lunch.
Aaron Pressman
@ampressman
aaron.pressman@fortune.com


fortune--2020-05-19--Women with breast implants deserve to know more about what’s in their bodies

Good morning, Broadsheet readers! The Fortune 500 loses a female CEO, shareholders are still watching gender diversity closely, and Fortune investigates the risky business of breast implants. Have a lovely Tuesday.
-A different kind of health concern. Today’s essay comes from our Fortune colleague Maria Aspan:
Early last year, one of my friends had a terrifying conversation with her doctor. In 2014, after her mother died of cancer and my friend discovered she carried a genetically high risk of eventually developing the disease, she had decided to protect herself with a preventative double mastectomy and reconstruction—“the Angelina Jolie surgery,” as she called it. Those procedures replaced her natural, cancer-prone breasts with implants that were supposed to be safer.
But five years later, my friend’s surgeon delivered a new warning: Her type of breast implants had been linked to a different sort of cancer, and the odds of getting it seemed to be getting worse. Suddenly, something that was supposed to help her physical and mental health was instead putting her at risk.
That’s a familiar refrain when it comes to breast implants, as I found in the course of a months-long investigation for Fortune’s June/July issue. Even though the devices have been on the market since the 1960s, and have been sold to more than 8 million American women since 2000, breast implants have been plagued by a long history of product recalls, lawsuits, government bans, and various health issues affecting the women who have them—up to and including death.
“There are a lot of women who are really suffering,” Diana Zuckerman, a scientist and president of the National Center for Health Research, told me. “You have these products that are widely, widely sold, and every few years we learn something new about the problems they cause.”
The most serious and sometimes fatal of those problems is a cancer of the immune system known as BIA-ALCL, for “breast implant-associated anaplastic large cell lymphoma.” More than 903 women have been diagnosed with the disease, which has been linked in academic studies to breast implants with a “textured” silicone shell, and more than 33 women have died from it. Women with textured implants made by Allergan, now owned by AbbVie, are at especially high risk of developing BIA-ALCL, according to the FDA, which in July asked the company to recall its textured implants from the market.
But, as I discovered when I started talking to women all over the U.S.—or, in one tragic case, to their survivors—Allergan’s recall didn’t fix all of the problems with breast implants. BIA-ALCL can sometimes take a decade or more to develop, as it did in the case of Paulette Parr, who died of the lymphoma last summer, at age 68. And it’s only one of many health complications that women with breast implants have been reporting for years.
Many of these concerns have long been ignored, or worse. Until 2019, the U.S. Food and Drug Administration allowed manufacturers to report problems with their implants in a hidden, non-public database. Meanwhile, Allergan and its major competitors (Johnson & Johnson and Sientra) have all failed to comply with FDA requirements to study the long-term effects of their implants on women’s health. (In separate statements to Fortune, all three companies say that they prioritize patient safety.)
The FDA’s Binita Ashar told me that the agency is finalizing a black-box warning label for breast implants, and is prepared “to take further action if necessary to protect patients.” A week after we spoke, the FDA did just that, sending more warning letters to breast implant manufacturers over their compliance failures.
Some of the women I spoke with remain happy with their breast implants—or at least with the option to have them. For example, even after having another surgery last year to replace her textured implants, my friend says she doesn’t regret getting them. For her, the risks associated with breast implants remain much lower than her hereditary genetic risk of developing an aggressive breast cancer.
But it’s impossible to weigh those risks, and to give your informed consent to any sort of medical procedure, if you don’t have information on all of the known dangers. “Everybody loves their implants ‘until.’ My ‘until’ was 18 years,” says Carol Small, a breast cancer survivor who got a textured implant in 1999 and was diagnosed with BIA-ALCL in 2017. “We need to have good, informed choices.”
Read the full story here.
Maria Aspan
maria.aspan@fortune.com
@mariaaspan
Today’s Broadsheet was produced by Emma Hinchliffe.
ALSO IN THE HEADLINES
- Record drop. Well, we said the number was ever-vacillating. Just a few hours after the Fortune 500 and our accompanying tally of female Fortune 500 CEOs published yesterday, car rental company Hertz said that its chief executive, Kathryn Marinello, would resign; her replacement is Paul Stone. That brings the number of female Fortune 500 CEOs down to 36, or 7.2%, compared to yesterday's 37.
- Rescue mission. German Chancellor Angela Merkel, with French President Emmanuel Macron, proposed a plan to rescue EU member states from the economic crisis of the coronavirus pandemic. Under their proposal, the EU would borrow €500 billion on financial markets and distribute that money to the hardest-hit European economies. Guardian
- How to re-open. In the latest issue of the magazine, Fortune 500 CEOs weigh in on how they're thinking about eventually re-opening the economy and, if applicable, their businesses. Rite Aid CEO Heyward Donigan, whose business never closed, says we'll never "go back to the old normal." Duke Energy CEO Lynn Good advises leaders to remember which priorities to put first: customers and employees. And Gap Inc. CEO Sonia Syngal says that "last time [she] checked, people still put on clothes every morning." Fortune
MOVERS AND SHAKERS: Rebecca Campbell, most recently president of Disneyland Resort, is the new chairman of Disney's direct-to-consumer and international divisions following the departure of Kevin Mayer, Disney's streaming chief who will be TikTok's new CEO. Google Cloud hired SAP Industries president Lori Mitchell-Keller as VP of industry solutions.
IN CASE YOU MISSED IT
- Warning sign. Five companies, mostly in mining and manufacturing, received a stern warning from the U.K. Investment Association over the lack of women in their senior roles. The "red-top alerts" are actually seen as a good sign: that shareholders, emerging from the crisis concerns of the pandemic, aren't likely to let issues like gender diversity slide during the economic downturn. Financial Times
- Consumer reports. Democratic lawmakers and consumer advocates are arguing that the Consumer Financial Protection Bureau, led by director Kathy Kraninger, has used the coronavirus pandemic to relax restrictions meant to protect consumers, under the guise of providing companies with flexibility through the crisis. Kraninger says the bureau is "first and foremost informing consumers ... and protecting them in the marketplace." Politico
- Leadership pays off. In New Zealand, we're seeing evidence that leadership skills are serving female leaders well not just in preventing the worst of the pandemic, but with voters. Three months ago, Jacinda Ardern's Labour party was neck-and-neck with its rival National party; today Ardern has a 59.5% personal support rate, compared to 4.5% for National leader Simon Bridges. Bloomberg
ON MY RADAR
There are real reasons you're playing pandemic pioneer woman Bustle
J.K. Rowling was drinking old-fashioneds and asked Twitter to explain Bitcoin. Here’s what happened next Fortune
Yes, those were sex dolls cheering on a South Korean soccer team New York Times
PARTING WORDS
"We chose this life. Everybody else has been forced into it. But I think you could turn that around and just embrace reality the way it is and not fight against it."
-Sister Judy Murray, a nun at the Carmelite Sisters of Baltimore, on being cloistered or quarantined


fortune--2020-05-19--How Honeywell’s CEO plans to survive—and thrive—through pandemic

Honeywell is going digital.
As chairman and CEO, Darius Adamczyk is trying to remake the 134-year-old behemoth into a modern-day tech company. Having taken the torch in 2017 from Dave Cote—who whipped the underdog into shape over his 15-year tenure—Adamczyk is now doubling down on Honeywell’s future as a “software industrial” company. He seeks to prove Honeywell can compete on turf dominated by Google, Microsoft, SAP, and Oracle.
But just as Honeywell, No. 92 on this year’s Fortune 500 list, was hitting its stride, calamity struck. A pandemic. Shutdowns. Oil and gas market mayhem. All of it comes as a perilous reality check on Honeywell’s ambitions. “We were starting to see real signs that the software transformation was working,” Scott Davis, CEO of financial analysis firm Melius Research, tells me. But that’s been “overshadowed” by the recent chaos, he says. Now it’s about “just trying to survive.”
Adamczyk sat for a (virtual) interview with Fortune at the end of April. Covering everything from the CEO’s rise to the top job to his playbook for the tumultuous months ahead, the conversation below has been edited for length and clarity.
Fortune: Give me the condensed version of how you came to Honeywell.
Adamczyk: Initially, I thought I was going be a heavy-duty engineer. I started at GE. Five years in, I thought, “Actually, I don’t know that I want to be an engineer for the rest of my life.” So I went to Harvard and got an MBA. After that, I joined Booz Allen and later, Ingersoll Rand. In 2007, I joined a company called Metrologic as CEO. A year and a half later Honeywell came along—right when Metrologic was going public—and bought the company.
I heard you wanted out at first.
Honeywell said, “If you don’t stay, then your equity doesn’t vest.” It was a financial decision. I said, “Well, I’m not particularly thrilled about this, but I’ll stay on for 12 months and help them out.” As I stayed on, I started to like it a lot more.
What did you not like about Honeywell?
There were too many people telling me what to do. I had been a CEO. I knew what I was doing. I generally don’t thrive when people micromanage me. But I understand now. In a big company like Honeywell, you can’t just have little kingdoms all over the place running independently. Still, going from calling all the shots, and then not making those calls, that’s challenging.
How did you come to the attention of Honeywell’s former CEO Dave Cote?
I was Dave’s mentee for a year. That’s how I first got to know him. In 2012, I had an opportunity to become CEO at another company. I went to see Dave for a three-hour career chat. It convinced me to stay longer. I thought, “Hey, maybe, there is a path for me here.” I also got a promotion to run something bigger and far more complex.
What were you put in charge of?
Honeywell Process Solutions [which makes industrial plant control systems]. I told Dave, “Give me the most broken business you have in the portfolio, and I’ll see if I can fix it.” Boy, did he oblige me. It was a mess, a total mess. I’ve never been more stressed than I was running that business. Even now, right now, it’s not exactly a fun time given the crisis we’re all in. Most of the decisions I have to make today are painful. But running that business was even worse.
After process solutions, you led Honeywell’s petrochemical business through a downturn. When did it become clear you were going to become CEO?
I didn’t feel like I had a chance. My unit was falling apart, and I was trying to take out costs. But Dave and the board knew the markets were falling off a cliff. They seemed to think I was doing a reasonable job of running the business even in those times, rather than panicking. I give them a lot of credit for that.
That kind of training must be extremely useful today.
This is my fourth dance, or black swan event, or whatever you want to call it. Maybe it’s not officially a recession yet, but it’s pretty clear it’s going to be one. A lot of people can tell you what to do, but unless you’ve been through a crisis or two, it’s a tough lesson to learn.
Beyond the pandemic, there’s an oil and gas crisis. That affects two major Honeywell businesses. How are you steering the ship when everything is falling apart?
You have to find those pockets of business where customers are still active, areas where there’s still demand. You can’t give up on growth, ever. Adjusting costs is the least fun part of my job. But we’re fortunate because we have a very strong balance sheet—$9 billion of cash—going into this.
How do you plan to spend the money?
We haven’t done as many acquisitions as, frankly, I would have liked. Prices were so inflated. As we start to emerge from this crisis—and we will emerge from it—we’re going to do transactions. I insist on thinking about the long term, about the next person who will run this business five or 10 years from now. You can’t shortchange those investments.
What would you like to buy, software companies?
It fits our journey to become a software-industrial company. But those generally are at the top of the premium valuation pool, so you have to be thoughtful and selective. It’s probably not a huge software company we would buy. It’s probably more of the “bolt-on” variety.
Now seems like a good time to acquire.
Maybe. The market may flip from sellers to buyers. But even this has to sink in. Sometimes people think they’re worth what they were worth in 2019. The world has changed dramatically since then.
Some people say air travel won’t return to the same levels. What do you think?
If we go back to 9/11, people thought the same thing. In my opinion, people will fly. They absolutely will. The best thing we can do is work with the airlines to help potential passengers feel comfortable and safe. We already have come up with some solutions involving PPE, hygiene, air quality, and so on.
You’re working on a number of ambitious “breakthrough initiatives” too. Which is your favorite?
I am extraordinarily pleased with quantum computing. We’re convinced that this thing works, and that we can make it much more powerful—an order of magnitude improvement every single year. We get called an industrial company, but I don’t think that’s totally fair. We’re a technology company.
Are you planning to become the next SAP?
I never see us becoming purely a software company. It will always be a hybrid of software and hardware. But obviously, the software part of our business has to grow bigger.


fortune--2020-05-20--Land O’Lakes CEO Beth Ford shares the real reason the brand ditched its ‘butter maiden’

This 23-year old wants to automate your company ’ s legal work—and his company Brainbase just raised $ 8 million

The 98-year-old dairy brand Land O’Lakes in February redesigned its packaging, replacing a logo featuring a Native American woman—the “butter maiden”—with the words “farmer-owned.” While the change was widely seen as a response to the pressure companies face to reevaluate outdated or insensitive symbols, CEO Beth Ford says the decision was more about what the farmer-owned co-op wanted to communicate rather than what it didn’t.
“We don’t want folks to misunderstand that someone was pressuring [us],” Ford told members of Fortune‘s Most Powerful Women community at a virtual gathering on Tuesday.
The revamp started with a months-long review of how consumers viewed the Land O’Lakes brand. “For folks my age—I’m a Baby Boomer—many people understand our brand,” Ford said. “But most consumers today are unfamiliar with the fact that we’re a farmer-owned co-operative.” For millennials and other shoppers taking a more ingredient-conscious approach to food purchasing, Ford and her team saw Land O’Lakes’ connection to local farmers as an advantage for a Fortune 500 food brand. “Consumers today are interested in understanding, where does my food comes from?” she said. “We saw that as a difference and we wanted to shout about that.”
Since February—a period of time that covers both Land O’Lakes’ rebrand and the onset of the coronavirus pandemic—the company has seen a 35% increase in new consumers “step[ping] into our franchise,” with purchases that feature images of real farmers on the packaging, Ford said. “We’re going to see whether that engagement stays with the brand,” she added.
Ford spoke with Fortune senior editor Beth Kowitt about leading through the coronavirus crisis, including the challenges in pivoting a hyper-efficient food supply chain with just-in-time delivery from supplying restaurants to feeding consumers—families aren’t likely to buy the same “640-lb. block of cheese” as a restaurant, Ford noted. Most challenges haven’t been in production, however, but in distribution. Focus Brands chief operating officer Kat Cole also weighed in on the issue: “Other than a few proteins, the issue for restaurants has not largely been supply,” Cole said. “The drivers and trucks all went to Amazon and grocery stores. They are not available to go from a distribution center to a restaurant that maybe now has lower drop sizes, inconsistent operating volumes, or lower average sales.”
During social isolation, Ford is doubling down on Land O’Lakes’ efforts to advocate for rural America. One in three rural Americans lack broadband access, even as that access becomes more important than ever as schools and work move online. “We have to push for major investment to meet the moment, like the 1930s investment in rural electricity,” she said.
Workers, like the drivers who are so in demand during this moment, should be the priority for businesses, Ford told her fellow corporate leaders. “If you are not putting the focus on your team right now,” she said, “you’ve lost the narrative if you’re not focusing on that as the primary issue.”


fortune--2020-05-20--Fashioning the future: At 80, Ralph Lauren is facing his namesake company’s toughest chapter yet

Ralph Lauren loves to tell a story about his earliest days in the clothing business. It was 1967. He had designed some ties, wider than most and made of unconventional fabrics, and was selling them to a few stores in Manhattan under the new brand name he had chosen, Polo. He especially wanted to sell them to Bloomingdale’s—“the hottest store in America,” he recalled as he told the story to a group of investors and Wall Street analysts more than 50 years later. The Bloomingdale’s buyer said he liked the ties and would buy them if Lauren did two things: make them slightly narrower and remove his own label from the back, replacing it with the Bloomingdale’s label. “I was really dying to sell Bloomingdale’s,” he said. But faced with the opportunity, he refused. “I wasn’t going to change the ties, and I didn’t, and I walked out,” Lauren said. “I thought my legs would crumble.”
Six months later, Bloomingdale’s called and said yes.
That was a turning point in Lauren’s life. “Had I changed that tie, I would not be here today,” he told the Wall Street crowd. And he drew a profound lesson from the experience: “I believed in myself.”
Believing in himself has worked spectacularly well for Lauren, a self-made billionaire and arguably the most successful fashion designer who has ever lived. He built his success on the brand he created, a brand that began its ascent on the day Bloomingdale’s called back. He expanded it beyond the Polo name to include his own name, and beyond ties to embrace men’s, women’s, and children’s clothing, accessories, home furnishings, restaurants, even coffee—a brand of greater scale and scope than the industry had ever seen.
The company is one of only two in the Fortune 500 whose name is simply the first name and last name of a living founder; the other is Charles Schwab. (To avoid confusion, we’ll call the man Lauren, the company RL Corp.) It is quite likely the only company that sends the Securities and Exchange Commission a required annual filing that opens with a full-page photo of the executive chairman on a horse, wearing a beat-up canvas coat, leather gloves, and a cowboy hat. But then, why not? The man, the brand, and the company have always been intertwined.
At age 80 Lauren has earned every right to be enjoying a victory lap, and indeed this past February he had just emerged triumphantly from a self-inflicted crisis in the brand’s value—only for the business then to be hammered by the coronavirus. In three short months the stock has fallen from $115 to $70 as physical sales have ground to a halt. (The company declined to make executives available for interviews, saying, “Our entire team is fully focused on protecting the safety and well-being of our teams and ensuring we are in a position of strength throughout and following this crisis.”)
Now, as he enters his ninth decade, Lauren is facing a triple threat: navigating his dreamy brand through a nightmarish pandemic, proving that e-commerce is a viable path forward for this storied luxury brand, and continuing to develop a brand that is relevant to millennials and Gen Z, not just their parents.
As with everything about his business, this challenge is intensely personal for Lauren. He owns most of his company’s stock and thus holds total control. Though the company has had two outside CEOs in recent years, there has never been much doubt who is really in charge. After RL Corp. announced the arrival of one leader in 2015, Lauren sent all employees a memo that read in part: “The Ralph Lauren Corporation is the Company I founded, nurtured, and love. I will continue to lead it today as I have for almost 50 years. I am not stepping down, nor am I stepping back. I am stepping up.”
Win or lose, whatever happens next, it’s all on him.
A mature brand
To understand where RL Corp. is now, you need to go back a few years, to when the brand was riding high. From 2010 to 2015 revenue rocketed 53%, to $7.6 billion. Other companies would miss earnings targets or experience mysterious inventory snafus, but not RL Corp. And while the business churned out profits, Lauren continued to sell an impossibly idealized world. “He’s got a movie running in his head all the time,” explains Roger Farah, Lauren’s No. 2 executive from 2000 to 2014. “Everything emanates from that—the product, the stores, the marketing, the showrooms.” Ralph Lauren doesn’t just design clothes. He directs movies, creating an alternative cosmos that’s an irresistible escape from real life. He even lives there, or seems to. His 19,000-acre Colorado ranch; his manorial estate in Bedford, N.Y.; the weathered beach house on Long Island; his collection of the world’s most elegant, perfectly restored cars—they’ve been running themes in his marketing and publicity for decades. As he once said, “I don’t do shoulders. I do worlds.”
By 2015, says retail consultant Steven Dennis, the question the company was facing was this: “As a mature brand, where do you go for growth?” RL Corp.’s answer was, you go to the channels that are growing. At that time, “growth was largely at the discount end of the market,” says Kathy Gersch, a retail veteran with experience at Nordstrom and e-commerce companies. Stores such as T.J. Maxx and Marshalls were doing well, as were mid-tier department stores such as Macy’s and Dillard’s. So RL Corp. fed those channels.
Macy’s was most important, accounting for 12% of total sales at the time. “The years from 2010 to 2014 were the best years in Macy’s history,” says Terry Lundgren, the chain’s then-CEO. “I remember reaching the billion-dollar mark for Ralph Lauren at Macy’s in 2010 or 2011. It was a huge event for us.” Of all the brands sold at the store, Ralph Lauren was “the most prominent of them all.”
Fashion designer Ralph Lauren walks the runway for Ralph Lauren fashion show during New York Fashion Week on September 7, 2018 in New York City. Victor VIRGILE—Gamma-Rapho via Getty Images
So RL Corp.’s strategy made sense in theory and also in practice, at least for a while. The brand proclaimed its upscale pedigree in Neiman Marcus and Bloomingdale’s, and most emphatically in Lauren’s own flagship store in Manhattan, a vast, old-money mansion that he gutted and renovated in 1986, and for which his decorators ordered 82,000 square feet of Honduran mahogany. Macy’s and other mass-market department stores then enabled middle-class consumers to participate in the heady Ralph Lauren world.
But the strategy soon ran into trouble.
The company’s growth-obsessed managers were afraid of producing too little inventory for those retailers, so, just to be sure, they produced too much. Often it was more merchandise than retailers, including the company’s own stores, could sell at full or near-full prices. As a result, department stores would sometimes have to slash prices 70% in order to clear out the goods, and more of them ended up in the off-price stores. Disheveled racks and bins of pawed-over clothing—this was a luxury brand? For many consumers, no, it was not. By devaluing the brand, the growth strategy was actually killing growth.
Sales fell, first a little, then a lot, and, alarmingly, they kept falling, quarter after quarter. This kind of thing just didn’t happen to Ralph Lauren Corp. Over the previous 20 years, annual revenue had declined only once, in the devastating financial crisis and recession of 2008 and 2009, and the decline was less than 1%. Those magical powers that others lacked were now faltering.
The leaders of Kate Spade, Michael Kors, Coach, and other luxury brands were making the same fundamental errors. All were finding what retail veterans already knew, that once an upscale brand gets “taken downstairs,” as they say, bringing it all the way back up is difficult and rare. Yet for RL Corp., a far larger business than those others, it had to be done.
As the trend lines started turning down in 2015, Lauren decided he needed new management. He hadn’t been the operating chief in decades, having delegated that job to experienced managers, most notably Farah. Now, a year after Farah had left, Lauren stunned the fashion world by bringing in Stefan Larsson from Gap’s Old Navy chain, which he had turned around impressively after 15 years at H&M, the fast-fashion chain. Why a 41-year-old fast-fashion expert to run a prestige brand? Because he “has the sensitivity of design and of building a business and growing companies,” Lauren told WWD. “That’s rare in our business. Usually it’s one or the other.”
Larsson quickly identified a key reason for RL Corp.’s decline. “We have 15 months’ lead time” from ordering merchandise to getting it into stores, he explained to a roomful of investors and analysts. In a seasonal business, that’s trouble. It meant, for example, that the company had to order next spring’s assortments before seeing the results of this spring’s selling season—and well before retailers were willing to order next season’s merchandise.
That’s why the company’s managers were always ordering too much; with no idea how much retailers would sell this season, let alone what they’d want next season, they had to play it safe. That “mismatch between demand and supply,” Larsson said, meant “our full-price channels have had an excess of inventory already starting out the season.” That excess “drives up the promotional pressure and, worse than that, it pushes inventory over to the value channels.” It also taught shoppers not to pay full price for Ralph Lauren.
Larsson’s fix included cutting lead time to nine months, closing 50 stores (after closing 43 the previous year), and laying off about 1,200 employees (after laying off about 750 the year before). Now, having promised Wall Street the company was finally getting religion about excess inventory, the top leaders faced a big question, the answer to which would be an acid test of their seriousness: What would they do with the excess inventory they still had?
They didn’t slash prices or send that inventory to off-price retailers. They burned it.
Though the company has had two outside CEOs in recent years, there has never been much doubt who is really in charge.
Among luxury brands that’s a routine though painful and rarely mentioned practice. Incinerating excess inventory keeps high-priced goods out of cut-price channels and maintains the brand’s exclusivity. There’s no evidence RL Corp. had ever done it since going public in 1997. The temptation to get at least a little revenue from the overage was apparently always too strong. Now the company chose instead to destroy $155 million of merchandise. It was showing the discipline of a top-tier brand.
Larsson knew that tons of work remained to be done—overhauling a weak e-commerce operation, discontinuing low-selling products, closing more stores, laying off more employees, and other cost cutting. But the corner was being turned. “Stefan Larsson’s strategy was a good one,” says Piper Sandler analyst Erinn Murphy. “It’s unfortunate that he never got to finish it.”
In February 2017, just 15 months after Larsson became CEO, Lauren announced that the two had “agreed to part ways.” The stated reason was “different views on how to evolve the creative and consumer-facing parts of the business,” which doesn’t explain much. Larsson went on to become president of PVH, the apparel firm that owns the Calvin Klein and Tommy Hilfiger brands; he declined Fortune’s request for comment. Farah believes Larsson was “not a good match” for RL Corp. in light of his fast-fashion background. As reassurance to Wall Street, the company’s announcement of the change pointedly noted that the strategy Larsson outlined would continue.
In addition to the pain and turmoil necessary for rehabbing the all-important brand, these events may have been distressing to Lauren for another reason. He was receiving an evaluation of his golden touch, and it wasn’t good. When he announced he was surrendering the CEO role and giving it to Larsson, the stock leaped, and when he announced Larsson’s departure, it dropped. The brutal message from investors was that they no longer trusted Lauren’s magical powers.
The company recruited a new CEO, Patrice Louvet, an executive with a 28-year tenure at Procter & Gamble. He had no experience with apparel but plenty of experience managing grooming and beauty businesses globally at P&G, a company famed as a management academy. Out of the spotlight, he has been advancing the fundamental imperatives for RL Corp. now: continued elevation of the brand; a return to sustainable, profitable growth; relevance to a new generation of customers; a better e-commerce presence.
It hasn’t been easy. Full-year sales didn’t resume growing until the company’s fiscal 2019 (which ended March 30, 2019). But managers knew they were winning because even as sales were falling, profits were rising. Brand discipline was paying off. With the company’s discounting at its lowest in five years, according to the Edited retail analytics firm, customers were paying higher prices. In the quarter that ended last New Year’s Eve, RL Corp. achieved the highest quarterly profit in its history. The magic was back. “The company’s metrics defy retail,” marveled Barclays analyst Adrienne Yih. At long last she could say with confidence that Ralph Lauren was executing “a successful (and very difficult to achieve) elevation of the brand.” For a gratifying moment, it seemed safe to pop the Champagne. (Story continues below.)
Ralph Lauren: Then and now
Ralph Lauren’s fall-winter 1978-79 fashion collection features the cowgirl look, with brown suede cowboy pants over jeans, brown plaid flannel shirt under beige poplin coat, cuffs trimmed with brown corduroy. Bettmann—Getty Images
Fashion Designer Ralph Lauren converts Rhinelander Mansion into his Manhattan store in New York City. Dirck Halstead—The LIFE Images Collection via Getty Images
Members of the United States delegation wave to the crowd during the Opening Ceremony for the 2008 Beijing Summer Olympics at the National Stadium on August 8, 2008 in Beijing, China. Jeff Gross—Getty Images
The Prince of Wales presents designer Ralph Lauren with his honorary KBE (Knight Commander of the Order of the British Empire) for Services to Fashion in a private ceremony at Buckingham Palace. Victoria Jones—PA Images via Getty Images
The future of Ralph Lauren’s world
Predicting how hard the coronavirus crisis will hit RL Corp. is futile, since that will depend on presently unknowable epidemiological realities around the world. As a seller of premium-price, very nonessential merchandise, it may struggle more than most companies in a year that’s being compared to the Great Depression. “Ralph Lauren remains a strong brand with one of the best management teams in the softlines industry,” writes Cowen analyst John Kernan in a recent note. Yet he downgraded the stock because the environment is so weak.
A couple of factors could ease the pain. Much of the company’s profit comes from core products that sell year after year—polo shirts, the flag sweater, cable sweaters. If they don’t sell this year, they can be packed up and sold next year. “It’s not a trend brand,” says Kathy Gersch. “It’s not Prada. That’s an advantage.” At least as important, RL Corp. has “a very strong balance sheet with negligible long-term debt,” notes Murphy. No analyst seems to doubt that it will weather this crisis and come out of it stronger than most competitors.
But the immediacy of the crisis shouldn’t obscure the larger, longer-term challenges to the brand. While it has been rescued from the remainder bins at T.J. Maxx, the hard fact is that it still isn’t what it once was. Consider the brand valuation rankings published annually by three marketing firms, Interbrand, Kantar, and Brand Finance. Using different methodologies, they all show exactly the same trend over the past decade: The value of “Ralph Lauren” peaked in 2014 and then plunged; it’s still nowhere near that peak.
A look further back shows greater deterioration. U.S. adults today see “Ralph Lauren” as less “high quality,” “worth more,” and “distinctive” than they did in 2005, says BAV Group, a brand research and evaluation firm that’s part of the advertising giant WPP. The firm’s surveys show that in the eyes of consumers, the brand is 28% less differentiated and 43% less relevant than it was then.
A POLO Ralph Lauren storefront that is boarded up in the Soho neighborhood on April 23, 2020 in New York City. David Dee Delgado—Getty Images
Looking back still further, an unorthodox measure of cultural influence shows the brand’s rise and decline. When Lauren started out in 1967, “Lauren” ranked No. 242 among names for girls born that year, according to the Social Security Administration. In 1989, after he had appeared on the cover of Time and was running multipage magazine ads filled with lavish photos portraying his alternative worlds, it ranked No. 9. In 2018, the most recent year for which information is available, the name ranked No. 171.
The issue of the company’s future raises the matter of Lauren himself. “The question of succession has been hovering over the company for at least a decade,” says Farah. “My guess is he will continue to work as long as he’s healthy, and he’s a very healthy man. I envision him being the leader for a very long time.” Others who know him agree that it’s inconceivable he would ever leave the business by choice. “Ralph, retire?” says Alan Flusser, a fellow menswear designer, longtime acquaintance, and author of a recent biography of Lauren. “What would he do for relaxation? He’d do exactly what he’s doing now.”
Lauren learned that believing in himself made him successful, and he isn’t going to stop. His controlling stake in the company means he can stay as long as he wants. He can stay too long if he wants, which worries some. “Whether he retires or just shifts his role could make or break the company,” says Gersch. “If he won’t let go when he should, then the future of the company is at risk.” Charles Elson, a corporate governance expert at the University of Delaware, says, “No one wants to feel that they’ve aged out, but at some point you do. You don’t go on forever, but with that stock structure you do go on forever, to the detriment of the investors.”
This concern could be considerably premature. Warren Buffett is running Berkshire Hathaway ably at 89, and his partner, Charlie Munger, is contributing at 96. Henry Kissinger, still writing perceptive articles, is about to turn 97. Eighty isn’t necessarily as old as it used to be. But the concern becomes inevitable, eventually.
The thing about creating worlds rather than merely designing clothes is that worlds can endure. RL Corp. and Ralph Lauren have been interchangeable thus far. But at some point, they’ll have to part ways for RL Corp. to live on.


fortune--2020-05-20--Here’s what CEOs see coming after the pandemic

This is the web version of CEO Daily. To get it delivered to your inbox, sign up here.
Good morning.
What will the world look like once the pandemic has passed? It’s not easy to view the path of a hurricane from its center, but business leaders are having to make bets based on their best guesses of the future. In our annual survey, we asked the CEOs of the Fortune 500 whether they agreed or disagreed with some of the predictions being floated these days about how things will permanently change. Here are the ones a majority of CEOs agreed with:
“Business travel will become less frequent, replaced by video conferencing.” – 91% agreed.
“Nationalism will rise, and global supply chains will become less common.” – 82% agreed.
“Government surveillance techniques will become more common worldwide.” – 81% agreed.
A majority disagreed with this one:
“Trust in government will rise, as a result to their response to the crisis.” – 55% disagreed.
And the CEOS split near the middle on these three:
“China will be strengthened as a power in the world” – 42% agreed, 38% disagreed.
“Trust in capitalism will rise, as a result of the business response to the crisis.” – 28% agreed, 24% disagreed.
“Concern about the environment will fall, as a result of more immediate focus on economic problems.” – 42% agreed, 35% disagreed.
Separately, Land O’Lakes CEO Beth Ford spoke virtually with the Fortune Most Powerful Women community yesterday about the disruption the pandemic is causing to the food system. “Production is not the issue,” she said. “We have plenty of food. Part of the problem is we have too much milk, too many cattle, too many hogs. What we have is a distribution problem.”
The challenge, she said, is that “over time, these supply chains were made hyper efficient. Everything was ‘just-in-time.’“ When restaurants shut down and home demand soared, “there was just not a lot of room to change… It’s not easy to change your platform because the margins are so narrow.”
News below.
Alan Murray
@alansmurray
alan.murray@fortune.com
TOP NEWS
Two views
Fed Chair Jerome Powell and Treasury Secretary Steve Mnuchin do not see eye to eye on the issue of federal coronavirus aid. As expressed yesterday, the former thinks more federal aid is needed, while the latter would prefer to wait and see, as—like President Trump—he thinks a V-shaped recovery is imminent. Powell: "The scope and speed of this downturn are without modern precedent and are significantly worse than any recession since World War II." Wall Street Journal
Rolls-Royce
Rolls-Royce is cutting 9,000 jobs as it now expects the airline industry's recovery from the coronavirus pandemic will take years. "This is not a crisis of our making. But it is the crisis that we face and must deal with," said the engine-maker's CEO, Warren East. The cuts will mainly affect the British firm's civil aerospace division, two thirds of which operates out of the U.K. BBC
Luckin delisting
Following an accounting scandal that saw its CEO and COO defenestrated, Luckin Coffee has now been delisted from the Nasdaq stock exchange (or at least it will be if its appeal fails). As Fortune's Eamon Barrett writes: "The brouhaha over Luckin’s fraud… could become the impetus Washington needs to act on its long-time threat to impose tougher regulations against Chinese stocks." Fortune
U.S. and Russia
The U.S. will send Russia 200 ventilators to help it cope with the pandemic—Russia has nearly 300,000 confirmed cases, making it second only to the U.S. (which has five times as many). The State Department said President Putin called President Trump to ask for help, and the U.S. seeks a better relationship with Russia on many fronts." The donation will begin today with a shipment of 50 U.S.-produced ventilators. CNBC
AROUND THE WATER COOLER
Common-ground language
In the U.S., the pandemic arose in a context of extreme political polarization, so conservative and liberal media outlets talk about it in very different ways. However, according to language-assessing A.I. startup Pluralytics, there is common-ground language to be found: words like "stimulus," "jobs" and "schools" resonate on both sides of the divide. Fortune
Sweden's neighbors
Denmark, Finland and Norway are looking to ease entry restrictions for people from other countries—but maybe not Sweden. Sweden, which avoided the full-lockdown route adopted by most other European countries, now has the highest COVID-19 mortality rate per capita. Financial Times
Virus mutation
Chinese doctors are seeing what may be evidence of the novel coronavirus mutating in unknown ways. It seems patients in northern Chinese provinces are carrying the virus for longer, taking longer to show symptoms, and taking longer to recover, than what was observed during the original Wuhan outbreak. Significant mutation of the virus could hamper efforts to combat it; on the other hand, the apparent differences could be a result of doctors' ability to monitor patients more thoroughly and from an earlier stage now. Bloomberg
Keeping score
At least two-thirds of the Fortune 1000 is now using a customer-sentiment metric—though some now call it a "religion"—known as the Net Promoter Score. As Geoff Colvin writes: "If you are somehow unfamiliar with the Net Promoter Score, you have nonetheless been touched by it—guaranteed. That’s because you have received an email or a phone call asking the one simple question at the foundation of the NPS empire: 'On a scale of zero to 10, how likely is it that you would recommend [Company Name] to a friend or colleague?' You were probably asked a second question also: 'Why did you give the answer you gave?' And that, believe it or not, is pretty much it." Fortune
This edition of CEO Daily was edited by David Meyer.


fortune--2020-05-20--Aviation giant Rolls-Royce announces sweeping job cuts as the coronavirus outbreak batters air trave

Aviation giant Rolls-Royce announces sweeping job cuts as the coronavirus outbreak batters air travel

Rolls-Royce Holdings Plc Chief Executive Officer Warren East’s five-year bid to revive earnings has been shattered by the coronavirus as the U.K. engineering giant moves to scrap 9,000 jobs and considers closing sites.
The jet-engine maker will cut 17% of its workforce and boost savings goals to contend with a travel slump that’s drastically shrunk the aviation market, according to a statement Wednesday. The plans are based on the assessment that the wide-body market will shrink by about a third from 2019 levels and take three to five years to rebound, East said.
“The impact of Covid-19 on global aviation is not going to be short term and therefore our reaction can’t be short term,” the CEO said on a conference call. “We’re trying to protect jobs for the future.”
Rolls-Royce is particularly exposed because of its focus on larger aircraft that will play a reduced role in global fleets as travel comes back. The pandemic crisis has depressed economies, and the return to flight will be colored by health-related restrictions that will discourage long-distance flights.
East said before the outbreak that the London-based company was turning a corner after years of restructuring that saw it eliminate about 10,000 posts in an effort to become more agile and productive.
Now, Rolls-Royce faces the test of rapidly resizing its business. East said on the call that the aerospace firm already has sufficient liquidity to get through the pandemic but must protect future jobs by acting now.
Rolls-Royce shares traded as much as 4.9% lower and were down 2.2% to 261.8 pence as of 9:45 a.m. in London. The drop took the decline this year to 62%, valuing the business at 5.1 billion pounds ($6.2 billion).
Job Cuts
East said that the company aims to make more than half of the job cuts this year, after union consultations that could take months. He added that two-thirds of the employees in civil aerospace are in the U.K. with one-third in the rest of the world and that’s “a good proxy” for where the ax will land.
The high number of job cuts suggests Rolls isn’t expecting a quick “V-shaped” recovery, said Norbert Kretlow, an analyst at Commerzbank AG.
The reorganization will predominantly impact the civil aerospace business but also have implications for central support functions, Rolls-Royce said. The company also said it’s carrying out a detailed review of its facility footprint.
Its main civil engine plants are in Derby, central England, Singapore, and Dahlewitz near Berlin, while it has maintenance sites in other locations. The company has a presence in 50 countries, East said.
Cost Savings
East, who joined from semiconductor developer ARM Holdings Plc, had told investors that Rolls-Royce needs to save 1 billion pounds this year as it faces the biggest challenge since the 1970s, when it was nationalized after entering liquidation. That figure will now be extended to 1.3 billion pounds on an annualized basis, including 700 million pounds from job cuts.
The company would consider taking advantage of the U.K. government’s Covid-19 Corporate Financing Facility to ensure extra liquidity but it would “be a relatively small amount of funding,” he said Wednesday.
While the cuts are an “essential step,” Rolls needs to do more to provide clarity on the cost base, Sandy Morris, an analyst with Jefferies International, wrote in a note.
Rolls-Royce had already taken measures to ensure extra cash flow, announcing in April that it would suspend its dividend and borrowing 1.5 billion pounds to boost reserves. The company also cut its forecast for engine deliveries this year, and now plans to produce 250 plane engines, down from its previous estimate of 450.
It was reported earlier this month that Rolls was considering a 15% cut to its workforce.


fortune--2020-05-20--This 23-year old wants to automate your company’s legal work—and his company Brainbase just raised $

This 23-year old wants to automate your company’s legal work—and his company Brainbase just raised $8 million

‘ Negative rates are not the answer ’ for Britain ’ s slumping economy—yet

Sanrio, the Japanese conglomerate behind “cute” merchandise like Hello Kitty, presides over thousands of brands—making the task of keeping track of licenses and collecting royalties a tall order. To streamline its licensing operations, Sanrio turned to Brainbase, a Los Angeles startup run by a 23-year-old wunderkind named Nate Cavanaugh.
Launched last summer, Brainbase has already amassed a diverse customer list that includes BuzzFeed, home decor maker Kathy Ireland, and the Vincent Van Gogh museum. And on Tuesday, Brainbase announced it has raised $8 million in a Series A funding round led by Bessemer Venture Partners and other investors, including Rent the Runway cofounder Jenny Fleiss.
Brainbase occupies a decidedly unsexy corner of the tech landscape known as legal tech, which typically entails entrepreneurs seeking to automate a variety of legal work. While the field offers the prospect of high margins, some legal-tech firms have struggled—including buzzy startup Atrium, which raised $75 million only to implode earlier this year.
In an interview with Fortune, Cavanaugh explained that Brainbase began by setting itself a relatively easy task—helping brand owners track their trademark licensing arrangements. After achieving a projected growth rate for this year of 450%, Brainbase plans to use its new funding round to pursue related services. These include a payment feature for clients to collect royalties more promptly, and tools to manage other forms of IP such as copyrights and patents.
“Brainbase is bringing the archaic, paper-shuffling world of IP management into the 21st century. We’re thrilled to partner with this team as they help owners of IP assets capture more value while saving a boatload of time and effort,” said Kent Bennett of Bessemer Venture Partners in a statement.
Oddly, Cavanaugh and his cofounders have no background in law but rather in fields like product design and economics. Cavanaugh says he was inspired to launch a startup focused on intellectual property when he was 19 and heard a talk by venture capitalist Fred Wilson about the problems created for startups by “patent trolls”—firms that don’t make anything but amass IP in order to pursue legal action against companies that do.
The idea for Brainbase took further shape after he learned of Tesla founder Elon Musk’s decision to make the company’s patents available to anyone who wished to use them. Realizing that he lacked the background to build a startup focused entirely on patents, he turned to building a broader licensing platform.
Today, Cavanaugh says, Brainbase works with an outside law firm to handle legal issues, while the company’s 20 employees—a figure he expects to nearly double after the funding round—focuses on software. The startup’s advisers include the former managing director at Sanrio, Ray Rehito Hatoyama, and former Mattel CEO Bryan Stockton.
Cavanaugh notes that he takes pleasure in the complexity and challenge of helping firms manage intellectual property.
“Legal tech is very unsexy, but it suits me as I wanted to do something difficult,” he says.
More must-read finance coverage from Fortune:


fortune--2020-05-20--Trump sees ‘a really great third quarter’ ahead. Investors aren’t so sure

This is the web version of the Bull Sheet, Fortune’s no-BS daily newsletter on the markets. Sign up to receive it in your inbox here.
Good morning. Yesterday’s “vaccine rally” wore off about an hour before the close. Today, the global markets are mixed in choppy trade.
Let’s see where investors are putting their money.
Markets update
Asia
The Asian indices are mostly higher , with Japan’s Nikkei up 0.8% .
, with Japan’s up . China has stepped up purchases of U.S. farm goods, particularly corn and pork.
has stepped up purchases of U.S. farm goods, particularly corn and pork. Don’t necessarily read into this some great thaw in trade tensions between the world’s two biggest economies. China’s pork production has been decimated by African swine fever for months, fueling record pork imports .
in trade tensions between the world’s two biggest economies. has been decimated by for months, fueling . The Chinese unicorn Luckin Coffee is being delisted from the Nasdaq following its latest accounting scandal. The fallout “could become the impetus Washington needs to act on its long-time threat to impose tougher regulations against Chinese stocks,” Fortune‘s Eamon Barret reports.
Europe
European bourses opened lower. Germany’s Dax was off 0.4% , and the benchmark Stoxx Europe 600 was down by a similar decline.
bourses opened lower. was off , and the benchmark was down by a similar decline. Rocked by low oil prices and coronavirus , Russia’s GDP crashed in April. The government doesn’t provide an official figure, but others crunched the numbers and calculated output fell by 28% .
and , crashed in April. The government doesn’t provide an official figure, but others crunched the numbers and calculated output fell by . The 2020 outlook doesn’t look much better in Britain. The U.K’s Chancellor of the Exchequer Rishi Sunak warned of “a severe recession, the likes of which we haven’t seen.” How bad? You have to go back to 1706 for such a dreary outlook.
U.S.
The Dow , S&P 500 and Nasdaq futures have been steadily climbing throughout the morning. That’s after yesterday’s late-session tumble.
, and futures have been steadily climbing throughout the morning. That’s after yesterday’s late-session tumble. Questions hovering over the results of Moderna ‘s COVID-19 vaccine trials sent shares in the biotech firm bombing 10% lower yesterday (that’s one explanation; another is it’s selling shares at a furious clip), taking the broader market with it.
‘s COVID-19 trials sent shares in the biotech firm bombing yesterday (that’s one explanation; another is it’s selling shares at a furious clip), taking the broader market with it. Ignoring warnings from Fed chairman Jerome Powell, President Trump yesterday said he expects “ a really great third quarter .”
Jerome Powell, yesterday said he expects “ .” UBS economist Paul Donovan, for one, isn’t buying it. “The level of GDP will not be great in the third quarter. Living standards will be below those of 2019. Unemployment will be at least double pre-crisis levels, and businesses will have failed. The GDP level is unlikely to recover before late 2021,” he said in a note to investors this morning.
Elsewhere
Gold is up, strongly.
is up, strongly. The dollar is flat.
is flat. The oil rally is on pause. WTI is down nearly 1%.
Bear market bounce?
April was one for the ages with the S&P 500 recording its best month since 1987. So far in May, it’s holding onto those gains. Despite yesterday’s tumble, the benchmark index has still added 0.3% since the April 30 close.
But clouds are gathering on the horizon, market observers note. “Volatility is picking up,” Matt Forester, chief investment officer of BNY Mellon’s Lockwood Advisors tells Bloomberg. “More volatility than what we’ve seen over the past couple months is probably in order for the market.”
Yesterday, BofA Global put out its latest fund manager survey, and the outlook isn’t great. The sentiment is decidedly bearish, even as we begin to reopen the global economy. Today’s chart bears this out.
A full three-quarters of respondent (top bar) said they anticipate the economy is heading for a more protracted U-shaped or, worse, the volatile W-shaped recovery. Just 10% (bottom bar) see the best-case V-shaped recovery.
As for the equities market, 68% see this current torrid run as a bear market rally; just 25% see us entering a bull market.
(A note on the chart above: I put all four data points together into one chart. The four elements are not supposed to add up to 100%.)
As always, there’s a lot in this report, so I will do a two-parter. Tomorrow I will break out where the survey panel sees headwinds for companies as they ramp up business operations, post-pandemic.
***
That’s it for me. Have a nice day everyone. I’ll see you here tomorrow.
Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com
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Today's read
The money note. Deaths, tragic downfalls, financial ruin...sounds like the makings of a great opera. Fortune's Phil Wahba takes us behind the curtains as the heavily indebted Metropolitan Opera tries to make a comeback from the COVID-19 pandemic.
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Market candy
14.2 trillion
It's Fortune 500 week, which went live on the site Monday.
This year marks the 66th running of the list. In total, Fortune 500 companies represent two-thirds of the U.S. GDP with $14.2 trillion (up 4%) in revenues, $1.2 trillion (up 8%) in profits, $20.4 trillion (down 10%) in market value, and they employ 29.2 million people worldwide.